January 13, 2022

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Private insurers, not just the state-run Citizens Property Insurance Corp., would be eligible for reimbursement from a hurricane catastrophe fund for policies they assume from insolvent carriers, under a bill approved by a Florida Senate committee Wednesday.

The Senate Banking and Insurance committee endorsed Senate Bill 1058 by a vote of 11-0. But before approving it, members briefly toyed with the idea of going much further in an effort to depopulate Citizens, which ended 2021 with more than 759,300 policyholders – a whopping 29% increase in one year.

An amendment to the bill offered by state Sen. Jeff Brandes, R-St. Petersburg, would essentially bar policyholders of failed insurers from flocking to Citizens if Citizens’ premiums were lower than the private insurer’s.

“What we’re saying is, you can’t get a below-market rate just because your insurance company failed, which is what Citizens is doing in most markets right now,” Brandes said in the committee meeting Wednesday.

The price floor would be relaxed the third time the policy is renewed, he explained.

Sen. Brandes

Brandes, Citizens officials and private insurers have noted that because of Citizens’ “glidepath,” or statutory limits on rate increases, many Citizens policy premiums are well below what other insurers offer for comparable coverage.

The Federal Association for Insurance Reform registered in support of Brandes’ plan. And while Citizens’ chairman supports it, staff members have expressed concerns about the corporation’s ability to implement such a plan. Members of the Senate committee also pointed out that the Florida Office of Insurance Regulation opposes it, and said the idea needs more deliberation.

“This is a major deal what we’re discussing here today, because, as we know, what we’re seeing is that people that are having to leave carriers go to Citizens at a much better rate,” said Sen. Doug Broxson, R-Pensacola.

But the plan would force Citizens to accept policies at private market rates, a major departure from the state-run insurer’s governing statutes, senators said. Committee Chairman Jim Boyd, R-Bradenton, said the amendment had opened up a needed discussion, but may be better suited for another bill.

After some discussion, Brandes agreed to withdraw the amendment.

Sen. Hutson

The bill itself, sponsored by Sen. Travis Hutson, R-Palm Coast, would still give the state a helpful tool in managing the growth and exposure of Citizens, according to a legislative staff analysis.

Under current Florida law, most property and casualty insurers pay premiums to the Florida Hurricane Catastrophe Fund and are eligible for the fund’s reinsurance on a portion of their catastrophic losses. But only Citizens is authorized to seek assignment of the liquidated insurer’s cat fund contract when it assumes the carrier’s policies.

SB 1058 would broaden the definition of an “unsound” carrier and would authorize the State Board of Administration “to provide Cat Fund coverage to authorized insurers or Citizens for the policies of unsound insurers that Citizens or the authorized insurer assumes or otherwise provides coverage, provided the conditions are mutually agreed upon between the authorized insurer or Citizens and SBA,” the analysis reads.

A similar bill, HB 695, has been introduced in the House by Rep. Cyndi Stevenson, R-St. Augustine.