Florida’s Broward Commissioner is Asking Congress to Lower Insurance Rates

A bill in the U.S. House called the Natural Disaster Reinsurance Plan, hopes to lower insurance costs for policyholders in states that opt-in to the program which will scale back the requirements regarding the amount of reinsurance that insurance companies need to purchase. 

Currently, a Broward commissioner is asking Congress to pass legislation he claims could lower insurance rates for Florida customers “immediately” by as much as 25%.

This would provide financial relief to many Florida residents who are currently paying some of the highest premiums in the country. The new plan was showcased in an economic impact report filed by Democratic Representative Jared Moskowitz.

The Natural Disaster Reinsurance Plan, which is Rep. Moskowitz’s bill will help lower premiums by scaling back the requirements for insurance companies to purchase reinsurance. States will be required to opt-in to the program so savings may vary by state.  The plan only covers home insurance, including windstorm, it doesn’t include flood or car insurance.

Reinsurance is basically insurance for insurance companies to protect themselves from major claims that typically come after a big weather event or natural disaster. Reinsurance allows insurers to offload some of their risks to the reinsurer. 

The cost of reinsurance is passed on to policyholders via higher premiums and in the last few years, the cost of reinsurance has skyrocketed. 

The report detailed the rising cost of Florida homeowners insurance with the average premium increase in Florida hitting 68% over the last two years. This is the fastest premium increase in the country. The report also noted that Florida has $2.9 trillion in property exposure, making it the most at-risk state for catastrophic property damage from storms.

“As a county commissioner, one of my major concerns is the affordability of housing. One of the major factors contributing to high cost of housing, both home ownership and rental, is the high cost of windstorm insurance,” said Broward County commissioner Steve Geller in a recent NPR article. 

Geller claims the bill would allow insurance companies to purchase less reinsurance, a saving which could result in savings for policyholders. Unfortunately, the bill doesn’t require or guarantee that insurance companies will lower their rates based on their savings which means rates may or may not go down, even as insurers lower their costs. 

According to Geller in the NPR article, most insurers purchase reinsurance to insurance themselves for a 1-in-250-year event.  The report estimates that an event like that would translate to about $94 billion in claim damages.

The bill would allow insurance companies to reinsure for only a 1-in-50-year event which translates into $63 billion in damages according to Geller.

The bill calls for the Federal government to issue bonds to cover any additional damages that go beyond the $63 billion in reinsurance which would be paid back by the state government within 10 years via a small tax on homeowner insurance premiums. According to the report, savings would outweigh the costs. 

“That will lower the cost of reinsurance by about 50%, and that will result in a reduction in every… homeowner’s insurance policy of about 25% statewide,” Geller said in the NPR article.

The House bill is currently stalled in the House Committee on Financial Services after being   filed last year by Representative Moskowitz.