April 27th, 2009

Florida Insurance Roundup: Apr 20 – 26, 2009

Posted at 11:00 AM ET

Guy Carpenter Florida Operating Committee

This week’s topics include:

Florida House Votes for Property Bill, Compromise with Senate Targeted for Friday

Late Friday, the Florida House of Representatives voted to approve HB 1495, a large property insurance package with a vote of 75 - 33. This happened as the Florida Senate was adjourning, but Senate President Jeff Atwater said he was confident that a divided Legislature would be able to hammer out the differences by this coming Friday. The Senate’s property package was suspended after losing important recoupment language on a voice vote.

Sen. Garrett Richter offered an amendment that would establish expedited procedures that would help private reinsurers recoup additional reinsurance costs that they could face with the elimination of a portion of the Florida Hurricane Catastrophe Fund’s (FHCF’s) Temporary Increase in Coverage Limit (TICL) layer, but Sen. Mike Fasano countered with a substitute that would significantly revise and restrict this provision. The passage of Fasano’s version on a voice vote prompted Richter to suspend activity.

The House bill was amended to include certain transparency language, including amendments that require policies to contain the statement that all insurance policies may be subject to assessment by Citizens Property Insurance Corporation (”Citizens”) and by the FHCF.

Both bills would begin to phase out the USD12 billion TICL in the FHCF in similar manners. Also, both bills would allow Citizens rate freeze to expire on January 1, 2010 but would cap rate increases. The House version includes a 20 percent cap with the Senate version at 10 percent.

The House version includes the following amendments, as well:

  1. Require the FHCF to estimate claims-paying capacity twice a year (as currently provided).
  2. Transfer part of the funds (10%) from a Citizens rate increase to the Insurance Regulatory Trust Fund (rather than the General Revenue Fund) to support the My Safe Florida Home Program.
  3. Authorize the use of federal loan funds for condominium “weatherization” and affect changes to condominium association mitigation requirements.

Senate Surplus Lines Bill Amended to Preserve Retroactivity for Pending Claims Only

After being withdrawn from its final two committees of reference, the General Government Appropriations Committee and Policy and Steering Committee on Ways and Means, Senate Bill 1894 relating to Surplus Lines considered by the Florida Senate on April 24, 2009 and amended on second reading.

SB 1894 states that certain provisions of Florida law do not apply to surplus lines insurers.

Of the seven floor amendments filed to SB 1894 since April 23rd, one was adopted (604340) that would preserve related lawsuits pending on the effective date of the bill, but otherwise implements regulatory retroactivity. Another amendment regarding claims administration was defeated by a vote of 14Y-20N, and the remaining amendments were withdrawn. SB 1894 must be read a third time on the Senate Floor.

Rate Deregulation Property Policy Legislation Reviewed by Florida House

The Florida House of Representatives’ version of the property rate deregulation language allows insurers to use a rate above the otherwise-filed rate as long as the insurer is authorized to write property insurance in Florida and qualifies under one of the following three conditions:

  1. Policyholders surplus of at least USD500 million (calculated based on the insurer’s most recent annual statement at the time of policy issuance or renewal). 
  2. Policyholders surplus of at least USD200 million and a net written premium-to-surplus ratio of 2:1 or lower (calculated based on the insurer’s most recent annual statement). The calculation must only consider reinsurance cover from the FHCF or reinsurers rated A- or higher.
  3. Policyholders surplus of at least USD150 million and is an insurer whose primary function is offering insurance to members of a non-profit corporation.

The measure also states that companies offering these policies will not be able to purchase TICL layer coverage, and they will have to notify insureds that their products are not subject to full state regulation by the Florida Office of Insurance Regulation (OIR) and that coverage from other carriers with regulated rates may be available.

Rates must still be filed with the OIR and are subject to disapproval for being inadequate or using a rating factor that is unlawful. Policies covered under this section cannot be counted in the existing statutory calculation pertaining to excess rates. Further, this will not apply to policies covering wind, and the insured must be given a quote by Citizens (or another fully rate-regulated insurer willing to assume the risk) before a policy is issued.

Federal Disaster Aid Available to 11 North Florida Counties

Federal aid has been made available to 11 counties in northern Florida to address the severe storms and flooding that have occurred since March 26, 2009. The Presidential Declaration covers the following counties:

  • Bay
  • Calhoun
  • Gulf
  • Holmes
  • Jackson
  • Jefferson
  • Liberty
  • Okaloosa
  • Santa Rosa
  • Walton
  • Washington

Further, the Hazard Mitigation Grant Program has been granted for all of Florida.


DISCLAIMER: Statements concerning, tax, accounting, legal or regulatory matters should be understood to be general observations based solely on our experience as reinsurance brokers and risk consultants, and may not be relied upon as tax, accounting, legal or regulatory advice which we are not authorized to provide. All such matters should be reviewed with your own qualified advisors in these areas.

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