R Street offers suggestions to fix Florida’s broken insurance system
TALLAHASSEE, Fla. (Dec. 19, 2012) — Efforts to shrink Florida’s Citizens Property Insurance Corp. will be futile unless the state takes steps to close the door to new policies, the R Street Institute argues in comments submitted to state Senate Banking and Insurance Committee Chairman David Simmons, R-Maitland.
Responding to Simmons’ recent call for proposals to reduce the risk of the state-run insurer, as well as to entice more private insurance capital to enter the Florida market, R Street Florida Director Christian Cámara laid out a series of recommendations that include requiring all new Citizens policies to be charged actuarially indicated rates and accelerating the so-called “glide path” that currently limits Citizens’ annual rate increases to just 10 percent.
Cámara also proposes restoring eligibility requirements that called on potential customers to demonstrate they could not receive coverage in the private market. Under the system put in place by H.B. 1A in 2007, the company is open to anyone who receives even a single quote 15 percent above Citizens’ rates.
Cámara also called on Citizens to implement a modest risk protection surcharge of about 5 percent of premiums to fund purchase of greater reinsurance or catastrophe bond coverage, and for regulators to allow private insurers to do the same.
“At a bare minimum, private insurers should be permitted to purchase private reinsurance in lieu of Cat Fund coverage for levels of protection the Cat Fund’s managers estimate are unlikely to be fully funded within the time frame the insurer would need liquidity to pay its underlying claims to policyholders,” Cámara wrote.
Other proposals put forward in the public comments include reducing the size of the Florida Hurricane Catastrophe Fund; setting higher conflict of interest and transparency standards for Citizens’ internal audit, employee and adviser functions; assisting low-income residents with loans or grants to undertake mitigation; and prohibiting Citizens from writing policies that cover new construction along beachfront properties or in federally designated Coastal Barrier Resources Act areas.
For the full text of the comments, please visit:
R Street is a non-profit public policy research organization that supports free markets; limited, effective government; and responsible environmental stewardship. It has headquarters in Washington, D.C. and branch offices in Tallahassee, Fla.; Austin,Texas; and Columbus, Ohio. Its website is www.rstreet.org.