PIA of Fla.: Citizens will be ‘Biggest challenge of 2006’

“There is little doubt Citizens will again be the focus of the Florida Legislature,” O’Connell said. “Many of the changes mandated by the 2005 legislature were barely in place before the 2005 hurricane season hit us head-on so it’s difficult to assess how those changes affected the performance of Citizens. Most of the changes appear to be positive.

“A second consecutive assessment due to losses at Citizens will be a major issue,” he continued. “There are already proposals to create a new mechanism for insuring wind damage in Florida and that will certainly garner a lot of interest.”

O’Connell said it’s simply not realistic to expect the people of Florida to sit back and accept a billion dollar assessment without expecting something be done about it.

“While recognizing the need for change we need to be very cautious, Citizens was recognized as the new and improved version of the former wind pool JUA and the property JUA when it was proposed four years ago,” O’Connell said. “Unless we can guarantee that we’ll do a better job of identifying the shortfalls in a new organization than any of us did with Citizens, we need to proceed cautiously.

“The devil is in the details though,” O’Connell explained. The Legislature must move carefully to avoid anything that is broad based.

“In addition, we think that the limits in the Guaranty Fund are too low,” he said. “The limit of $300,000 has been on the books for more than 30 years. It’s time the Legislature raised the limits to more closely reflect Florida’s real estate values.”

O’Connell said PIA of Florida is watching PIP, which is due to sunset in 2007 unless the Legis-lature addresses it in the ’06 session.

“The Senate has done an exhaustive study on what needs to change for PIP to work,” O’Connell explained. “Just looking at that study should be a reasonable indication that PIP has serious problems. With these needed reforms PIA would support the continuation of PIP, but if that doesn’t happen, we are all probably better off if it simply fades away. It’ll be interesting to see how serious the 2006 Legislature is about fixing this problem.”

PIA of Florida is also watching the national catastrophic plan. Few in Florida would argue against a need for such a plan.

“The challenge will be whether or not we can convince lawmakers outside of Florida that this need is truly national in scope,” O’Connell explained. “If we can find even one benefit coming from the widespread devastation of the 2005 hurricanes, it would be the fact that it touched more Americans than any previous natural disaster in history and it has raised the public’s awareness of a possible pending crisis.

“As the ’04 and ’05 hurricane recovery depletes the reserves of America’s insurance industry and threatens the solvency of the insurance system, the real challenge is whether insurance companies can adequately reserve for future events,” O’Connell commented. “Obviously PIA members, their customers and carrier partners all have a stake in the overall stability of the insurance system.

“Perhaps our best and only chance of making this a reality is to create a natural-catastrophe funding mechanism through a public-private collaborative effort. If we hope to provide immediate financial stability to markets in the aftermath of natural disasters, then Congress needs to act.”

O’Connell said that last spring several PIA of Florida board members visited with key staff members of Florida’s U.S. Senators and with several members of Congress in Washington, D.C.

“A discussion on the need to support and promote a national natural disaster program was a key part of our Washington agenda,” he said. “We talked about the need to generate interest outside of Florida and we left with a clear understanding that any chances of this becoming a reality were totally dependent on building support from non-hurricane-impacted states. We were successful in getting PIA National to adopt this issue as one of their legislative priorities. They are committed to use their resources towards building a national coalition behind this initiative.

“Two years ago I would have said that the likely passage of a national natural catastrophe program was nil,” O’Connell explained. “Today there is glimmer of hope.”

Looking at 2005 accomplishments
O’Connell said PIA of Florida accomplished a lot in 2005, including: Received special recognition from the National Association of Professional Insurance Agents for achieving an unprecedented 50 consecutive months of positive gains in membership.

Company survival
“Looking back after the tumultuous hurricane seasons of ’04 and ’05, it has to be considered no small achievement that companies continue to write in Florida,” O’Connell commented. “Sure, we continue to find it tougher to access new markets, but very few companies have pulled out of the Florida market entirely, and, over the past two years, only one went out of business. This speaks volumes for the industry and may, in itself, be the major success of 2005.

O’Connell applauded last year’s retooling and modernization of Citizens. “We remain guardedly optimistic that the changes implemented will result in a significant improvement in service and help them to better meet their ever-growing demand,” he said.