TAMPA - It's one of the scariest pieces of mail a Floridian can receive: notice that your homeowners insurance won't be renewed. Good luck finding a new carrier.
That's what greeted Frank and Susan Fucci one day in October. Their premiums on their new manufactured home had tripled since they retired here from northern Virginia in 2002. If they couldn't find a private insurer, they would face far more expensive premiums in the state-run Citizens Property Insurance Corp.
"It's an extremely harrowing experience trying to get coverage at all," Frank Fucci said Friday.
He found a new carrier, but his anxiety prompted him to write to a number of political candidates to ask what they intend to do about the problem. When lawmakers meet Jan. 16 for a special session devoted to property insurance, Fucci, a former financial analyst, will be watching.
"We need some out-of-the-box thinking. I think we need some radically different approaches to the property insurance problem," he said.
Don't count on it. Insurance industry executives are managing expectations that the session can lead to premium cuts.
"Rate reductions I think, are not an expectation that we would be putting out there at all," said Julie Pulliam, spokeswoman for the American Insurance Association. "The risk is still there. The Legislature cannot do anything to pass a law to get rid of the hurricane risk in Florida."
A committee appointed by Gov. Jeb Bush has offered 50 recommendations to reform Florida's insurance market. Whether any of those can lead to premium reductions is up for debate and it's not clear how many ideas can muster enough votes to pass.
There should be a consensus on increasing the state support for mitigation programs for homes that could reduce damage in future storms. Lawmakers also are expected to change the state's catastrophic fund, triggering its availability somewhere less than the current $5.3 billion in damages.
Neither would have an immediate effect on rates. Lawmakers can eliminate some future rate increases by repealing provisions from this year's hurricane bill, said state Sen. Steve Geller, D-Hallandale Beach.
150 Percent Citizens Increases
Citizens policyholders face 150 percent premium increases over the next three years under one provision in the 2006 legislation, which passed on the last day lawmakers met in May. A separate provision allows some policies to increase as much as 10 percent a year without state approval.
"There's no ifs, ands or buts," said state Sen. Mike Fasano, R-New Port Richey. "Those provisions must be repealed or businesses are going to go out of business and people are going to lose their homes."
By law, Citizens must charge rates higher than private insurers. If the Citizens increases survive, private policyholders soon would face similar rate hikes, Fasano said.
Although some legislators defend the bill, a majority will favor repeal because their constituents are demanding it, he said.
Some of the bill's defenders, though, sat on the governor's committee, Geller said. "The rest of the panel consisted primarily of insurance company officials."
Some recommendations before lawmakers would increase the deductibles policy holders would have to pay in future storms. Others reduce the amount of coverage private companies could offer.
Unfortunately, there's no place lawmakers can look to as a model.
"You're more the laboratory than any state is for you," said Candace Thorson, deputy executive director of the National Conference of Insurance Legislators. "There's no state that's been in your situation."
One proposal on the table could be the "radically different" idea Fucci hopes to see. The governor's committee recommended changing the collateral requirements facing foreign reinsurance companies wanting to do business in Florida. Reinsurance is coverage private insurers buy to spread the risk of their policies. The cost of those secondary policies is passed directly to property owners.
Currently, foreign companies must establish credit lines equal to their liabilities. That cost may keep foreign companies out of the market.
Geller, a past president of the insurance legislators' conference, and state officials have pushed for years to reduce that collateral and insist it will lead to more competition and lower rates.
"They told us if we made these changes, costs will go down and availability will go up," Geller said.
Domestic reinsurance companies disagree. Reducing the existing collateral requirements would place U.S. companies, which are licensed by each state they operate in, at a competitive disadvantage. Also, they say, it likely won't work.
"I have not spoken to any underwriter who says reducing collateral will increase insurers willing to assume catastrophic risk in Florida," said Dennis Burke, vice president for state relations at the Reinsurance Association of America. "It's a red herring. It has nothing to do with how much money people are willing to expose."
Swiss Re, one of the largest and most profitable reinsurance firms that does not sell reinsurance in Florida, wouldn't commit.
"It's difficult to determine whether a reduction of collateral will bring about increased capacity and affordability to the Florida catastrophe market," vice president Debra Hall said in a statement. "Even if it did free up capacity, there is no assurance that the capacity would be deployed in Florida. Similarly, there is no assurance that reduction of collateral would translate into cost savings for insurers or consumers."
One Point Of Agreement
There's disagreement over what might stabilize the insurance market, but no one disputes the issue's complexity. "There's no magic bullet" is a cliche uttered by advocates on all sides even as they appear to recognize the problem is getting worse for property owners.
Citizens, the state's insurer of last resort, has 1.3 million customers, said spokesman Rocky Scott. That's up from 860,000 a year ago.
What that means is that private insurers still are fleeing the Florida market in droves. Though Florida officials have been touting a state program to fortify homes against storm damage, it's moving slowly.
The Legislature created the Florida Comprehensive Hurricane Damage Mitigation Program in May and provided $250 million in funding. It began operating in August, and homeowners are eligible for free inspections and possibly grants of up to $5,000 to make fixes.
The program still hasn't given out any grants, though, said Jeff Takacs, a spokesman for the Florida Department of Financial Services. There's also a backlog of more than 45,000 people waiting for free inspections, which still aren't available in many counties.
The process likely will speed up as more inspectors are certified and trained, but it isn't clear how much mitigation will save the average homeowner.
That's a feel-good measure that can reap some long-term benefit, but it would take a greater state role in rate regulation and an enhanced catastrophic fund to reduce rates, Geller said. To get there, lawmakers may have to choose which is more important - adherence to a belief that a free market and limited regulation works best, or accepting the state's involvement to bring relief to property owners.
Fucci's expectations aren't very high.
"I'm not optimistic they're going to make the hard decision to benefit the citizenry at large," he said. "I think it's going to get a lot worse before it gets better."