Florida’s largest homeowner insurer is offering a slate of coverage changes, but concedes that without legislative changes there will be little reduction in its exposure or policyholder count.
Gov. Rick Scott last month ordered Citizens Property Insurance Corp. to find ways to reduce its financial exposure that could be implemented next year without legislative action.
But in a presentation to Scott and other state officials, Citizens Board Chair Carlos Lacasa said that although the insurer has developed a slate of 31 non-legislative recommendations, the insurer could do little to affect its overall status without significant public policy changes.
Citizens currently has 1.5 million policyholders, representing more than $500 billion in total exposure.
“Not withstanding these proposals, it will cut an inch out of the problem,” Lacasa. “The problem requires significant legislative changes.”
The 31 separate proposals offered by Lacasa called largely for reductions in coverage.
Starting this month, among other things, Citizens is capping coverage on high-value homes at $1 million, a move that could affect 7,500 homeowners. It also is raising its sinkhole deductible to 10 percent, reducing its personal liability coverage from $300,000 to $100,000, and limiting increases in loss assessment coverage.
Citizens is also no longer going to provide coverage for most structures beyond the main residence. Excluded from the coverage will be screen porches, carports, pool enclosures, and patios that are not built out of the same material as the main residence.
The insurer is also placing a $10,000 cap on any cosmetic damage to floors that cover less than five percent of a home’s total square footage.
Next year, homeowners who have filed for claims in the past could see an additional fee.
The committee also explored the option of dropping law and ordinance coverage on everything but the primary residence and phasing out hurricane-proofing discounts five years after an inspection.
Scott praised Lacasa for the board’s efforts, but stayed focused on the underlying issue of Citizens’ financial structure. He questioned whether policyholders understood the potential financial obligation they are facing as Citizens’ policyholders.
The insurer has a total surplus of $5.7 billion, which along with $6.6 billion in coverage from the Florida Hurricane Catastrophe Fund, private reinsurance, and pre-event bonding gives it a total claims paying capacity of $16.7 billion. But beyond that it relies on policyholder surcharges and assessments.
Citizens Director of Legislative Affairs Christine Ashburn told officials they are finalizing a form that all policyholders must sign stating they understand the assessments as they were directed to do by the legislature earlier this year. At the urging of officials, she said, the insurer is also trying to develop examples of possible assessments given certain circumstances.
Scott said he was concerned that policyholders would give little weight to the form without those examples.
“I don’t think people are setting on the cash to pay assessments,” said Scott.
As for legislative changes, Lacasa came up with a list of several proposals, many of which have previously been considered by state lawmakers.
The list includes allowing Citizens to increase its rates beyond its current 10 percent annual cap on rates and allowing the insurer to raise rates due to increased reinsurance costs outside the 10 percent cap.
Lacasa also called on officials to remove several barriers to depopulation, such as provisions that currently allow policyholders to remain in Citizens even though they may receive any offer of coverage from another insurer.
“These are controversial measures, but we are ready and willing to take the heat for them,” Lacasa told Scott.
Even with those changes and the other recommendations, Lacasa said there will be a continual need for Citizens. He estimated the insurer would still have 800,000 policies, representing $314 billion. Those policies would include coastal properties, older homes, older mobile homes, older condominium associations, and some policies in sinkhole areas.
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