Florida Business Group Urges Property Insurance Rate Increase
Oct. 22, 2009 – A Florida business group says the state’s public property insurance business is hurting for cash and needs at least an average 10 percent rate increase to remain solvent.
Florida lawmakers in 2002 created the state-backed Citizens Property Insurance Corporation to provide insurance protection to residents and businesses in the Sunshine State’s hurricane-prone areas. But if damages exceed available funds for property damage claims, property owners across the entire state are assessed to make up the shortfall. Floridians already are paying a 1 percent assessment to replenish the state’s Hurricane Catastrophe Fund, which was severely depleted after four hurricanes struck Florida within a month during 2004 and Hurricane’s Katrina and Rita inflicted more damages in 2005.
The Florida Legislature recently approved increasing premium rates to offset potential funding shortages if a major hurricane or other catastrophe were to strike. But state insurance officials and representatives of various special interests are at odds over how much rates should be increased.
Officials representing the Associated Industries of Florida are urging an immediate, 10 percent rate increase for all policies. But state insurance officials are proposing much smaller rate increases, saying the Legislature intended for some rates to increase and others to decrease with 10 percent being the maximum potential rate hike.
Citizens has a $4 billion surplus, but officials for the Associated Industries of Florida say the state-backed property insurer currently has $413 billion in exposure on the more than 1 million properties it has underwritten. A 10 percent rate hike would be sufficient to raise more than $211 million needed to bridge a potential budgetary gap if a Category 2 or stronger hurricane were to strike, according to Associated Industries officials.
But state officials are proposing rate increases of between 5 percent and 10 percent, saying a sudden 10 percent jump in insurance rates would be too burdensome on homeowners and job providers already struggling to make ends meet in a down economy.
State insurance officials are proposing rate increases of 1.8 percent for mobile home owners, 5.4 percent for homeowners and 8.8 percent for dwelling fire insurance protection. Increases of 2.1 percent for mobile home physical damage insurance and 10.1 percent for commercial properties and homeowners association insurance plans also are proposed. If approved, the rate increases would take effect in January.
The proposed rate increases are much lower than officials for Citizens Property Insurance Corporation have expressed as necessary to adequately fund the state-backed program. Citizen’s actuaries have said rates need to go up by my more than 10 percent for commercial residential properties, such as apartment complexes, 40 percent on private homes and 140 percent for wind-only commercial policies to properly fund the program.
State insurance regulators have scheduled a hearing on Nov. 10 to address the matter.