This could spell potential trouble for insurance agents, who receive a lower commission from Citizens than from a private insurer.

Rep. Ron Reagan, R-Sarasota, who identified himself as an insurance agent, said in discussions before passage of the bill that “insurance agents are going to take it on the chin on this one,” but also suggested the issue as one that could be revisited in March.

“The bottom line is that Florida has just reinforced its reputation as one of the most overregulated insurance markets in the country,” said Cecil Pearce, vice president for the Southeast Region for the American Insurance Association.

Mr. Pearce said the bill, “while providing some immediate rate relief to policyholders, who live in the most hurricane-threatened areas of the state, does nothing to encourage insurers to invest additional private capital in Florida, which should be the ultimate goal of public policymakers.”

The legislation includes provisions that expand the state catastrophe fund's capacity to cover 90 percent of losses between $6 billion and $35 billion, while also allowing primary insurers to purchase reinsurance from the Florida Hurricane Catastrophe fund at lower rates than the private market.

Mr. Pearce said this meant the bill has the potential to saddle Florida policyholders and taxpayers with billions of dollars in hurricane losses,

In an analysis of the bill, Bank of America Equity Research analyst Tamara Kravec noted that the changes being made to the catastrophe fund could affect demand for reinsurance and reinsurers who previously focused on the Florida market would begin to look elsewhere for business.

Additionally, the changes made at Citizens will allow it to directly compete with private insurers while also being subsidized by the state.

Private insurers for all lines, not just homeowners, are now exposed to assessments from Citizens, and property insurers will be required to pay or deny claims within 90 days of being notified and return “excess” profits totaling more than 10 percent of average underwriting profit over a ten year period.

“Insurers don't mind competition, but oppose creating an environment where the state does not have to play by the same rules and can undercut the private market as provided in this legislation,” said Jeff Brewer, a spokesman for the Property Casualty Insurers Association of America. “These actions do not encourage insurers to come back into already troubled market.”

Another portion of the bill addresses what lawmakers referred to as “cherry picking.” It requires any insurer that writes private auto coverage in Florida and property in another state to also offer property coverage in Florida.

The bill also suspends the state's “use and file” rate system until Jan. 31 of 2009.

Several provisions that had been viewed as extremely hurtful by the insurance industry were removed when lawmakers conferred over the weekend.

Among the items excised was one that would have barred insurers from setting up Florida-specific subsidiaries and would have required the state Office of insurance Regulation to factor in the national profits of an insurer when considering a rate request.

“Although the Legislature stepped away from the abyss and did not enact the most damaging reform proposals that were on the table during the special session, the legislation does not resolve the critical problems in the Florida insurance marketplace,” said Mr. Brewer.