Two weeks.

That's all the time that remains for Florida lawmakers to make big changes to the state's fragile homeowner insurance market.

Two reform bills — one in the House and one in the Senate — have been introduced in Tallahassee, each proposing cash infusions of hundreds of millions of dollars to the state system, along with changes to insurance regulations to solve problems going forward. The bills share common ground but differ sharply on specific issues.

The tough part for legislators lies in reconciling the bills and in doing it quickly.

They must. The system has reached a crisis point. In addition to issues unresolved from the previous year and finite time left in the session, a new hurricane season begins June 1.

Battered by multiple hurricanes in the past two years, insurance companies are dropping policies and raising rates in what they say is an attempt to remain in the market. Homeowners, hit again and again with higher rates, surcharges and the hurricane repairs, are wondering how much more they can take.

Further, the two anchors of the Florida insurance market — Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund — are hemorrhaging money. Citizens, the state's insurer of last resort, expects a $1.7 billion deficit. The catastrophe fund is staring down an estimated $1.5 billion hole.

Sen. Rudy Garcia, R-Hialeah, the main author of the bill in his chamber (SB 1980), and Rep. Dennis Ross, R-Lakeland, the primary author of the House's bill (HB 7225), agree it will be tough to mesh the two pieces of legislation into a comprehensive package.

Finding middle ground

Both bills put more of a burden on seasonal and wealthy residents, while sparing full-time residents from higher costs. Both seek to shrink Citizens and send more money flowing into its coffers, and also provide ways to pour more money into the catastrophe fund, a pool of money that helps insurers offset losses from major hurricanes. Both bills create programs that would give people money to strengthen their homes against hurricanes. And both require cash buildups for the catastrophe fund.

But the House bill is much more strict. It would remove all homes worth $1 million and up from Citizens next year. It would force non-homesteaded property like vacation homes, investment properties and businesses to get coverage from Citizens only after first being rejected by three regulated insurers and three "surplus lines" companies. Surplus lines companies' rates are unregulated and typically much higher.

Even if those homes make it into Citizens, the House bill would place them in a separate account, charge them higher rates and require them to cover their own deficits.

The House bill also gives insurers the ability to change their rates by 5 percent statewide or 10 percent in a specific area without regulator approval. And a House committee voted last week to put $920 million in tax dollars into Citizens to help cover its estimated $1.7 billion deficit.

A Senate committee also voted last week to use tax money for Citizens' deficit, allocating $750 million.

The Senate bill, however, has some significant differences. It would remove $1 million homes from Citizens in 2011, after charging them a 25 percent surcharge beginning next year. It would also require seasonal residents to pay 25 percent surcharges on Citizens' premiums as well as a 25 percent surcharge every time there is an assessment.

The Senate bill also makes it easier for insurers to get rate hikes for $1 million homes by requiring regulators to prove that those hikes are excessive before denying them. And it would let insurers raise rates to recoup the cost of their reinsurance, which is insurance for insurance companies.

But aside from these problems, which lawmakers have known about for months, there is a new conundrum. Insurance companies are claiming that there's no affordable reinsurance in the private market and they want the state to step in.

Reinsurance dries up

Most insurers want to buy reinsurance to cover the losses they'll incur before they can tap the catastrophe fund. Most reinsurance policies in Florida are renewed on June 1, and right now insurance executives are flying to London and Bermuda, where most reinsurers are based, to try to negotiate deals. They say reinsurance has become nearly impossible to find, and what little is for sale is expensive.

When insurance companies can't get reinsurance, they often raise rates or drop policies to take in more money or reduce their potential losses. Don Cronin, CEO of United Property & Casualty Insurance Co., said that if his firm can't find reinsurance it would have to drop policies. Cronin is still trying to make a deal and said he has been quoted deductibles that were two to three times what his company now pays.

"It would be like if the consumer had a 2 percent hurricane deductible and suddenly this year had to maintain a 6 percent deductible for each storm," Cronin said. "The reinsurance is the single largest expense we have as a company."

Some companies want the state to step in. Florida already sells cheap reinsurance through the catastrophe fund. Companies pay into the fund, and this year they can tap it once they pay out $5.4 billion in claims. Some insurers want the catastrophe fund to lower that deductible so they can tap the fund sooner.

Gov. Jeb Bush has suggested that the legislature look at this option. Insurance Commissioner Kevin McCarty, who traveled to Bermuda recently to talk with reinsurers, supports lowering the catastrophe fund deductible for a year. McCarty said buying reinsurance will be especially difficult for smaller companies, which make up 33 percent of Florida's market.

The Senate's Garcia tried to amend his property bill at a committee meeting April 7 to allow those smaller companies to tap the catastrophe fund sooner. But he withdrew the amendment after some senators expressed concern about piling more risk onto Florida taxpayers.

"When people who spend their lives estimating risk don't want it, it scares me," Sen. J.D. Alexander, R- Lake Wales, said at the meeting. "If I was in private business I'd tell you to forget it."

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By STEPHANIE HORVATH
Palm Beach Post Staff Writer

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