E. GARCIA AND MARY ELLEN KLAS
Florida's largest insurance company can't afford to cut rates unless taxpayers pay for it.
That's the conclusion legislators have reached in the final days of a special insurance session to seek rate cuts for Citizens Property Insurance policyholders and other homeowners statewide.
A proposal floated Friday would give customers of state-run Citizens a rate cut of 10 percent to 20 percent.
The cost: possibly $400 million to $500 million from budget reserves, the state's biggest subsidy yet.
Other proposals that would provide customers of private insurers similar rate rollbacks were being fleshed out Friday. But lawmakers did resolve differences on several plans designed to give homeowners more choice and control over their insurance premiums.
Among provisions on which there was agreement: Insurers will be required to give specific credits on premiums when policyholders strengthen their homes; homeowners will be allowed to reduce rates by buying less coverage than their home's value; and insurers can no longer deny coverage based on the age of a home.
The proposal to bail out Citizens and provide real rate relief to its policyholders surfaced late Thursday and was continuing to be worked out Friday. It calls for Citizens' reinsurance to be paid out of state reserve funds.
Sen. Jeff Atwater, a North Palm Beach Republican, said the added cost to the state is justified, given homeowners' financial straits. ''They're on their knees,'' he said. "They are in pain beyond belief.''
Citizens policyholders also would see a rate freeze for one year and dodge two rate hikes: the nearly 56 percent rate increase due in March and the 25 percent rate hike that was due to kick in in January. For some homeowners in South Florida, this would have meant a nearly 100 percent increase in 2007 windstorm rates.
But giving Citizens such a big handout troubles a number of lawmakers.
Rep. Don Brown, R-Defuniak Springs, said the Citizens bailout, as well as proposals in the House and Senate to provide additional, less expensive reinsurance to private insurers, could create ''a huge unfunded deficit'' for Florida.
How to fund the reinsurance payment for Citizens was a major detail yet to be worked out late Friday. Possibilities included waiving it entirely, paying it up front from state coffers or paying it after a massive storm with a tax on all Florida residents or homeowners.
The upside is real savings for Citizens, which the company says it would pass on entirely to policyholders. The downside is that it diverts state funds from other uses.
''We have to really hope that we don't have a bad storm season'' this year, said Dan Gelber, a Miami Beach Democrat and House minority leader.
Based on numbers drawn up by Citizens' actuary, consumers who buy all their homeowners coverage from Citizens would see a drop of about 10 percent in their total premium.
Homeowners who buy only windstorm coverage from Citizens could see a decline of about 20 percent.
If the House goes along with a Senate plan to let Citizens write fire and theft coverage -- especially for policies in the designated wind-pool area -- the rate reduction could be slightly higher. But homeowners would have to accept Citizens as their sole insurer to reap the premium savings.
The notion of expanding Citizens has few fans in the House.
''Citizens has been a nightmare for a lot of us,'' said Rep. Jack Seiler, a Wilton Manors Democrat. "Why do you expand something that's been a nightmare?''
House Speaker Marco Rubio earlier this week called Citizens "the worst insurance company in the state of Florida.''
Gov. Charlie Crist, however, backs the idea.
Crist continued to pressure lawmakers Friday, calling three homeowners who have written him to complain about their soaring premiums.
''I'm pleased by the general movement of things,'' Crist said. But he warned lawmakers to remain vigilant against what he called the powerful insurance lobby. "We are up against a significant force.''
Legislators gave Crist one major victory Friday, when they agreed to his proposal to prohibit companies from writing auto insurance in Florida if they write homeowners insurance in other states but won't write it here.
However, legislators working to reconcile attempts to offer savings to customers of private insurers discovered proposals on the table may fall short for the state's largest private carrier, State Farm.
The Florida subsidiary already relies on its parent company to buy backup insurance and wouldn't be interested in buying Florida's offer of reinsurance, in return for a 25 percent rate reduction, unless the price is low or free.
State Farm, for its part, says that if the state-offered reinsurance is less expensive than what it buys from its parent company, "we will take advantage. Whatever savings there are, we will pass 100 percent of these savings on to our customers.''
Ensuring all homeowner policyholders get rate relief remains the priority as the special session winds down.
''We might come to a resolution [on] Citizens, we might come to resolution on the [catastrophe] fund, but unless we find resolution on State Farm, the governor indicated he's not going to take it,'' Seiler said.