Citizens Property Insurance Corp. Seeks Rate Increases Amid Sinkhole Concerns

Strategic Insights -

Citizens Property Insurance Corp., the state-run insurer of last resort, has filed for rate increases in response to an order by Florida regulators, aiming to address concerns over sinkhole-prone regions and competitive market rates. The proposed increases, ranging from 11.8% to 90% in certain areas, would affect over 1 million policyholders. The insurer's growth, largely driven by its presence in sinkhole-exposed areas, has raised concerns among regulators and industry officials.

Key Takeaways:

  • Citizens Property Insurance Corp. has filed for a 19.7% statewide average rate increase for its personal-lines account and an 11.8% statewide average increase for its high-risk, or wind-only account.
  • The proposed rate increases would affect over 1 million policyholders, with the largest increases expected in Pasco County (90%), Franklin County (61.9%), and coastal Gulf County (61.5%).
  • The insurer's growth has been driven by its presence in sinkhole-exposed areas, particularly in the Tampa Bay region.
  • Citizens has about 882,000 policies and is now the second-largest homeowners insurer in the state, behind only State Farm Florida.
  • The state's explosive population growth and reluctance of private insurers to take on sinkhole risk have contributed to Citizens' rapid growth.
  • The Florida Department of Financial Services has created a task force to address the problem of Citizens' growth and improve customer service.
  • The task force, made up of representatives from various industry groups, aims to make recommendations on returning policies to the private market and improving adjuster response times.

Statistics:

  • Estimated insured losses from the four hurricanes (2004): $20.49 billion
  • Number of claims associated with the four hurricanes: 2.2 million
  • Number of claims in Florida: 1.7 million
  • Percentage of claims and losses in Florida: 78% of claims, 85% of losses
  • Citizens' high-risk account: $878 million of surplus, $1.2 billion in losses
  • Citizens' personal-lines account: $533 million of surplus, $355 million in losses
  • Percentage of policyholders facing rate increases: 90% in Pasco County, 61.9% in Franklin County, 61.5% in coastal Gulf County, and 58.8% in coastal St. Lucie.

Sources:

  • A. M. Best via COMTEX (Jan. 04, 2005)
  • Florida Office of Insurance Regulation
  • Citizens Property Insurance Corp.
  • A. M. Best Company, Inc.
  • Fran Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com