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CEI Analyst Hails Passage of Insurance Reform Bills

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CEI Analyst Hails Passage of Insurance Reform Bills

Changes Represent a Free Market Approach

Tallahassee, FL, April
6, 2009—The Florida Senate Committee on Banking and Insurance today
overwhelmingly approved both SB 2036 and SB 1950 with bipartisan support.

SB 2036, sponsored by Senator Mike
Bennett (R-Bradenton), would allow private insurers to bypass the state’s
current rate regulation process and would immunize their
policyholders from potentially enormous assessments by Citizens Property
Insurance Corporation after a major hurricane. Citizens, a state agency,
serves as the largest provider of property insurance in Florida, and current
law allows it to levy assessments – “hurricane taxes” – on all property and
auto insurance policies in the state should it find itself unable to pay its
claims after a storm. These taxes do not require any additional
legislative approval. 

SB 1950, sponsored by Banking and
Insurance Committee Chairman Garrett Richter (R-Cape Coral) would implement
several changes to Florida
insurance law that would reduce the enormous hurricane risk the state and its
taxpayers are currently exposed to. These changes include a decrease of the
Florida Hurricane Catastrophe Fund. On its own, the CAT Fund has the ability to
literally bankrupt the state should it be faced with a projected $18 billion
shortfall in the aftermath of a major storm.

The bill would also provide a
“glide path” to gradually increase Citizens’ artificially suppressed rates to
an actuarially sound level. This would place Citizens in a more stable
financial position and would reduce the need or severity of “hurricane taxes”
after a storm. Part of the rate increase would be directed to the My Safe
Florida Home program, a highly successful mitigation grant program that has
effectively fortified thousands of Florida
homes, thereby reducing the state’s overall hurricane risk.

Both bills, which must still pass
the full House and Senate, would significantly expand the availability of
property insurance throughout Florida
and would give residents more options to insure their homes. Last week,
the House version of both bills (HB 1171 and HB 1495, respectively) passed
their first committees of reference in the Florida House of Representatives
with bipartisan support.

“A free-market approach is
the only long-term solution to the state's insurance crisis and
these bills take that approach,” said Christian Cámara, Director of the
Competitive Enterprise Institute's Florida Insurance Project. “These proposals
would transfer a substantial portion of hurricane risk away from taxpayers, and
would expand Floridians’ ability to make their own decisions when it
comes to the rates they pay and the companies they buy from.” 

CEI is a non-profit, non-partisan
public policy group dedicated to the principles of free enterprise and limited
government.  For more information about
CEI, please visit our website at www.cei.org.