Florida Regulator Approves Citizens New Multi-Peril Program

The Florida Office of Insurance Regulation approved a new multi-peril commercial non-residential insurance program for Citizens Property Insurance Corp.

The new multi-peril product provides up to $2.5 million in coverage. The policies will cover damage from wind as well as fire and other perils traditionally included in a commercial property insurance policy. The Office has approved the policy forms and rates for Citizens to proceed with its program no later than Jan. 1, 2008.

The OIR also approved a 15 percent rate increase for commercial wind-only policies. Effective Jan. 1, the increase will bring the cost of Citizens’ wind coverage closer to the cost of the wind portion of the coverage offered by private insurers in the rest of the state.

“Although no one likes to see a rate increase in our state’s current insurance climate, Citizens needs additional rate in order to better ensure its ability to pay commercial claims,” McCarty said. “I remain committed to doing everything within my power to bring property insurance rates under control and to ensure that Florida consumers are being offered the savings expected as a result of the law passed during January’s Special Session.”

Citizens Communications Director, Rocky Scott said Citizens originally requested an average 300 percent rate increase, saying that their commercial multi-peril rates had gone unchanged since 1980. He said state legislation passed in 2005 legally requires insurers to charge actuarially sound rates and that the average 300 percent increase would have accomplished that mandate.

Scott said the OIR sets Citizens rates, as opposed to the voluntary market where the state regulators either approve or deny rates.

Earlier this year, the Florida Legislature authorized Citizens to assume the policies of the Property and Casualty Joint Underwriting Association (PCJUA) and to create a plan to offer commercial insurance to businesses.

“Adding Citizens to the mix of companies writing commercial multi-peril insurance is good for the competitive market,” said Insurance Commissioner Kevin McCarty. “Everyone is familiar with Citizens, but this is an important step, because it is the company’s first coverage offering away from what had been its main niche of offering homeowners insurance statewide and commercial wind-only insurance only in the high-risk areas of the state.”

Citizens completed two parts of a three-part plan by June: It assumed the policyholders of the PCJUA, and then it began to sell its temporary wind-only policy for businesses that are not located in the high-risk or “wind pool” area.

The third part of the plan was to develop a comprehensive program that offers multi-peril property coverage for businesses throughout the state. Citizens filed its forms and rates in September to accomplish the plan’s third step.

As Citizens begins selling its new commercial multi-peril policy state-wide, the OIR also ordered it to stop selling its wind-only policies – business it had assumed from the PCJUA – in areas of the state outside the high-risk coastal areas. Citizens still offers wind-only coverage in the coastal “wind pool” area.

In addition, the Office also ordered Citizens to make a rate filing for its commercial program every year so that any rate increases that are necessary in the future can be done in smaller increments to make them more affordable to policyholders.

Scott said increases will be requested annually in an effort to reach what he referred to as actuarially sound rates.

Jeff Grady, president of the Florida Association of Insurance Agents said the Citizens increase equates to homeowners subsidizing businesses. Frustrated by the process but glad that the OIR only allowed 15 percent this year, Grady said, “At some point you have to recognize the difference between businesses and homeowners.”

In 2004 the OIR issued an order requiring Citizens to file for new rates, but it was not until the Florida Legislature stepped in and passed legislation tailored at improving Citizens that the OIR was successful in getting Citizens to seek the necessary rate increase. The January legislation required Citizens to be more accountable for its actions.

Source: Florida Office of Insurance Regulation