SCOTT: WHY IS CITIZENS INSURING NEW CONSTRUCTION

By MICHAEL PELTIER
THE NEWS SERVICE OF FLORIDA

THE CAPITAL, TALLAHASSEE, December 6, 2011......In what is likely to make builders and other trade groups a little nervous, Gov. Rick Scott on Tuesday asked the head of the state-backed property insurer why the government-backed company should offer coverage to those who want to build new houses near the beach.

Speaking during a Cabinet meeting and reiterating his position later to reporters, Scott said he wants to know whether Citizens Property Insurance Corp should be insuring new construction in hurricane prone regions where private insurers have refused to go.

While making it possible for homeowners to build, offering coverage for new homes increases the risk for all property insurance policyholders, who will be required to bail out Citizens if a major hurricane hits and it can't pay all its claims. 

Citizens, Scott argued, is already handling 1.5 million residential and commercial policies at below market rates. 

"If someone is going to build a new home, does it make sense for an existing citizen of the state basically to subsidize their property insurance?" Scott asked. "If someone wants to build a home in an area where it is difficult or impossible to get insurance, should we be subsidizing that?"

Scott's comments came following a presentation by Citizens chairman Carlos Lacasa, who outlined a series of proposals to help the state-backed insurer reduce its exposure, which has grown significantly in recent years.

Citizens can make internal adjustments -- such as reducing overage for ancillary buildings or reducing the liability cap -- that will produce minor savings, but Lacasa said any major depopulation and reduction of risk cannot come without action from legislators, who have been reluctant to make drastic changes affecting policyholders from Pensacola to Key West. In fact, lawmakers a few years ago capped rate increases for the state-backed insurer. 

With both state and federal elections looming, taking on such a controversial issue may not be a high priority for a Legislature already expecting tough battles on the budget and the redrawing of political boundaries. 

Lacasa also questioned whether the state wanted to place more formidable barriers within the home and commercial building sectors because new construction creates jobs in several industries. 

"Few other industries have such an impact," said Lacasa, a former state lawmaker appointed by Scott to lead the Citizens' board. 

Speaking to reporters after the meeting, Scott said he expects Citizens to push ahead with internal change while seeking statutory reforms. 

"My expectation is that the board is going to do their job and make the changes that they can do without legislation and then be aggressive advocates for what they know needs to be done," Scott said.