AIA Satisfied with Fla. Legislative Session

May 3, 2004

The Florida legislature wrapped up its annual session last Friday night, giving final approval to key measures that will add capacity to the state’s hurricane reinsurance fund and put the workers’ compensation joint underwriting association (FLWCJUA) on a sound financial footing, according to the American Insurance Association (AIA).

Legislators also passed a Financial Services Consumers’ Bill of Rights, and earlier in the session approved a change long-sought by AIA in the premium tax reporting system.

“This session was characterized by legislators and insurers working together cooperatively to address issues that are critically important to the continued health of the Florida insurance market,” said Cecil Pearce, AIA vice president, southeast region. “In the process, we brought about positive, long-term changes in two of the state’s insurance programs, for hurricane reinsurance and workers’ compensation coverage.”

The projected $36 million deficit in the high risk category of the workers’ comp JUA – caused by artificially capped rates – demanded a solution this session. “Negotiations between the insurer and business coalition and lawmakers resulted in a restructuring of the entire JUA so that all risks are adequately rated and the JUA can be self-supporting,” said Pearce. HB 1251 restructures the JUA into three tiers and provides for funding of the existing and projected Sub plan D deficits.

The bill adding capacity to the state’s Hurricane Catastrophe Fund (CAT Fund) was presented as the top property insurance issue for Chief Financial Officer Tom Gallagher (D) this session.

“A hurricane makes landfall in Florida on average once every two years, and the CAT Fund is key to maintaining stability in the state’s property insurance market by providing additional reinsurance capacity,” said Pearce.

SB 2488 expands the capacity of the CAT Fund from $11 billion to $15 billion through the addition of surplus lines insurance to the assessment base and an increase in the emergency capability of the Fund to assess all policies (except workers’ comp and, for the next three years only, medical malpractice). Insurers’ deductible – or retention level – also was reduced from the current estimated $5-5.2 billion to $4.5 billion.

Other property and casualty issues addressed by legislators included:

* HB 251 – Enhances carriers’ ability to assign insured properties to the appropriate local taxing jurisdiction for purposes of determining premium taxes. The bill requires the Department of Revenue to establish an electronic database for insurers’ to use in allocating premium on their premium tax returns.

* SB 2994 – Advocated by the Department of Financial Services as a Financial Services’ Consumer Bill of Rights, includes provisions affecting insurers that are essentially current best practices. These include maintaining homeowners insurance coverage when a mortgage company fails to pay escrowed premium, clarifying that a carrier cannot refuse homeowners coverage based on a single previous water claim unless appropriate repairs were not completed, and allows insurance applicants who have been denied coverage based on loss history to obtain some of the information relied on by the insurer.

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