Special session to cover insurance

There may yet be insurance relief for homeowners and businesses.

A special legislative session will be held in January to begin efforts to address the insurance crisis in Florida, Governor-elect Charlie Crist and legislative leaders announced Wednesday.
Special session

Insurance proposals up for consideration

• Increasing the size of state program to offer grants and loans to help residents make their homes more resistant to hurricanes, reducing potential losses from a major storm.

• Allowing insurers to buy more reinsurance -- insurance for insurance companies -- from the state's hurricane catastrophe fund.

• Allowing Citizens Property Insurance Corp. wind-only policyholders to also buy their fire and theft coverage from Citizens rather than from private companies. Citizens officials are currently required to take on only high-risk wind policies and send the more profitable fire and theft lines to private companies.

• Increasing funding to a state program that provides low-cost loans for start-up insurance companies or existing companies that agree to take on more policyholders.

• Allow consumers to buy homeowner insurance policies without coverage for destruction of furniture and other personal belongings.

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The news comes as a relief to thousands of Floridians who have faced steady increases in insurance premiums since 2004's and 2005's vicious back-to-back hurricane seasons. Though observers caution against high hopes of significant change, it at minimum provides a forum for leadership to try to solve one of the state's most vexing issues.

Gov. Jeb Bush, who leaves office on Jan. 2, raised the possibility of a special session months ago.

However, as recently as last week, Bush said he saw no point in pulling legislative leaders together to deal with insurance issues unless they were in agreement on a course of action. As of Wednesday, there was no such agreement.

Instead, Bush put the 50 recommendations developed by the Property and Casualty Insurance Reform Committee he created into a bill to be considered during the special session that begins Jan. 16.

The scheduling of the session follows an announcement earlier this week that a conference on property insurance would be held in Tallahassee next week to educate legislators on "fundamentals that drive the property insurance issue."

Any real change would happen at the special session. ''I hope the report and draft legislation will serve as a starting point for consensus and swift action in January,'' Bush said. ''No time should be lost in stabilizing the marketplace for consumers," he said in a statement.

Crist, Senate President Ken Pruitt, R-Port St. Lucie, and House Speaker Marco Rubio, R-Miami, offered no specifics as to how they plan to reverse rising rates and get private insurers to start writing policies again. The announcement of a special session was made in a statement without any of the men making themselves available for interviews.

There are no shortage of ideas to tackle the property insurance issue, but that may be part of the problem in reaching agreement during the special legislative session.

''Gov. Bush's insurance reform task force came up with 50 proposals and then each of the 160 legislators has their own idea as to how to solve the problem,'' said Sen. Bill Posey, R-Rockledge, who is serving as Pruitt's point man on insurance.

Posey also wasn't optimistic that a special session could led to lower rates in the near future. He said only one thing is certain: "Absolutely, positively, there is not a silver bullet that we are going to do, that will lower rates.''

What lawmakers need to do during the special session is start developing consensus as to proposals that can be agreed on quickly and implemented soon, Posey said.

He also said that recommendations from Bush's task force, such as allowing insurance companies to buy more reinsurance from a state fund to hedge their risk or expanding a grant and loan program for homeowners who hurricane-proof their homes, would be a good start in fixing the property insurance marketplace. Such a fix will provide consumers lower rates in the long term, he said.

The state fund, called the Florida Hurricane Catastrophe Fund, sells reinsurance at lower rates than private-market companies.

Crist, a Republican, made lowering property insurance rates one of key parts of his gubernatorial platform. He reiterated that commitment and the need for a special session in the joint statement issued Wednesday.

"Florida families are suffering from the devastating effects of skyrocketing rates and cancelled insurance problems, and they desperately need relief,'' Crist said. "I am optimistic that we can find solutions that will address not only our immediate needs, but will also yield a better system to address future storms that are predicted to make landfall in Florida."

Posey said he is concerned about Crist's plan to require insurance companies that want to sell auto insurance policies in the state also to write homeowners policies, saying the effect would be to increase the exodus of homeowner insurers from Florida.

Crist said he wanted to limit the ability of insurance companies operating in the state to "cherry-pick," selling the most profitable types of insurance and cancelling those with greater risk.

Meanwhile, Democratic leaders expect more support for their plan to make the state the primary insurer of the bulk of the first $100,000 of hurricane damage to a home.

State voters gave Democrats seven new House seats in the election this month, which means Republicans now hold a 79-41 majority.

"The House was jolted by this last political season because people were talking about dinner-table issues like wind insurance rates," said Minority Leader Dan Gelber, D-Miami Beach. "Political reality is coming fast upon our Republican colleagues and I suspect they will continue to move closer to our position."

Crist has met with Democrats since being elected after criticizing various proposals on the campaign trail.

But one insurance industry official says politicians from both sides of the aisle are misleading Florida residents about lower property rates.

Bob Hartwig, an economist with the Insurance Information Institute, an industry-funded group, said politicians are offering home and business owners false hopes that rates will go down. As development of the Florida coast line continues, insurers face the potential of higher and higher losses from a major hurricane, Hartwig said.

''In reality, short of towing Florida to the North Atlantic Ocean, there is nothing that can change the path of higher losses from hurricanes,'' he said.

The 2006 hurricane season passed without major incident, but in a best-case situation, there would be several more windstorm-free years, he said. Only that could lead to a stabilization of rates, said Hartwig. However, he added that such a positive weather cycle doesn't negate the overall forecast of an increased hurricane cycle during the next two decades.

Critics say that past legislatures have done what the insurance industry has wanted and it has not stabilized the situation. They argue that by giving in to insurers, the government has unwittingly created an environment beneficial to the industry and onerous to state residents.

For instance, under state law, Citizens Property Insurance Corp., the state-run insurer of last resort, is required to charge the highest rates of any insurer so as not to compete with private companies. Although that might have made sense at one time, many insurers have fled anyway, leaving Citizens as the only game in town for a lot of homeowners.