Capitol Chatter: July 20
Citizens insurance gears up for rate battle
The Board of Governors for Citizens Property Insurance Corp. will meet next week to vote on rate increases for the state-backed insurer. But a preliminary meeting in Miami gives hints as to what may be coming.
A punt, of sorts.
However, the board's Miami meeting showed that a majority want the Legislature to lift the 10% cap on rate increases before trying to unilaterally impose higher rates on new customers. After the terrible hurricane seasons of 2004-2005, insurers determined they had been charging too little.
So private insurer rates began soaring to compensate for the risk, but the Legislature imposed the 10% annual cap during Gov. Charlie Christ's administration to shield homeowners from the soaring rate hikes.
That moved caused many large private insurers to flee the state and has created a gap between Citizens and the private insurers, which has helped swell the ranks of policyholders with Citizens. The state insurer of last resort for those who could not obtain insurance elsewhere is now the largest insurer by far.
State actuaries say Citizens' rates need to be nearly 30% higher for wind storm coverage. It's not looking like that will happen when the board meets to set rates July 27.
However, sinkholes are a secondary problem for Citizens, one that Gilway was surprised to discover. And an AP story reported that a 254% rate increase for sinkhole coverage could be discussed next week -- creating another hurdle for homebuying in sinkhole-prone regions such as north Tampa Bay.
Online travel companies win another round
Florida counties hoping for a tax windfall from online travel companies took a major blow late last week when a Tallahassee judge ruled in favor of the companies.
The counties, led by Broward County, argued that the companies should pay local tourist development taxes on the marked up prices they charge online customers for hotel rooms. The companies argued their markup is a fee, and has nothing to do with the cost of the room, so it does not fall under the tax.
Circuit Judge Terry Lewis' ruling is in line with two other recent legal rulings in Florida siding with the online companies, such as Orbitz and Expedia.
In his opinion, Lewis wrote, “It is, in essence, a tax on the hotelier for the privilege of engaging in that business. The (online travel companies) are not hoteliers and do not engage in that business.”
Insurance companies now healthier financially
Hurricane season is under way and, according to state number-crunchers, most private Florida insurers are well prepared financially to handle what may come.
The Florida Office of Insurance Regulation determined that nine out of 10 Florida insurers have the financial ability to cover claims in a one-in-80-year hurricane and that three out of four have the finances for a 100-year storm. Hurricane Andrew in 1992 is considered a one-in-50-year storm.
The change from recent years, when the financial ability of many private insurers was in doubt, comes from a combination of improved access to global credit markets and better reinsurance markets.
Insurance Commissioner Kevin McCarty recently told Florida Cabinet members that net income for Florida insurers rose 40% in the past year -- a vast improvement from when several insurers went under, and evidence of their growing financial strength.
'ello Guv!Scott does Britain
Gov. Rick Scott was in Great Britain last week in his never-ending quest to pitch Florida as a business home.
Scott first met with British Prime Minister David Cameron to talk about the importance of the aerospace sector, coming coincidentally a week after Airbus announced a 1,000-employee plant in Mobile, Ala., on the Florida border. With NASA pulling back from the Space Coast, the state is after replacement jobs and the new Airbus plant will need suppliers and create the need for other ancillary companies.
With 12 military aviation bases and three spaceports, the aviation sector in Florida includes about 2,000 companies and 83,000 employees, according to Enterprise Florida. But defense cutbacks from Washington, D.C., could threaten some of those.
The British ties were already strong before this trade mission.
Great Britain is one of Florida's largest direct investors after Brazil, and about 1.3 million tourists visit the state each year from the isles. Florida and Britain had trade totaling $2.43 billion last year, and more than 340 British companies have operations in Florida.
While Scott also met with a series of CEOs of major British companies, there were no major announcements out of the trip.
This is Scott's sixth trade mission to other countries since January 2011. He has led trade delegations to Canada, Panama, Brazil, Israel and Spain and is planning to visit Colombia in the fall.