Maria Mallory White
South Florida lawmakers will continue to push this week for changes to the state's Hurricane Catastrophe Fund, which backs up insurers and gives them the means to offer lower-cost coverage to Floridians.
Driven by reinsurers, some policymakers have hoped to slowly reduce the overall size of the so-called Cat fund, on a path that could drive up individual property insurance premiums.
The smaller Catastrophe Fund approach may prove financially palatable to consumers in less hurricane-prone areas of Florida. But for Broward and Palm Beach counties, which are generally at considered high-risk for storm damage, the cost for homeowners coverage would likely rise, say opponents to such a plan.
"The more money that goes to reinsurance means higher rates," Jay Neal, director of the advocacy group Florida Association for Insurance Reform, said in a recent interview.
Consumers covered by Citizens Property Insurance Corp. already face a state-approved 10 percent annual increase, the so-called glide path. . Citizens has 191,092 properties covered in Broward and about 133,589 policies in effect in Palm Beach.
Senate Bill 1262 seeks to trim the fund in a number of ways including, for example reducing the maximum amount of reimbursement that property insurers can collect from the backup fund. The measure also would drop the amount of mandatory coverage for the Catastrophe Fund over time, meaning insurance companies would have to get the difference from the private market.
The companion bill (HB 1107) filed by Rep. Bill Hager from Boca Raton received a warm reception from the House Insurance and Banking Subcommittee.
But a second idea has emerged that proponents say could reduce premiums by expanding the bonding requirements from one to three years, a move that could generate $6 billion a year without giving much more of the market to private reinsurers.
"We have to manage rates and risks, this ... does both," said Sen. Jeremy Ring, D-Margate. He tried to get the idea included in the Catastrophe Fund bill in the committee. It didn't get a particularly favorable reception. But the debate is expected to heat up again on March 20 when the legislation returns for a vote by the same panel. Ring's proposal could also result in a floor showdown over the direction of the backup fund, which has grown as the state has avoided a major storm for seven years.
The Senate bill, sponsored by Sen. Alan Hasy, R-Umatilla, reduces the maximum reimbursement amounts that insurance companies would buy from the fund, and otherwise seeks to reduce the overall financial obligations of the fund. The idea is to reduce the likelihood and amount of bonding and emergency assessments charged to Florida residents in the event of a shortfall by insurers in the wake of a major hurricane.
Hays' bill could add 1.2 percent a year to premiums, said Florida Insurance Consumer Advocate Robin Westcott. However, the increase is expected to be offset by an anticipated drop in reinsurance rates, Westcott said. "What I see is a tremendous opportunity right now where you do you see that ability to reduce the Cat Fund's liabilities and really have no impact to consumers," Westcott said.
Material from the News Service of Florida was used in this report.