main menu page title feature menus content footer
My Florida C F O

CFO's Initiatives

Stay Connected

Follow the
Department of
Financial Services

Sign up for the CFO's

Press Release

News   RSS RSS   Press Office   Archive

Irs Ruling Confirms That Legislation Offers Millions in Future Savings to Florida Homeowners


TALLAHASSEE - Florida Treasurer and Insurance Commissioner Tom Gallagher announced today that a private letter ruling from the Internal Revenue Service (IRS) confirms that pending legislation he has proposed to merge the state's dueling residual markets into one will offer millions in tax savings to Florida homeowners.

The legislation, sponsored by Representatives Jeff Atwater (R-Palm Beach), Carlos Lacasa (R-Miami) and Sen. Rudy Garcia, merges the Florida Windstorm Underwriting Association (FWUA) and the Florida Residential Property and Casualty Joint Underwriting Association (RPCJUA) into one entity - Citizens Property Insurance Corporation (CPIC). Under the legislation, CPIC is structured to be a tax-exempt entity and will have the ability to issue tax-free bonds.

Today, SB 1418 by Sen. Garcia unanimously passed the Senate Banking and Insurance Committee, and HB 1361 by Rep. Atwater passed the House Insurance Committee.

"This ruling means that Florida homeowners will save more than $80 million in tax savings this year if this legislation passes," Gallagher said. "And I expect significant savings to be realized by policyholders."

"If another major hurricane strikes Florida, everyone in the state with a homeowner's policy could be assessed for hurricane losses," Atwater said. "Homeowners should not be stuck paying the tab on taxable bonds when the IRS has said tax savings are possible with the passage of this bill."

"We are working to make sure that the huge increases in premiums scheduled for this year can be reduced by factoring in the dollars we save with the tax exemption," Lacasa said.

"Homeowners will not only save millions in federal income taxes, they will save billions of dollars in interest if we ever see another hurricane like Andrew, which caused more than $16 billion in insured damages," Garcia said. Garcia pointed out that if Florida had another catastrophic storm and had to issue $5 billion in bonds to help pay claims, homeowners would save up to $2 billion in interest if this legislation passes.

Representative J.D. Alexander, who is also working to reform Florida's residual markets, joined Gallagher and fellow legislators in hailing the IRS ruling.

"This ruling is a good starting point for implementing reforms of our state's residual markets," Alexander said. "I will continue to work with Commissioner Gallagher to pass a bill that offers tax savings and equity for homeowners."

Under the legislation, CPIC would offer homeowners one policy with full coverage comparable to the private market or wind-only policies for homeowners currently eligible for coverage by the FWUA. The bill also includes "consumer choice" language that gives policyholders the option to maintain a relationship with his or her agent in the event of a take-out.

According to Gallagher, the RPCJUA and the FWUA currently offer varying levels of insurance coverage, leaving consumers to contend with gaps in coverage. The FWUA provides hurricane coverage to about 410,000 coastal residents, more than 65 percent of which are in south Florida. The RPCJUA, created after Hurricane Andrew to serve as a safety net for homeowners who could not obtain insurance in the private market, covers approximately 110,000 policyholders.

"With CPIC, homeowners would have access to one policy with full coverage, one agent to deal with, and one adjuster to handle claims," Gallagher said. "This eliminates the risk of gaps in coverage and enables homeowners to better understand what is covered in their policy."

In addition to tax savings, CPIC would decrease policyholder assessments by adding surplus lines carriers and their policyholders in the assessment base, which now only includes regulated carriers. Surplus lines companies, which wrote nearly $1 billion in premium last year in homeowners' insurance, are currently exempt from assessments.

CPIC's rates for a full policy would be based on the same formula now used by the RPCJUA, which uses the highest average rate among the top 20 insurers writing in that area. "Under CPIC, there would be no more runaway rate increases like we are now seeing with the FWUA," both Atwater and Garcia said.

Log on to the department's website at and click on "News Releases" to view a copy of the private letter ruling from the IRS.