Florida Citizens insurance rate freeze rejected
The House bill would raise premiums to keep the company solvent.
By Brandon Larrabee
TALLAHASSEE – The House turned aside proposals Thursday to continue a freeze on premiums for customers of taxpayer-backed Citizens Property Insurance Corp., setting the stage for a vote on a sweeping property insurance bill today.
The defeat of the rate-freeze amendment, on a 76-40 vote, came as lawmakers considered legislation that supporters say is critical to keeping insurance companies financially stable and to prevent further damage to the state’s battered housing market.
The measure would increase Citizens premiums by an average of 10 percent a year statewide until the rates were high enough to stabilize the state-owned company. It would also eliminate $12 billion in optional coverage offered to private insurance companies by the Florida Hurricane Catastrophe Fund.
State officials say the fund is oversold and could come up billions of dollars short if a major hurricane slammed into the state.
Not allowing any changes could wreak havoc on the state’s property markets, supporters say. One rating agency has threatened to downgrade insurance companies that depend on the Catastrophe Fund, a move that would make it more difficult to obtain a mortgage in Florida.
The Citizens rate freeze, put in place after the devastating 2004-05 hurricane season, was set to expire at the end of the year; continuing it would leave the company tottering on the edge of financial insolvency, supporters of the changes say.
If the state-backed company is unable to pay its bills, an assessment could be tacked onto every property insurance policy in the state.
"When the storm happens, your constituents and my constituents, when they get that big assessment on their policies, they’re going to scream at you," said Rep. Bryan Nelson, R-Apopka, a sponsor of the bill. "We don’t have the money to cover Citizens claims, we don’t have the money to cover the CAT funds claims. We have just been extremely lucky."
But lawmakers who fought for the rate freeze said Floridians were already struggling to pay their bills in the middle of one of the worst economic downturns since the Great Depression.
"The reality of right now is our citizens cannot afford more increases in their property insurance bills," said Rep. Evan Jenne, D-Dania Beach, who offered an amendment extending the freeze until the end of 2012. "I don’t disagree with the premise. I disagree with the timing."
Rep. Mary Brandenburg, D-West Palm Beach, said she had heard plenty from voters worrying about the possibility of dramatic increases in property insurance premiums.
"I haven’t had a single letter from somebody saying they’re lying awake at night worrying about the financial soundness of the CAT fund," she said.
The House is expected to take a final vote on the measure as soon as today. The Senate is expected to take up a similar bill soon.