This evening, the Florida House and Senate reached a compromise on the property insurance reform bill they have been working on for about a week now.
A writeup of the key provisions of the bill can be found at the Palm Beach post. A few of the more significant items that caught my eye:
Cherry picking: Requires insurers that offer homeowners policies in other states and offer auto insurance in Florida to sell homeowners insurance in Florida, effective Jan. 1, 2008.
Profits: Prohibits excess profits by property insurers and require refunds to consumers.
State-backed reinsurance: The state would continue to offer insurance companies $16 billion in cheap reinsurance through the CAT fund. For two years, it could, with State Board of Administration and legislative approval, offer $3 billion at near-market rates below the $6 billion level where the CAT fund kicks in. The state for the next three years would also offer $12 billion atop the CAT fund level, and, with State Board of Administration and legislative approval, an additional $4 billion beyond that.
Savings from state-backed reinsurance: Requires 100% pass through to the consumers of savings from reinsurance program.[...]
Citizens rate floors: Removes requirement that Citizens charge the highest rates in the marketplace. Removes requirement that Citizens be noncompetitive with rates of private companies in high-risk areas.[...]
Multi-peril policies in high risk areas: Authorizes Citizens, beginning on April 1, 2007, to write multi-peril policies (as well as wind-only policies) in areas eligible for coverage in High Risk Account, provide Citizens creates a “business plan” that is approved by the Governor and Cabinet and by the Legislative Budget Commission.
All in all, nothing too surprising given the public debate surrounding reform.
In principle, I do like the removal of the Citizens rate floors…which is something that was already permitted in areas where the Commissioner determined that no competitive market existed. I think that requiring a more realistic definition of “competitive market” would have been more appropriate, but the net effect is the same, for now.
I don’t like the anti-cherry-picking measure. I’ll bet that I’m not the only person who will be looking through the actual statutory wording of that part of the bill as soon as copies become available, to see what it really says.
I want to say that the largest auto insurers in Florida are either auto-only specialists, or already have a presence in the Florida HO market, and therefore any market disruption probably won’t be too significant… but this combined with the excess profits provision is going to make Florida look like an even less attractive admitted market.
What has me really wondering now is what sort of loads need to start being built into the rates for many lines of insurance to begin accounting for the potential for increased assessments after Florida’s next active hurricane season….or how many non-property insurers (and even some property insurers) will actually study that sooner, rather than later.