Florida lawmakers pitch radical idea to solve property insurance crisis

TALLAHASSEE — State Rep. Spencer Roach, a Republican from North Fort Myers, believes he has the solution to Florida’s property insurance crisis.

On Tuesday, a House committee gave him a chance to make his pitch.

During a 30-minute presentation and discussion, Roach and Rep. Hillary Cassel, a Democrat from Dania Beach, described a radically different vision for homeowners insurance in Florida.

“We have the solution,” Roach said.

Instead of Floridians paying hurricane premiums to private, for-profit insurers, they could be covered by the state-run Citizens Property Insurance, and probably for cheaper. Citizens would collect the money, much like the National Flood Insurance Program, the lawmakers said.

Private insurance companies would still provide coverage for fire, theft and other damage — and even wind coverage, if they wanted, Roach and Cassel said.

But if Floridians pooled their hurricane premiums, Florida could break its boom-and-bust cycle of insurance failures triggered by storms since 1992′s Hurricane Andrew, they said.

The move could save residents money and provide a more reliable backstop than the private insurance market, the lawmakers said. And they said the money would be there for hurricane response, instead of potentially going toward profits or payouts to insurance executives.

After Andrew, state lawmakers created the precursor to Citizens to offer coverage to homeowners who can’t find it on the private market.

In the decades since, Citizens has grown after storms, surging to nearly 1.5 million policies in recent years. Republican governors and lawmakers have repeatedly responded by incentivizing Florida-based insurers — who are also major political donors — to take policies out of Citizens.

“History repeats itself,” Cassel told lawmakers. “In 20 years, our successors are going to be looking at the same crisis and asking why we haven’t done more.”

Would it work?

During Tuesday’s hearing, Citizens President and CEO Tim Cerio cautioned that taking on the state’s hurricane risk could make it difficult to acquire reinsurance, which is insurance that the corporation and private insurers buy ahead of storm season to pay claims.

Although Citizens’ board, made up of political appointees, hasn’t taken a position on the idea, Cerio cautioned that a major storm could leave the state on the hook for billions of dollars in assessments, which are levied on all Floridians with auto or home insurance policies.

“That’s a big hit to the pocketbook,” Cerio said.

Roach told Cerio afterward that many details would need to be sorted out in the legislation.

But it’s not a new idea, Roach said. He compared it to the federally subsidized National Flood Insurance Program or the California Earthquake Authority, which was created after the 1994 Northridge quake prompted insurers to flee that state.

Fifteen years ago in Florida, after the last insurance crisis triggered by a series of storms, former state Rep. Don Crane and other volunteers tried to convince lawmakers to adopt an idea similar to Roach’s.

At the time, Citizens’ former chief risk officer reviewed the group’s paper and wrote that it was a “surprisingly persuasive argument.” Florida TaxWatch vetted it in 2011 and found the idea “a viable one.” Large insurers including State Farm and Allstate privately supported the idea at the time.

Had lawmakers at the time adopted Crane’s approach, the fund would have been self-sustaining with a surplus of at least $82 billion by now, Crane and his colleagues calculated then.

“I am convinced that inevitably, Florida will have to embrace this model,” Roach told lawmakers.

Roach and Cassel have personal experience with the insurance market. Cassel is a lawyer who used to work for insurers and now represents homeowners.

Roach’s home was destroyed during Hurricane Ian. His insurer was St. Petersburg-based United Property and Casualty, which initially denied his claim before going out of business. He was eventually paid through the Florida Insurance Guaranty Association — which levied assessments on Floridians to pay its claims — but still had to take out $100,000 in loans to rebuild his home, he said.

“I have a pretty bitter taste in my mouth right now about the way these insurance companies treated me and my constituents,” he told the Times/Herald last month.

“If the Gambino family were operating the way these folks were, we would call it racketeering.”

Will it go anywhere?

The legislation, House Bill 1213, has virtually no chance of passing this session. It wasn’t heard for a vote in any committee during this year’s session. Tuesday’s hearing, called a workshop, was also strictly limited by committee chairperson, Rep. Wyman Duggan, R-Jacksonville.

Although lawmakers had an hour left in Tuesday’s committee, Duggan limited the topic to 30 minutes — 10 minutes for Cassel and Roach, 10 minutes for Citizens’ response and 10 for lawmakers to ask questions.

Still, Roach said he was thankful the idea was heard at all, and he credited House Speaker Paul Renner, R-Palm Coast. Renner told reporters last month that Roach’s idea was worth hearing and discussing.

One Republican representative commended Roach and Cassel for the idea, but most seemed skeptical.

“It is an interesting concept,” Rep. Cyndi Stevenson, R-St. Johns, said afterward, adding that she thought creating more resilience, such as not building so heavily along the coast, was the ultimate solution to the insurance crisis.

The idea of pooling risk with the state is reasonable, said Gavin Magor, director of research and ratings at West Palm Beach-based Weiss Ratings, which examines the financial health of every Florida-based insurer.

“I think its time has come,” Magor said after the meeting. “We cannot continue doing things the same as we did before, because it hasn’t worked.”