Fla. Senate Okays Insurers’ Antitrust Exemption Repeal

The Florida state Senate approved legislation yesterday that would repeal state insurers’ antitrust exemption and freeze rates for the state-run property insurer.

Senate Bill 2860 was passed on a 32-7 vote.

A Senate staff analysis of the legislation refers to its “major” changes to the state’s insurance laws.

Among its provisions are those freezing rates for the state-run Citizens Property Insurance Corp., increasing the penalties for violations of the insurance laws, and changing the standards and procedures for rate filing.

The provision that has created significant concern among insurers would subject their industry to the Florida Antitrust Act and enforcement under the state Attorney General’s Office in addition to the authority already held by the Office of Insurance Regulation.

“The Senate bill does not address the delicate balance in Florida between long-term market stability and immediate rate relief,” said David Sampson, president and chief executive officer of the Property and Casualty Insurers Association of America (PCI).

“Measures that dramatically increase government regulation over company operations hurt our efforts to seek long-term market stability. Such harsh measures squelch our efforts to attract and retain private insurers to write more policies in Florida,” said Mr. Sampson.

Insurance issues over trade practices, Mr. Sampson argued, should be addressed through the OIR. “Adding an additional layer of regulation through the Florida Antitrust Act threatens to hurt—not help—homeowners' ability to access property insurance in the private market,” he said.

Liz Reynolds, Southeast state affairs manager for the National Association of Mutual Insurance Companies, also offered harsh criticism of the bill and warned against its implications.

“This bill attempts to punish insurance companies with increased authority by the Office of Insurance Regulation at the expense of encouraging a competitive environment that would provide more choices for consumers,” she said. “It also subjects insurers to Florida antitrusts laws, setting up dual regulation.”

Ms. Reynolds also took exception to praise offered by Sen. Jeff Atwater, R-North Palm Beach, for a provision in the bill allowing Citizens Property Insurance Corp., the state-run insurer, to adopt a “glide path” to actuarially sound rates using a “stairstep” approach to increasing rates over several years.

“At the same time members of the Senate recognize the need for Citizens to become solvent through collection of actuarially sound rates, they are chilling the private marketplace with tighter regulation on the ratemaking process,” Ms. Reynolds said.

“Don't consumers in the private market deserve the same ‘glide path’ to reach solvency for their chosen insurer instead of obstacles to providing appropriate coverage at appropriate rates?” she asked.

However, State Insurance Commissioner Kevin McCarty, who heads the OIR, took a different stance, focusing on the increased authority the bill provides him.

“There are numerous consumer safeguards in this key piece of legislation that will protect Florida consumers from unnecessary and unsupported property insurance rate increases,” Mr. McCarty said. “It will stop insurance companies from bypassing my office and increasing rates through the use-and-file or arbitration processes. It also will increase the office’s authority to make certain that companies pay their policyholders’ claims on time,” he added.

The OIR has said it is not concerned regarding the antitrust provisions in the bill.

At the federal level insurers for years have had a limited exemption from antitrust law under the McCarran-Ferguson Act. The provision allows some exchange of information to provide for the ratemaking process.

Florida ’s bill also seeks to strengthen the state’s Insurance Capital Build-Up Incentive Program, which was designed to lure new capital to the homeowners market by offering low-interest loans to companies willing to add a matching amount to their surplus.

The bill appropriates $250 million for the program. It requires companies seeking the loans to use a percentage of their capital to assume policies now issued by Citizens.

“Through its funding for the Capital Build-Up Incentive Program, the bill will help continue to encourage growth in Florida’s insurance market—which already has seen more than 20 new companies and $3.4 billion in capital added to the Florida market since January 2006,” Mr. McCarty said.

No companion legislation exists in the state House of Representatives, and Mr. Sampson said he expects members there “will have a more comprehensive debate about the future of the Florida property insurance market.”