HB 245 Update: Florida Senate Opts Out Of Opt-Out Clause

In my previous post on HB 245, I described the Florida legislature’s efforts to depopulate Citizens by allowing surplus lines carriers to pluck policies from Citizens.  The legislation at the time allowed surplus lines insurers to take a policyholder out of Citizens unless that policyholder objected and opted out of the new surplus lines coverage.  In my previous post, I called the “opt out” provision “the greatest flaw in the legislation”.  The Florida Senate agreed, and yesterday lawmakers voted to amend the bill to remove the opt-out clause.  If the bill passes, policyholders will now need to affirmatively opt in to the switch from Citizens to the new surplus lines insurer.  You can read more about the amendment here.

The bill’s concept remains fundamentally flawed.  What the state really needs is more capacity in the admitted market.  Yesterday, Tower Hill, a Gainesville-based insurer and one of Florida’s largest writers of residential property insurance, held a conference at The Breakers in Palm Beach.  Tower Hill representatives stated that the company has the ability to greatly expand its capacity in its admitted coverage and would welcome the opportunity to take out Citizens policies under certain conditions.  Although cherry-picking the best risks from Citizens remains a concern, the legislature ought to focus more effort on shifting homeowners policies from Citizens to well-capitalized, home-grown insurers like Tower Hill.  The Office of Insurance Regulation has been working on those efforts, and, although it is a slow process that does not make headlines, it is the path to regaining a healthy homeowners insurance market in Florida.

After the active hurricane seasons in 2004 and 2005, many admitted carriers were left either insolvent or with little surplus.  Many insurers purchased insufficient amounts of reinsurance, and some still do.  But the legislature should not discount the strength of the admitted market, or turn its backs on home-grown insurers who are working to increase capacity, and are willing to slowly drain Citizens of its bloat.