Florida’s Adding to Citizens’ Risk Worries CFO Sink
Florida lawmakers rolled the dice again on May 1, signing off on a new insurance bill that does little to alleviate Florida’s risky stakes in the marketplace, according to industry executives and many lawmakers. A big piece of the legislation extended a rate freeze for another year for the state-backed Citizens Insurance’s 1.2 million customers.
“Citizens is getting deeper in the hole,” said Sam Miller, of the industry’s Florida Insurance Council. “They clearly don’t have the money now to pay its claims if we have a hurricane.”
Senators passed the bill (SB 2860) on a 33-5 vote, several hours after it passed the House. Gov. Charlie Crist has supported some measures in the bill, including tougher regulatory measures.
The bill means all car or homeowner policies will be assessed if a catastrophic storm hits and the state is unable to meet financial obligations.
“We’ve made a conscious decision to accept the risk,” said Jeff Atwater, R-North Palm Beach, who sponsored the bill.
Also in the bill: increasing from $1 million to $2 million the maximum price of a home that can be covered under Citizens. That move worries the state’s chief financial officer, Alex Sink, who is concerned about covering the more expensive homes because that means the state takes on more risk. Sink has also warned about the potential for Citizens’ customers facing a dramatic premium increase once the moratorium on its rates expires.
The measure, however, does provide incentives for new companies to enter the lucrative but risky Florida market by offering low-interest loans for start ups.
The bill doubles maximum fines for insurers that violate state law. By abolishing arbitration panels it also makes it harder for insurers to hike rates after being denied increases by regulators. Moreover it extends to January 2010 a provision that requires insurers to get state approval before raising property insurance rates. Insurers must also notify regulators 90 days before they can drop more than 10,000 homeowner policies in one year.
Since lawmakers passed the bill last year, the state has denied dozens of insurers’ rate increases.