Thursday, 3 May 2007
Lawmakers Oppose Florida-Only Insurance Subsidiaries
The Florida House of Representatives Policy and Budget panel approved legislation in a 22-6 vote to prevent insurance companies from creating Florida-only subsidiaries. The bill will now to go the House floor for further scrutiny.
Insurers in Florida are looking for ways to reduce their companies’ risk as the hurricane season looms around the corner. With the onslaught of devastating hurricanes over the last several years, insurers are expecting increased risk in the Gulf and Atlantic coastal states to be at all time highs. The result has been very expensive homeowners insurance premiums.
The state-specific branches formed by property insurers would group together policyholders with similar risks — in this case, hurricane risk. They argue that subsidiaries, or “pup companies” would protect policyholders in other parts of the country from paying for the hurricane risk of Florida residents.
Lawmakers in Florida disagree. Florida Governor Charlie Crist contends the subsidiaries would merely allow national insurance companies to protect their gross profits, and leave Florida policyholders with financially weaker insurance protection.
“When they [insurance companies] have a satellite company, that’s not spreading the risk,” said Republican State Representative Julio Robaina.
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