A key Florida Senate committee last week advanced a bill that would allow surplus lines carriers to take over coverage of second homes from Citizens Property Insurance Corp. Reaction by agents and brokers was mixed.

The issue of having the state-backed insurer provide coverage of so-called vacation homes, often at rates that are below what the admitted market can offer, has cropped up repeatedly in recent years as Citizens has grown in policies and exposure. A 2022 effort to end the coverage died in committee.

This year, Senate Banking and Insurance Committee Chairman Jim Boyd, R-Bradenton, has revived a plan to let surplus carriers step in as a way to help depopulate Citizens. The carrier now insures 45,000 to 60,000 secondary homes, Citizens’ Christine Ashburn told the committee.

Senate Bill 1716, as revised in the committee last Monday, would allow surplus carriers to make takeout offers, as long as the insurers have a financial strength rating of “A” or higher, as determined by the financial rating firm AM Best. The insurers also would have to utilize Florida-based surplus lines brokers; and would be required to have their takeout plans and rates approved by the Florida Office of Insurance Regulation.

The Florida Association of Insurance Agents supports the bill as a way to help with Citizens’ depopulation plan and because it would help ensure that Florida agents would be kept in the process, said B.G. Murphy, director of government affairs for the association.

But some Florida insurance brokers have said that allowing surplus lines into the primary market may not go far enough to solve the affordability crisis for many homeowners and condominium associations that have seen premiums quadruple in some cases and have seen coverage limits drastically reduced. Mike Clarkson, managing director of Hilb Group of Florida, the insurance brokerage for hundreds of condo associations, suggested that second-homers that go with surplus carriers would likely try to return to Citizens upon renewal the next year. He also is concerned because surplus lines are not regulated as tightly as admitted insurers.

And state Sen. Bobby Powell, D-West Palm Beach, pointed out that surplus lines insurers’ claims would not be backstopped by the Florida Insurance Guaranty Association in case of insolvency.

Boyd, an insurance agency owner, said in the committee hearing that most surplus firms tend to have larger surplus levels than do primary carriers, meaning they are less likely to become insolvent.

A recent bulletin from A.M. Best, suggests that surplus carriers can occasionally encounter financial headwinds. The rating firm on Dec. 20 downgraded the outlook, from stable to negative, for James River Group but affirmed the financial strength rating as “A-.” James River includes James River Insurance Co., a specialty and excess and surplus carrier operating in all 50 states. But for the E&S segment of the industry, A.M. Best in November revised its outlook from stable to positive, citing efficiencies and strong underwriting results.

Florida Condos Say They Can’t Get Coverage. Bill Would Let Citizens Step in

The committee also approved SB 966, which would require that most home warranties provided by home builders to be automatically transferred to subsequent home buyers while the warranties are in effect.

Senate Bill 988 would exempt information about homes, collected as part of the state’s My Safe Florida Homes wind-mitigation grant and inspection program, from Florida’s broad open records law. The committee passed the bill by a vote of 9-0, with the sponsor noting that it would help protect private information about homes, including photographs, from falling into the hands of “unscrupulous individuals.”

SB 1622 was requested by the Florida OIR. If signed into law, it would require insurers, including reciprocals, to file supplemental financial reports monthly instead of quarterly, and to break the data down by ZIP code. The bill also would codify that property insurers during a declared state of emergency, may not cancel or non-renew a homeowner or condominium policy for a wind-damaged property for at least 90 days after the structure has been repaired. That time frame would be shortened if the policyholder has not paid premiums, has provided a material misrepresentation of the facts in a claim, or has caused a delay in repairs, the bill notes.

The measure also would eliminate the current requirement that property insurers utilize a weighted model or the average of two or more hurricane loss models. The bill’s sponsor, Sen. Jay Trumbull, R-Panama City, said that change was needed to prevent insurers from choosing the two models showing the largest projected losses, which can affect rates and premiums for property owners.

“My goal and intention was to make sure that we weren’t using two models that were the two more expensive models, and that we were focusing on ones that were less expensive,” Trumbull said at the meeting. A Senate staff analysis can be seen here.

SB 1622 also would eliminate the current requirement that the state’s public housing authorities’ self-insurance funds cap losses per occurrence at $350,000.

“There are 24 housing authorities in the state. This would allow them to have an actuarily defined premium they could write instead of having to go to HUD (the U.S. Department of Housing and Urban Development) for the excess,” Trumbull said.

The bills now move to a second Senate committee.