Florida Keys News
Sunday, May 4, 2014
Choices in the flood insurance market
Still, concerns about private firms going belly-up

The state Senate and House of Representatives have passed legislation designed to encourage private insurance companies to provide flood coverage in Florida.

If the governor signs S.B. 542, it will give state residents more choices and hopefully reduce some of the financial burdens of the National Flood Insurance Program (NFIP).

Currently, only six private companies offer flood insurance coverage in Florida, according to the state Office of Insurance Regulation.

The bill essentially makes it easier for private companies to offer flood coverage, and streamlines procedures for their rate reviews from the Office of Insurance Regulation, according to officials.

The Office of Insurance Regulation would maintain jurisdiction over rates, and companies would be required to file a plan of operation and financial projections with state insurance regulators, unless the company maintains at least $35 million in surplus.

"Conceptually, additional providers, consumer choice, competition, lower rates sounds great," Monroe County government's Legislative Affairs Director Lisa Tennyson said. "The bill's passage doesn't guarantee that private companies will come into the market, or that their rates will be competitive. We will have to wait and see."

Tennyson questioned if the private companies would have the financial resources to pay claims in the wake of a major hurricane.

"These firms don't have the security of the NFIP, which is backed by the U.S. Treasury," Tennyson said. "So there are concerns about what happens to a property owner that is insured by a company that goes belly up."

Private firms can decide not to renew a policyholder, Tennyson said, and they are allowed to "cherry pick," she added. The companies may choose to write policies only for the properties least likely to flood.

"This will lead to a situation in which only the riskiest properties are left in the NFIP, sapping the NFIP's ability to spread risk among high- and low-risk insureds, and undermining the NFIP's future financial sustainability," Tennyson said.

Florida Insurance Commissioner Kevin McCarty supported the legislation, and now welcomes the opportunity for the state Office of Insurance Regulation to work with private insurers to provide coverage alternatives to the National Flood Insurance Program, he said.

"The Florida Legislature's action today in passing S.B. 542 promoting choice in the flood insurance market will be good for Florida consumers," McCarty said Thursday in a prepared statement.


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