Florida’s insurance market of last resort — Citizens Property Insurance Corp. — wants to reform itself by charging higher rates and increase the participation of private market reinsurers.
A proposal made during a legislative meeting on Wednesday by Florida Insurance Commissioner Kevin McCarty would allow for a restructuring of the market and the creation of a “reinsurance pool” that would allow private reinsurers to participate annually in covering a “pool” of wind exposure, according to meeting materials.
The pool would have “no assessment capability,” but would also not be subject to agency “rule making” and act as a voluntary market for carriers.
The pool would also be “managed by technical experts; active insurers should have role on board,” the materials said.
Currently, of the approximately $20 billion in Citizen’s risk finance capacity, about 57 percent is held in the private market and 39 percent by the Florida Hurricane Catastrophe Fund. The reinsurance annual cost is $2.75 billion, the materials said.
The proposal is part of a larger push that seeks to move the state further into the private market for both carriers and reinsurers.
“I appreciated the opportunity provided by Chairman Simmons and members of the Senate Banking and Insurance Committee today to articulate principle-based solutions to the challenges facing Florida’s property insurance market,” said Commissioner McCarty. “These free-market solutions are based on sound insurance and economic principles.”
Another major part of the reform proposal that would act as a carrot for the private reinsurance market would be to separate risks by creating a “Coastal Account” that would include focus entirely as a “true” residual market for residents.
Key to the reform, however, is allowing Citizens to pass through rate increase above the current 10 percent cap, something that has failed in previous reform attempts.
