News & Updates


Republican plan would hike homeowner insurance rates 23% on coast


Palm Beach Post Capital Bureau

Monday, March 30, 2009

TALLAHASSEE — Coastal homeowners could see their insurance rates jump 23 percent and state workers would prop up the state’s catastrophic storm fund under a proposal Republican leaders plan to unveil this week.

The proposal would hand homeowners covered by Citizens Property Insurance Corp. a statewide average increase of 10 percent, with increases for individual policy holders capped at 20 percent. It would be the first increase for Citizens since 2006.

The plan also would:

  • Reduce the capacity of the Hurricane Catastrophe Fund by $12 billion over six years, which could result in Citizens and private insurers raising the cost of property policies. State officials estimate an average annual increase of 3 percent.
  • Allow the state to borrow $2 billion from the state pension fund to back up the catastrophe fund in event of a hurricane.
  • Use $26 million from the proposed Citizens increases to pay for My Safe Home Florida, which helps homeowners finance new storm windows and fortified roofs.

State lawmakers said the Citizens increases are needed to make the state-run insurer financially sound and less competitive with the private market. The increases would start next year and continue annually until premiums from the state-run insurer became "actuarially sound."

But Citizens rates are already set to increase next year without any action from the legislature. When the current rate freeze expires, Citizens would apply for a rate increase with the Office of Insurance Regulation. The office has granted incremental increases to companies in the past.

House lawmakers say their bill is needed to give homeowners certainty about the increases and time to plan.

"Hopefully it will entice people to look for other companies and move out of Citizens,"said House Speaker Pro-Tem Ron Reagan, R-Bradenton.

The proposal also would increase property insurance rates across the state so lawmakers can reduce the capacity of the catastrophe fund. The $28 billion catastrophe fund has about $8 billion in cash to cover claims but obligates the state to provide up to $28 billion in cheap reinsurance if there is a catastrophic hurricane.

Gov. Charlie Crist and the legislature added $12 billion to the capacity of the catastrophe fund in 2007 to help drive down private premium rates.

By cutting capacity, lawmakers would force companies back to private reinsurance, and the higher costs would be passed along to consumers. Officials estimate those higher costs could amount to about 3 percent.

Meanwhile, questions about whether the state could finance the catastrophe fund in the current economy have raised red flags from credit rating agencies, said Rep. Bryan Nelson, R-Apopka, the bill’s sponsor. If credit ratings were downgraded for private carriers depending on the catastrophe fund, banks would have another hurdle to write mortgages in the state, he said.

To backstop the fund, Nelson would borrow $2 billion from the state’s $92 billion pension fund.

"No one is really happy about this. It’s not something I want to do,"Nelson said. "But the good news is that if we can put something together, we won’t need that access to capital within a few years."

Senate President Jeff Atwater, R-North Palm Beach, said in January that Citizens rates needed to better reflect private market rates. His bill last year extended the rate freeze but also created a Citizens task force that ultimately recommended the increase that Nelson and Sen. Garrett Richter, R-Naples, will include in their bills.