Report of possible tornado in Hobe Sound; no injuries

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January 10  |  Florida, News, Tornado  |   Danielle Szeliga

By Keona Gardner

Dottie Mancusi was sitting at her kitchen table reading the Bible on her iPad on Thursday evening when, “All of a sudden I heard a big bang and the whole house shook,” she said.

“I thought it was an earthquake.”

It wasn’t tremors from below but wind from above: Martin County Fire Rescue officials say it was an unconfirmed tornado that damaged the home and about 30 others. No injuries were reported.

Mancusi said after the rumbling she continued reading the Bible on her iPad, thinking it was just a hard rain. She learned the extent of the damage when her neighbors knocked on her door to make sure she was unharmed. Then she saw her metal roof, peeled back like a sardine can with water coming in the Florida room of the home.

She said nothing else was damaged.

Mancusi said she attributes her safety to God.

“He takes care of me,” she said.

According to Martin County Fire Rescue Division Chief Jon Belding, about 6:20 p.m. in the 8500 block of Southeast Lyons Road, crews responded to reports of a possible tornado.

There was no request for medical or Red Cross assistance.

“It was definitely some type of wind event,” Belding said.

There are reports of downed power lines and blown transformers in the area, Belding said.

According to a Martin County Fire Rescue news release, Fire Rescue personnel went door to door to over 108 homes to assess damage and check for injuries.

The Martin County Fire Rescue Emergency Management Agency will be working with the National Weather Service, Melbourne on Friday to determine the cause and type of wind event that occurred, the news release said.

Flood-insurance alert

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January 9  |  Flood, Florida, News  |   Danielle Szeliga

Congress should try again to delay premium increases


Florida’s congressional delegation meets tomorrow, in a closed-door session, to discuss the rising concerns about increases in National Flood Insurance Program premiums.

Let’s hope our members of Congress emerge from the meeting with a solid strategy for stemming the tide of dramatic hikes in some premiums. After all, although the insurance program benefits millions of Americans from coast to coast, the stability of its premium rates are vital to Floridians and the state’s economy.

The Biggert-Waters Flood Reform Act of 2012 has a well-intended aim — to reduce a $24 billion deficit in the federal program. The act calls for premiums for residential property to rise nationwide to market rates; in other words, the law seeks to reduce the subsidization of policies.

Yearly premiums for current homeowners would rise over the next five years, but new buyers of those homes would have to pay market rates immediately.

Economic impacts

While flood insurance rates in some cases could triple or quadruple for some older, low-lying properties, the number of Florida homes affected will be relatively small in the near term. Florida TaxWatch, a nonpartisan research institute, estimates that premiums will rise for 13 percent of Florida’s subsidized policyholders.

Yet the effects of the act are already being felt. As Zac Anderson reported Sunday in the Herald-Tribune, some real estate professionals — including surveyors, who determine the elevations of properties for insurance purposes — say transactions have already been affected by concerns over unaffordable premiums. At the least, there appears to be a growing sense of uncertainty over the impacts of premium increases.

The economic effects of the Biggert-Waters bill were supposed to be assessed by the Federal Emergency Management Agency in an “affordability study.” Completion of the study was not mandated before the first round of rate hikes went into effect. But a substantial group of representatives and senators, especially those from coastal states, contend they wanted the study completed before premiums escalated.

In light of the size of the increases and the widespread utilization of federal flood insurance — most mortgage companies require that borrowers obtain the coverage — it makes abundant sense for Congress to know the real-world impacts of the act.

Two types of relief

Florida’s members of Congress are seeking temporary relief in two ways. In the Senate, Democrat Bill Nelson and others support legislation that would delay the rate hikes for four years and require FEMA to complete the study before rate hikes are approved. In the House, Republican Rep. Vern Buchanan, whose district includes Manatee and Sarasota counties, is co-sponsoring a bill that calls for delaying rate hikes for the owners of primary households that were placed in a greater risk category by new flood maps. (Those changes could affect 78,812 of the 109,273 policyholders in Buchanan’s 16th congressional district.)

Although Florida has the most policyholders, states up and down all coastlines have a lot at stake; so do inland states, such as Colorado and New Mexico, which have received 10 times more in claims payments than premiums paid, according to a study by Florida Taxwatch. What’s more, subsidized rates account for 13 percent of policyholders in Florida, compared with a national rate of 20 percent.

In short, this is not just a Florida problem.

During the past two decades, FEMA and state and local governments have improved the accuracy of their maps and provided incentives for owners to make their homes less susceptible to flooding. Those efforts should continue.

But the nationwide reliance on federal flood insurance is too great for implementation of sweeping changes without consideration of their economic impacts. Delay the premium increases until Congress has the data needed to make an informed decision.

Source: Herald-Tribune

Guest Opinion: 10-step plan could end property insurance blues

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January 7  |  Florida, News  |   Danielle Szeliga

By J. Robert McClure

State officials know that getting blamed for property insurance problems ranks right up there with tax hikes on the list of politically toxic issues. So it’s tempting for lawmakers and regulators to avoid making the tougher reforms in an insurance marketplace that, ironically, also carries the risk of a huge tax hike.

Adding to this political inertia is the fact that Florida has gone through eight straight hurricane seasons without a major storm. That has significantly lessened the sense of urgency felt in the wake of eight hurricanes in 2004-05 that devastated Florida with $30 billion in insured damages.

Florida’s property insurance marketplace became a mess on a scale not seen since the aftermath of Hurricane Andrew in 1992. The state-run Citizens Property Insurance – ostensibly Florida’s “insurer of last resort” – became the largest property insurer, placing a Cat 5 financial risk on the backs of all Floridians.

Here’s the problem: If a big storm struck a major urban area – or if a series of storms crisscrossed the state – Citizens and the state’s catastrophe fund (Cat Fund) on which Citizens relies wouldn’t have enough money to pay all the claims.

To get the money, Florida – its tax base and credit rating damaged because of widespread property damage – would need to go hat-in-hand to Wall Street and borrow record amounts of money.

State law would require a tax on every property and auto insurance policy. In such a scenario, elected officials would refuse to impose the fiscally prudent rate hikes necessary and the state-sponsored insurance hole would be dug even deeper.

Granted, some progress has been made. Citizens is being downsized by transferring policies to the private sector. And the Cat Fund is gradually being right-sized. Yet enormous fiscal and political risks persist, and elected officials need to act even faster.

Coming right on cue, there is a new study from The James Madison Institute that says it all in its title: “Ten Reforms to Fix Florida’s Property Insurance Marketplace – Without Raising Rates.”

Source: news-press.com

Legislative and Regulatory Update

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December 20  |  Florida, News  |   Danielle Szeliga
State Capital Bulletin
December 19, 2013
State: Florida
Topic: Legislative and Regulatory Update
Lines Affected: All
PCI Contact: 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. Attachment 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. Attachment 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

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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.

Bill Filed to Expand Private Flood Coverage in Florida

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December 18  |  Flood, Florida, News  |   Danielle Szeliga
State Capital Bulletin (PCI)
December   17, 2013
State: Florida
Topic: Bill   Filed to Expand Private Flood Coverage in Florida
Lines Affected: Property



A Senate Bill was filed on Tuesday, December 17, 2013, intended to ease restrictions on insurers that may offer non-NFIP flood coverage in Florida. A hyperlink to the full bill text as filed is provided below.

Senate Bill 542

Senator Jeff Brandes, R – St. Petersburg, filed a bill on December 17, 2013 that is intended to ease regulatory restrictions on insurers that may offer private flood coverage to insureds through a base policy or an endorsement to a policy. A key part of SB 542 would allow policyholders the choice of covering the outstanding balances of their mortgages, the replacement costs of their properties or the actual cash values of their properties. In the next couple of weeks another Pinellas County legislator, Representative Larry Ahern, R – Seminole, is expected to file the companion bill in the Florida House.

Following is background information from the legislative office of Senator Brandes, as well as a high level recitation of the points contained in the proposed legislation.

From Sen. Jeff Brandes, R-St. Petersburg:

  1. Why is the legislation necessary?

Since 1968 when the National Flood Insurance Program (NFIP) was created, the market for flood insurance has been dominated by the federal government. With the NFIP $24 billion in debt, it became obvious to Congress that the program needed significant reform. Part of that reform is to encourage greater participation by private insurance companies. Private insurance companies are regulated by the states and private companies will not write a significant amount of flood insurance unless they have the freedom to rate and sell products at prices they believe is appropriate. Insurance carriers also need to control the contract language that defines the terms of the insurance they sell. Since private flood insurance is basically a new product, this bill is necessary to establish the regulatory framework that will govern the companies that choose to sell flood insurance in the state of Florida.

  1. What does the proposed bill do?

The bill authorizes insurance companies to offer flood insurance either by endorsement to an existing policy or by issuing a separate policy for the peril of flood. The bill establishes minimum standards for flood insurance coverage offered in Florida and outlines four different methods for establishing flood insurance premiums. And finally, the bill expands the membership of the Florida Commission on Hurricane Loss Methodology to include experts on flood insurance and directs the commission to establish standards for the computer models that are used to estimate potential flood losses.

  1. What consumer protections are included in the bill?

The bill protects consumers by clearly stating that the policies offered by the private market must provide at least as much coverage as the policy offered by the NFIP. In addition, the continued existence of the federal program guarantees that consumers will not be forced to pay higher premiums than those charged by the federal government.

  1. Why is this bill a good deal for consumers?

This bill allows insurance companies to offer a flood insurance policy that provides more coverage than the NFIP policy. At the same time, the bill provides consumers with a range of choices to fit their individual circumstances:

  • Consumers can choose the amount of coverage they want rather than having to purchase full replacement cost as required by a standard homeowners insurance policy;
  • Consumers can limit flood coverage to the main structure to reduce the cost of the policy;
  • Consumers can pick a deductible which fits their individual financial situation.

Key Highlights of the Bill:

The bill amends Chapter 627, F.S., to authorize insurers to provide coverage “for the peril of flood, on any structure or the contents of personal property contained therein.”

The package:

  • Adds projected flood losses to the factors that must be considered by the Office of Insurance Regulation in reviewing a rate filing.
  • Authorizes projection of flood losses through a model, method or average of models determined to be acceptable or reliable by the Florida Commission on Hurricane Loss Projection Methodology.
  • Increases the membership of the modeling commission to include an engineer who is an expert in floodplain management and a meteorologist who specializes in floods (both appointed by the CFO).
  • Requires that the modeling commission “adopt actuarial methods, principles, standards, models or output ranges for flood losses by July 1, 2015.”
  • Establishes a menu of rate filing requirements and procedures. Insurers are allowed to use the normal filing procedure under 627.062; make an informational filing (similar to Commercial Auto); use the individually rated risks procedure (where the insurer sends in a quarterly report to OIR listing each policy and the rate charged); or use consent to rate procedures (similar to some rating actions in North Carolina).

As it relates to flexibility, an insurer may offer a flood policy:

  • That has a deductible based on a stated dollar amount or a percentage of the coverage amount. At a minimum, an insurer must offer deductible amounts applicable to flood losses that equal the standard deductibles offered under the National Flood Insurance Program.
  • That provides that any loss that is repaired or replaced will be adjusted on the basis of replacement costs up to the policy limits; or the actual cash value of the property.
  • That restricts flood coverage to the principal building, as defined in the applicable policy.
  • At any agreed upon rate amount, including coverage limited in the amount of all outstanding mortgages applicable to the covered property.
  • That covers the defined peril of flood and possibly also covers other water intrusion.

The bill contains a provision that this statute supersedes all other insurance statute where there is a conflict, and generally provides that there are normal admission company procedures/minimum surplus requirements unless you are an existing insurer with at least $35 million in surplus and offer the flood coverage via endorsement.

State lawmakers propose solution to flood insurance crisis

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December 18  |  Flood, Florida, News  |   Danielle Szeliga

By Stephen Nohlgren and Jeff Harrington

A Florida Senate bill filed Tuesday seeks to alleviate skyrocketing federal flood insurance premiums by setting up a competing — and hopefully cheaper — state-run market.

The bill, sponsored by Sen. Jeff Brandes, R-St. Petersburg, would invite private insurers to enter the market by creating a new regulatory system just for flood insurance. It would evaluate rates, risks and a company’s financial strength.

Over the last 35 years, Florida homeowners paid four times more in National Flood Insurance Program premiums than they collected in claims. Despite that, many of the older homes in low-lying areas now face sharply higher rates under new Congressional mandates. In some cases, rates are jumping from a few thousand dollars to $15,000 or more.

“I have to believe the private market could make a profit at those prices,’’ Brandes said Tuesday at a news conference.

He and other state legislators jumped into the fray because the Florida Congressional delegation has not been able to secure a rate hike delay in Washington.

State Rep. Larry Ahern, R-Seminole, plans to file a companion bill in the House, and other legislators around the state have signaled their support, Brandes said.

“We hope to have this bill to the governor’s desk early in the session,’’ he said. “It is designed to go into effect immediately,’’ he said, unlike most new laws, which take effect in July.

Many mortgages written in Florida require homeowners to carry flood insurance, almost all provided by the national program. A Congressional overhaul last year zeroed in on hiking rates for older properties that have enjoyed lower rates for decades.

In some cases, rates in flood zone areas will rise about 20 percent annually until they reflect what the federal government deems the proper market risk.

But under certain conditions — such as when a home is sold — the new owner must pay the full market rate immediately, possibly tripling or quadrupling the premium.

“It has killed the real estate market,’’ said Treasure Island Realtor Shirley Madden, who attended the news conference.

One Tampa-based insurer, Homeowners Choice Property & Casualty Insurance, has already jumped into the market by taking care of existing customers.

Beginning Jan. 1, Homeowners Choice will start adding flood endorsements to its homeowners policies. The company has about 140,000 policyholders statewide, but is starting out slowly with this new line of business.

“We’ll probably do the first 3,000 flood policies and see how it goes. Then do the next 3,000,” CEO Paresh Patel said. “It’s a very measured approach. We’re not going to write everybody.”

Patel said 3,000 policies represents about $1 billion in exposure. “Once we get comfortable about the first billion, we can talk about the next billion,” he said.

He estimated the maximum rate of coverage for a property with $250,000 in building coverage and $100,000 in content coverage would be just over $3,000 in an “A” flood zone and about $6,800 in a “V” flood zone.

Homeowners Choice won special approval for its product, said Ron Lehmann, spokesman for the R Street Institute, a think tank that monitors the insurance industry.

The Brandes bill would set up a complete regulatory framework for all flood carriers. Among other things, it would add an engineer who specializes in flood plains to a state board that oversees rate setting, as well as a meteorologist with expertise in floods.

Private insurers could not compete with the federal program when it was subsidized, Lehmann said.

“But if the government is offering real actuarial rates,’’ he said, “that is something our companies can match.’’

The Florida legislation also would add flexibility to the marketplace, Lehmann said. Insurers would not have to offer content coverage, for example, or temporary living expenses if a home was destroyed. Coverage could be pegged to the mortgage amount, not the total replacement cost.

That would be welcome relief for Verla and Richard Waldo, a Seminole couple facing much higher flood rates next fall.

The Waldos, who moved into their 864-square-foot, two-bedroom home in 1997, have whittled their mortgage balance from $75,000 to nearly $40,000.

Verla Waldo, 73, said she had a letter from her bank saying it would be satisfied with $41,600 in flood coverage — enough to cover the remaining mortgage — but her insurance agent insisted that the national program now requires full replacement value, or $111,000 in coverage.

“They’re saying that I can’t say how much coverage I want,” she said. “I’d like to know when my rights were taken away from me.”

Source: Tampa Bay Times

Lower property insurance rates

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December 17  |  Florida, News  |   Danielle Szeliga

Florida this year enjoyed its eighth consecutive hurricane-free storm season. That was good news for everyone in the state, but especially for property insurance companies. They have seen their profits soar and their costs plummet.

Will all this good fortune have a trickle-down effect on Florida property owners, in the form of lower premiums? Don’t bet on it.

Insurers have been raising their rates for years, and most of them are doing it again this year, Zac Anderson reported in Thursday’s Herald-Tribune.

A significant change in the rate-increase forecasts would require that state regulators stand up to the insurance companies and actually try to protect consumers.

Fortunately, consumers appear to be gaining a powerful ally — Florida’s chief financial officer, Jeff Atwater. He directed insurance commissioner Kevin McCarty to compile a report, by Dec. 18, detailing how much property insurers have saved this year and why consumers have not benefited.

Atwater’s intercession raises hopes that the trend of rising profits and rising premiums might be reversed, but he’ll have to overcome a powerful insurance industry that prefers things just the way they are.

The 10 largest Florida-based private property insurance companies “collected $283 million in net underwriting profits through the third quarter of 2013,” Anderson reported. He cited figures from the National Association of Insurance Commissioners.

Besides having avoided hurricane-damage payments since 2005, insurers saved hundreds of millions when the cost of reinsurance — the policies that insurance companies purchase to back up their claims — fell by 20 percent or more.

Nevertheless, of the rate requests that property insurers filed with regulators through October, 69 percent were for increases. Of the 21 proposed decreases, most were minor.

How much profit is too much?

The regulators’ record on rate hikes is not encouraging. According to the Associated Press, annual reports by the Florida Office of Insurance Regulation (OIR) show that it has approved more than 100 rate-increase requests each year since 2009 — many of them by double-digit percentages.

State Farm Florida — which boosted its rates five times from 2009 to 2012, despite shedding 125,000 high-risk policies — raised them again in October, by 6.3 percent. This was after the company posted a $126 million underwriting profit through the third quarter of the year.

McCarty, the insurance commissioner, pointed out to the AP in May that private insurers’ rate filings are allowed to include some percentage of profit.

The question for McCarty is: How much profit is too much?

As we noted above, not all Florida insurers demanded increases this year. One of the largest, Security First Insurance, cut its rates by an average of 9.3 percent statewide.

Locke Burt, the president of Security First and a former state senator, cited the reduced cost of reinsurance and changes in Florida law as reasons for the decrease.

If Security First can cut its rates, why can’t other Florida property insurers, which benefited from the same changes in reinsurance costs and the law?

Some companies — including State Farm Florida — told Anderson that they’re using their profits to purchase more reinsurance or to boost reserves. “Ultimately you want an insurance company that has the financial security and backing to cover claims,” said State Farm Florida spokeswoman Michal Brower.

Meeting ‘solvency standards’

Increasing your reinsurance and reserves sounds commendable, but it might be unnecessary.

At least, that’s what Commissioner McCarty implied in a Herald-Tribune guest column last February.

McCarty was responding to a Jan. 27 editorial, in which we cited the “dangerously low reserves” of many Florida insurers — an assertion echoed by insurance-rating firms and the Herald-Tribune’s Pulitzer Prize-winning series on the insurance industry.

“Florida’s insurers must meet rigorous evaluations by the OIR to maintain all appropriate solvency standards,” McCarty said in his column.

“While the individual surplus of Florida’s insurers are reported to be relatively small in scope,” McCarty added, “the Florida insurance marketplace has spread its risk globally through reinsurance and other risk-transfer mechanisms, resulting in access to more than $20 billion in additional capital or ‘reserves’ to pay claims.”

Since Florida insurers must already “maintain all appropriate solvency standards,” should they forgo additional reinsurance and reserves this year in favor of lower premiums for policyholders?

That’s a question that McCarty should ask as the OIR reviews rate filings — and one he should answer in his report to Atwater on insurer finances and the effect on consumers.

“There’s no more excuses,” Atwater told Anderson. “Now is the time, and I have very high expectations the industry is going to act or be held accountable.”

That would be a welcome change.

Source: Herald-Tribune

Homeowners look to state for flood insurance relief

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December 17  |  Flood, Florida, News  |   Danielle Szeliga

By Josh Boatwright As efforts in Congress to curtail a precipitous rise in flood insurance rates came to naught, hope remains that state leaders and private companies will offer a solution for homeowners whose premiums have soared since new rules took effect Oct. 1 in the National Flood Insurance Program. State Sen. Jeff Brandes, R-St. Petersburg, is expected to unveil legislation Tuesday to streamline regulatory approval of private insurers so they can offer more coverage as an alternative to the Federal Emergency Management Agency’s program. Over the past month, several companies have begun offering policies that are often a fraction of the government’s cost calculations. It’s too soon to tell whether this shift to the private market will be a permanent solution for thousands of people in the Tampa Bay area affected by the rate changes. But homeowners and insurers are heartened by state efforts that appear to be making it viable to sell private flood coverage. The U.S. House of Representatives ended its session last week without taking up the matter. “Companies that are interested in getting into flood insurance, it should be as easy to do that as possible as long as they meet the burdens they have to meet,” said Sam Miller, executive vice president of the Florida Insurance Council, the state’s largest trade association. “It remains to be seen, even though there’s interest in it, if there’s going to be private capital to make a huge footprint down here.” Nearly 200 members of the U.S. House and Senate have come out in support of halting the rate increases called for in the 2012 reform of the federal flood insurance program. They’ve introduced about a dozen bills looking to delay the premium changes by several years until FEMA conducts an affordability study for the new rates. None of them gained enough traction for a vote as Congress battled through a government shutdown and tense budget negotiations. The bipartisan Biggert – Waters Act seeks to fill a $24 billion deficit in the federal flood program by increasing rates that have remained artificially low for older homes. “We don’t expect a whole lot on the federal front, at least not anytime soon,” Florida Office of Insurance Regulation Deputy Director Richard Koon told the state Senate Banking and Insurance Committee at a meeting last week. Koon’s office sent out a memo in October to insurers operating in Florida to outline rules for selling private flood policies and several have entered the market. Tampa-based Homeowners Choice Property & Casualty Insurance Company was approved last week by state regulators to offer primary flood insurance as an endorsement to existing homeowners policies. “We plan to help them by offering insurance prices at near-current rates without the drastic federal mandated increases anticipated under the Biggert-Waters Act,” company President Scott Wallace said in a statement. The most popular option for clients of St. Petersburg agent Jake Holehouse is a standalone policy offered by insurance giant Lloyd’s of London. For people accustomed to paying $1,000 in the federal program to insure their older home, the typical Lloyd’s rate of about $3,000 a year may seem like a drastic leap. When those homeowners see federal rates rise to $9,000, or much more in some cases, the private option seems reasonable, Holehouse said. Consumers’ willingness to pay premiums that more closely match risk may partly explain why companies that had shied away from selling primary coverage in the past are now entering the market, he said. “We’ve been caught in these two extremes, extremely low and extremely high, and now what we need to do is get balanced,” he said. One aim of Brandes’ bill will be to give people more choices in how much coverage they want, allowing for the exclusion of a garage, for example. “This bill would allow you to not have flood insurance on other structures if you chose to only have your house insured,”

Brandes said at a committee meeting last week in Tallahassee. In order for private policies to pass muster for lenders, though, companies will have to ensure that they offer equivalent coverage to the federal program. “On a homeowners policy, there are standards that lenders have in place to protect financing of those properties,” Miller said. Brandes has said he is working closely with the members of the banking and insurance industries to ensure any new state regulations would meet their requirements. All but one bank accepts the Lloyd’s policy, which is guaranteed to match all the federal program’s standards, Holehouse said. While Holehouse and others still hope to see reforms in the way the federal government charges for its policies, the influx of private companies has begun to stave off the worst effects of the law. “What it’s allowing us to do is save homeowners a ton of money and allowing the real estate market to continue to work,” he said. Source: The Tampa Tribune

Florida Senator Preparing Bill to Aid Private Flood Insurance Market, Battle NFIP Rate Hikes

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December 13  |  Flood, Florida, News  |   Danielle Szeliga

By Thomas Harman

A Florida bill to help private companies offer flood insurance in order to combat the expected rate increases resulting from National Flood Insurance Program reforms is poised for introduction and consideration by a state Senate committee.

The bill’s sponsor will be Sen. Jeff Brandes, a Republican from St. Petersburg and Pinellas County, where some of the highest NFIP rate increases have occurred and more than 50,000 homes are impacted. He made the announcement at the end of a Dec. 10 Senate Banking & Insurance Committee meeting.

The Biggert-Waters Flood Insurance Reform Act of 2012 established NFIP rate increases to cover a $24 billion deficit in the program, but remapping has resulted in rate increases viewed by critics as exorbitant. There have been several efforts to pass legislation in Congress — and one lawsuit filed by Mississippi along with several coastal states — to delay implementation of the rate increases (Best’s News Service, Oct. 29, 2013).

But Richard Koon, the deputy commissioner for property/casualty in the OIR, was not optimistic about action in Washington. “We’re not seeing a whole lot on the federal front — at least not anytime soon,” he said.

Brandes told the panel the bill is focused on market-based options that would allow entry by private insurers so that homeowners “are not being forced into paying these onerous rates.” The bill creates a new, streamlined application process through the OIR for insurers to use. And he said the bill would offer consumers flexibility by giving them an option instead of current requirements to insure other structures in the event they only wish to insure their homes.

Florida Insurance Council Executive Vice President Sam Miller said he was encouraged that House and Senate staff participated in drafting the bill. He said the bill’s intent appears to streamline the marketplace entry process for flood insurers. And while the bill appears to provide consumers with options — giving homeowners a choice of not having to cover garages and other structures apart from their homes, for instance — it also leaves open the question of whether banks will be receptive to those changes. “It sounds like they’re being careful with what they’re trying to do, which is good,” Miller said.

The Property Casualty Insurers Association of America has not seen the bill language, but issued a statement in support of private market options for covering flood and other perils. “So long as the proposal does not place additional government mandates on the market, impinge on insurer’s underwriting abilities and promotes insurance products that satisfy the general requirements of the Flood Disaster Protection Act, additional viable solutions to cover flood risks should be welcome in Florida,” said Donovan Brown, PCI counsel for state government relations. “PCI looks forward to reviewing the specifics of the legislative proposal and working with Senator Brandes to address these issues.”

The top five writers of homeowners multiperil insurance in Florida during 2012 were Citizens Property Insurance Corp., with a 19.53% market share; State Farm Group, with 8.68%; Universal Insurance Holdings Group, with 8.42%; Tower Hill Group, with 6.62%; and USAA Group, with 4.78%, according to BestLink (www.ambest.com/bestlink).

Source: AM Best

Failure to Timely Respond to Claims May Give Rise to Claims for Interest in Florida

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December 9  |  Claims, Florida, News  |   Danielle Szeliga

For a number of years there has been litigation over when, pursuant to Florida law, an insurer must pay interest on amounts that are improperly withheld. While there are differing legal opinions on this matter under the common law, the Florida legislature has enacted statutory provisions that may provide some relief to associations and unit owners that suffer from inappropriately delayed and/or denied claims.

Florida Statute 627.70131 provides, in part:

 (5)(a) Within 90 days after an insurer receives notice of an initial, reopened, or supplemental property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay is caused by factors beyond the control of the insurer which reasonably prevent such payment. Any payment of an initial or supplemental claim or portion of such claim made 90 days after the insurer receives notice of the claim, or made more than 15 days after there are no longer factors beyond the control of the insurer which reasonably prevented such payment, whichever is later, bears interest at the rate set forth in s. 55.03. Interest begins to accrue from the date the insurer receives notice of the claim. The provisions of this subsection may not be waived, voided, or nullified by the terms of the insurance policy. If there is a right to prejudgment interest, the insured shall select whether to receive prejudgment interest or interest under this subsection. Interest is payable when the claim or portion of the claim is paid. Failure to comply with this subsection constitutes a violation of this code. However, failure to comply with this subsection does not form the sole basis for a private cause of action.
(b)Notwithstanding subsection (4), for purposes of this subsection, the term “claim” means any of the following:

1.A claim under an insurance policy providing residential coverage as defined in s. 627.4025(1);
2.A claim for structural or contents coverage under a commercial property insurance policy if the insured structure is 10,000 square feet or less; or
3.A claim for contents coverage under a commercial tenants policy if the insured premises is 10,000 square feet or less.

Because both condominium unit owner policies and the association’s master policies are considered to be “residential coverage” under (b)(1), this applies equally to claims filed under either policies.

The claims process is a stressful time for associations, boards, property manager, and unit owners alike. When claims are improperly delayed or denied, it simply adds insult to injury. Thankfully there are remedies, such as the statutory interest requirement above, that can help compensate policyholders in such an instance.

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