High-risk policies, reinsurance hobble Citizens debate

Article Courtesy of The Palm Beach Post

By Michael C. Bender, Dara Kam And S.V. Date
Published  January 20, 2007

TALLAHASSEE Lower property insurance premiums in Florida are at least another day away after state lawmakers spent Friday debating immediate relief for Citizens Property Insurance customers vs. potential long-term problems for the insurance market.

Two Palm Beach County legislators - from the same party and who represent some of the same people - found themselves on opposite ends of the argument over whether rate relief from the state-run insurer needed to be finished by the end of the special session on Monday, could wait until the regular session or if details could be left to the governor and Cabinet.

While the House and Senate ironed out dozens of minor differences, the main sticking point continued to be over a Senate proposal to allow Citizens to write multi-peril policies and get free reinsurance, which it currently purchases from the state Hurricane Catastrophe Fund for about $400 million per year.

The proposal from Sen. Jeff Atwater, R-North Palm Beach, could save Citizens customers as much as 23 percent off their 2006 premiums.

But House members, including Rep. Adam Hasner, a Delray Beach Republican who lives in Atwater's Senate district, said such a move would lead to a huge expansion of Citizens - which they reject - and create rates too low for private insurers to compete.

"You're not going to see me get misty-eyed," Atwater said about the criticism, which came from both parties in the House. "The private market walked out of coastal Florida a long time ago. We're only trying to offer relief to the people they already left at our doorstep."

House members, however, chipped away at the proposal by questioning the long-term effects.

"The most important thing is that we're still committed to meaningful, responsible rate relief and we just believe expanding the role of Citizens is not something that should be done in special session," Hasner said. "And if we're going to expand this business, there should be a business plan in place."

But Crist, along with many in the Senate, wants a bill before the end of the special session on Monday that cuts rates for all homeowners - whether privately insured or Citizens customers.

House members, who are close to an agreement with the Senate to cut private premiums by giving insurers cheap reinsurance, want to spend more time reorganizing Citizens before they'll agree to changes that would result in lower rates.

"I want to make sure Citizens customers get rate relief," Hasner said. "But if we're going to make fundamental changes to Citizens, I want to make sure we don't make a bigger mess.

Atwater said reluctant lawmakers should recognize voters are clamoring for action.

"They need to realize before they depart on Monday that there are going to be thousands of people with high expectations that they did something to provide immediate relief to the Citizens policyholders," Atwater said.

Friday's negotiations started early and went late as lawmakers publicly finalized dozens of issues and privately debated what to do with Citizens and how to give private insurers cheap reinsurance from the catastrophe fund.

Chief among their compromises Friday was an agreement to require companies that sell property insurance in other states to sell it in Florida if they want to offer car insurance here.

Legislators also agreed on proposals to prohibit insurers from dropping policies 100 days before hurricane season and to allow some homeowners - mostly those who own their homes outright - to go without wind coverage.

The proposal that would force auto insurers to sell hurricane coverage in Florida if they sell it elsewhere is intended to give consumers more choices for getting hurricane insurance, and was a central issue of Crist's campaign last year, but lawmakers acknowledged it might not immediately lower premiums.

After one meeting concluded at 7 p.m., conference committee co-Chairman Sen. Bill Posey reminded senators of a final 9 p.m. meeting with House committee members. A bleary-eyed Sen. Jim King, R-Jacksonville, asked whether everyone would be required to attend.

At the late meeting, Posey accused the House of refusing to make any concessions regarding Citizens or the catastrophe fund and threatened to start from ground zero today if they didn't compromise.

Rep. Ray Sansom, R-Destin, responded, "We can start over but we've agreed to a lot."

The meeting adjourned shortly before 10 p.m. with the two sides agreeing to continue negotiations today.

Throughout the day Friday, one idea privately and intensely negotiated among lawmakers was to make any changes to Citizens dependant upon a detailed business plan being approved by the state Board of Administration, which includes the governor, chief financial officer and attorney general.

Crist, however, continued to say that the legislature should let Citizens compete for all policies statewide as the best offer for Floridians and bristled at the idea of waiting for a business plan to do so.

"It's not complicated," he said in a rare display of anger. "I want them to run like a business. ... It's not complicated. It's not complex. It is simple."

Crist also criticized another House talking point that purports Citizens to be the worst insurance company in the state and therefore should not get to play a larger role.

The governor pointed to the 83-year-old widow in Pensacola he cited in his inaugural address whose State Farm policy went from $1,000 to $5,000.

"Guinevive doesn't think (Citizens) the worst company," he said. "I think she thinks State Farm is the worst company."

House members also criticized Atwater's plan, saying it could jeopardize Citizens' tax-exempt status, which is based on the agency's mission as an insurer of last resort. A reversal of its tax exemptions would put Citizens on the hook for millions of dollars.

Atwater acknowledged the possibility and said lawmakers had not received a legal opinion on the question. But he believed Citizens would not be hurt by the changes.

"There is nothing we've changed saying Citizen's mission is still not to serve those who are in a desperate situation," Atwater said.

Lawmakers also negotiated whether to find between $400 million and $500 million in the state general fund to offset Citizens' cost of purchasing reinsurance.

One proposal from Rep. Jack Seiler, D-Wilton Manors, was to loan the money to Citizens.

Crist declined to spell out exactly how big a rate cut he needed to see in a final bill on Monday, or how a premium reduction should be handled for customers of Citizens.

"I don't want to do any ultimatums today," he said. "Hopefully there won't need to be a time for that."