Apr 23

Florida Locals Alarmed at Bill to Give State Conduit Assessment Power

by Shelly Sigo

APR 22, 2015 1:13pm ET

BRADENTON, Fla. – A bill making its way through the final days of the Florida legislative session would vastly expand the financing power of the Florida Development Finance Corp.

House Bill 7067, a major economic development bill, was amended in recent weeks to give FDFC the ability to issue bonds statewide without local government approval.

City and county officials worry that local powers would be usurped by an agency that would have unilateral authority to issue industrial development bonds statewide without their permission.

HB 7067 would also give the FDFC the authority to place assessments on property bills across the state to finance energy saving improvements for property assessed clean energy, known as PACE, projects.

The bill would abolish a requirement that has been in FDFC’s enabling legislation for nearly two decades obligating the agency to obtain written agreements with local governments in order to issue bonds for projects in those communities.

The expanded authority is being sought as FDFC attempts to validate $2 billion in bonds that it plans to issue as a conduit to finance projects for energy-related and wind-hardening improvements under Florida’s property assessed clean energy law.

Two appeals of the validation are pending before the Florida Supreme Court. One challenger alleges that the bonds cannot be validated because the FDFC does not have the authority to levy assessments that would secure the debt.

The FDFC has partnered with California-based Renovate America Inc., to administer its Home Energy Renovation Opportunity financing program and solicit investors to purchase the PACE bonds.

On Monday, after learning about recent amendments to HB 7067 pertaining to the FDFC, Flagler County commissioners adopted a resolution opposing the bill. The resolution, which is being sent to lawmakers and other counties, said the bill would create a “state-run monopoly.”

The proposed law would give a non-local government authority the ability to levy special assessments, and allow a California company to sidestep laws that others have followed for years, said Flagler County Administrator Craig Coffey.

“The precedent this sets for the future for private companies to use a governmental special assessment process unchecked is equally alarming,” Coffey said.

Flagler County, on the state’s northeast coast, is a founding member of the Florida PACE Funding Agency, an independent unit of local government authorized to operate across the state to finance PACE projects. The agency has already validated $2 billion in bonds for its program.

The Florida League of Cities, which represents more than 400 cities, towns, and villages, also opposes HB 7067.

“The League has concerns with FDFC having authority to levy the special assessment without any oversight, accountability or an interlocal agreement with the local government,” said Amber Hughes, a legislative advocate for the FLC.

Even though PACE-related assessments would be voluntary for property owners, allowing a non-elected entity to operate apart from local government is a concern, she said.

Hughes said the bill’s details relating to FDFC surfaced gradually over the past few weeks, catching elected officials off guard.

The Florida Development Finance Corp. would not respond to questions from The Bond Buyer asking how the legislation came about or if it was approved by the corporation’s board.

“The FDFC is monitoring this legislation as it makes its way through the process,” said Beth Frady, public relations director for the state’s public-private economic development agency Enterprise Florida Inc., which provides administrative services to the FDFC.

Rep. Mike La Rosa, R-St. Cloud, sponsors HB 7067.

The bill “makes administrative changes to the operations of the Florida Development Finance Corp. [and] ultimately repeals ineffective programs,” La Rosa told the House Transportation & Economic Development Appropriations Subcommittee on March 31.

In addition to giving FDFC autonomous authority to levy PACE assessments statewide, HB 7067 would also ratify decisions that have been made by the FDFC’s board since Jan. 1, 2008.

A legal analysis prepared for the bill does not explain why it is necessary to confirm actions of the board.

However, the agency was unable to meet for a long period beginning late last year because some board members voted on bond issues for several years without being properly appointed. Remaining board members resigned or their terms ended.

The governor, who appoints all five members of the board subject to confirmation by the Senate, appointed three new board members on March 27. They held their first meeting on April 7 and they didn’t discuss HB 7076 publicly.

HB 7067 would appear to ratify the votes of the FDFC board out of concern that the pending PACE validation could be challenged further, said a Florida attorney who asked not to be identified.

The bill would vastly expand the powers of FDFC to become a statewide issuer of bonds, the attorney said, adding, “This seems inconsistent with FDFC’s original purpose of being an issuer for small conduit bond issues that were too small to do alone, but to aggregate them into a pool.”

An act of the Legislature created the Florida Development Finance Corp. in 1993 to be a special development finance authority primarily to issue industrial development revenue bonds for small manufacturers, as well as brownfield and economic development projects.

Over time, FDFC has also served as the conduit issuer for nonprofit health care facilities and charter schools.

In 2010, the Legislature expanded the corporation’s responsibilities to allow it to participate in the federal Department of Energy’s guaranteed loan program for renewable energy infrastructure projects, and projects authorized by Florida’s PACE law.

Since 1997, the FDFC has served as the conduit on 65 bond issues totaling more than $940 million, according to the analysis for HB 7067.

In its fiscal 2014 audit, FDFC reported serving as the conduit issuer on four transactions totaling $229.9 million for which it received application and issuance fees of $303,963.

In January 2014, the FDFC board adopted a resolution authorizing the issuance of up to $2 billion in PACE bonds after entering the agreement with Renovate America.

During the district court validation proceeding for the bonds last year, former state Rep. Robert Reynolds intervened. He contended that the bonds could not be validated because FDFC does not have the authority to impose assessments. In the PACE program, assessments on tax bills provide security for the debt.

The district court validated the bonds, and Reynolds appealed to the Florida Supreme Court.

The Florida Bankers Association has also filed an appeal of the validation.

The FBA is challenging the legality of the PACE law adopted by the Legislature in early 2010, and signed into law by then-Gov. Charlie Crist.

While the Florida Supreme Court has scheduled oral arguments in both cases for May 7, a ruling is likely to take months.

The Florida Legislature’s session ends May 1.

Scott, who has been reluctant to authorize new debt in the past, has not said if he would sign the bill expanding FDFC’s power if it should pass.

“Governor Scott will review any legislation that makes it to his desk,” the governor’s press secretary Jeri Bustamante said Tuesday.

While HB 7067 has a companion bill in the Senate, Senate Bill 1214 currently does not contain language about the FDFC.

Both bills have cleared their respective committees, and could go to the floor for a vote this week. If they pass, the House and Senate would have to reconcile the differences.

In addition to the PACE bonds, the FDFC plans to be the conduit issuer for $1.75 billion in federal private activity bonds for the All Aboard Florida private passenger train project.

St. Lucie County, along the east coast, has filed a lawsuit challenging the PAB allocation by the U.S. Department of Transportation because a portion of the project has not received federal environmental clearance.

Apr 16

Florida Cabinet approves buying $2.2 billion more in catastrophe insurance By Steve Bousquet April 14, 2015

TALLAHASSEE — Gov. Rick Scott and Cabinet members voted Tuesday to bolster the state’s catastrophic insurance fund with $2.2 billion of added coverage in advance of what forecasters predict will be another quiet hurricane season in Florida.

State financial experts say the cost to a typical policyholder will be “minimal,” or a premium increase of two-thirds of 1 percent or $13.75 a year, including homeowners covered by the state-backed Citizens Property Insurance Corp. But they say the timing is ideal because reinsurance rates are at all-time lows.

“The fund today is at the strongest point it has ever been since its creation in 1993,” said Ash Williams, executive director of the State Board of Administration, which oversees the Florida Hurricane Catastrophe Fund, known as the Cat Fund.

Reinsurers, primarily offshore companies in Bermuda or oversees, sell added layers of coverage to insurance companies to help pay claims after a major hurricane or other catastrophe.

Williams said this is the first time the SBA has recommended the purchase of reinsurance in the private market since 1993. He said the deal will allow the Cat Fund to reach its state-mandated ceiling of $17 billion to cover all storm claims in a single season.

Williams told Scott and the Cabinet that overall year-to-year premium costs will go down by about 0.4 percent because of the repeal in January of a 1.3 percent special assessment on policies to pay claims from storms in 2004 and 2005.

Under a two-part transaction approved Tuesday, the state will buy $1 billion in reinsurance, transferring that risk to the private insurance market, and $1.2 billion in coverage will be secured from the issuance of bonds.

By spreading some of its future risk, the state hopes to avoid having to hit policyholders with higher assessments if a hurricane strikes Florida.

State Insurance Commissioner Kevin McCarty told officials that he did not believe the transaction would result in higher rates.

Joining Scott in the 3-0 vote were Chief Financial Officer Jeff Atwater and Attorney General Pam Bondi, who as SBA trustees must approve state investment decisions. The third Cabinet member, Agriculture Commissioner Adam Putnam, is not a voting trustee.

William Stander of the Florida Property and Casualty Association, representing 13 Florida-based homeowner insurance companies and 1.5 million homeowner policies, said FPCA opposes the purchase of reinsurance as too costly.

Stander noted that the state’s own analysis shows that the cost of buying reinsurance to the state will be $34.5 million more than a pure bond sale. “The purchase of reinsurance is more expensive,” Stander testified.

Other opponents included Jay Neal of the Florida Association for Insurance Reform and Rep. Frank Artiles, R-Miami, who said it makes no sense to raise premiums on policyholders and is unnecessary. “It’s nothing more than corporate welfare. It’s wasteful,” Artiles said.

A hurricane has not made landfall in Florida since 2005.

Apr 16

Reinsurance bad deal for Florida homeowners By Ray Rodrigues April 14, 2015

On Tuesday, executives from the Florida Hurricane Catastrophe Fund recommended to the state Board of Administration, consisting of Gov. Rick Scott, Chief Financial Officer Jeff Atwater and Attorney General Pam Bondi, that they approve the purchase of billions of dollars of reinsurance from the private market. I believe the proposed risk transfer is a violation of state law and urge the board to say no.

The Florida Hurricane Catastrophe Fund was created in November 1993 during a special legislative session after Hurricane Andrew. The purpose of the fund is to protect and advance the state’s interest in maintaining insurance capacity in Florida by providing reimbursements to insurers for a portion of their catastrophic hurricane losses. The fund has proven to be a successful mechanism for moderating property insurance rates by providing alternative reinsurance that would otherwise have to be purchased from the private global reinsurance market.

The capacity of the fund is set by statute and is currently $17 billion. Since I was elected to the Legislature in 2012, there have been a number of bills, none successful, that would lower that capacity and force carriers to buy more expensive coverage from the private reinsurance market, which would raise homeowner’s insurance rates. Now fund advisers are asking the board to illegally sidestep the prerogatives of the state Legislature by effectively lowering the fund’s capacity.

This proposal not only violates statute, but is also a bad deal for Florida. Industry representatives and consumer groups agree that the proposed risk transfer has already moved rates up. By some estimates the average rate payer would get a $66 increase at their next renewal. This might make financial sense if it were to avoid serious risk in the future but it does not. The risk of private reinsurers having to pay is so unlikely that some have called it “phantom risk.” Fund managers are asking insurance consumers to pay the $66 this year to avoid a less than 1 percent chance of having to pay about $8 bucks in hurricane taxes later. The only people who would win if this proposal is approved are the Bermuda reinsurers and their brokers. One of my colleagues even labeled it “corporate welfare.”

I believe that our state leadership is smarter than that and will shut down this unwise and illegal proposal not only this year but also in the future. There are still six weeks until hurricane season starts, plenty of time for markets to restabilize and avoid this unnecessary rate increase.

Ray Rodrigues is a state representative from Estero.

Sep 23

FAIR Honors Locke Burt’s Leadership in Developing Solutions that Improve Florida’s Home Insurance Market

Consumer Advocacy Group Presents Security First Insurance Chairman and President with Lifetime Achievement Award 

Tampa, Fla. (September 17, 2014) – The looming and ever-present potential for catastrophic weather. A challenging regulatory environment. Premium affordability. These challenges, in addition to a diverse and vocal group of constituencies, have caused Florida to become one of the most volatile property insurance markets in the world, especially after Hurricane Andrew wreaked havoc on the state in 1992. Since that time, W. Lockwood “Locke” Burt has worked tirelessly – and mostly behind-the-scenes – to help shape policy that provides for a stable and competitive home insurance market in Florida. Consumer advocacy group Florida Association for Insurance Reform (FAIR) recently paid tribute to Burt’s efforts by honoring him with the organization’s Lifetime Achievement Award during the organization’s Second Annual Awards Dinner and Gala held in Tampa, FL.


A Lifetime Commitment to Improving Florida’s Home Insurance Marketplace

In addition to developing legislation to improve the safety of Florida families and children, during Locke Burt’s 12-year tenure with the Florida Senate, he is credited with helping Florida navigate its way out of a home insurance market that was left in shambles after Hurricane Andrew. Respected for his ethics, candor and ability to work with fellow legislators on both sides of the aisle to improve life for Floridians, he counseled state leaders and helped create a viable and healthy private homeowners insurance market where Floridians were provided more options and sound insurance protection.


Raised in insurance and with a nearly 100-year family history in the industry, he began Security First Insurance Company shortly after leaving the Senate. As chairman and president of Florida-based home insurance carrier Security First Insurance, Burt continues to recognize that effective legislation is critical to stabilizing Florida’s homeowners insurance market. He remains very active in providing feedback, guidance, and proposals to help shape legislation that benefits all Florida insurance consumers.


His efforts to improve Florida insurance laws have contributed to creating an environment where insurance premiums can prudently be reduced. Burt’s company, Security First Insurance, was among the first to pass these reductions on to Florida consumers by lowering homeowners insurance rates. In 2013, Security First Insurance reduced its homeowners insurance rates by an average of 9.3 percent statewide. This was followed in 2014 by a further reduction of 4.7 percent.

“I’m delighted to receive this award from FAIR,” said Burt. “I’ve been impressed by FAIR’s ability to bring together a diverse group of individuals representing public adjusters, trial lawyers, insurance companies and consumers to develop and advocate for the passage of common-sense legislation to improve the homeowners insurance marketplace in Florida. I look forward to working with them in the future to continue this good work.”


“Locke’s contributions to the property insurance public policy debate are unmatched.  He has both the credibility and integrity to promote policy that is best for Floridians overall, not just for the industry,” said Jay Neal, President and CEO of FAIR.  “Even though this is a lifetime achievement award, we look forward to many more years of his active participation in improving the market and providing the best service and options to Florida insurance consumers.”


Locke and Ann Burt with FAIR Lifetime Achievement Award



About Florida Association for Insurance Reform (FAIR)

FAIR is a non-partisan, non-profit educational organization that works to educate Florida consumers and insurance industry stake-holders about the effects of insurance public policy. Unlike other organizations that represent specific constituencies, FAIR works with all constituencies to facilitate ongoing dialogue and transparent communications. FAIR believes that there is a solution to every insurance problem that both promotes a robust insurance market and also protects consumers and policyholders.



About Security First Insurance

As a Florida homeowners insurance company, Security First Insurance provides homeowners, renters, condo unit owners, and dwelling fire insurance to nearly 190,000 customers located throughout Florida. The company is nationally recognized for developing award-winning innovative technology designed to improve the customer experience and streamline catastrophe response. Security First Insurance has been assigned a Financial Stability Rating® (FSR) of A, Exceptional, from Demotech, Inc. and is strongly committed to improving Florida’s homeowners insurance market and supporting initiatives that protect residents and communities of the Sunshine State.  www.securityfirstflorida.com

Sep 23

Weiss Ratings Critical of Florida Property Insurance Market Discredited

A recent article from Reuters reported that Florida’s property insurance market may be an “accident waiting to happen.” An unbiased and balanced assessment of the market proves that this is simply untrue. The Florida property insurance market as a whole is strong, well regulated, and fully capable of paying claims when disaster strikes. The Reuters article not only misstates key facts but also builds a narrative based on financial ratings from Weiss Ratings, a Jupiter, Florida Company that uses incomplete models and has a dubious history that includes multiple run-ins with the Securities and Exchange Commission.

There are three substantive reasons that Weiss ratings of Florida’s property insurance market have no credibility. Every year in advance of hurricane season, property insurance companies in Florida must prove to regulators and rating agencies that they have the financial wherewithal to pay claims, even in the worst of circumstances. Demotech, the premier rating agency for Florida property companies, requires them to have the ability to pay claims from a 1:100 storm, a 1:50 storm, a 1:30 storm plus an additional event—all in the same year. To put this into perspective, consider that Hurricane Andrew was a 1:35 year event. There is no way that even the nation’s largest insurance companies could meet this high financial bar without buying reinsurance to spread the risk.   Reinsurance costs are roughly half of total premium dollars, the reason that Floridians pay the highest property insurance rates in the nation. Weiss does not review these very important reinsurance treaties. To rate a Florida insurer without undertaking a thorough review of its reinsurance treaties is like estimating the distance a car can travel by examining its color but not checking the fuel gauge.

Second, the Reuters article calls Weiss “a national agency with a reputation for tough ratings.” At first blush, this seems like a great thing for consumers. But when you look closer, you see that Weiss gives almost all companies low ratings. State Farm of Florida is rated C- (recently upgraded from D). JP Morgan Chase currently has a D rating from Weiss. Bank of America and Wells Fargo are only slightly higher with D+ ratings. It’s easy to claim that your record of predicting failures is good when you claim that virtually every company is vulnerable. The Reuters article calls Weiss’ track record at predicting insurance company failures “close to the mark” because it assigned them low ratings a year before failure. It does not mention that two of the failed Florida P&C companies actually had higher Weiss ratings on the date that they failed than from the year before, while only one was downgraded over the same period.

There is a third practical reason that Weiss ratings are irrelevant to the property insurance market, not just in Florida but nationally. Those homeowners who have a conforming mortgage must have homeowner’s insurance policies from companies with ratings sanctioned by Fannie Mae and Freddie Mac. Freddie and Fannie guidelines recognize Demotech, A.M. Best, and S&P, but not Weiss. Any company relying solely on a Weiss rating to write property coverage would simply go out of business.

Sadly, this may be more than just a matter of an incomplete or different rating philosophy. Some suggest that Weiss issues doomsday scenarios for one reason and one reason only—to pedal financial advice in the form of pricy newsletter subscriptions. It’s an old school sales technique that if you can scare someone badly enough, you can get them to buy a “cure.” And it is part of a business model that has more than once landed Weiss in hot water.

In 2006, the U.S. Securities and Commission (SEC) settled administrative proceedings against Weiss Research, Inc., Martin Weiss, and Lawrence Edelson (a long-time Weiss employee) for “violations of the Investment Advisers Act of 1940 in connection with their operation of an unregistered investment adviser and the production and distribution of materially false and misleading marketing materials.” The settlement paid by Weiss was over $2.1 million dollars. This was not the first brush with the SEC. According to a 1992 New York Times article calling Weiss the “Bad Boy of Insurance Ratings,” in 1972 Martin Weiss was cited by the SEC for “promotion of unregistered securities” and banned from the industry for four months.

Weiss’ troubles with the SEC have no direct relationship to its ratings of Florida property and insurance carriers. However, it is relevant information to have when considering whether the ratings are credible.

During the 22 years since Hurricane Andrew after which large legacy carriers started to shed their 95% of the property insurance market, Florida has built a strong domestic property insurance market that now writes over half of our market. There was no operating manual to guide state regulators and credible rating agencies through this remarkable transformation. There were, and will likely continue to be, bumps in the road. But overall the system is working.

FAIR’s mission is to help ensure that insurance consumers receive accurate information to make informed decisions about coverage options from companies that will be willing and able to pay legitimate claims. We have no choice but to call out anyone who would scare Florida insurance consumers with a motive that appears to be nothing more than a cynical ploy to sell financial advice.

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