Positive Fallout from New Homeowners
Insurance Law

The fallout from Florida lawmakers’ new law that reduces homeowner’s insurance rates by as much as 20% and in some cases even more is beginning to take shape.

The emergency rule signed by the state’s new governor, Charlie Crist freezes homeowner insurance rates and stops policy cancellations on non-renewals through
May 1.

Allstate Floridian, which had announced that it would begin non-renewing 106,000 policies by April 1 was stopped in its tracks by the new retroactive law. No rate increases or policy cancellations are allowed under the new law until May 1st.

The lower insurance rates are provided to Florida homeowners through lower rates insurance companies will pay for reinsurance from the newly formed Florida Hurricane Catastrophe Fund. Reinsurance is insurance the insurance companies purchase to protect their risk in the case of a claim.

Another major insurer of Florida homes, however, American Strategic Insurance has already requested a rate reduction to lower hurricane wind policy rates by 20%. The company, which writes a large amount of policies in the Destin and South Walton area, will save $27.4 million on reinsurance by purchasing it from the state.

Rate reductions could come as soon as March 1 for more than 150,000 ASI policy holders.

Insurance company representatives attended the special legislative session called to resolve the states insurance crisis in January, but it was clear that lawmakers did not invite them to participate in the special session.

Lawmakers hammered out the new 167-page law to help resolve the states spiraling insurance rates after it became Florida’s number one issue following sky-rocketing rates.

The higher rates resulted as a response to insurance companies’ multi-billion dollar pay-outs to homeowners following the series of hurricanes in 2004 and 2005. Two other insurance companies are also expected to request rate reductions in coming weeks.