Florida lawmakers eye post-storm insurance overhaul

By Michael Peltier
Wednesday, January 17, 2007; 12:35 PM

TALLAHASSEE, Florida (Reuters) - State lawmakers looking to overhaul Florida's troubled property insurance market are wrestling with proposals that would give the state government a much bigger role in insurance.

Eight hurricanes caused more than $30 billion of insured losses in Florida during 2004 and 2005, created tumult in the state's property insurance market and drove up rates so dramatically, they became an issue in last year's election.

Leaders of the Republican-run state legislature said they agree on "90 percent" of House and Senate reform bills expected to be grist for final insurance legislation over the next several days.

But Florida legislators remain far apart on whether to allow a state-run insurer to compete more broadly with private property insurance companies and whether the state should take on more exposure to potentially catastrophic insurance losses.

Both chambers began a special session on Tuesday aimed at rolling back rates for 1.3 million policy holders of Citizens Property Insurance Corp., a state-run pool that provides hurricane coverage to coastal residents unable to obtain insurance from the private market.

The rollback would reduce proposed premium increases by nearly 70 percent, backers calculate.

The House and Senate plans also propose expanding the state government's hurricane catastrophe fund by reducing the threshold private insurers must pay out to $2 billion from $6 billion.

That change would lower risk to private insurers, who would then be required to pass those savings on to consumers. Backers say homeowners could see savings of 25 percent.

Two major bones of contention remain.

Florida's new Republican governor, Charlie Crist, and Senate leaders want Citizens Property to go head-to-head with private insurers by offering competitive rates and providing theft and other lucrative types of homeowner coverage.

Private insurance companies, many of whom have cut back or limited homeowners polices since 2004 and 2005, oppose an expansion of coverage by Citizens. Citizens now only offers wind coverage in high-risk areas of the state.

Crist and Senate lawmakers also want to set up a taxpayer-financed insurance pool that would kick in for storms with insured losses in excess of $22 billion.

That proposal would reduce reinsurance rates for private insurers, but would put Florida taxpayers on the line for up to $60 billion in the event of a storm so strong it would be seen only once in 250 years. Backers say chances of even a 50-year storm were remote and would cost taxpayers about $4 billion.

House leaders question the need for that change and say the proposals put the government into a precarious situation should a monster storm hit. They also question the philosophy of thrusting the state into the private insurance market.

Committees in both chambers were to meet again on Wednesday to formally approve their respective plans and send them to their full chambers for consideration. Once each chamber approves its respective plan, conferees will take over and an agreed bill would then be voted on by each chamber.

The session is scheduled to run until Monday, but could be concluded early, especially if lawmakers agree to focus only on issues that provide immediate relief while leaving other issues until they return for a regular annual session in March.

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