Plus, new reinsurance proposal
The first major takeout of Citizens Insurance policies in three years, the wait for a new reinsurance lifeline for Florida insurance companies, a strict interpretation of AOB cancellation provisions, plus Citizens reveals required flood insurance counts on applicable windstorm policies. It’s all in this week’s Property Insurance News.
Citizens Takeouts: The Florida Office of Insurance Regulation (OIR) has approved three private insurance companies to takeout up to 20,000 personal residential policies from state-backed Citizens Property Insurance. These are the first major takeouts requested since April 2020. The legislature’s 2022 property insurance market reforms made policy acquisition easier by changing Citizens policyholder eligibility rules to further reduce Citizens policy count. The new law means private insurance company coverage has to be 20% more expensive (up from 15%) for a policyholder to remain with Citizens. OIR’s consent orders expect the companies to assume the policies by April 18. Citizens’ policyholder acceptance rate for takeout offers has been only 15%, most believe because of Citizens’ cheaper rates. Citizens’ reps are hopeful the reforms mean more takeouts happen. While it may seem painful for those consumers who pay higher rates, the greater body of policyholders across all insurance companies benefit by being at less risk of assessments should Citizens need help paying future catastrophic claims.
© Can Stock Photo / radiantskies
Reinsurance Help: There’s a new consensus proposal afoot that would provide Florida’s private insurance companies with readily available and affordable reinsurance to help pay catastrophe claims from the first dollar of loss. It would fill the gap that currently exists in the Florida Hurricane Catastrophe Fund reinsurance coverage, which has an aggregate $9 billion retention, a similar concept to a homeowner’s insurance deductible. The proposal would help consumers by softening private reinsurance costs to fill that gap. It would greatly supplement the two new reinsurance programs the legislature created in its 2022 property insurance market reforms. While the proposal has not yet made it into a filed bill in the upcoming 2023 legislative session, we look forward to the legislature engaging with all stakeholders to find ways for the Cat Fund to serve as a better shock absorber to what’s expected to be very tough negotiations in the world market of June 1 reinsurance renewals for the upcoming hurricane season. Reinsurers have made clear at recent conferences that they “have other places than Florida to invest their money.” Reinsurance was one of the many topics we discussed at the recent Insurance Journal’s Academy of Insurance panel discussion on “The Sinking Florida Property Insurance Market.”
Assignments of Benefits (AOB): A Hillsborough County court agreed with American Integrity Insurance Company and has dismissed a lawsuit filed by Gale Force Roofing and Restoration. The carrier argued the AOB didn’t have unified language of the law’s provision that a policyholder can rescind an AOB within 14 days of its execution, after 30 days from the stated start date if work has not commenced, or after 30 days of its execution if there is no start date stated and work hasn’t commenced. Gale Force had argued its contract had the appropriate part of the above language reflecting its specific contract with the carrier’s policyholder. The court disagreed, ruling the word “or” in the provision contemplates all three possible cancellation options and must be included in AOB contracts. This ruling provides a strict interpretation of the legislature’s 2019 Assignment of Benefits reform cancellation provisions and is potentially helpful in future litigation.
Tim Cerio
New Citizens Chief & Flood Policy Expectations: The Citizens Property Insurance Board of Governors last week appointed the carrier’s General Counsel, Tim Cerio, to become president and CEO, succeding Barry Gilway who retired in December. The Board, with Gilway’s blessing, chose to forgo a national search for the position, citing the need to seamlessly execute needed reforms to Citizens passed by the legislature in its recent December special session. One of the reforms requires those living in flood zones to purchase flood insurance to become or remain a Citizens policyholder in 2023. Citizens reports it has 250,000-260,000 wind coverage policies for which the flood requirement qualifies.
OIR Proposed Rule: Speaking of flood insurance, OIR will hold a rule development workshop on February 15 at 3pm on Rule 69O-137.009, Filing Procedures for Commercial and Personal Residential Property Supplemental Quarterly Report. The proposed amendment will update form OIR-D0-1185 to add the data required by Chapter 2022-271, L.O.F., and questions about private flood insurance to the form currently in use.
LMA Newsletter of 2-6-23
