Florida’s Citizens Pulls Back on Condominium Rate Hikes for Now

By | December 20, 2011

Florida condominium buildings that rent out 25 percent of their units will see no rate increase for now despite playing a key role in the state’s largest property insurer’s plan to reduce its policy count.

Since last month, Gov. Rick Scott, along with other state officials, has pressed the board of Citizens Property Insurance Corp. to find ways to shed its current 1.5 million policyholders. One proposal called for capping the available coverage for condominium buildings that rent 25 percent of their units through timesharing agreements or other arrangements at $1 million.

Citizens’ staff said the cap could have a significant impact on the insurer’s bottom line, which currently has more than $500 billion in exposure.

Currently, the insurer writes 26,000 wind-only policies on condominium buildings, most of which are located along the state’s coast line. Those policies represent $100 billion in exposure, of which only 20 percent is covered because rates are inadequate. About $55 billion of the coverage is for building complexes worth more than $1million.

Citizens’ officials, however, warn that implementing such a cap could spell trouble down the road.

“I sense this is one of those kinds of issues where we could confront a backlash at all levels and we really have to thoroughly look at it,” said Citizens Board Chair Carlos Lacasa.

Citizens board member Carol Everhart, vice president of the Tampa, Fla-based BB&T bank, which insures condominium units, recused herself from the vote. She warned, however, that if the proposal was implemented, it would have serious consequences.

The premiums would rise for those owners by upward of 45 percent, said Everheart.

The condominium issue demonstrates the dilemma faced by policymakers trying to trim Citizens. The state needs the lower rental rates for apartments and condominiums along the state coastline to help prop-up a sagging economy that has been hardest hit by the construction and tourist industries.

On the other hand, if the state should suffer a major hurricane, it could wipe out the balance sheets of many insurers and leave Citizens as the one major player left in the market. This is why Scott and others are pressing now for changes to be made.

Citizens’ board member John Rollins said he understands the position of condominium owners, many of whom have lived in the state for years. Still, he said, something must be done and the 25 percent rule is the best offer currently on the table.

“Condominium complexes should not enjoy a major subsidy in rate level by sitting on the beach in the most risky areas of Florida and sitting in the assessment account, ultimately, of every Floridian,” said Rollins.

The board voted to table the issue until February 4 to gather more data. However, given that the legislature is half-way through its session, it will be a tough sell to lawmakers and consumers alike.

Topics Florida Pricing Trends

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