Fla. Session Day 1: Expanding State’s Hurricane Cat Fund Tops the Agenda

When Florida House Speaker Marco Rubio and State Senate President Ken Pruitt slammed their gavels in opposite sides of the Florida Capitol Tuesday signaling commencement of a special legislative session, the hopes and dreams – and affordable house payments – of an entire state hung in the balance, and the eyes of the nation looked on.

After prayers, pledges of allegiance and moments of silence, senators and congressmen went their separate ways to begin the arduous task of reining in insurance costs for constituents protesting just outside the door. They came to Tallahassee in busloads demanding that their elected representatives speak the language of reform.

The Senate Banking and Insurance Committee chaired by Sen. Bill Posey, R-Rockledge, work-shopped Senate Bill 4-A, termed “Hurricane Preparedness and Property Insurance.”

The bill, if passed would offer insurers additional coverage under the Florida Hurricane Catastrophe Fund up to $3 billion below industry retention of an estimated $6 billion for 2007 and 2008. The CAT Fund is a tax exempt trust fund created in 1993 after Hurricane Andrew as a form of mandatory reinsurance for residential property insurers.

“This is the biggest part of the rate reduction in this bill,” said Sen. Steve Geller, D-Hallandale. “We can’t go home without doing this.”

The Florida Hurricane Excess Loss Program was also highlighted in the bill, which would create premium savings for residential property insurance policyholders by limiting the liability of property insurers for amounts above those covered by the CAT Fund by the state assuming liability for 90 percent of such losses up to a 250-year probable maximum loss event.

For Citizens Property Insurance Corp., the state’s insurer of last resort – and now the states largest insurer – SB 4-A would delete the requirement that its rates be non-competitive and no lower than the top 20 insurers operating in the state.

The bill would also rescind an approved rate increase that took effect on Jan. 1, and require Citizens to refund any monies paid by consumers on the increase. Rates would be frozen at the Dec. 31, 2006, level, holding through 2007.

The so-called Panhandle exemption on Florida Building Code would be eliminated under the new proposal mandating stricter codes and allowing consumers in extreme Northwest Florida to enjoy discounts based on higher building standards.

On the other hand, some modifications are proposed in coverage exclusions and deductibles such as the option to exclude windstorm coverage, pending lender approval.

The new bill would also clarify local government authority to form self-insurance funds for property insurance; authorizing the use of bond proceeds to finance property coverage and claims.

In regard to reinsurance, which many say is the root cause of high insurance premiums, the bill would authorize the Office of Insurance Regulation to lower the deposit requirement for reinsurers licensed in other countries.

The special session on insurance, continued today at 8:30 a.m., is expected to last up to seven days.