Nearly two years after a substantial makeover at Citizens Property Insurance Corp., Florida's largest property insurer may be in line for even more significant changes. Lawmakers during the 2008 session approved the creation of the Citizens Property Insurance Corporation Mission Review Task Force. The 11-member panel was directed to develop a report recommending what changes would be needed to return Citizens to its former role as a state-created, noncompetitive residual market mechanism.

The final report, due Jan. 31, is expected to make a sweeping series of recommendations that would affect Citizens' operations and balance sheet. That could set the stage for a contentious showdown during the 2009 legislative session; many of the recommendations would require approval from both state lawmakers and Gov. Charlie Crist, who pushed for major changes to Citizens when he took office in 2007.

Among the recommendations now being considered by the task force:

Repeal the state law that allows someone to take a policy with Citizens if the premium offered by an alternative private insurer is more than 15 percent higher than what Citizens charges.

Repeal the wording in state law that requires Citizens to provide “affordable property insurance” to Floridians.

Repeal the state law that allows Citizens' policyholders to say no to an offer from a private company that has agreed to take over existing Citizens' policies.

Change state law so that insurance agents have no say in whether or not a policyholder moves from Citizens to a private company that agrees to assume Citizens' policies.

Let the current Citizens' rate freeze end in 2010 and permit Citizens to achieve actuarially sound rates over a “number of years.”

Improve the quality and quantity of policy level data made available to interested take-out companies.

Reduce the amount of reinsurance provided by the Florida Hurricane Catastrophe Fund — which provides reinsurance to Citizens — now that additional private reinsurance appears to be available in the Florida market.

Lawmakers May Fight Makeover

But it's far from clear that state lawmakers will be receptive to such a sweeping set of recommendations, especially since the Republican-controlled Florida Legislature made several wholesale changes to Citizens in 2007 in the wake of a public outcry over rising property insurance rates.

Although 2009 is not an election year, significant changes still might pose a political risk that some politicians would be unwilling to accept. Despite continued depopulation efforts, Citizens currently has 1.14 million policyholders in Florida.

State Sen. Mike Fasano, a New Port Richey Republican who sits on the Senate Banking and Insurance committee, wasted little time in criticizing the draft recommendations and predicted that they are “going to be a very tough sell” to the full Legislature.

Fasano said constituents in his district — which includes portions of Pasco, Pinellas, Citrus and Hernando counties on Florida's West Coast — have “been through the wringer many times” and have bounced between private carriers and Citizens. He said that residents he hears from “don't know who to trust.”

The veteran lawmaker said he would fight any effort to take away the ability of a policyholder to veto a move out of Citizens. Fasano also said he would strongly oppose any effort to require that Citizens' rates become actuarially sound in the next few years, saying people in his district would be paying a rate that “most of my constituents could never afford.

“It's easy for these millionaires on this task force to say their rates can increase 300 and 400 percent,” said Fasano. “Come back to my district and talk to constituents who are on the verge of foreclosure.”

Fasano may have some allies in his effort to push back any changes. While members of Citizens' Board of Governors have so far signed off on an effort to recalibrate the rates charged by the insurer, other recommendations under consideration by the task force aren't going over well.

Allan Katz, a former top official in the Department of Insurance who now sits on the Citizens' board, continues to insist that some ideas under consideration won't work under the current volatile state of the insurance marketplace in Florida.

“I hope we're not doing anything that would put us in a position contrary to the reality we are dealing with,” Katz told fellow members of the Citizens' board at their December meeting.

Business Lobby Pushing for Change

But some of Florida's powerful business lobbying groups have a completely different viewpoint. They remain fearful that despite Citizens current level of reserves, the insurer will have to impose assessments or a “hurricane tax” on businesses to pay off claims associated with a large hurricane.

Citizens currently has a three-tiered assessment system that calls for its customers to be the first ones to pay an additional surcharge in the event of a deficit. But if that surcharge does not generate enough money, Citizens can place up to a six percent assessment on private insurance policies, including property insurance policies, surplus line policies and auto insurance. The assessment, which can be passed on to policyholders through rate increases, does not apply to workers' compensation, medical malpractice and federal flood insurance policies.

If neither one of those assessments covers the shortfall, an emergency assessment of up to 10 percent of the deficit can be placed on Citizens' policyholders and those with private property and casualty insurance policies, including surplus lines and auto insurance. This emergency assessment also would not apply to medical malpractice and workers' compensation policies.

Barney Bishop, president and CEO of Associated Industries of Florida (AIF), testified to the task force that his organization will not be “bashful” in arguing to lawmakers during the 2009 session that they must act as soon as possible to change the way Citizens operates.

Bishop said a large storm would eventually lead to huge assessments that would spark a political firestorm. He said state lawmakers need to stop having coastal residents get subsidized insurance at the potential expense of the rest of the state.

“The politicians have heard for the last few years about the people from the coast,” Bishop said. “They ain't heard nothing yet. If a hurricane hits and all the people in the interior of the state figure out they have been subsidizing the people on the coast, that will be the real revolution.”

AIF in December presented its own set of recommendations on what should happen to Citizens. The group recommends that Citizens start in July 2009 a two-year phase in of actuarially sound rates.

The organization also is suggesting that the Legislature prohibit Citizens from purchasing additional reinsurance from the so-called Temporary Increase in Coverage Limit, or the extra $12 billion layer of the Florida Hurricane Catastrophe Fund created by state lawmakers in 2007. The Cat Fund has roughly $28 billion worth of exposure, but recent projections show that the state could not borrow enough money to cover the risk if a major storm were to hit the state.

Bishop said that Citizens should take the $86 million it now spends on added reinsurance from the Cat Fund and use it to purchase private reinsurance or to create a “special claims reserve” that could be used to reduce the need for any assessments in the future.

“It's disingenuous if we encourage insurers to buy reinsurance knowing de facto we don't have the dollars,” Bishop testified.

AIF also recommends enhancing incentives that should be offered to Citizens' policyholders who harden their homes to withstand hurricanes. The group also said that Citizens should be barred from selling commercial non-residential multi-peril policies statewide and multi-peril residential policies in non-coastal areas.