A proposal that could increase property insurance rates by sheering off some bulk in the state's Hurricane Catastrophe Fund was hit by a bipartisan front in the Senate on Tuesday.
Sen. Alan Hays (R-Umatilla), agreed to postpone his bill, SB 1262, after an amendment to block the downsizing by Sen. Jeremy Ring,(R-Margate) was supported 7-5 by the Senate Banking and Insurance Committee.
The postponement doesn't necessarily mean the end of the effort to reduce the backup insurance fund, but considerably slows it.
"We cannot afford to kowtow to the reinsurance market," said Jay Neal, executive director of the Florida Association of Insurance Reform. "The effort is very much alive. It's going to be pursued much more aggressively than it has been. This is not done."
Committee Chairman Sen. David Simmons (R-Maitland) couldn't say if the bill will be revived this session. Meanwhile, the House companion, HB 1107, has received favorable support from the Insurance & Banking Subcommittee, but is being repackaged into a substitute bill that must still proceed through three committees.
Opponents of Hays' bill pointed to proposals that have already been advanced this session that could increase rates for customers of the state-backed Citizens Property Insurance Corp., and noted that the catastrophe fund has been deemed actuarially sound by state economists.
"I don't think we should be doing anything," said Sen. Tom Lee (R-Brandon). "I think what we've already done in Citizens, that's going to increase insurance rates, is enough for this session."
The catastrophe fund provides state-backed reinsurance for property insurers to help maintain lower-cost coverage for policyholders. If its top limit of coverage is reduced, rates likely would rise.
Hays' proposal is to reduce the fund from $17 billion to $14 billion over three years. The bill also would change its name to something expected to be more palatable to bond underwriters: the less ominous but more bureaucratic State Board of Administration Finance Corp.
Currently, the state has about $8 .6 billion in reserves available to repay insurers if a storm hits. Florida would have to borrow the additional amount, up to $17 billion, recouping the money through increases to all property owners.
"It's a matter of having less exposure to the people of Florida," Hays said. "So the difference between that $17 billion and the $8.6 billion is what we'll have to borrow if the right storm hits."
All insurance companies that write property coverage in Florida must participate in the CAT fund, and the bill would reduce the maximum amount of the mandatory coverage, while also increasing the co-pays for insurers. The coverage the CAT fund sells to insurers is far less expensive than private reinsurance, helping to keep the cost of property insurance lower in Florida than it otherwise might be.