Florida Senate Committee Approves Bill with Sweeping Changes to Property Insurance Laws


    On March 7, 2013, the Florida Senate Banking and Insurance Committee approved SPB 7018 (the “Bill”) by a vote of 11-1.  The Bill, if enacted, would make several changes to Florida’s property insurance laws.  In particular, the Bill proposes the following changes, among others:

    • The establishment of the Florida Catastrophe Risk Capital Access Facility (“FCRCAS”) within the State Board of Administration, intended to increase the access of small domestic property insurers to additional capital for catastrophe risk coverage and alternative risk-transfer mechanisms. After an initial apportionment for its startup, FCRCAS would be funded entirely by participating insurers on a pro rata basis and perform four functions:
           o Aggregate the demand for risk finance from global capital markets among
              smaller volume domestic property insurance companies;
           o Design and execute risk-transfer tools such as insurance-linked securities and
              other securitization models for participating insurers, and use special purpose
              vehicles or protected cells, onshore or offshore, as appropriate, to increase
              access to risk capital;
           o Identify and coordinate appropriate risk-transfer products and opportunities,
              with an initial focus on the portion of the reinsurance market that provides
              layers of coverage below, alongside, and above the Cat Fund; and
           o Establish and maintain contact with global risk capital market participants,
              institutions, and investors for the purpose of satisfying and coordinating insurer
              demand for additional risk capital.
    • Bad faith claims against Citizens Property Insurance Corporation (“Citizens”), Florida’s state-run insurer of last resort, would be allowed though subject to Florida’s statutory sovereign immunity protection applicable to state agencies.
    • Insurers would be able to offer consent to excess rates to any number of policyholders in competitive counties, and up to 10% of their commercial policies and 5% of their personal policies in counties that the Florida Office of Insurance Regulation determines to lack a reasonable degree of competition.
    • Citizens would be prohibited from providing property coverage to residential dwellings with a replacement cost of $600,000 or more (down from $2 million), along with other new ineligibility standards.
    • Citizens would be permitted to enter into certain risk-sharing agreements with authorized insurers as part of agreements for insurers to remove policies from Citizens.  Under such agreements, Citizens would act as a reinsurer on the removed exposure, to incentivize removal while reducing Citizens’ overall exposure.
    • Agents submitting risks to Citizens would be subject to more stringent documentation requirements.
    • Citizens would be subject to new rating standards that require its rates to be actuarially sound and not competitive with rates charged in the admitted voluntary market.

    The goal of the Bill is to increase the availability of reinsurance in Florida and to reduce the need for consumers to seek policies from Citizens.  If enacted, most of the changes would take effect on July 1, 2013.  For a copy of the Bill, click here.

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