Citizens reform advances, despite Hurricane Hukill headwinds

by R.J. Lehmann on February 24, 2012

The Florida House of Representatives has passed legislation by an 89-25 margin that would limit Citizens Property Insurance Corp.’s ability to assess private insurers’ policyholders to make up for shortfalls at the state-backed insurer.

Sponsored by Rep. Ben Albritton, R-Wauchula, H.B. 1127 reduces the post-event assessments that Citizens can lay on other insurers’ policies in coastal zones to 2% from the current 6%, while eliminating altogether the existing 6% regular assessments on other commercial and personal lines policies.

Policies are assessed when claims exhaust Citizens’ reserves and an initial round of 15% assessments on Citizens’ own policyholders. Albritton’s bill also would change the recoupment process for any remaining deficits to be paid over time through “emergency” assessments, rather than the regular assessments that must be paid to Citizens by private insurers within one month.

The significantly reduced threat of post-event hurricane taxes is expected to make Florida a more attractive market for private insurers, many of whom fled the state both before and after a set of 2007 “reforms” that rolled back rates and required both Citizens and the state-backed Florida Hurricane Catastrophe Fund to take on an enormous amount of risk.

Of course, as with recent efforts for Cat Fund reform, which have again found themselves stalled, Citizens reform likewise has come up against resistance. In both cases, one of the major obstacles has been Rep. Dorothy Hukill, R-Port Orange, chair of the House Economic Affairs Committee. As the Wall Street Journal‘s Mary Kissel described it :

On Wednesday, Ms. Hukill introduced amendments to a catch-all insurance bill sponsored by Kissimmee Rep. Mike Horner. The original Horner bill had language that required Citizens’ applicants to get three private market quotes before obtaining taxpayer-backed insurance and limited agent commissions. The Hukill amendments erased those good ideas. Thankfully, other Citizens reform bills in the House and Senate are still moving ahead.

GOP members of the Economic Affairs Committee went along with Ms. Hukill’s power play without even debating it, which was the least that should’ve been done. But the far greater sin lies with Ms. Hukill, who is term-limited in the House and running for a state Senate seat this year. She may think that opposing unpopular reforms will win her backers at the polls, but it sure doesn’t say anything positive about her leadership qualities.

Citizens has apologists on the other side of the aisle, as well. Responding to Albritton’s contentions that, even with the reduced authority to lay assessments, Citizens still has $6 billion in reserves, $3.5 billion in borrow money and the backing of the Cat Fund, said Rep. Jeff Clemens, D-Lake Worth, told the Gainesville Sun that this only demonstrated earlier warnings about Citizens’ precarious financial state were “overblown.”

“I think in private moments some of my colleagues will admit that Citizens is in better shape than many of our private insurers,” Clemens said. “Unfortunately, their ideology won’t let them admit that in public so it was refreshing to hear Rep. Albritton come out and say it.”

Of course, private insurers don’t enjoy the full-faith-and-credit of the State of Florida, nor are they able to tax their competitors’ customers when it turns out they’ve run out of money. Which is not to mention the fact that Florida would enjoy a far healthier private market were its leaders not so intent on suppressing rates for short-term political gains.

Leaving those quibbles aside, with passage of Albritton’s bill, attention now turns to its companion, S.B. 1346. That measure has cleared the Banking and Insurance Committee and two subcommittees of the Senate Budget Committee. It still must pass the full Budget Committee before it can be brought up for a vote on the Senate floor.

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