State lawmakers’ push to reduce the size of Citizens Property Insurance Corp. by luring unregulated out-of-state insurers hit a major speed bump on Tuesday.
Consumer-focused lawmakers approved an amendment to the so-called surplus lines bill (HB 245), forcing insurers to get a signature before taking over a policy.
For homeowners with Citizens Insurance, that means they will only end up with a surplus lines carrier if they proactively choose to do so. That’s if the bill passes. Before state representatives could vote to send it to the governor, bill sponsor Rep. Jim Boyd, R-Bradenton, opted to temporarily postpone it.
Consumer advocates say the “opt-in” amendment is crucial because surplus lines insurers don’t have the same protections as licensed carriers in the state.
"This bill is still bad news for policyholders, but at least now Floridians will have a right to review offers from unregulated surplus lines carriers," said Sean Shaw, president of Policyholders of Florida.
Proponents of the original bill say the amendment amounts to a “straight jacket” that strips down the bill and will discourage private insurers from coming to Florida’s hazard-prone market.
“With this amendment on, I don’t think a surplus company is going to come in,” said Sen. Garrett Richter, R-Naples who is sponsoring the bill. “I think they’ll put their capital elsewhere.”
With 1.5 million policies, Citizens is the state’s largest insurer, and industry fiscal hawks say a major hurricane could sap its resources. Many private insurers have shunned Florida because of its precarious position between the Gulf of Mexico and the Atlantic Ocean. Richter and Boyd pointed out that the original bill had plenty of consumer protections—including a $50 million surplus requirement and a solid financial rating.
A bipartisan coalition in the Senate and the House disagreed, voting to add additional language requiring consumers to approve the policy takeover with a signature.
Before the amendment, the proposal was expected to affect up to 50,000 of Citizens’ 1.5 million policyholders. Now, it’s not clear whether it will even pass.
Boyd said that with the amendment, the bill “might as well be dead.”
Several South Florida lawmakers voted in favor of the amendment in the closest vote on the House floor this year. The measure passed 63-52, with support from nearly all Democrats and nearly a third of House Republicans.
“The policy holders of Florida won,” said Rep. Frank Artiles, R-Miami, who was critical of the original bill when it passed the House last month. “At the end of the day, they were represented. We did the right thing.”
With three days left in the legislative session, it is not clear whether Boyd will bring his pared-back bill back up for a full vote in the House.
With little legislative help in its effort to slim down, Citizens has launched on a depopulation program of its own.
Citizens' risk-reduction effort includes last year’s premium increase for sinkhole coverage, a roof-inspection requirement for old homes and a statewide re-inspection program for homes receiving wind-mitigation discounts.
Last month, the company scrapped wind coverage for homes worth more than $1 million.
UPDATE: Citizens has appointed an interim president. Tom Grady, Commissioner of the Office of Financial Regulation, will replace Scott Wallace, who announced his resignation in January.
See Citizens' announcement here--> InterimPresidentAnnouncement03.06.12