Fla. Lawmaker Pushes Hurricane Insurance Surcharges for Vacation Homes

March 22, 2006

Owners of vacation and second homes would be slapped with a 25 percent surcharge on policies obtained from the state’s insurer of last resort under a proposal unveiled by a Senate committee chairman.

That’s one of many ideas that Banking and Insurance Committee Chairman Rudy Garcia presented to the panel. The Miami Republican’s plan is designed to stabilize insurance rates, reduce the state’s role in providing coverage and encourage private insurers to expand in Florida.

Garcia said hurricane insurance is the most important issue facing lawmakers this year but predicted it would be the last bill the Senate will pass before the legislative session ends in early May.

”We will meet and deliberate and take as much time as we can on each of these issues to have the consumers prevail,” Garcia said after the meeting. He hasn’t put his proposal into a bill yet.

Insurance Commissioner Kevin McCarty also told the committee he expected movement soon in Congress on proposals that would create a national catastrophe fund similar to Florida’s to serve as a backstop for insurance companies facing heavy losses from natural disasters of all kinds.

Citizens Property Insurance Corp., created by the state to provide coverage to people unable to get it from private companies, will be a focal point of the eventual bill. Citizens can help make up for losses, mostly in high-risk areas, through assessments on the policies of homeowners throughout Florida who have coverage from private insurers.

Those homeowners already have been assessed for $515 million in losses from the four hurricanes that struck the state in 2004. Another assessment is expected this year due to a $1.4 billion deficit from last year’s storms.

Garcia’s proposal would attempt to hold down Citizens assessments through the 25 percent surcharge on homes that are not the primary residences of their owners.

”When people with vacation homes have equal standing as people with their primary homestead that can’t afford it, that’s something of an unlevel playing field,” Garcia said.

His proposal differs from House legislation that would bar Citizens from assessing other homeowners for losses to vacation homes and rental properties.

Both proposals would prohibit Citizens from insuring homes valued at $1 million or more. That raised an objection from Sen. Steve Geller, D-Hallandale Beach. He said rapidly escalating property values have pushed homes valued at $400,000 or $500,000 a couple of years ago beyond $1 million.

Geller said many are owned by working professionals not wealthy enough to afford higher priced coverage that might be available. Garcia said $1 million is only a starting point and that the dollar value is likely to be increased.

”That number is not the magic number,” he said.

Another key difference is the House proposal would let insurance companies increase their rates 10 percent to 25 percent on average without approval from state regulators. Garcia said that’s not in his plan “at this time.”

”We are committed to exploring every avenue,” Garcia said. He said it is vital that insurance companies not abandon Florida. Some already have stopped writing new policies.

”Will there be an insurance market is the question we’re adding to this debate,” he said. “Will there be an insurance company, period, that will insure us?”

Some committee members offered more ideas.

Sen. Skip Campbell, D-Fort Lauderdale, called for creating an office to represent consumers in insurance rate cases, stopping companies from charging higher rates before approval and putting a time limit on paying claims.

Campell, a candidate for attorney general, also suggested giving $500 million each in surplus sales tax revenue, much of it from hurricane rebuilding, to Citizens and the state’s catastrophe fund.

Gov. Jeb Bush is against that idea but has proposed sending a $100 check to every homeowner.

Sen. J.D. Alexander, R-Winter Haven, suggested a $9 billion limit on Citizens assessments, noting a worst-case scenario could result in estimated losses of $36 billion.

”That scares me to death,” Alexander said. “It’s more than the total debt of the state of Florida.”

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