Florida Senate bill SB 1770, which contains a measure designed to create a facility to allow smaller Florida insurers access to capital market sources of risk transfer through instruments such as catastrophe bonds and securitization, has passed another of its hurdles after being approved by the Senate. The bill, which many expected to have died by now as so many others have, was passed yesterday after a major amendment to plans to increase insurance rates for Florida Citizens customers.
The bill contains a number of measures designed to improve and solidify the Florida property insurance market, including a measure to make Florida Citizens rates actuarially sound (risk-based pricing), increase rates for second homeowners and a measure to allow higher rates to be charged to cover insurers purchase of additional reinsurance. Generally the Bill aims to improve the way hurricane risk is priced, managed, insured, reinsured and transferred within the state of Florida.
The amendment to the bill changed plans which would have raised rates for all Florida Citizens customers to just target new customers of the insurer of last resort. With that amendment in place the bill was passed yesterday, voted 24 in favour to 15. The bill now moves on to the House, but its future remains uncertain with only a week left in the legislative session.
The bill contains a measure to create the Florida Catastrophe Risk Capital Access Facility. This facility if approved would enable smaller, primary domestic insurers operating in Florida to access the capital markets through the pooling of risks and the use of instruments such as catastrophe bonds, insurance-linked securities and other securitizations. You can read much more about the facility in our previous article here.
As we said above, there are still a number of hurdles for this bill to pass before the Florida Catastrophe Risk Capital Access Facility could become a reality, passage through the House will not be easy.
Encouragingly though, despite SB 1770 having a number of major amendments to its text on the way through the Senate, the section calling for the creation of the Facility has largely been left alone, suggesting that lawmakers perhaps see the value in creating such a facility. So even if this bill fails in the House we could see this Facility appear in a future bill on Florida’s insurance market.