Legislation to bring Citizens Property Insurance Corporation’s rates in line with market value is moving in the Senate after clearing its first committee on Tuesday.
Florida’s nonprofit property insurance company’s rate increases are currently capped at 10% per year under their “glide path.” Meanwhile, the market rate has grown 20% to 30% annually.
“The only reason Citizens is making any money today is simply that they have $6 billion in investments and they make a lot of investment income,” Sen. Jeff Brandes told the Senate Banking and Insurance Committee.
The St. Petersburg Republican’s bill (SB 1574) would limit the application of the glide path to existing policies on homesteads and single-unit condos with replacement costs less than $700,000. It would also raise the 10% cap to 15% and then to 20% if Citizens hits 1 million policyholders and and 25% if it hits 1.5 million policyholders.
That would help curb out-of-state millionaires and others buying second homes and rental homes from buying property insurance for cheap, Brandes said.
Citizens is currently growing by about 45,000 policies per week. And the nonprofit could hit 1.5 million policies if any two traditional property insurance companies go under and Citizens picks up those policies, which could potentially tank the state’s finances during a disaster, Brandes said.
“We’re looking at Citizens ballooning in growth, us facing an untold exposure during hurricane season, and we know Citizens today is losing money on a policy basis,” Brandes said.
His bill would also authorize surplus lines insurers to participate in Citizens depopulation, take-out and keep-out plans. But provisions surrounding surplus lines drew questions from Democratic Sen. Perry Thurston and Republican Sen. Doug Broxson, a past chairman of the committee.
Broxson raised concerns that Citizens agents might handle surplus lines differently. And he stressed the importance for the Banking and Insurance Committee to vet the insurance-related portions of the bill before handing the next committee a potential “Pandora’s box.”
Brandes proposed removing the surplus lines provision if it meant assuaging his concerns and getting the bill out of committee. However Broxson said that wouldn’t be necessary given Brandes’ promise to warn consumers transferring into Citizens that it is not a domestic carrier.
The committee advanced the bill 11-1, with Thurston casting the lone nay vote. He would have preferred the committee address the surplus lines concerns then and there.
The bill, which would take effect in 2022, next heads to the Senate Agriculture, Environment and General Government Appropriations Subcommittee, its second of three committee stops. There is currently no House companion legislation.