Florida Lawmakers Aim to Shrink State Insurer Citizens

Florida lawmakers are looking to cut the state’s largest property insurer down in size.

The plan is to reduce the number of properties insured by Citizens Property Insurance Corp. by allowing it to raise its rates by as much as 25 percent a year while also reducing the value of homes it can insurer.

Senator Alan Hays (R-Umatilla) and Representative Jim Boyd (R-Bradenton) have filed similar bills designed to reduce the number of policies in Citizens, the state’s “market of last resort.”

A presentation by Citizens’ executives in January showed that the insurer has 1.2 million total policies in force, including 787,000 residential policies, making it the largest homeowners’ insurer in the state. In personal residential insured value market share, Citizens accounts for 14 percent of the market, just one percent behind the leader State Farm, which accounts for 15 percent of the market.

When it comes to commercial residential insured value market share, Citizens accounts for 53 percent of the market dwarfing the second ranked American Coastal Insurance Co. at 15 percent and QBE Insurance Corp. at 12 percent.

Several years ago, after the 2004 and 2005 hurricane seasons when eight major storms made landfall in the state, lawmakers froze Citizens rates from January 1, 2007 to December 31, 2009. More recently, lawmakers let Citizens rates rise but placed a 10 percent cap on any rate increases.

The rate controls made it difficult for private carriers to compete with Citizens resulting in growth in the state-backed insurer. This growth, combined with the reduction in premiums, has helped make the insurer heavily dependent on policyholder assessments. Now, lawmakers said it is time to do something to return the insurer to its intended purpose of being the market of last resort when it comes to the residential and commercial resident markets.

Under the bills filed by Hays and Boyd, the 10 percent cap on rates would be scratched in favor of a 25 percent cap. Second, the lawmakers are calling for a reduction in the value of homes Citizens would be allowed to insure. Starting in 2012, homes valued above $1 million would no longer qualify for coverage. That cap would be adjusted downward to $750 million in 2014 and finally $500,000 in 2016. As of January 1, 2015, homeowners would only be eligible for coverage if an offer from a private carrier exceeds Citizens’ rates by more than 25 percent.

If the bill becomes law, Citizens could no longer insure commercial non-residential risks, a move that would affect some 8,600 policyholders.

Hays and Boyd also included a number of provisions designed to restrict certain risks covered by the insurer. For example, the bill states that property owners located in special flood zone areas as defined by the National Flood Insurance Program must maintain a separate flood policy. The only exceptions would be condo unit owners above the first floor or mobile homes located more than two miles from open water.

The bill mirrors several other provisions contained in the legislature’s main property insurance reform bill. Aiming at sinkhole damage, as of January 1, 2012, sinkhole claims could no longer be filed for damage to driveways, sidewalks, decks or patios. The act would not apply to current policies, but would apply at renewals. And taking the position that the insurer is a governmental agency, policyholders could no longer use public adjusters to assess claims.

Topics Florida Carriers Legislation