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Date of Issue: December 14, 2006

Insurance: Bigger threat than hurricanes

GSR pic
Sabine and Tom Buehler, owners of Haley's Motel in Holmes Beach, are worried about the impact of higher rates for wind insurance on their business. Islander Photo: Molly McCartney

Tom and Sabine Buehler have mixed feelings about last week's decision by state-run Citizens Property Insurance Corp. to postpone action on a proposed 767 percent increase on wind coverage.

On the one hand, they are glad the ax hasn't fallen.

On the other, they are apprehensive about what is going to happen.

Citizens delayed its decision on rates to allow time for the state Legislature to address the state's insurance crisis in a special session beginning Jan. 16.

The Buehlers own Haley's Motel in Holmes Beach.

 "I am scared," Sabine Buehler said. "If we get a 700 percent increase, we close. There is no way we could make the payments."

Wind insurance for the Buehlers' motel cost $3,463 this year. An increase of 767 percent would push the bill for their Citizens coverage to over $30,000.

Tom Buehler said that the insurance industry, including Citizens, is more of a threat to him and his motel than a hurricane. He said that policyholders now have to pay for future storm risks.

The proposed Citizens increase is based in part on the cost of reinsurance (what an insurer pays for insurance) to cover a 1-in-70 year storm. "I would rather pay a surcharge for the damage after there was a storm," rather than pay now for something that might or might not happen in the future, Buehler said.

"I wish I could charge my motel rates based on future risks," he said.

Before its meeting in Gainesville on Thursday, the Citizens board had also been considering rate increases of 8.5 percent to 104.6 percent for Manatee County homeowners. Citizens insures about 18,500 homeowners in Manatee, including many on Anna Maria Island.

The rate hike recommendations set off a firestorm of complaints when they were announced last month. Policyholders and politicians said such big increases would ruin many small business, hurt consumers and damage the state's economy.

Among the first to yield to the outcry was Citizens' board chairman Bruce Douglas, who said he would oppose the increases because the economic impact would be too severe.

In recent days, there has been a kind of political theater taking place around this issue, with a parade of leaders declaring their opposition to the rate hikes and urging Citizens to hold off on any action until the special legislative session has a chance to pass new insurance laws.

Gov.-elect Charlie Crist and new state Chief Financial Officer Alex Sink as well as some lawmakers have embraced this approach.

The great irony in this is the fact that the Citizens rate hikes were proposed because of a state law passed in May. Under that law, known as Senate Bill 1980, Citizens was supposed to begin including the cost of reinsurance in its rate-making process, even though Citizens doesn't have to buy reinsurance.

Now, in a twist worthy of a Shakespearian play, lawmakers are saying they want to eliminate the requirement - the mandate for the Citizens proposed increase - that they passed just a few months ago.

In a Dec. 5 letter to the Citizens board, state Sen. Jeff Atwater, who represents parts of Broward and Palm Beach counties, said he intended to join several other senators in filing legislation "to remove from Florida Statutes those mandates which are driving the actions of CPIC to propose this increase."

Atwater said Floridians "can not withstand another hike in property insurance rates. The dream of the young Florida family wishing to buy a house is rapidly disappearing. Retired Floridians, despite every heroic effort they are making, now fear the prospects of giving up their home. If something does not turn around soon, we will place the economic engine of Florida at risk."

In closing, Atwater said, "Please accept this request to defer further rate consideration until after the special session. Let us work together with the confidence that we can find a better answer."

Lawmakers are already trying to sift through the various plans and recommendations that have been made to reform the broken state insurance system.

Near the top of the list of proposed reforms is a restructuring of Citizens, the state's insurer of last resort and the largest insurer in the state, with nearly 1.3 million policyholders.

State Rep. Bill Galvano, who represents western Manatee County and has been a leader in the insurance reform effort, has urged that the state eliminate the controversial and arbitrary wind-pool boundaries.

Working closely with Galvano on this issue is John Laurie, a Bradenton insurance agent who served as a technical advisor to the governor's special insurance reform committee.

In its Nov. 15 report, the committee issued a 115-page report with specific recommendations. To see that report in full, go online to www.myfloridainsurancereform.com and click "Interim Report."

The Buehlers say they are watching to see the final outcome in this insurance drama, but they are convinced that they won't be getting any premium reduction.

"The rates are going up. No doubt about that," Tom Buehler said. The insurers are "just waiting to see what they can get away with."

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