News & Updates


Crist quietly signs bill allowing 10-percent rate hikes for Citizens property insurance customers


Palm Beach Post Staff Writer

Thursday, May 28, 2009

TALLAHASSEE — Insurance companies applauded Gov. Charlie Crist today for approving a bill that opens the door to annual 10-percent premium hikes for Florida property owners.

The bill, which Crist quietly signed Wednesday night, lifts a three-year rate freeze on customers of the state-run Citizens Property Insurance Corp. 

It also dismantles many of the changes Crist pushed through the legislature in 2007, which means Floridians with private insurance policies could also see a 10 percent jump.

"The approval of this bill is a necessary first step to stabilizing the property insurance market in Florida," Associated Industries of Florida CEO Barney Bishop said. He said the measure "will help to bring national insurance companies back to the Florida market."

Bishop said a stable market would bring lower premiums. But most Floridians can expect an increase in their next renewal.

For Citizens customers, those hikes, which need to be approved by the state Office of Insurance Regulation, would come after Jan. 1. The 10 percent increase could occur each year until rates were deemed "actuarially sound," or the amount customers should pay to recoup future losses.

Windstorm-only policies from Citizens rates are, on average, 55 percent below that measure, according to the state-run insurer. Multi-line policies are an average 40 percent lower than what a private company would likely charge.

"In all likelihood, customers will indeed see a rate increase of up to the 10 percent cap," said state Office of Insurance Regulation spokesman Edward Domansky.

The bill (HB 1495) also gradually reduces the size of the state’s $28 billion Hurricane Catastrophe Fund, which private insurance companies use to reinsure their windstorm policies.

In 2007, lawmakers increased size of the fund from $16 billion and offered deeply discounted rates to private companies. Those companies were required to pass along any savings to their policy holders.

By reducing the fund – by $2 billion per year for six years – private companies will be forced back to the private re-insurance market, where rates are higher.

"This bill seeks to better manage, in a fiscally responsible manner, how we pay for losses that are inevitable here in the most hurricane-prone place on the planet," said Florida Insurance Council Vice President Gary Landry.

The change in 2007 helped reduce skyrocketing rates, which had become a central issue in the 2006 gubernatorial election. But the state’s dismal tax collections and the global finance crisis raised questions about whether Florida could cover its obligations if a major storm made landfall.

U.S. Rep. Ron Klein, D-Boca Raton, has introduced a measure in Congress to create a national hurricane catastrophe fund that could suppress rates. Known as the Homeowners Defense Act, a similar measure passed the House last year but died in the Senate.