|State Capital Bulletin
|December 19, 2013
||Legislative and Regulatory Update
||Donovan Brown, Counsel, State Government Relations
This Florida State Capital Bulletin contains legislative and regulatory updates for the beginning half of December, 2013.
Citizens Planning $1.6B Private Market Risk Transfer for 2014
Citizens Property Insurance Corporation is planning another $1.6 billion in risk transfer to Bermuda and other private reinsurance markets for the 2014 hurricane season and will have a specific proposal in the near future. Citizens Chief Financial Officer Jennifer Montero briefed the Citizens board during its final meeting of 2013 concerning this issue. There are no plans for private market risk transfer products next year for the Personal Lines Account and Commercial Account, she reported, but there is a $1.6 billion objective for the Coastal Account. This would consist of 50 percent in alternative capital products, or $800 million, and 50 percent in traditional reinsurance, another $800 million, she stated.
Teams led by Raymond James, Guy Carpenter and Willis Re will be working with others on proposals to come back to the Citizens board in late January 2014 or early February 2014, according to Montero.
Citizens Policies on the Decline, Reports Citizens CEO
Citizens’ President and CEO, Barry Gilway, projected the state-backed insurer should be down to 925,000 policies by the start of the 2014 hurricane season and around 725,000 policies by the end of 2015. “Within two years we should be closing in on that 750,000 number,” Gilway said on December 17, 2013 after addressing Governor Rick Scott and the Florida Cabinet. Gilway credited a “depopulation” effort to shift policies from Citizens into the private market through Office of Insurance Regulation-approved takeouts of the least-risky policies. The decrease is projected to continue through a clearinghouse that will shop new and renewed policies to private firms when started in 2014, he said. “We’re launching 2014 in a very positive way,” Gilway told Scott and the Cabinet. The agency has seen its number of policies drop from 1.5 million in August 2012 to currently a little more than 1 million, which has reduced Citizens’ financial exposure to claims from a storm. “Of the half million people that have moved into the private market, we have reduced their assessment potential that they would have to pay at the worst possible time, when the storm hits,” Gilway said “The vast majority have better coverage than they would have with Citizens and the vast majority have gotten that coverage at a better price.” Figures as of November 29, 2013 show Citizens total policy count at 1,062,817. As of October 31, 2013, there were 1,223,009 policies, according to Citizens’ website. Through the clearinghouse, all new applicants will be shopped to private firms. If coverage is found within 15 percent of Citizens’ premium, the policy would go to the private carrier. For Citizens customers, renewals will have to go to the private market if comparable coverage is found at or below the state-backed insurer’s rates.
Governor Scott and Florida Cabinet Select Bruce Meeks as the First Citizens Property Insurance Inspector General
Governor Rick Scott and members of the Florida Cabinet selected Bruce Meeks as Inspector General of Citizens Property Insurance. After signing SB 1770 into law during the 2013 legislative session, Governor Scott tasked Chief Inspector General Melinda Miguel with conducting a nationwide search for the new Citizens Inspector General. This stewardship role was a provision of 2013’s Citizens legislation.
Bruce Meeks, of Tallahassee, is currently a partner at the law firm of Robert and Meeks. He previously served as the inspector general for the State Board of Administration from 2002-2010. Meeks also served in the Florida Attorney General’s office as the Deputy Executive Attorney General from 1998-2002, and as personnel director for the Office of Attorney General from 1995-1998.
Citizens Delaying Implementation of Clearinghouse
A three-week delay has been set for the rollout of a legislatively approved insurance clearinghouse that is expected to help reduce the number of homeowners’ policies in Citizens. The delay is needed in part to respond to questions about the privacy of policy holders as their applications to Citizens are marketed to private insurers. “When we introduce this, we want to make absolutely sure that it’s going to be successful,” Citizens President and CEO Barry Gilway told the Senate Banking and Insurance Committee during the December 2013 legislative committee week. “By moving this date by three weeks, it gives us the opportunity to conduct far more user-acceptance testing, and, with a much more degree of confidence when we launch this system, that it will operate as advertised.” The clearinghouse system had been scheduled to begin comparing new policies on January 2, 2014, but is now expected to go into use January 27, 2013, Gilway said. In addition, the clearinghouse now will begin with seven initial insurers, as opposed to the four that were to begin on January 2, 2014. The inclusion of renewals of Citizens policies into the clearinghouse remains on schedule to begin July 1, 2014.
In August 2013, the Citizens board approved a five-year contract with Bolt Solutions, Inc., to design the software for the clearinghouse. The contract, which has an option for an additional five years, could total $44.9 million over the decade.
Insurance Consumer Advocate Bill
Chief Financial Officer (CFO), Jeff Atwater and his Insurance Consumer Advocate, Robin Smith Westcott are nearing completion on a draft homeowner’s claims bill, following on the work left by the previous Insurance Consumer Advocate. Due to industry involvement, a number of provisions in the bill have been removed or altered. The industry remains vigilant in monitoring the progress of the draft bill and preparing for its filing for the 2014 legislative session. As reported on the December 13, 2013 PCI Florida Legislative and Regulatory Update Conference Call, Representative David Santiago and Senator Aaron Bean will carry the bill for the CFO.
Florida Supreme Court to Take Up Westphal Case
The Florida Supreme Court accepted jurisdiction over Westphal, a closely watched workers-compensation insurance case that stems from on-the-job injuries suffered in 2009 by a St. Petersburg firefighter. Justices issued an order that said they accepted “jurisdiction” in the dispute involving firefighter Bradley Westphal, who injured his back and his leg. The long-running case centers on a state law that placed a two-year limit on temporary disability benefits. That limit cut off disability payments in 2011 to Westphal, who was unable to work because of his injuries but also couldn’t meet a standard to qualify for permanent disability benefits. A three-judge panel of the 1st District Court of Appeal earlier in 2013 struck down the limit on constitutional grounds. The full appeals court in September 2013 backed away from that constitutional ruling, though it ruled in Westphal’s favor on other grounds. Outside of PCI and other industry’s participation, the case has drawn attention from a wide range of groups including: the National Federation of Independent Business, the Florida Justice Association, Florida Workers Advocates and the Police Benevolent Association. The Supreme Court stated it would schedule oral arguments in a separate order to come in the near future.
Cabinet Moves Forward E-Proof of Insurance Implementation
In the last Florida Cabinet meeting of 2013, the Cabinet (consisting of Governor Rick Scott, Attorney General Pam Bondi, Chief Financial Officer Jeff Atwater and Agriculture Commissioner Adam Putnam) approved without comment a request from the state Department of Highway Safety and Motor Vehicles (“Department”) to move forward rulemaking allowing use of electronic devices to display proof of auto insurance. Use of electronic devices was put into law in a 2013 bill worked on by PCI, but the Department’s administrative rule currently requires motorists to carry “3 1/2 inches × 2 1/4 inches” identification cards that list personal-injury protection benefits and property-damage liability insurance providers and policy numbers, along with the vehicle year, make and vehicle-identification number. The rule has been on the books since 1989. The fast-tracked rule will eliminate this requirement and further implement the law allowing use of electronic devices for proof of insurance.
OIR Releases 2013 Underwriting Profit and Contingency Factor Order
Please see the attached order for the 2013 Underwriting Profit & Contingency Factors determined pursuant to Rule 69O-170.003, Florida Administrative Code. This order can also be located on the PCI website atwww.floir.com/Sections/PandC/ProductReview/PC_Rate_Filing_Requirements.aspx.
OIR to Again File MHCA Legislation
As a reminder, the Florida Office of Insurance Regulation (“OIR”) again intends to file legislation adopting the NAIC Model Holding Company Act. Drafts of the bills, identical to the 2012 bills, are again attached for review.
OIR Appointment of Chief of Staff and Deputy Chief of Staff
Florida Insurance Commissioner Kevin McCarty announced that Rebecca Matthews has been appointed Chief of Staff for the Office of Insurance Regulation. Ms. Matthews has been serving in the Interim Chief of Staff capacity since October 25, 2013. Monte Stevens has also been named as Deputy Chief of Staff with a primary focus on government affairs.
Ms. Matthews joined the Office in 2008. During her tenure with the Office, Ms. Matthews’s primary areas of oversight included government affairs initiatives, covering both legislative and cabinet affairs; market research and technology; and serving in an advisory role to the Chief of Staff for agency administration and operations.
Prior to joining the Office, Ms. Matthews served as Legislative Affairs Director for both the Florida Department of Management Services and the Florida Lottery. She also served in lead communications positions, including as Vice President of Communications at the Florida Bankers Association. Ms. Matthews received her Bachelor of Science degree in Communications from Florida State University with a minor in Political Science.
Mr. Stevens previously led government affairs efforts for the Office during 2007-2012. Most recently, Mr. Stevens served as the Director of Government Affairs and Public Policy at the Florida Medical Association. Additionally, he served as a Senior Legislative Analyst in the Florida House of Representatives Majority Office and as Deputy Director of Legislative Affairs at the Florida Department of Financial Services and Florida Agency for Health Care Administration.
Mr. Stevens has a Bachelor’s degree in Political Science from the University of Missouri-Kansas City and a Master’s degree in Communication Studies from Kansas State University.
Scott Wants to Cut Vehicle Registration Fees without Premium Tax Increase
Governor Rick Scott announced last week that he wants to cut motor vehicle registration fees, but without repeal of the premium tax Florida jobs credit as proposed by the Florida Senate in 2012. During an appearance in Tampa, wheeled out his proposal to cut auto registration fees by $401 million in 2014. The governor’s office estimates the cut – which would kick in on September 1, 2014 – would result in a decrease of more than $25 for most motorists.
The Republican-controlled Florida Legislature increased auto fees in 2009 as part of an overall package of tax and fee hikes to help balance the state budget. Then – Governor Charlie Crist – who was a Republican at the time- signed the fee hike into law. Crist is now running against Scott as a Democrat.
Scott had already said he wants to cut $500 million in taxes and fees in 2014. But this is the first time he has spelled out which taxes and fees he would target to cut.
In a white paper describing the proposal, the Scott administration contends that a projected budget surplus for 2014 should be used to undo the auto registration fee hike.
During the week of December 9, 2013, Florida economists concluded that the state’s main tax collections would grow by 3.8 percent over the current fiscal year and another 4.9 percent by the middle of 2015, bringing the total to $27.5 billion. This means that Scott and state legislators in the spring of 2014 could have a budget surplus in excess of $1 billion even after paying for enrolment growth for schools and programs such as Medicaid.
A legislative proposal to cut the auto registration fee is already moving in the Florida Senate, but the cut is not quite as large as the governor is recommending. The bill (SB 156) would cut the average auto registration fees by $12 a year and would cost the state an estimated $233 million. Auto registration fees can vary widely depending on the type of vehicle.