Florida Senate’s Insurance Fix Hinges on Changes to Citizens

Owners of homes worth more than $1 million could continue to get hurricane coverage from state-run Citizens Property Insurance until 2011, but would pay a 25 percent surcharge for their coverage under a measure approved Friday by a Senate panel in Tallahassee, Fla.

Some part-time residents could also see surcharges to help blunt losses to Florida’s insurer of last resort under the bill.

It’s part of the Legislature’s effort to ease the financial impact on homeowners following two years of beatings from hurricanes. It’s not just the hundreds of thousands who are seeing their premiums go up, all Florida homeowners are paying more because they’re being assessed to cover losses at Citizens.

Two types of homes, both symbols of life in Florida, are a key part of the effort to ease the financial burden of back-to-back hurricane batterings.

Coastal vacation homes, many of which are over or closing in on $1 million in value and therefore expensive to replace, have become virtually uninsurable by private insurance companies. That means many of those homeowners must turn to Citizens, which in turn drives up losses that all Floridians are underwriting.

And mobile homes, the enduring symbol of generations of snowbirds and middle-class retirees, don’t stand up very well in the strongest winds. Citizens now covers most of them, too.

Under the Senate’s wide-ranging hurricane insurance bill (SB 1980) some part-time mobile home owners without homestead exemptions, snowbirds, also could be asked to pay more to help soften losses to Citizens. The measure puts a 25 percent surcharge on Citizens customers in non-homestead property that isn’t someone’s principle residence.

Many of the owners of the state’s 800,000 mobile homes are seeing their private insurance canceled and are turning to Citizens. Since Citizens has higher rates than private companies, insurance is getting very tough to afford for mobile home owners, Nancy Stewart, a lawyer for the Federation of Manufactured Home Owners of Florida said.

Tacking a 25 percent surcharge on top of that won’t be good for middle-income or retired part-time residents, she said.

“We’re desperate now,” said Stewart. “It’s only going to be more desperate.”

The committee rejected an amendment that would have denied Citizens coverage altogether to new mobile home owners who aren’t already in Citizens.

Sen. J.D. Alexander, R-Lake Wales, said the state needs to encourage people to live in stronger homes, not mobile homes.

“We need to be careful of creating incentives that push people toward less wind-worthy structures,” Alexander said.

The focus of the bill is reducing Citizens’ losses because they affect all Florida homeowners, who are paying a 6.8 percent assessment on their own insurance to bail out Citizens. That is expected to go higher, Citizens has an estimated $1.7 billion deficit from 2005 losses.

One thing the bill won’t do is reduce premiums. For some residents, it is likely to increase them in the short term, lawmakers acknowledge. In a way, reducing premiums and avoiding the high Citizens assessments are mutually exclusive.

Many experts and lawmakers say private insurance rates actually aren’t high enough in Florida, which is why so many companies are refusing to write policies, leading Citizens to have to cover more people.

Thus, if rates are too low, assessments will have to go up after hurricanes because companies won’t have enough to pay losses and will tap into the state-backed reinsurance account known as the Catastrophe Fund, or leave the state sending more people to Citizens.
Which leads to another aim of the bill: avoiding hurricane losses altogether by strengthening homes.

While reducing the number of Citizens policies and thereby deficit assessments is the top goal of the bill, it also creates a program for inspecting and retrofitting vulnerable homes, although it doesn’t yet include any money for the program.

“We can lower costs if we invest heavily in mitigation in this state and that’s really the most important thing,” Rade Musulin, the chief actuary at Florida Farm Bureau Insurance said.

Another idea is to create incentives for private insurance companies to take on more policies in Florida. But a measure that would have made it easier for small companies to tap into the Catastrophe Fund was removed from the bill when some lawmakers balked at having taxpayers underwrite the companies’ risk.