"Surplus Lines" insurance bill sparks heated debate

Mar 5, 2012

As the final scheduled week of the 2012 Florida Legislative Session got underway, the state senate was working through a long list of bills.  Tom Flanigan reports the issue of allowing unregulated out-of-state insurers to take over Citizens Insurance customers sparked spirited debate.

The bills kicking around the legislature this session would allow private insurers called “surplus lines” companies, to simply take over Citizens customers.  Those customers would get a letter, telling them they now had an insurer other than Citizens.  If they wanted, they could opt out of the deal and stay with Citizens.  But if they did nothing, they’d be locked in to the new company.  That was one sticking point with a number of lawmakers.  Another sticking point was the very fact that out-of-state surplus lines insurers, unregulated and with no assurance they’d even be able to pay claims, would be providing the coverage.  That was the essence of the Senate Bill sponsored by Naples Republican Senator Garrett Richter.  Fellow Republican State Senator Mike Fasano of New Port Richey, proposed a corrective amendment…

“This would require that those surplus lines companies that would be taking policies out of Citizens, that they come under the Florida Insurance Guarantee Association like every other insurance company in the state has to.”

The Florida Insurance Guarantee Association, called “FIGA” for short, is supposed to be a safety valve in the event property insurers are overwhelmed in the wake of an unusually severe storm…or storms.  Richter, upset by Fasano’s amendment, rose to insist surplus lines companies would have far more reserves than either FIGA or Citizens.  Then he turned his attention to the amendment’s sponsor…

“Now what really confuses me, Senator Fasano….I’m puzzled.  I’m puzzled by your attacks on this bill and your attempt to kill it because of FIGA.”

Meanwhile, Senate Budget Chief J-D Alexander recalled the 2006 failure of the Poe Insurance Companies.  Those firms, owned by former Tampa Mayor Bill Poe, were later sued by state regulators.  The charges were the  top officials paid themselves big money as their companies were losing millions.

“And I guess my question is, this implication that somehow regulation of insurance companies protects our public in some way when in Poe’s case in particular I guess I’d ask was it not the regulatory scheme that allowed with Poe that caused that failure.”

And Senator Richter insisted the whole idea was to make sure whatever entity was providing the coverage would be solid enough financially to pay claims…

“Why wouldn’t we want to give give policy holders a chance to move to a strong, solvent insurer to avoid assessments for them and for all of Floridians – that can avoid assessments for all Floridians – that own cars, small businesses and homes.”

Senator Fasano finally had had enough of others answering questions regarding his amendment…
“With all great respect to all that are asking these questions, they are going to Senator Richter, so what I’d like to do is just temporarily postpone or pass the amendment…”

Effectively taking it off the table for the time being.  Senators then took up thirteen more amendments, most also trying to provide more state oversight to the surplus lines insurers.   In the course of the ensuing debate, Senator Thad Altman, Republican of Melbourne, asked whether the legislature should even be trying to move policy holders out of Citizens in the first place…

“As I said earlier, I believe that Citizens is solvent.  We haven’t had a major storm in years and especially when you look at the rates that individuals are paying – exorbitantly high rates for Citizens – and I don’t believe the people of Florida and our insurance company Citizens is irresponsible or actuarially unsound.”  

Altman’s amendment would give policyholders the final say on whether or not they stayed with Citizens.  That amendment did pass.  More amendments came and went   Finally, after more than an hour-and-a-half of questions and debate, Senate President Mike Haridopolos brought the matter to a close…

“Pursuant to Rule 4419, the order is engrossed and placed in the calendar of bills for third reading.  Read the next bill.”

Later in the day, former Florida Insurance Consumer Advocate Sean Shaw called the amended senate bill a bit less predatory, but still bad news.  He said his organization Policyholders of Florida would keep working for its defeat this week.