Vol 7 No. 19 - January 31, 2007

WIND INSURANCE: Accessible, maybe; affordable, maybe not

By Cindy Lane
sun staff writer

As experts study the massive new state property insurance law, it appears that insurance may be more accessible for Anna Maria Island business owners, but not necessarily more affordable.

One of the dozens of provisions in the insurance reform law signed by Gov. Charlie Crist last week requires Citizens Property Insurance Corp. to provide insurance coverage to commercial property owners who previously could not get insurance due to their location inside a wind zone.

Island business owners in the Property and Casualty Joint Underwriting Association, created last year for such stranded commercial property owners, will be transferred to Citizens under the new law.

"It’s certainly a change from the direction we’ve been going," state Rep. Bill Galvano said, adding that while the law does not refer specifically to wind zones, nothing in it limits or denies Citizens insurance coverage based on a property’s location.

“The attorney interprets that to mean that the new law requires Citizens to insure property anywhere in the state, regardless of its location inside or outside of a wind zone.

But the wording of the law was revised so hastily in a marathon seven-day special session, that may not be what it actually says, said John Laurie of Wyman Green and Blalock Insurance in Bradenton, who serves on the state’s Property and Casualty Insurance Reform Committee. The committee advises the Legislature on insurance.

While Laurie is working to get clarification on the accessibility issue, he said it may wind up to be a moot point for commercial property owners inside the wind zone because the law doesn’t mandate maximum rates.

"It may be that they qualify, but it may not be affordable," he said.

Another problem with the law is that if everyone is able to get insurance through Citizens, more business will go to the state-run insurance company, increasing the state’s liability.

"The ‘state’ is us," Laurie said, explaining that the taxpayers of Florida would ultimately have to pay should a Hurricane Katrina or a series of smaller storms hit Florida.

Another downside of the new law is that Citizens is competing with other insurers on an unlevel playing field, which may discourage companies from doing business in Florida, he said.

Citizens’ rates are not based on actuarial science, Laurie said, explaining that unlike other insurers, who must buy reinsurance and price their rates according to 100-year storm risks, Citizens bases premiums only on 50-year storm risks.

"I’m hoping companies don’t fold up their tents and go home," he said. "You can’t mandate the laws of business."

The committee will advise the Legislature on insurance through its regular session, beginning in March, when further changes to the law are expected to be made.

Ultimately, the insurance industry would like to see Citizens become a reinsurer rather than a direct insurer, he said.

"But the market is too chaotic now," he said. "That may take a few years."

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