Citizens may seek record rate
By TOM ZUCCO, Times Staff Writer
Published November 17, 2006
Citizens Property Insurance Corp.'s 1.3-million policyholders could be hit by a
proposed 55.8 percent average statewide rate increase starting March 1 because
of a change in state law.
That's on top of the 25.9 percent average
statewide increase Citizens is already scheduled to start collecting Jan. 1.
Taken together, some homeowners in parts of
Pinellas, Pasco and Hernando counties could see a near-doubling of premiums that
already are among the highest in the Florida insurance market.
That's the good news. Those rate hikes pale in
comparison to another Citizens proposal - to hit commercial policyholders with a
statewide average 610 percent increase in March.
During a conference call Thursday of Citizens'
actuarial and underwriting committee, the members recommended the record rate
increases to comply with new requirements in state law.
The new rate hikes will be presented to
Citizen's board of governors Dec. 7. If approved, the rate request will be sent
to state regulators.
If regulators give their okay, the added rate
increases would go into effect March 1.
All Citizens policyholders will be affected by
the new rates, but the steepest of the residential increases would apply to
homeowners in Citizens' "high risk account" or HRA. Citizens, the state-run
insurer of last resort that has ballooned into the largest property insurer in
Florida, has about 400,000 policies in HRA accounts.
The net effect of the dual January-March
increase is that homeowners who have Citizens policies and live in coastal
sections of Pinellas could see their premiums rise a total of 97.4 percent. In
coastal Hernando, the increase would be 59 percent, and in coastal Pasco, 55
Business owners would fare much worse. In
coastal Pinellas, the county's 561 commercial property owners who have Citizens
policies could see their premiums jump 969 percent, making the average yearly
premium soar from $1,514, to $16,190.
Citizens' 161 commercial policyholders in
coastal Pasco and Hernando could see increases of about 420 percent.
The Jan. 1 rate hike of 25.9 percent is the
result of a regular rate filing Citizens made in late 2005. The second increase
planned for March, committee members explained, is the result of a change this
year in state law that requires Citizens not only to charge rates that are
actuarially sound, but also factor in costs of reinsurance - insurance for
insurers - that have skyrocketed this year.
However, Citizens buys no reinsurance from the
private market and has no plans to do so. It relies instead on assessments and
reinsurance from the state-supported Florida Hurricane Catastrophe Fund, or CAT
"But Senate Bill 1980 now requires Citizens to
set its rates as if it were buying reinsurance at the same levels as in the
private market," said Citizens chief actuary John Rollins.
The rates that will be implemented Jan. 1 were
filed in December 2005, Rollins said. "We didn't know much about our 2006
reinsurance costs then, which is what we are attempting to replicate in this
Rollins also said a change in the way
hurricane catastrophe models predict future damage also played a major role in
setting the rate.
"But the bottom line," said committee member
Bill Sanders, "is that the biggest producer of this increase is reinsurance."
The committee tied its staggering 610 percent
average commercial rate increase to the Property and Casualty Joint Underwriting
Association, which was formed last spring to provide commercial insurance to
small businesses that can't find it in the private market. To date, it has
written just 188 policies. Citizens, however, has 16,827 commercial policies,
nearly all of them in coastal areas.
The commercial rate increase would bring
Citizens' rates more in line with those of the PCJUA, committee members said,
meaning Citizens would no longer act as a competitor.
But committee members seemed most concerned
about the fate of residential policyholders, including some in Escambia,
Miami-Dade and Broward counties who could see their combined rates climb as much
as 118 percent.
"There's going to be a lot of heat," said
committee chair Richard DeChene, "as to how can you file any kind of increase
two months after the first one."
Tom Zucco can be reached at
email@example.com or 727 893-8247.