Floridians Can Anticipate State-wide Premium Hikes

Florida homeowners can expect an 8.3 percent statewide increase in the cost of homeowner’s insurance, Bob Lotane, spokesman for the Florida Office of Insurance Regulation told the Bonita News. He said worst-hit areas will have the highest increases.

“There are certain areas that carriers aren’t going to need rate changes and some that will be able to justify it,” Lotane said. “In South Florida, hurricanes were already priced into rates, but insurance companies will be able to justify rate changes in areas such as the central part of the state.”

Lotane said rates will rise due to a higher cost of reinsurance and increasing costs of building materials.

In 1993, the Legislature created the Florida Hurricane Catastrophe Fund, and in 2004, the Legislature increased the fund’s limit from $11 billion to $15 billion. The payout for Hurricanes Charley, Frances, Ivan and Jeanne is $2 billion, contributing to what officials estimate will be more than $20 billion of claims for the industry when all of them are settled.

Currently the catastrophe fund kicks in after insurance companies pay a deductible for each storm, not each hurricane season. This year, Allstate Floridian Insurance Co. and State Farm, the state’s largest homeowners insurance carriers, paid $948 million and $800 million, respectively, in deductibles. After the insurance companies pay the deductible, the fund covers 90 percent of losses; the companies pay the other 10 percent.

Allstate stopped writing homeowners’ policies after Jeanne made landfall in late September, and State Farm has restricted its coverage.

Bill Mellander, an Allstate spokesman, said the company hasn’t applied for a rate increase, and he doesn’t know when it will start writing policies again. He said the state and the insurance industry are working together to address the risk and management needs of homeowners’ insurance in Florida.

“For the insurance market in Florida, the story is what’s going on in Tallahassee,” Mellander said.

State officials are looking at restructuring the catastrophe fund by lowering the deductible for multiple storms in the same season. The issue probably will be addressed during the regular legislative session in 2005. Hurricane relief is on the Legislature’s agenda for a December special session, specifically for homeowners who paid a deductible more than once.

Topics Florida Catastrophe Pricing Trends Hurricane Homeowners