Florida governor freezes property insurance rates
By Michael PeltierReuters
Tuesday, January 30, 2007; 12:13 PM
TALLAHASSEE, Florida (Reuters) –
Florida Gov. Charlie Crist on Tuesday froze property insurance rates and blocked insurers from canceling policies as the state prepares for another hurricane season and insurance reforms kick in.
One week after state lawmakers signed off on a sweeping package of property insurance reforms, Crist said the remedies needed time to work and that he feared insurers may attempt to drop customers and raise premiums that do not reflect the recent changes backers say would reduce their risk.
“It’s fundamental that we make sure no policies are canceled and we make sure that no rate increases are slipped under the door before this law becomes effective,” said Crist, a Republican.
Soaring homeowners insurance rates, coupled with rapidly rising property taxes, were a threat to Florida’s fast-growing economy, according to Crist and others.
Crist’s emergency rule, which remains in effect for 90 days, took the industry by surprise. The order will not affect companies that have recently had rates approved by the state’s Office of Insurance Regulation.
Private insurers say the freeze, though temporary, may cause their bond ratings to drop, which will directly affect their bottom lines.
“We think the rule will have a drastic negative impact on some of our members,” said Guy Marvin, president of the Florida Insurance Council, an industry group that represents most private property insurers still writing business in Florida.
Last week, Crist signed into law a bevy of fixes aimed at resuscitating Florida’s property insurance market. Property owners in Florida have been reeling from skyrocketing rates and an exodus of private carriers after eight hurricanes hit the state in 2004 and 2005.
The new laws more than double the size of the Florida state hurricane catastrophe fund by putting policyholders on the hook for as much as $36 billion in hurricane losses that would be paid by assessing holders of property, automobile, commercial and other lines of insurance.
In response, Standard & Poor’s Ratings Services and Fitch Ratings in the past week have downgraded ratings on outstanding bonds from the Florida Hurricane Catastrophe Fund Financing Corp. The new laws could significantly increase the amount of bonds issued by the fund, according to the Wall Street ratings agencies.
With access to cheaper reinsurance, insurers must pass on savings to their customers, who on average could see rates fall by more than 20 percent, state officials estimate.
In addition, Florida’s biggest property insurer, state-run Citizens Property Insurance Corp., would expand by selling other types of coverage to some of the 1.3 million policyholders who have wind insurance with Citizens.
Lawmakers also froze Citizens’ rate at 2006 levels, a move that negated planned increases of more than 75 percent.
© 2007 Reuters
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