May 29, 2008 - Yesterday, Governor Charlie Crist signed a "homeowners' bill of rights" insurance bill, the most significant legislation (SB2860) regarding property insurance from the latest state legislative session which was introduced by Senator Jeff Atwater (R - Palm Beach) and amended by the House. The Governor signed all but the portion of the bill that would have reduced the surplus of Citizens Property Insurance Corporation in order to fund the Capital Build-Up Incentive Program.

Initially, the bill would have prevented Citizens Property Insurance Corporation (CPIC) from offering wind-only policies. In the Florida Keys, this would have forced all of those with requirements to carry windstorm coverage to utilize CPIC for all property insurance, eliminating consumer choice and limiting available coverages.

FIRM, working with the Office of Insurance Regulation and Representative Ron Saunders, helped to remove that restriction. Consumers can continue to select from a wide range of providers for most property insurance needs, relying on CPIC to fill the gap with windstorm coverage.

In addition, "use and file" has been repealed and current rates have been extended for another year. Both of these provisions were aggressively pursued by FIRM.

The following is a summary of key aspects of SB 2860 that will most greatly impact consumers in the Florida Keys.

GENERAL PROVISIONS (FOR ALL PROPERTY INSURANCE COMPANIES)

Use and File. The practice of insurers billing consumers for rates that have not been approved has been disallowed for another year, until January 1, 2010. FIRM will continue to lobby for permanent repeal of use and file, and in support of prior rate approval.

Mitigation. A Commission is being formed to bring consistency to the application of mitigation credits that are developed pursuant to the uniform home grading scale (which may be amended should the Commission find it necessary) by February 1, 2011. Policyholders will then have two years (until 2013) to obtain an inspection of their property and file for the new discounts.

As of January 1, 2010, any buyer of a home with an insured value of $500,000 or more must receive a written disclosure of the structure's "windstorm mitigation rating" from the seller.

Claims Handling. Insurers must pay undisputed claim amounts within 90 days of the claim being filed.

Transparency. Insurance companies can no longer withhold documents from regulators containing what they may determine to be "trade secrets." Rather, they must submit such documents with each page clearly marked "trade secret" with the understanding that they will be treated with confidentiality.

Capital Build-Up Incentive Program
This program allows start-up companies to build the capital required to satisfy regulatory standards of solvency by offering funds from the state in exchange for surplus notes from the insurer. The program is open to insurers that commit to increasing their writings of property insurance, including wind.  The legislation would have funded the program by taking $250 million out of CPIC's surplus; Governor Crist vetoed that funding mechanism.

CITIZENS PROPERTY INSURANCE PROVISIONS

Rates.

- Rates in effect as of December 31, 2006, must remain in effect unless a subsequent rate was lower than the rate on that date. (Monroe County's current rate, reduced in October 2006, will still stand.)
- CPIC must make an actuarially sound filing on July 15, 2009 that would take effect no sooner than January 1, 2010. 

Wind-Only Policies. A prior stipulation that would have prevented CPIC from offering new wind-only policies in the windborne debris regions (like Monroe) has been removed.

Homestead Distinction. For purposes of potential assessment or rate differentials, the distinction between homestead and non-homestead homes has been eliminated. This was a goal of FIRM.

Modeling Benchmark. The Florida Public Hurricane Model must serve as the minimum benchmark for setting CPIC wind-only rates. This was a goal of FIRM. FIRM is preparing to meet with the developers of the Public Model to determine how Monroe County's unique geography, topography, history and building code are reflected in its calculations.

Two-million Dollar Home Exemption. As of January 1, 2009, CPIC may not cover homes with an insured value of over $2 million unless the property owner's insurance agent stipulates that such coverage was unavailable in the private market. In that case, CPIC may offer coverage for the next three years, after which time the dwelling will be ineligible for CPIC coverage. Originally, the cap was million dollar homes. FIRM argued that the more expensive the home, the more likely it was to be well-built and have high deductibles, thus creating a lower risk.

Take-Outs. Policyholders may be "taken out" of CPIC by another insurer as long as the new premium is no more than 15% greater than that of CPIC.

Manufactured and Mobile Homes. CPIC coverage of manufactured and mobile homes constructed prior to 1994 is limited to actual cash value (not replacement cost).

Customer Relations.

- Consumers must have 180 days of written notice of any cancellation.

- Consumers who challenge a settlement must have access to all files pertaining to their claim and account.

Structural Considerations.

- Shutters. As of January 1, 2009, any home with an insured value of $750,000 or more must have shutters to be insured by CPIC.

- Wind Mitigation Rating. As of January 1, 2011, any buyer of a residential property (regardless of insured value) located in the windborne debris region must receive a written disclosure of the structure's "windstorm mitigation rating" from the seller.

- Code Plus. A prior stipulation that homes constructed after January 1, 2009 within 2,500 feet of the shoreline must be built to "code-plus" standards in order to be insured by CPIC has been eliminated. 

Assessments.

- Assessments to cover existing CPIC deficits will now kick in when CPIC deficits exceed 6% of their projected direct written premium for that year.

- Emergency assessments may be required when/if regular assessments are insufficient to recover the existing deficit, and may be levied for as many years as necessary to eliminate the deficit. Such emergency assessments may not exceed 10% of the amount required to eliminate the deficit or 10% of the statewide premium, whichever is greater.

- If a new deficit is incurred after 2008, all CPIC policyholders may be levied a surcharge of up to 15% for a period of 12 months to cover the deficit.

- Should CPIC actually collect surcharges in excess of any deficits, the excess will remain with CPIC to offset any future deficits (and the potential for any future surcharges or assessments).

Challenges. CPIC may not file an administrative challenge or judicial review of any final order of the Office of Insurance Regulation.

Transparency. Information regarding CPIC rate filings after July 1, 2008 will be made available to the public via a website.

CPIC's Future. The Citizens Property Insurance Corporation Mission Review Task Force will be created to return CPIC "to its former role as a state-created, noncompetitive residual market mechanism."

UPCOMING CPIC POLICYHOLDER FORUM

Insurance Commissioner Kevin McCarty and representatives from Citizens Property Insurance Corporation will be in Key West on Thursday, June 12 to discuss how the latest legislation may impact consumers in the Keys, and to answer any questions from policyholders. The Policyholders Forum will take place at Key West High School from 4:00 to 7:00 p.m. on June 12, 2008, and is open to the public.