TALLAHASSEE, Fla. – March 14, 2008 – A special Senate panel investigating how insurers set homeowner rates delivered a broad set of recommendations for the current legislative session and beyond.

Several recommendations delivered Thursday to Senate President Ken Pruitt by the Senate Select Committee on Property Insurance Accountability cover how insurers can calculate profits and forecast losses in their rate filings and how they should account for the cost of back-up insurance coverage.

The senators, who took testimony from insurance company officials, reinsurers and regulators, were surprised to learn that although the computer models insurers use to help estimate future losses have to be approved by the state, some companies modified the models with data that hadn’t been approved.

Sen. Steve Geller, a Democrat from Cooper City who co-chaired the panel with Jeff Atwater, the North Palm Beach Republican senator, said he had believed state “law was clear, but obviously not.”

Geller noted that there’s one controversial recommendation that would prohibit insurers from buying additional back-up insurance from the private market after they’ve purchased cheaper coverage from the Florida Hurricane Catastrophe Fund.

But if insurers are meant to rely in large measure on the back-up coverage from the CAT fund, perhaps lawmakers might consider putting the full faith and credit of the state of Florida behind the fund, said Geller.

Another proposal that may not sit well with insurers would require companies to provide a rate filing if they decide to drop a large percentage of their policies. Geller said rates would then need to reflect the company’s greatly reduced risk.

The goal of the panel, set up in January, was to investigate why insurance rates hadn’t dropped as much as lawmakers and regulators expected after an insurance reform bill required insurers to pass on savings achieved from buying cheaper reinsurance from the state.

The catastrophe fund was expanded to provide up to $28 billion in coverage. But rather than double-digit reductions expected, many insurers lowered rates less than 10 percent. Some companies, such as Allstate Floridian and Florida Farm Bureau, filed for hefty rate increases.

Insurance Commissioner Kevin McCarty said the bulk of the panel’s recommendations increase protections for Florida residents. These include putting limits on profits and reinsurance charges.

Another recommendation is eliminating the “use and file” provision, which allows insurers to put in place a rate increase and then file the necessary paperwork with regulators. There are already bills in the Senate that either eliminate or further extend the ban already in place.

Other recommendations include providing additional money for a state program to give free inspections and matching dollars for people who want to harden their homes against storms.

Belinda Miller, deputy commissioner of the Office of Insurance Regulation, said the recommendations would beef up the state’s ability to oversee the insurance industry.

“These are crystal clear and everybody has to follow the same rules,” Miller said Thursday.

But Sam Miller at the Florida Insurance Council, an insurance industry trade group, said these recommendations “fly counter to so far successful efforts by the state to attract new insurers to Florida to help control the growth of Citizens.”

The recommendations from the Atwater-Geller panel will now go to the Senate Banking and Insurance committee, with the expectation that the committee will draft a bill to include many of the suggestions.

On the other side of the capitol, the House Insurance committee is holding a special session Friday from 9 a.m. to 3 p.m. to examine in more detail the claims-paying ability for Citizens Property Insurance and the CAT fund.

Committee chairman Rep. Don Brown, R-DeFuniak Springs, called the meeting after Citizens officials told the Senate insurance committee that the continuing turmoil in the credit markets could hurt the insurer’s financials. Its liquidity could be further constrained – already Citizens has bought back about $2 billion of variable-rate securities it had sold in previous years to avoid being hit with higher rates on these bonds.

The House committee is doing its own analysis of whether the state’s current strategy to have sufficient funds on hand to pay claims after a major storm – through the CAT fund and Citizens – would be sufficient.

Miller said the Senate committee’s recommendations don’t address these growing financial concerns.

Copyright © 2008 The Miami Herald, Beatrice E. Garcia. Distributed by McClatchy-Tribune Information Services.