“The Florida General Assembly last week passed legislation demonstrating members’ understanding of the importance of matching rate to risk, maintaining insurance solvency and claims-paying ability for the private and residual markets, and encouraging a vibrant and diverse insurance marketplace for consumers.
“HB 1495, which was amended during negotiations, will allow the state-run Citizens Property Insurance Corporation to begin increasing its rates at no more than 10 percent per year for individual policyholders. The action ends the freeze on Citizens’ rates that lawmakers had previously enacted.
“We wish the Legislature had included a flex-rating provision for the private insurance market, in addition to the rate increase for Citizens, as was originally included in the House version of the legislation. That would have helped private insurers and their policyholders be able to adjust more easily to changing market conditions to assure solvency and claims-paying ability.
“However, the 'glide path' to actuarially sound rates for Citizens’ policyholders is good for all Florida citizens. It means the true cost of risk will no longer be shrouded in mystery and that the expense of that risk will begin to shift more appropriately to those who live in high hurricane-risk areas. Passage of this legislation shows that lawmakers understand that keeping Citizens’ rates at woefully inadequate levels only set up Floridians for even worse economic circumstances later when the next big storm strikes.
“The bill also will increase rates and lower coverage amounts over time for the Florida Hurricane Catastrophe Fund, which provides reinsurance. Most legislators understand that Cat Fund coverage cannot be just a matter of hoping for the best. This legislation provides for a more 'real' Cat Fund, one that will actually be able to cover the liabilities it's taken on. Again, it's about maintaining solvency and claims-paying ability for private and residual market and not mortgaging the future by relying on 'taxes' (assessments) in the future and the ability to sell bonds, which may or may not exist.
“Another bill passed by the Legislature was HB 1171, which allows some companies to sell policies virtually free from rate regulation and would prohibit those companies from purchasing coverage in the Temporary Increase in Coverage Layer. While it is helpful that legislators recognize consumers are now demanding pricing freedom for companies, it would be even more beneficial to make that kind of freedom available to all companies and consumers.
“The financial 'storm' we've experienced recently certainly helped illustrate the precariousness of providing insurance through a mechanism – the Florida Cat Fund and Citizens – based on crossed fingers, prayer, and the hope that others will provide a 'bail out.' If none of those work, then the citizens of Florida will have to keep picking up the tab. With passage of this legislation, Florida’s insurance market – and its policyholders – are headed toward a much brighter future.”