Florida's Last-Resort Homeowners Insurer Postpones Rate Increase Vote Amid Legislative Tensions

Strategic Insights -

The board of directors of Citizens Property Insurance Corp., Florida's last-resort homeowners insurer, has delayed voting on a state-mandated rate increase until after the January special session on the state's property insurance crisis. The decision comes as the Legislature considers a series of measures aimed at addressing the crisis, including a proposal to provide additional funding for the Florida Hurricane Catastrophe Fund.

Citizens' wind-only policies would see an average rate increase of 55.8% under the current proposal, while full homeowners policies would see a statewide average increase of 10%. However, the board's decision to postpone the vote suggests that the outcome of the special session will play a significant role in determining the insurer's rate increases.

"We're in a lot better shape than we were last year or the year before," said Citizens spokesman Rocky Scott, highlighting the insurer's efforts to build up its cash reserves and pay down its debt. With $2 billion in cash and $5 billion in bonds available, Citizens is better equipped to handle storm claims, having paid out over $5 billion in claims in 2004 and 2005.

Key Takeaways:

  • The board of directors at Citizens Property Insurance Corp. has postponed voting on a state-mandated rate increase until after the January special session on the state's property insurance crisis.
  • Citizens' wind-only policies would see an average rate increase of 55.8% under the current proposal, while full homeowners policies would see a statewide average increase of 10%.
  • The proposal to provide additional funding for the Florida Hurricane Catastrophe Fund is being considered by the Legislature.
  • Citizens has paid out over $5 billion in claims stemming from the 2004 and 2005 storm seasons.
  • The insurer has built up its cash reserves and paid down its debt, with $2 billion in cash and $5 billion in bonds available.
  • Citizens is expecting to grow by at least 300,000 policies next year, with a direct written premium of $4.6 billion.
  • A growth-management watchdog group, 1000 Friends of Florida, projects that the state's population will approach 36 million by 2008.
  • A study from GE Insurance Solutions predicts that insurance losses from hurricanes will continue to rise due to more frequent and severe storms and a growing coastal population.

Statistics:

  • Average rate increase for Citizens' wind-only policies: 55.8%
  • Statewide average rate increase for full homeowners policies: 10%
  • Total amount paid out in claims by Citizens in 2004 and 2005: $5 billion
  • Total amount in cash reserves and bonds available to Citizens: $2 billion and $5 billion, respectively
  • Projected growth in policies for Citizens: 300,000
  • Direct written premium for 2007: $4.6 billion
  • Total insured value of coastal property in Florida: $1.94 trillion (2004)
  • Projected population growth in Florida: 18 million to 36 million by 2008

Sources:

  • A. M. Best Company, Inc. (Dec 08, 2006)
  • BestWire (Nov 17, 2006)
  • BestWire (Nov 30, 2006)
  • BestWire (Nov 16, 2006)
  • BestWire (Nov 22, 2006)
  • 1000 Friends of Florida (study)
  • GE Insurance Solutions (study)
  • Insurance Information Institute (study)