Legislature’s property insurance bills propose sweeping changes, including a reinsurance fund

Florida legislative leaders, in tandem with Gov. Ron DeSantis’ administration, have unveiled a comprehensive property insurance package that Republicans hope will stabilize a market in which insurers are collapsing and homeowners are getting hit with major rate hikes.

While some insurance experts had predicted only slight tweaks, the House and Senate bills unveiled would make sweeping changes, including establishing a temporary reinsurance fund that would rely on $2 billion in taxpayer money.

Other changes call for clamping down on lawsuits filed against insurance companies while at the same time blocking insurers from refusing to renew or offer policies to homeowners with roofs that are less than 15 years old.

“These are policies that we believe will help curb abuses in the market without creating unintended consequences,” said Rep. Jay Trumbull, a Panama City Republican and Chair of the House Appropriations Committee, in a memo to House members. “In developing this legislation, we have worked to balance the interests of the stakeholders in Florida’s insurance market while ensuring that the consumer remains paramount in the conversation.”

Sen. Jim Boyd, Chairman of the Senate Banking and Insurance Committee, wrote to his colleagues in a memo that “the proposal balances fair costs and protections for consumers while adding reasonable guardrails for insurance companies against the frivolous litigation and fraudulent claims that drive up rates for everyone.”

DeSantis in late April announced he was calling legislators back to the Capitol for a Special Session to deal with the ongoing meltdown of Florida’s property insurance market. The Governor took that step after the House and Senate failed to reach an agreement over what steps to take. House Republicans, in particular, did not like some of the provisions in the Senate bill because they argued they would be too burdensome to low-income homeowners.

As time drew nearer for the Special Session, outside observers were skeptical on what type of reforms would actually be considered. But DeSantis promised earlier this week there would be “significant reforms” and that “we’re not going to accept anything less than a very significant package for the people of Florida.”

The four bills released Friday evening, two in the House (HB 1D & HB 3D) and two in the Senate (SB 2D & SB 4D), will likely draw opposition from some insurers, as well as trial attorneys.

“I am proposing that we codify that attorney fee multipliers only be awarded in rare and exceptional circumstances, clarify when a bad faith suit may arise, and prohibit the ability to transfer the right to receive attorney fees in a property insurance litigation,” Boyd wrote in his memo. “A policyholder may not prevail in a property insurance bad faith suit unless they establish that the property insurer breached the insurance contract.”

One part of the proposal would put in place strict new limits on attorney fees associated with property insurance lawsuits as well as limitations on so-called “bad faith” lawsuits against insurers over property insurance claims.

The legislation also addresses roofing costs, which insurers maintain have been the main driver of rate hikes because of unscrupulous roofing contractors. Insurers would be allowed to offer policies with a separate roof deductible but that deductible could not apply to a loss caused by a hurricane or a tree. Furthermore, no insurer could refuse to write or renew a policy because a roof is less than 15 years old.

Another substantial part of the bill would create a new reinsurance fund — backed by the state — that would offer coverage to insurers. This would allow domestic insurers to tap into the coverage before they are allowed to access the state-created Florida Hurricane Catastrophe Fund.

Insurers that tap into the “Reinsurance to Assist Policyholders” program this year would be required to lower their rates by June 30, 2022 to reflect the savings. Any insurers that access the program next year would be required to lower their rates in 2023.

“Hopefully, we never have to use it, but this additional funding provides certainty that will help stabilize the market,” Boyd said about the new reinsurance fund.

The legislation also creates a new $150 million program that would offer matching fund grants to homeowners who undertake “home hardening” improvements designed to help their property withstand hurricanes. Applicants would be able to receive up to $10,000 in program money.