“The market is in crisis. We have to do something,” FL Senate passes $1B insurance industry subsidy

On Tuesday, the Florida Senate passed insurance reforms which would give another $1 billion subsidy to the carriers, but don't expect lower premiums anytime soon.

Members of the minority party lamented that the bill would tie policyholders' hands in fights with insurance companies by eliminating financial incentives for plaintiffs' attorneys to represent them in court.

But the bill's sponsor —Banking and Insurance chairman Joe Boyd, who runs an insurance and investment firm in Bradenton — conceded his reforms could take a year to 18 months to filter through the regulatory system and begin to show results.

"Immediately, there is no impact," he said.

Still, he argued it would be in consumers' best interests because it would prevent the collapse of the insurance market in the nation's third-largest state and slow the rate of increase in premiums. And a healthier market will attract insurance companies to the state, Boyd added.

"The market is in crisis. We have to do something," Boyd said.

The approval vote was along party-line - 27-13.

Similar legislation is pending in the Florida House.

FORA

About that $1 billion: The bill would create a Florida Optional Reinsurance Assistance program — referred to as FORA — in that amount that would help insurers pay the deductibles on their reinsurance policies, William Stander, who lobbies for Florida-based insurers, explained in an interview with the Phoenix.

Those costs have been rising because of a tightening in global capital availability. State regulations require insurers to carry certain levels of reinsurance coverage and they can't operate in Florida if they don't, he said.

Earlier this year, the Legislature set aside $2 billion in taxpayer money to help the insurers meet that burden; they could dip into the money during the first or second years of the two-year program. In return, the carriers must lower premiums.

The companies won't have to pay to participate in the $2 billion fund but will have to buy in to the second fund, money that will contribute to its value. Since they're paying, they won't have to lower premiums this time.

"It's meant to stabilize the market," Boyd said of the program.

"The global reinsurance market is shrinking; Florida is not as attractive as it used to be. Many of our domestic carriers, that are the ones doing business in Florida now, are finding it hard to access reinsurance in the market at a reasonable cost, which gets passed on to the consumer," he added.

As outlined in a legislative analysis, Fitch Ratings has predicted that insurance prices will rise by more than 10% next year nationally, with Florida at the top of that curve. Reinsurance costs grew by 54 percent during the 2020-2021 financial year above rates in 2019, according to the Florida Office of Insurance Regulation.

This report first appeared on the website of the Florida Phoenix, a nonprofit news organization dedicated to coverage of state government and politics from Tallahassee. It has been edited to length, to read the complete report, click here.