Make us your home page
Instagram

Citizens Property Insurance board approves 10% rate hike

Ending a three-year rate freeze, the board of state-run Citizens Property Insurance approved raising rates for most policyholders by 10 percent next year.

After a heated debate Wednesday, Citizens also agreed to cap any rate cuts at 10 percent as well, rejecting a committee recommendation that rates remain frozen for those customers. Only about 80,000 of Citizen's 1 million policies, including some in Pinellas County, would qualify for rate cuts based on computer models used by the insurer.

The state Legislature in its last session said Citizens should be on a "glide path" to gradually raise rates. The long-term goal is to build enough reserves to handle claims from a major hurricane without assessing property owners statewide. But it will take a while to get there: The Legislature capped the maximum rate increase next year at 10 percent.

Without a cap, Citizens policyholders would have faced an average increase of 47.7 percent to bring rates up to an actuarially sound level, according to a Citizens analysis. Put another way: Citizens, which brings in an estimated $2.112 billion in premiums annually, would need to bring in another $1.08 billion to properly cover its financial risk.

With Wednesday's vote, Citizens rates are slated to rise 6.7 percent on average with many paying the maximum 10 percent.

If approved by regulators, the new rates would go into effect Jan. 1.

Although many coastal policies are expected to see rates rise, proximity to the coast isn't the sole rate-setting factor. In fact, one projection by Citizens indicated that many Pinellas County homeowners could actually enjoy the maximum rate cut even as the rest of the bay area faces the maximum 10 percent increase.

State regulators have the final say in approving or rejecting the rate filing. And, unlike private insurers, Citizens does not have a right to appeal the state's decision.

Citizens, which covers homeowners who cannot find coverage in the open market, is entering the heart of hurricane season in "its best shape ever," said chief financial officer Sharon Binnun. It has about $16 billion in claims-paying ability.

Yet Citizens' reserves could be quickly depleted, based on computer models that project losses from one or more major hurricanes. As the state's insurer of last resort, the company is allowed to charge not just its own policyholders but private insurance policyholders statewide if it cannot handle claims from a massive storm.

The 7-1 vote in favor of the rate filing, with board member Tom Lynch objecting, came after board members were sharply divided over how to handle policyholders who would qualify for a rate cut.

Citizens staff had recommended capping any rate decrease at 10 percent to be consistent with the high end of a rate increase. But the claims committee, which reviewed rate issues, recommended no rate decreases. The board voted 5-3 to revert to the original staff recommendation of a 10 percent cap on cuts.

Lynch argued against any rate cut. He said it would hamper Citizens' goal to move toward financial stability, to lower its hurricane exposure and shore up its reserves as it faces an influx of discarded State Farm policyholders. State Farm, the largest private property insurer in the state, intends to gradually pull out of Florida entirely.

"Our Legislature wants us to achieve financial soundness," Lynch said, adding that resisting a rate cut would help that cause.

He reasons that the rate cuts will discourage policyholders from exploring switching to private insurers, a shift that would decrease the state's financial exposure. In other words, fewer Citizens' polices — and more private policies — means less risk for Florida taxpayers.

But board member Carlos Lacasa countered that when someone is entitled to a rate reduction, "we should strive to give them that reduction, not only out of fairness but because that's what the actual rates indicate."

Citizens chairman James Malone recommended the 10 percent rate cut for policyholders who qualify. But he was highly critical of the Florida Office of Insurance Regulation's dominating role in the process. Regulators had previously told Citizens officials that they had no choice but to give at least partial rate cuts to policyholders who were entitled.

"You can phase in decreases," OIR deputy commissioner Belinda Miller told the board, "but I don't think you can ignore them."

What's Next?

Citizens Property Insurance will submit its rate filing to state regulators July 15. Florida Insurance Commissioner Kevin McCarty, who oversees the Office of Insurance Regulation, has 45 days to review the filing. If regulators alter the rate request, their decision cannot be appealed by Citizens. New rates would go into effect Jan. 1.

One million strong and growing

With a growing base of 1 million property insurance policies statewide, Citizens Property towers over private insurers in Florida, particularly in higher-risk, coastal areas.

County # of Citizens' Policies

Pinellas 101,502

Pasco 61,156

Hillsborough 36,392

Hernando 26,471

Citrus 4,602



1 million strong
and growing

With a growing base of 1 million property insurance policies statewide, Citizens Property towers over private insurers in Florida, particularly in higher-risk, coastal areas.

County Policies
Pinellas 101,502
Pasco 61,156
Hillsborough 36,392
Hernando 26,471
Citrus 4,602


FAST FACTS

What's next?

Citizens Property Insurance will submit its rate filing to state regulators July 15. Florida Insurance Commissioner Kevin McCarty, who oversees the Office of Insurance Regulation, has 45 days to review the filing. If regulators alter the rate request, their decision cannot be appealed by Citizens. New rates would go into effect Jan. 1.

Citizens Property Insurance board approves 10% rate hike 07/08/09 [Last modified: Saturday, July 11, 2009 12:55pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. SeaWorld shares drop Monday to 2017 low after disclosure of federal subpoena

    Tourism

    The Orlando parent company of SeaWorld and Busch Gardens theme parks saw its stock drop 3.5 percent Monday to $15.10, its lowest price of this year.

    Killer whales perform at Shamu Stadium at SeaWorld in Orlando in 2011, before public pressure was placed on the theme park company to curtail its orca shows.SeaWorld has since announced an end to the traditional killer whale entertainment  at its theme parks. [AP Photo/Phelan M. Ebenhack]
  2. Rick Scott appoints longtime ally Jimmy Patronis as Florida CFO

    State Roundup
    Rick Scott appoints Jimmy Patronis (background) as CFO. [STEVE BOUSQUET | Tampa Bay Times]
  3. Local gas prices plummet as Fourth of July holiday travel approaches

    Tourism

    TAMPA — Local gas prices are enjoying an unseasonal dip around the $2 mark just in time for the hectic Fourth of July holiday travel weekend.

    The price of regular unleaded gasoline has dropped to $1.99 at a Rally station on Pasadena Ave. South and Gulfport Boulevard South, South Pasadena.
[SCOTT KEELER   |   Times]

  4. Air bag recalls, lawsuits lead Takata to file for bankruptcy

    Autos

    Shattered by recall costs and lawsuits, Japanese air bag maker Takata Corp. filed Monday for bankruptcy protection in Tokyo and the U.S., saying it was the only way it could keep on supplying replacements for faulty air bag inflators linked to the deaths of at least 16 people.

    Japanese air bag maker Takata Corp. CEO Shigehisa Takada bows during a press conference in Tokyo on Monday. Takata has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of defective air bag inflators.
[(AP Photo/Shizuo Kambayashi]
  5. Airbag maker Takata bankruptcy filing expected in Japan, U.S.

    Corporate

    DETROIT — Japanese airbag maker Takata Corp. has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of faulty air bag inflators.