On January 22 the Florida legislature approved several measures that will lower the cost of homeowners insurance by transferring billions of dollars in additional insurance risk to the state.  Insurance rates increased sharply in Florida after the state was hit by eight hurricanes in 2004 and 2005; the trend of fierce storms is predicted to continue for another 10 years or more.  Shortly after Governor Charlie Crist took office on January 1, he convened a special legislative session to address the problem of escalating insurance costs.  One legislative analysis shows that other homeowners will save an average of 21.8 percent, although estimates of cost savings vary widely, with some as high as 40 percent. The smallest savings under the new legislative package will go to homeowners in South Florida covered by the state-sponsored insurer of last resort, whose insurance prices will decrease by as little as 8 percent.  Some of these homeowners now pay three times as much for coverage as before 2004.

Under the new law, private insurers will be able to buy reinsurance from the state’s Hurricane Catastrophe Fund at rates below the market price in return for reducing homeowner premiums.  If the fund becomes depleted as a result of catastrophic losses, home, auto and other policyholders would have to pay annual assessments. The measures must still be signed by Crist.

Fla. Lawmakers Agree on Insurance Relief Plan (Insurance Journal 1/23/07)

January 26, 2007