TALLAHASSEE -- Florida lawmakers were still hashing out details late Saturday on a wide-ranging plan aimed at cutting property insurance rates across the state. At 11:30 p.m., House and Senate negotiators outlined a potential compromise that could play a key role in driving down rates for customers of private insurance companies.
That issue involves the state offering cheap reinsurance -- a crucial form of backup coverage used to pay hurricane claims -- to insurance companies. Those companies, in turn, are expected to pass on the savings to consumers through lower rates.
Also, lawmakers were negotiating whether to spend tax dollars to buy reinsurance for the state-backed Citizens Property Insurance Corp. By saving hundreds of millions of dollars on its reinsurance costs, Citizens would be able to pass on savings to consumers.
Earlier in the day, negotiators also agreed to block two major rate increases for Citizens customers. Those changes would repeal an increase of as much as 21.4 percent that began taking effect Jan. 1 and kill another 55.8 percent increase expected later this year.
The changes cannot be finalized until Monday, when the full House and Senate gather for the final day of a special legislative session. But lawmakers are almost certain to pass any agreement coming out of the negotiations.
"Our concern is that we don't want to go home without providing substantial savings," said Senate Minority Leader Steve Geller, a Cooper City Democrat who was heavily involved in negotiations.
The situation is complicated, however, because offering rate relief to Citizens customers and other residents likely would force the state to take on potentially huge financial risks. That is because the state would play a larger role in insuring against hurricane damages.
Sen. Jim King, a Jacksonville Republican whose district includes parts of Volusia and Flagler counties, said the Legislature's dilemma comes down to this: Pay me now or pay me later. To hold down rates upfront, lawmakers face the possibility of having to find a way to pay hurricane claims later.
"In essence, what we will do is we will say we prefer to pay you later," King said.
Lawmakers negotiated throughout Saturday afternoon and evening, as they dealt with dozens of issues related to overhauling an insurance system that has been in turmoil since eight hurricanes hit the state in 2004 and 2005. The special session started Tuesday.
The final-day negotiations hinged on finding a way to provide cheap reinsurance to insurance companies while trying to cut rates and potentially expand Citizens.
The state already sells low-cost reinsurance through its Florida Hurricane Catastrophe Fund. The potential agreement Saturday would expand that coverage.
Geller, who helped lead negotiations on the reinsurance issue, said rate cuts for customers would vary across the state.
Created to serve residents who couldn't find private coverage, Citizens has long been one of the most-controversial parts of the insurance system.
Citizens ran up deficits of more than $2.2 billion in paying claims from the 2004 and 2005 hurricanes. That forced property owners throughout the state -- including those who are not Citizens customers -- to help pay off the deficits.
The rate increase that began taking effect Jan. 1 was designed to make Citizens better able to pay hurricane claims in the future. The Legislature also passed a law last year that was supposed to lead to another round of rate increases this spring.
But with Citizens customers howling for relief, House and Senate negotiators approved a plan Saturday to prevent the increases from moving forward. In doing so, however, they increased the likelihood that Citizens will run deficits again in the future if Florida is hit by a major hurricane.
Negotiators also appeared on the verge of agreeing to a proposal that likely would lead to Citizens selling more types of property coverage in coastal areas. Backers hope the move would bring in more premiums, allowing Citizens to reduce rates by as much as 10 percent.
jim.saunders@news-jrnl.com