Hurricane insurance proposal is in neutral
Published: Sunday, January 21, 2007 at 6:01 a.m.
Last Modified: Sunday, January 21, 2007 at 12:00 a.m.
TALLAHASSEE — With a Monday deadline looming, state lawmakers struggled Saturday to find a plan that will give real property insurance rate relief to Floridians.
Two big issues have vexed House and Senate negotiators in the weeklong special session.
They have yet to find a way to substantially cut rates for the state-run Citizens Property Insurance Corp., which provides coverage for some 1.3 million Floridians.
And they can't settle on a plan that will result in rate relief for customers of private insurers like State Farm, which covers 1 million homeowners, by providing cheaper state-backed reinsurance.
Although lawmakers have two more days left before the session's scheduled end, some said the session was teetering on the brink of failure if the Legislature cannot agree on a major rate-cutting plan as called for by Gov. Charlie Crist.
"It's not partial success. It's total failure," warned House Democratic leader Dan Gelber of Miami Beach.
Gelber said lawmakers, thus far, are falling well short of Crist's call for a 25 percent overall property insurance cut and 40 percent for windstorm rates.
Crist also suffered a policy setback Saturday when House and Senate negotiators ditched the governor's plan to prohibit national insurance companies from creating Florida-only subsidiaries. Crist and others had argued that the so-called "pup" companies unfairly shielded the national companies' profits when setting rates.
But House members, who had supported the pup company ban, agreed to Senate Banking and Insurance Chairman Bill Posey's suggestion that lawmakers hold off on the issue until it can be more thoroughly discussed in their regular session, which begins in March.
Under the latest rate-cutting proposal, the House proposed letting Citizens act like a private insurer by offering more lucrative "multi-peril" property insurance policies that would cover more than just windstorm losses. The House would let Citizens sell those policies, which would include fire and theft coverages, contingent on the development of a "business plan" that would have to be approved by state officials and lawmakers.
Allowing Citizens to expand its coverage, and bring in more profits, could result in a rate cut of 10 percent. That would be in addition to eliminating a 21 percent Citizens rate hike that took effect on Jan. 1 and removing a pending 56 percent rate hike set for March 1 — measures lawmakers have already agreed to do.
Gelber discounted the elimination of the new rate hikes, saying Citizens' customers were already paying exorbitant rates in 2006 and need relief from those charges. Only the proposed 10 percent cut — linked to the multi-peril policies — would reduce those rates, he said.
Some have suggested that the state could temporarily relieve Citizens of paying for its back-up reinsurance from the state Hurricane Catastrophe Fund. By eliminating that $400 million-plus cost, Citizens could further lower its rates by another 10 percent or more.
"It's the only way you're going to reduce Citizens' premiums," Gelber said.
Sen. Jeff Atwater, R-North Palm Beach, who is also pushing for more cuts for Citizens' consumers, said he met with Crist on Saturday and the governor encouraged him to keep trying to find more rate cuts. He said "don't stop fighting," Atwater said.
But the measure to give Citizens free Hurricane Catastrophe Fund coverage is bitterly opposed by private insurers, who complained that it would give Citizens an unfair competitive advantage since they have to pay for their own coverage.
"We don't mind competing," said John Thrasher, a lobbyist for Florida Family Insurance, a Florida-based company that has about 107,000 property policies. "But basically they're saying put one arm behind your back and compete with the guy with two."
Aside from the Citizens' issue, lawmakers are also looking to find rate cuts for private insurance consumers.
That help will likely come in the form of the state providing cheaper reinsurance to those private companies. If the companies can get cheaper back-up insurance from the state — which could potentially shield them from some impact of a major hurricane — they can pass those savings on to consumers.
But the Senate wanted to provide the coverage — which would be on top of the $16 billion Hurricane Catastrophe Fund — free of charge. The House wanted to charge for it.
Sen. Steve Geller, D-Hallandale Beach, advanced a compromise plan Saturday that would offer the private insurers an additional $18 billion in backup coverage for $2.33 for every $100 of coverage. But as of early Saturday evening, House negotiators hadn't moved off their position of asking for a much higher price for the coverage, up to $20 per $100 of coverage.
Critics have warned that the state could face a huge liability if it offers the backup insurance at cut rate prices and then must pay for the impact of a Katrina-like hurricane.
But Geller said if the compromise plan is accepted it could result in an overall property insurance rate cut of 5 percent for State Farm consumers and 14 percent in their windstorm rates.
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