Surplus lines insurers and their customers are exempt from fees other policyholders pay to support the Florida Insurance Guaranty Association and they may be cheaper because they aren't subject to Florida rate regulations.
But there are risks: If a major storm hits, their policyholders can't tap FIGA, a fund that helps pay claims when insurers fold. Regulators can't intervene if a surplus lines insurer refuses to pay homeowner claims or drastically raises rates.
That's a big concern for Sen. Mike Fasano, R-New Port Richey: “What’s it going to cost the consumer who can’t afford private insurance?"
Sean Shaw, an attorney and founder of Policyholders of Florida, agreed: "Allowing companies that are not fully regulated by the state to swoop in and take Citizens policies" is unacceptable.
Rep. Jim Boyd, R-Bradenton, who is sponsoring one of the bills, said consumers who don’t want to leave Citizens, the state's largest home insurer, wouldn’t have to and the bill only allows insurers that have strong financial ratings and at least $50 million in claims-paying reserves to participate.
He said the unregulated insurers would have to charge a reasonable price if they want a Citizens policyholder to switch.
“Along coastal communities, a lot of commercial buildings are already insured by surplus lines carriers…It’s just another option for [consumers] to consider as they’re looking at what they’re paying and what they’re covering themselves for,” Boyd said. “Perhaps would help, Boyd said.
All property insurance policyholders pay fees to offset Citizens' deficits from the 2005 hurricanes. Boyd said lawmakers should consider other ideas to reduce the risk the insurer poses to Floridians such as "doing away with those multi-line discounts [that motivate some to choose Citizens over private insurers] or making coverage options for Citizens not as attractive as standard lines.”
<em>Staff writer Kathleen Haughney contributed to this report.</em>