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Governor Signs Bill Reducing Costs for Hurricane and Other Catastrophic Storm Insurance, Accompanied by Gallagher

5/10/2002

MIAMI- Governor Jeb Bush today signed legislation to lower catastrophic property insurance costs for thousands of Floridians. The Governor signed Senate Bill 1418, known as the Windstorm Bill, into law at Florida International University's Hurricane Center in Miami.

The legislation creates a federally tax-exempt Citizens Property Insurance Corporation (Citizens) to provide full wind, hurricane, and hail policies for residential and commercial properties unable to obtain insurance. In addition, Citizens will help lower costs by issuing tax-free bonds, capping windstorm rate increases and offering consumers a choice to remain in the state's coverage when private options are available. Senator Rudy Garcia (Hialeah) and Representatives Jeff Atwater (Palm Beach), Gus Barreiro (Miami), Sally Heyman (N. Miami Beach) and Ken Sorenson (Key West) were prime sponsors of this bill.

"This bill provides important reforms that will save Florida's homeowners millions of dollars in catastrophic insurance fees," said Governor Bush. "No one wants to imagine that another devastating hurricane will hit our state, but if it does, this legislation will help contain insurance-related costs. While we have always worked to provide an insurance safety net, this will ensure that those who rely on this coverage are getting the best insurance for their money."

Citizens will combine Florida's current insurers of last resort, the Florida Residential Property and Casualty Joint Underwriting Association (JUA) and the Florida Windstorm Underwriting Association (FWUA). Presently the FWUA provides hurricane coverage to about 410,000 coastal residents, more than 65 percent of whom are South Florida residents. JUA covers approximately 110,000 policyholders, but is prevented from providing insurance in areas covered by FWUA. The JUA was created after Hurricane Andrew for homeowners across the state who could not obtain insurance in the private market.

In the long term, this legislation will help lower assessments for policy holders by allowing Citizens to assess surplus line policies when a deficit occurs as a result of a catastrophic event. This will enable

citizens to broaden the assessments for debt financing, and ultimately lower policy assessments. Surplus line companies wrote almost $1 billion in homeowner insurance premiums last year, but are currently exempt from this process.

The Citizens Property Insurance Corporation will:

* Fill any gaps in the coverage provided by these two groups by offering homeowners one policy with rates similar to those in the private market, or provide wind-only coverage for those homeowners who currently have FWUA insurance.

* Cap residential windstorm rates at 10 percent. These rates were slated to increase as much as 40 percent this year.

*Allow policyholders to purchase all homeowner and catastrophic coverage through their own personal insurance agent. In the past, homeowners who were only able to get coverage under FWUA or JUA would have to go to more than one entity to get their coverage.

*Provide rates based on the formula used by JUA to help prevent runaway rate increases experienced by homeowners with FWUA insurance.

Citizens will be governed by a seven member board made up of Florida residents, appointed by the State Treasurer, effective July 1. The Treasurer will also appoint the executive director and senior managers, as well as a technical advisory group.

Joining Governor Bush at the signing were Senator Rudy Garcia, Representatives Jeff Atwater, Sally Heyman, Ken Sorensen, Philip Brutus (N. Miami), Gaston Cantens (Sweetwater), and Eleanor Sobel (Hollywood), and Insurance Commissioner Tom Gallagher, as well as members of the Professional Insurance Agents, Association of Insurance and Financial Advisors and the Florida Association of Insurance Agents.