With Spring meetings of the Florida Legislature coming to an end in Tallahassee in May, the Florida Insurance Council has applauded House and Senate leaders for proposals supporters believe will help entice capital into the state’s cash-strapped insurance market and strengthen homes across the state against hurricane winds.
“These efforts work hand-in-hand,” Sam Miller, FIC’s executive vice president said. “Investors will be much more willing to bring capital into Florida’s insurance market when they see that we are taking bold steps such as strengthening homes to lessen the risks associated with hurricanes. Experts all agree that one of the best ways to lessen the damage from storms is to mitigate.”
Mitigation efforts play a key role in both of the big hurricane insurance packages (HB 7225 & CS SB 1980) before the House and Senate. Both bills require the Department of Community Affairs to create programs to provide low interest loans to homeowners to “harden” or retrofit their homes. FIC strongly supports these mitigation efforts in both House and Senate plans.
FIC also strongly supports elements of both plans that strengthen the building codes in Florida. Both plans repeal the Panhandle exemption from true implementation of the windborne debris regions in ASCE 7-98, adopted as part of Florida’s Uniform Statewide Building Code. The effect of the repeal would be to require storm shutters or impact resistant glass on new construction in Franklin through Escambia counties wherever recommended by the American Society of Civil Engineers, probably an average of five miles from the coast.
Market tightening
Having paid out more than $30 billion in losses over the past years in the wake of eight destructive hurricanes, Florida’s private homeowners’ insurance market is tightening. Insurers are reducing their exposure in the hurricane-prone state, leaving more and more homeowners with no alternative but to seek hurricane coverage from Citizens Property Insurance Corporation, the state-run insurer of last resort.
Even Citizens has felt the effects of the past two storm seasons as it currently faces a $1.7 billion shortfall. Homeowner policies in and out of Citizens will be assessed a fee to make up the difference. In an attempt to ward off future assessments, both bills under consideration take steps to remove some of the risk from Citizens, thereby reducing potential future losses. Both proposals remove homes valued at $1 million or more from Citizens. The House bill would become effective Jan. 1, 2007, while the Senate bill makes the high-valued homes ineligible for Citizens beginning July 1, 2011, but subjects those homes to a 25 percent surcharge on January 1, 2007.
In another move to entice capital into the market, the House proposal allows regular market insurers to compute with the surplus lines industry to cover, at unregulated rates, those $1 million-plus homes removed from Citizens. The Senate bill apparently would allow unregulated rates by standard insurers once the $1 million-plus property is no longer eligible for Citizens.
“Insurers can find investors who would be willing to bring capital into the market to insure those high-valued homes,” Miller said, “but only if they could have the flexibility to charge a competitive rate, reflective of the risk.”
FIC supports this incentive plan.
Topics Florida Hurricane Homeowners Market
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