Florida Legislators Propose Use of Sales Tax Revenue to Bail Out Major Insurer’s Debt

Florida legislators may use sales tax revenues to cover a billion-dollar deficit at Citizens Property Insurance Corp., after final recommendations were made by Insurance Commissioner Kevin McCarty and a special task force Monday, reports the Sun-Sentinel.

The state’s Task Force on Long-Term Solutions for Florida’s Hurricane Insurance Market also suggested other potential alterations to the state’s troubled insurance market:

• Using sales tax to pay off the estimated $1.36 billion debt at Citizens, the state-backed insurer of last resort. Currently, Florida policyholders are subsidizing the debt.
• Capping Citizens’ high-risk coastal property policies at $1 million, making homeowners with high-value homes get coverage from unregulated surplus carriers.
• Creating no-interest or low-cost Florida home loan programs for people who want to upgrade their homes to make them more resistant to hurricane-force winds.
• Lobbying the U.S. Congress to create a national catastrophe fund for insurers.

The recommendations come just before the start of the 2006 session of the Florida State Legislature, which begins today. Homeowners won’t find any immediate relief from high insurance rates, but some of the group’s ideas could help keep customer premiums in line going forward. Bringing stability to Florida’s beleaguered insurance market will invariably help rein rates in.

Using sales tax money to bail out Citizens is gaining traction with certain legislators after the tax force endorsed using it to free thousands of Florida homeowners insurance policyholders of this undue burden. One assessment is that at least $110 out of every $1,000 of annual premiums could be conserved. The sales tax plan has the backing of some state leaders, including state CFO Tom Gallagher, a Republican candidate for governor.

“Floridians are calling for insurance rate relief, and this is one way we can deliver it immediately,” Gallagher said.

However, Gov. Jeb Bush and Senate President Tom Lee have opposed using tax money for Citizens, the state’s No. 2 home insurer. The recommendations of the task force come on the eve of legislators’ return to Tallahassee, and its chief believes there is reason for optimism.

“I think we’re still early enough in the process” for the report to affect upcoming homeowner insurance legislation, McCarty said. “There’s still certainly time for some dialogue.”

Sam Miller, executive vice president for the Florida Insurance Council, said many of the recommendations already have been folded into a property insurance bill unveiled by House Republicans last month.

“There may be things in here we don’t support, but I think we support practically all of it,” Miller said.

Hopefully, this consensus among the state’s political leaders will lead to some prompt Florida insurance reductions for cash-strapped and hurricane-weary citizens from Tallahassee to Key West. The Florida Home Loan staff supports the legislation enthusiastically.