That would be welcome news to millions of Florida homeowners suffering under backbreaking increases in property insurance costs over the past several years. The Insurance Information Institute, a nonprofit organization funded by large insurers, estimated in 2023 that Florida homes cost $6,000, three times the national average, to insure.
Steve Geller, a former Florida legislator and current Broward County commissioner, presented a plan he says would cut by half the amount of reinsurance that Florida-based insurance companies must purchase each year to ensure they can pay all claims in the event of a major storm.
Currently those companies are required by rating agency Demotech to purchase enough reinsurance to pay claims after a storm that has a 1-in-130-year chance of occurring.
Geller says such a storm hasn’t happened in Florida. And it’s been since the 1920s that the state has experienced a 1-in-50-year storm.
A congressional bill submitted last May by U.S. Rep. Jared Moskowitz, a Democrat from Coral Springs, would require the U.S. Treasury Department to issue 10-year Treasury notes to cover damage beyond what would be generated by a 1-in-50-year storm.
With that guarantee in place, insurers would only have to buy enough reinsurance to cover a 1-in-50-year event, rather than a 1-in-130-year event, Geller said at a news conference held Thursday to outline the proposal.
That would reduce reinsurance costs by half and — because reinsurance costs make up half of insurance premiums — reduce costs of homeowner policies by 25 percent, Geller said.
Geller, also a Democrat from Broward County, presented a study by the South Florida Regional Planning Council, which he chairs, estimating that a 1-in-50-year storm currently costs insurers $62.5 billion.
Florida would pay back the Treasury note by charging all property insurance customers in the state a special assessment of between 1 percent and 3 percent of their premiums for up to a decade.
Because storms over 1-in-50 years are so rare, Geller said, “there are very few cases in which this would have to occur,” he said.
Meanwhile, Florida homeowners would save $838 million in premiums over five years and see annual cost increases slashed, Geller said.
Other states with high risk of catastrophes — such as California, Texas and Louisiana — could participate as well, while states that experience fewer events could opt out.
Paul Handerhan, president of the Fort Lauderdale-based Federal Association for Insurance Reform, said the savings on premiums would make the plan a good deal for policyholders.
The state already guarantees coverage for damages from storms, and policyholders are required to repay any amount that’s not covered by reinsurance, he said.
For example, the Florida Insurance Guaranty Association was formed to pay all claims if an insurer goes insolvent, but FIGA recoups that spending by assessing insurance companies.
State law requires state-owned Citizens Property Insurance Corp. to apply surcharges and assessments, potentially against all insurance policyholders, if it depletes its $16.7 billion in reserves and reinsurance.
Treasury-note rates are typically lower than bonds the state would have to purchase to cover all damage, Handerhan said.
But Jeff Brandes, former state senator and outspoken critic of the state’s insurance regulation, questioned Geller’s assumption that a 1-in-50-year storm is unlikely to occur as ocean temperatures increase each year.
Brandes said the plan backed by Geller and Moskowitz amounts to “socializing the risk” — meaning employing socialism to make everyone pay for damage of a limited number. Republicans in Congress are unlikely to back it, he said.
“I understand why people would want to do this,” he said. “But it kind of resembles plans that people have presented to make Citizens the sole provider of wind insurance.”
During the just-completed 2024 legislative session, state House members Spencer Roach and Hillary Cassel sponsored a bid to sell Citizens wind insurance to anyone in the state who wants it. Under the plan, traditional private insurers would still provide comprehensive coverage. Roach reasoned that the coverage would be backed by a surplus that would build up in years without hurricanes.
But their plan went nowhere in the Florida Legislature.
And Moskowitz’s plan has gone nowhere in Congress since he first filed it last May.
Geller admitted Thursday that the idea will be difficult to get through Congress. For one thing, it would be opposed by global reinsurance providers because they would make less money if small carriers were required to purchase less reinsurance, Geller said.
Several national insurers are in the reinsurance business as well. They would likely lobby to block any plan that erodes their revenue stream, he said.
Similar plans have been proposed in the past.
Charlie Crist proposed one in 2022, his last year in Congress. The Fueling Affordable Insurance for Homeowners (FAITH) Act would have authorized low-interest rate federal loans to state insurance commissioners to pay off catastrophic losses over a set threshold.
But Crist went on to lose the governor’s race to incumbent Ron DeSantis later that year, leaving Moskowitz, who was not present at the Thursday news conference, to reintroduce it last year as the Natural Disaster Risk Reinsurance Program Act of 2023.
Geller said that Moskowitz, appointed by DeSantis as director of the Florida Division of Emergency Management from 2019 to 2021, is ideally suited to push the proposal through Congress.
But his bill hasn’t been heard by a committee and has no Senate counterpart.
Geller said the idea should gain momentum now that the South Florida Regional Planning Council has produced a report that fully projects costs and savings.
Brandes, however, said it’s easy to produce a plan to lower insurance premiums.
One way is by lowering the loss level that enables insurers to access the Florida Hurricane Catastrophe Fund, a state-funded reinsurance program that costs insurers less. Reducing what’s called the “retention level” from $8.2 billion to as low as $4.5 billion would enable insurers to buy cheaper reinsurance while getting the same level of coverage.
Brandes, who left the Senate after 2022, did not get traction on a legislative bill he sponsored that year. That would have lowered the retention level and saved the state up to $1 billion a year, and individual households $150 a year.
But as catastrophe models show the potential for costly weather damage increasing rather than decreasing every year, lawmakers and business interests seem wary of getting behind any plan that generates fewer dollars for insurance and recovery, Brandes said.
“Politicians always underestimate the cost of insuring risk, while models say risk is increasing,” he said. “Ultimately it’s taxpayers who pay at the end.”
Geller and Moskowitz, along with several guests, are scheduled to talk more about their proposal during a town hall meeting Friday hosted by the South Florida and Treasure Coast Regional Planning Councils. It will take place from 9:30 a.m. to 3 p.m. at the Palm Beach Transportation Planning Agency located at 301 Datura Street in West Palm Beach.
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