The Florida Insurance FACT Book is the result of years of pertinent data accumulated by the Florida Insurance Council. It is a one-of-a-kind, constantly evolving, Florida-specific resource that includes important material compiled from Florida Insurance Council, along with data assembled from other Internet sites, including state agencies, the Florida Legislature and important national sources.

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Florida Insurance Guaranty Fund Internet Site


FDIC Analysis of Florida Hurricanes and Impact on Banking; Excellent Resource Document 

 The Federal Deposit Insurance Corporation maintains Supervisory Insights on its Internet site. This Internet resource includes a June 6, 2007, report on Florida entitled,  "Wind Hazard Insurance: No Longer Just a Technical Exception."

 Abstract: "In this article we present an overview of the impact of the rising ost, and in some cases the lack of availability, of wind hazard insurance, with a focus on Florida. Although the issue is not new to Florida, it has intensified to the point that it is often labeled a crisis."

FDIC Analysis of Florida Hurricanes and Impact on Banking



May 15, 2007

From Florida Insurance Council staff

The Property Casualty Insurers Association of America (PCI) today released the results from a study it commissioned to review the economic impact of property insurance reforms enacted in Florida’s January Special Legislative Session. The findings are consistent with conclusions reached from a similar study done by Associated Industries of Florida. Both studies conclude that the legislation helps reduce homeowners’ insurance premiums, but does so at great taxpayer risk.

PCI’s study was conducted by Milliman, Inc., while the AIF study was commissioned by the Tillinghast. Both are independent consulting firms.

The Milliman study shows that recently passed legislation in Florida (from the special session) will mean that homeowners will pay less for property insurance, while motorists and small business owners will pay more if an average to large storm hits Florida.

Furthermore, in announcing the findings of the study, William Stander, PCI’s assistant vice president and regional manager, says legislation passed in the regular session that just concluded, will only magnify the problem.

Joseph Annotti, Senior Vice President, Public Affairs for PCI said the Florida Legislature passed the legislation hoping the wind does not blow this year. "Hope is not a good business strategy and not a good economic strategy," he said.

The Tillinghast study released in March found similar conclusions. It estimated that per household, total nominal assessment costs to pay off bonds that likely will be needed to provide the state-run insurer, Citizens, with the cash it needs to pay claims, would range from $1,700 for a moderate hurricane to $14,000 for a major hurricane spread over the next 10 to 30 years and spread to homeowners, auto owners and business owners.

Here are the key findings of the Milliman study:

The study ran several scenarios for the 2007 hurricane season, ranging from light to severe, and estimated the financial impact of projected losses on Citizens Property Insurance Company (Citizens), Florida’s state-run insurer; the Florida Hurricane Catastrophe Fund (FHCF), the state-sponsored reinsurance fund; and the associated cost or benefit to Florida policyholders.

Among the key findings:

The Milliman study shows that recently passed Florida legislation will mean that homeowners will pay less for property insurance. Motorists and small business owners will pay more for insurance if an average to large storm hits.
The biggest beneficiaries of the legislation will be homeowners living in southern coastal counties with estimated premium reductions for the average homeowner reaching $1,096 in Dade County and $1,587 in Monroe County under a no hurricane scenario.

Homeowners living in non-coastal or northern counties will see only modest reductions in their premiums, with premiums down an average of $47 in Orange County, $36 in Duval County and $28 in Leon County under a no hurricane scenario.
Motorists receive no direct benefit from the legislation, but could see a net increase in 2008 assessments that range from $45 to $182 per vehicle, depending upon location, if an average to large storm hits. Total assessments for motorists could reach 20% of the total auto premium per year under the new legislation.

Small business owners will receive no direct benefit from the legislation, but could see an increase in assessments ranging from $171 to $402 per year if an average to large storm hits.

The approximately 30% of Florida households who rent will not see any direct benefit from the January 2007 Special Session legislation, but could see their auto insurance costs rise if a storm hits. Similarly, those homeowners who do not carry homeowners insurance will not see any direct benefit from the legislation but could see their auto insurance costs rise if a storm hits.

Under the new law, Citizens will suffer a deficit of $3.7 billion and the FHCF will suffer a deficit of $22.3 billion if a 1-in-25 year hurricane hits Florida.

To pay for claims resulting from a large storm Citizens and the FHCF will likely have to raise capital in bond markets. The amount of total capital needed after a storm could be very large - as much as $26 billion from a 1-in-25 year storm to $69 billion from a 1-in-250 year event. To put these potential bond issues in perspective, the largest single municipal bond offering from 1947 - 2005 was a $10 billion offering by the State of Illinois in 2003.

A bond offering as large as the one that would be required to finance a loss may take time to arrange and could negatively affect how quickly financial obligations can be paid. Large bond offerings may also have to be guaranteed by the State of Florida, which could negatively impact the state’s credit rating and/or require a higher interest rate for repayment.

By reducing premiums in high-risk areas such as Dade and Monroe Counties, future development in storm prone regions is made cheaper by the legislation.

Increased development of high-risk areas will raise losses from future storms, which will in turn increase future assessments and rates for all areas.

To pay off losses from a large storm, consumers would be required to pay approximately 10% assessments and surcharges for up to 7 years in the case of the FHCF and approximately another 10% for 8 years in the case of Citizens. Given the combination of assessments and surcharges from Citizens and the FHCF, consumers could be facing additional charges of about 20% of their policy premium for a number of years.

If large storms hit in consecutive years, policyholders could face multiple additional charges on their policies and could see these charges exceed 20% and/or last for even more years than the 7 to 8 projected by the Milliman report.

"The bottom line," PCI’s William Stander concluded, "is that consumers, insurers and public policymakers have a long way to go to reach our shared goal of making people safer, buildings stronger, and the insurance market stable and reliable over the long term. We want to work with legislators in a less politically-charged environment to carefully consider a variety of options to establish a system that will deliver increased competition, greater consumer choice and long-term market stability for Floridians in all parts of the state."


May 2007 Powerpoint from Dr. Bob Hartwig, president of the Insurance Information Institute in New York: Pre-vs. Post-Event Funding in Florida for the 2007 Hurricane Season. Topics include annual average assessment per Florida household for a 1-in-50-year hurricane and 1-in-250-year hurricane.

Insurance Information Institute: Potential Assessments Following a Hurricane in Florida

Special Session Hurricane Insurance Package Doubles Cat Fund for Three Years; Increases Insurer Regulation, but Without Prohibition of Pups & Other Radical Proposals; Citizens Assessment Base is Expanded.

(We found some mistakes in this report released this morning after studying the final conference committee analysis that has just come out. We apologize for those and are correcting them in this revised report. One major mistake was that the Cat Fund expansion is for three years, not two years. Another is that the Citizens assessment base is expanded based on the Cat Fund model to include all property and casualty insurance, including auto insurance, but exempting workers’ compensation and medical malpractice. The recoupment for Citizens was changed to be consistent with the Cat Fund recoupment, so there is an automatic pass through, Leonard Schulte reports.)

(Much of this information includes descriptions taken directly from Summary of Conference Committee Report on Hurricane Preparedness and Insurance released by the House Majority Office this morning.)

House and Senate conference committee members reached agreement late Sunday on a package they believe reduces hurricane insurance rates 5 to 30 percent and which blocks 75 percent rate increases for vocal south Florida policyholders of Citizens Property Insurance Corporation. The major savings for private insurers results from a three year, optional doubling of the Florida Hurricane Catastrophe Fund.

Governor Charlie Crist told reporters late Sunday he wants to “verify” the insurance premium savings to be produced by the massive legislation, but will probably sign it.

The House/Senate conference committee did not formally meet today as had been scheduled, but members individually signed the conference report. This legislation now goes to the full House and Senate for final approval this afternoon and then to Crist, marking the end of a special session which began January 16. The House and Senate are currently scheduled to convene at 1 p.m., but this could be moved back. The special session must end by midnight.

The conference committee summary of the final agreements was released at mid-morning and is available on the FIC Internet site through this link.

The Conference Committee on Hurricane Insurance & Preparedness final conference report is now available. The conference report has been filed as amendment 574486 to HB 1A.

Premium reductions for private carrier insurers are to be achieved through expansion of the Florida Hurricane Catastrophe Fund and options for policyholders to take on higher deductibles, exclude windstorm coverage and exclude contents coverage, with the approval of their mortgage holder.

Citizens Property Insurance Corporation’s 1.3 million policyholders are spared a 75 percent statewide average rate increase by repeal of PML and reinsurance rating standards passed by the Legislature last year and the additional coverage flexibility discussed above. The broader assessment base will produce savings on future and current bonds. Policyholders getting underlying perils coverage from Citizens in the High Risk Account will see a savings there.

Expansion of the Cat Fund and repeal of the Citizens rate increases exposures all Floridians to huge surcharges in the event that the Cat Fund and Citizens face major losses during the next twos years and are required to issue billions of dollars in bonds. The Cat Fund expansion “will lower private insurance rates 5 percent to 30 percent,” The Tallahassee Democrat reported today. “Florida consumers and businesses (however) are exposed to a potential $70 billion in assessments if the fund is wiped out in multiple years.”

Here are some of the most significant provisions:

Cat Fund: The House-Senate conference committee adopted a package that allows insurers to buy down their retention for the 2007, 2008 and 2009 hurricane seasons to as low as their share of an industry aggregate retention of $3 billion instead of the current $6 billion. The lower retention will be purchased in increments - an insurer's share of $1 billion industry aggregate reductions in the retention - and will be priced at near market rates.

The package also allows in 2007, 2008 and 2009 for an optional buy-up for insurers from their share of the current $16 billion maximum capacity to their share of at least $28 billion. There is authority for the State Board of Administration to authorize an additional $4 billion on top of the $28 billion, with the approval of the Legislative Budget Commission. This new top end coverage * everything over $16 billion, will be offered in a carrier's share of $1 billion increments and will be priced at 2.33 percent rate on line.

The package also provides optional additional coverage of up to $10 million for limited apportionment companies under certain circumstances.

The legislation requires that 100 percent of the savings insurers achieve from the cheaper Cat Fund reinsurance be passed along to their policyholders.

House-Senate negotiators struggled Sunday over whether to find state revenues to cover the Cat Fund premium for Citizens Property Insurance Corporation, or least a portion of it, to provide additional savings for Citizens policyholders. They decided finally against this move. Cat Fund officials had expressed concern about possible problems with their bonding arrangements because of what would have been a substantial revision in the revenue stream for handling Cat Fund debt.

Cherry-picking, or linking the sale of automobile insurance to homeowners: The House language: "Effective January 1, 2008, no insurer writing private passenger automobile insurance in this state may continue to write such insurance if the insurer writes homeowners' insurance in another state but not in this state unless the insurer writing private passenger automobile insurance in this state is affiliated with an insurer writing homeowners' insurance in this state." The Senate language which was rejected would have required that an insurer offer in Florida any coverage it sells in any other part of the country or the world or coverage that is sold by an affiliate or parent.

Pups: Senate position that does not prohibit future establishment of state affiliate companies, the so-called pups, that our large national companies rely upon to guarantee the company's solvency. Pups established in the future will be required to maintain minimum surplus of $50 million.

Expansion of the Citizens assessment base: Conference committee members went back and forth on the issue, but agreed finally to expand the Citizens Property Insurance Corporation assessment base to the Cat Fund model, all property & casualty, including automobile insurance, but excluding workers’ compensation and medical malpractice. It is our understanding that medical malpractice insurance premium will once again be part of the Cat Fund assessment base if there are assessments from the 2007 hurricane season.

The recoupment for Citizens was changed to be consistent with the Cat Fund recoupment, so there is an automatic pass through, Leonard Schulte reports.

Citizens competing with the private market: Citizens Property Insurance Corporation will be able to offer all perils coverage in its High Risk Account along with wind coverage, competing directly with private carriers. It must submit a business plan for the expansion to be approved by the Financial Services Commission and Legislative Budget Commission. It is apparently unable to compete with the private market in any other manner, although Crist and south Florida legislators wanted widespread competition between Citizens and private insurers.

As an analysis from the House Majority Office this morning notes, the package “deletes the requirement that Citizens’ rates be non-competitive and no lower than the top 20 insurers.” It does require “rates to be actuarially sound and subject to the standards that generally apply to property insurers under s. 627.062, F.S. (prohibits property insurance rates that are excessive, inadequate, or unfairly discriminatory).”

An offer of private coverage makes a risk ineligible for Citizens coverage unless it is at least 25 percent higher than the comparable Citizens rate.

Non-renewals prohibited during hurricane season: Here is the final language: " the insurer shall give at least 100 days' written notice, or written notice by June 1, whichever is earlier, for any non-renewal, cancellation, or termination that would be effective between June 1 and November 30."

Insurer oath: The Senate position requiring a sworn oath from the CEO or CFO and an actuary of an insurance, including senior officials with national carriers, to accompany rate filings. The officials are signing an oath, under the penalty of perjury, that the information in the rate filing is accurate and reflects premium savings "reasonably expected to result for legislative enactments." The Financial Services Commission may adopt rules and forms implementing this requirement.

Increased surplus requirements: No change, except for the $50 million minimum surplus for pups.

National profits: The conferees rejected this proposal from the House: In determining whether excess profits exist, the Office of Insurance Regulation is directed to consider the profits of national affiliates of Florida-based subsidiaries.

Excess profits: The conference committee accepted House language which apparently establishes an excess profits law. It requires property insurers to return excess profits to policyholders. Our lobbyists say companies should be able to live with this. Excess profits won’t be determined until after examination of an insurer’s earnings and losses over 10 years.

Arbitration: Arbitration is not repealed as proposed in earlier legislation, but it is suspended through December 31, 2008.

Use and file: Use and file is "suspended" for rate increases until 12/31/2008. It is still allowed in the interim for rate decreases.

Other rating issues: Flex Rating. The flex rating plus or minus 5 percent authorized in the 2006 hurricane insurance package is repealed. Rate Look Back. The conferees rejected a proposal to require carriers to submit new filings within 24 months of a rate increase of 10 percent or more to demonstrate that the higher rates are still appropriate. Dividends to Stockholders: Rejected a House proposal requiring domestic stock insurers to maintain 133 percent of minimum surplus if they pay a dividend to the parent.

Reinsurance: Allows a reinsurance credit for reinsurance ceded to alien reinsurers. Reduces the trust fund requirement for non-U.S. reinsurers if OIR determines the adequacy of regulation in the country of licensure and the financial strength of the insurer.

Insurance Consumer Advocate: We were incorrect in earlier reports. The Office is Insurance Consumer Advocate is NOT transferred from the Department of Financial Services to the Office of the Public Counsel, which represents consumers before the utility-regulating Public Service Commission. The consumer advocate is given new standing to intervene in rate cases under certain circumstances.

Payment of property claims: The conferees accepted a House provision that requires an insurer to pay or deny a property claim within 90 days unless such failure is beyond the control of the company. Lobbyists note that these circumstances beyond a carrier's control would include a major hurricane. Legislators instructed OIR this was to be the case.

Allowing consumers more choices in their coverage

Ex-windstorm: Requires insurance companies to make available to homeowners the option of excluding windstorm coverage. The applicant must personally write a statement requesting the exclusion and show proof of approval from the mortgage holder.

Declining contents coverage: Insurers will be required to offer a policy excluding coverage for personal contents. The insurer must obtain a written consent form.

Insurance tied to the mortgage balance: The conferees were considering proposals requiring insurers to offer a policy covering the limits of the mortgage balance, but they decided against this.

Elimination of deductible caps: Current caps on deductibles in homeowners insurance are repealed. However, the policyholder must submit a written statement and obtain approval by the mortgage or lien holder if the deductible is more than 10 percent for a home valued at less than $500,000.

Installment payment plans: Insurers must allow personal lines residential and commercial policyholders to pay premiums on a quarterly or semiannual installment plan.

Reappointing residual market boards: The conference committee rejected a House proposal to change the membership/appointment process for residual markets and other special quasi-public insurance entities. This was seen as an attempt to reduce insurance community representation on the board. A separate House proposal to reorganize and re-appoint the board for Citizens Property Insurance Corporation was accepted. The current board must be fired by March 1, although the appointing officials could apparently re-appoint some or all of the existing board.


Panhandle Carveout: The conference committee agreed to eliminate the Panhandle Carveout from windborne debris regions in effect statewide under the Florida Building Code. Internal Pressurization in High Wind Areas: Adopted the Senate position to "delete the internal pressurization option." This is accomplished by adopting the International Building Code. Deductible buy-down: requires insurers "to provide the policyholder the option of selecting an appropriate reduction in the policy's hurricane deductible or selecting the appropriate discount credit or other rate differential."

Windstorm Mitigation Study Commission: Requires appointment of a windstorm mitigation study commission to report by March 6, 2007. The committee shall analyze solutions for mitigating the effects of windstorms on structures and make recommendations for mitigating windstorm damage. The committee shall have eight members, with the Governor, President of the Senate, Speaker of the House, and Chief Financial Officer each selecting two members. The committee expires May 15, 2007.

My Safe Florida Homes: Makes the following changes to grant program within the Florida Comprehensive Hurricane Damage Mitigation Program: low income homeowners are exempt from the requirement to have a dwelling with an “insured value” of $500,000 or less (i.e., the home does not have to be insured); grants may be used on previously inspected existing structures or a site built single family dwelling that is under construction to replace a homestead damaged or destroyed by a hurricane (rebuild); and low-income homeowners may use grant funding for repair to existing structures leading to mitigation improvements.

Authorizes the DFS to contract with a not-for-profit corporation to conduct all or parts of the Florida Comprehensive Hurricane Damage Mitigation Program.

Requires wind inspectors to have a level 2 background check, which includes fingerprinting.

Requires the DFS to develop and maintain as a public record, a statewide list of authorized wind certification and hurricane mitigation inspectors.

Requires the Financial Services Commission to develop a uniform home grading scale to grade a home’s ability to withstand the wind-load from a hurricane.

Each licensed general lines insurance agent and consumer representative must complete one hour of continuing education every two years regarding premium discounts available on property insurance policies based on hurricane mitigation options and the means of obtaining the discounts.

Requires insurers to provide notice of combinations of discounts, credits, rate differentials, or reductions in deductibles, for windstorm mitigation.

Requires insurers to offer deductible reductions for mitigation measures.

Citizens Property Insurance Corporation/Other Issues

Rate rollbacks: The final package repeals the January 1, 2007 actuarially sound rate filing and requires refunds when consumers have already paid the higher rates. Freezes Citizens rates for 2007 at the December 31, 2006, level or lower. Requires a new rate filing effective January 1, 2008. It deletes the requirement that rates cover costs of specified PML's, averting a pending 56 percent average rate increase. It deletes a requirement for a catastrophe load in Citizens rates. Citizens Rate Floor: Deletes the requirement that Citizens charge the highest rates in the marketplace. It removes the requirement that Citizens be noncompetitive with rates of the voluntary market.

Joint committee oversight: As part of this expansion and competition with the private market, Citizens would undergo "a corporate restructuring" over the next two years under supervision of a new House-Senate committee.

Commercial JUA: The Florida Property & Casualty Joint Underwriting Association (commercial JUA) is transferred to Citizens. It will continue to operate under the current commercial JUA board at least for the time being until the current policies in this poll are run off. At some point the Citizens board will propose a plan of operation to the Office of Insurance Regulation. It could include issuing all perils policies, not just wind to commercial as is the case now in both Citizens and the commercial JUA. It could include insuring property valued at more than $1 million, the current cutoff for eligibility in the commercial JUA.

Sinkholes: As the House Majority Office summary on the final package notes, it “requires property insurers to provide coverage for catastrophic ground cover collapse, defined as geological activity that results in the abrupt collapse of the ground cover that is clearly visible to the naked eye; results in structural damage to the building and its foundation; and the insured structure being condemned and ordered to be vacated by the appropriate governmental agency.

“Contents coverage shall apply if there is a loss resulting from a catastrophic ground cover collapse. Structural damage consisting merely from the settling or cracking of a foundation, structure, or building does not constitute a loss resulting from a catastrophic ground cover collapse. “Insurers must continue to make sinkhole coverage as currently defined in statute available for an appropriate additional premium. Insurers offering policies that exclude coverage for sinkhole losses must provide written notice to the policyholder in 14-point type.”

Capital Build-up Program: Lowers capital contribution to $7 million for insurers writing only mobile homes. Gives priority in fund distribution to insurers writing only property for manufactured homes. Changes the minimum writing ratio of net written premium to surplus for newly formed manufactured home insurers eligible for a surplus note under the program from 2:1 to 4:1.

Self-Insurance Funds; Bonding Authority

Hospitals risk pooling and self-insurance funds:

  • Allows alliances of two or more hospitals licensed and located in Florida for property coverage.
  • Provides requirements for hospital alliance self-insurance funds.
  • Allows the alliance of hospitals in special districts, county hospitals, or municipal hospitals to borrow and bond to finance property coverage and claims.
  • Provides bonding guidelines.

Local government risk pooling and self-insurance funds:

  • Allows local governments to self-insure for property coverage.
  • Allows governmental entities to bond to finance property coverage and claims.

Community association self-insurance funds:

  • Allows one or more community associations created and operating as condominium, co-op, homeowners, timeshare and vacation, and mobile home park lot tenant associations to apply to OIR to form a commercial self-insurance funds for property and casualty insurance.

Not-for-profit self-insurance funds:

  • Allows two or more not-for-profit corporations to create a self-insurance fund for property or casualty insurance, under certain conditions.

Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice, June 2007 by the Insurance Information Institute, New York.

Residual Property Insurance Markets - National Survey

  June 2007, Review of the Emergency Management Preparedness and Assistance Trust Fund, by the Florida Legislative Committee on Intergovernmental Relations.

Insurance Surcharges Finance Emergency Managment Trust Fund