Florida Senate Moves to Allow Surplus Lines Insurers to Cover Second Homes

A pivotal Florida Senate committee recently pushed forward a bill poised to reshape the landscape of property insurance for second homes. Senate Bill 1716, championed by Senate Banking and Insurance Committee Chairman Jim Boyd, proposes allowing surplus lines insurers, with an AM Best rating of "A" or higher, to offer coverage previously under Citizens Property Insurance Corp. This move aims to reduce the policyholder count of Citizens, which currently insures tens of thousands of secondary homes, by leveraging the capacity and flexibility of surplus lines carriers.

The bill mandates that these surplus lines insurers use Florida-based brokers and obtain approval from the Florida Office of Insurance Regulation for their takeout plans and rates. While the Florida Association of Insurance Agents endorses the bill for its potential to aid Citizens’ depopulation efforts and ensure the involvement of local agents, concerns arise from various corners. Some brokers fear this shift might not adequately address the ongoing affordability crisis, especially for homeowners and condominium associations facing soaring premiums and reduced coverage limits.

Critics, including state Sen. Bobby Powell, highlight the regulatory and safety net disparities between surplus lines and admitted insurers, notably the lack of coverage by the Florida Insurance Guaranty Association in case of insolvency. However, proponents argue that surplus lines companies typically maintain higher surplus levels, theoretically reducing the risk of insolvency.

In addition to SB 1716, the committee also advanced several other bills aimed at enhancing the state’s property insurance landscape, including SB 966 for home warranty transfers, SB 988 to protect homeowners’ information, and SB 1622, which introduces more stringent financial reporting requirements for insurers and modifies regulations on hurricane loss model usage and public housing authority insurance.

As these bills progress to further committee reviews, they represent significant efforts to address the complexities and challenges of Florida’s property insurance market, balancing the needs for market stability, consumer protection, and regulatory oversight.