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State regulators approve lower rates for most homeowners with Citizens Property Insurance

Published Sep. 6, 2014

State regulators have approved lowering rates for most homeowners covered by Citizens Property Insurance, the first widespread rate cut by the state-run insurer in years.

Homeowners with multi-peril policies in Hillsborough, Pinellas and Citrus counties are all pegged to receive average rate cuts of 8 percent or higher, far better than the statewide average cut.

The decision reflects a broader improvement in Florida's long-suffering property insurance market after eight hurricane-free years and a big drop in sinkhole claims, thanks to a new state law.

The Florida Office of Insurance Regulation on Friday said the average Citizens' homeowners rate will fall by 3.7 percent, slightly more than the 3.4 percent cut Citizens had originally sought in June. Rates will fall 4.6 percent, on average, for mobile home owners with multi-peril coverage.

Citizens has previously said nearly seven out of 10 policyholders statewide would see lower rates if its filing were approved.

The average multi-peril homeowners policy — the most common type — will have a rate of $2,383 for 2015, down from $2,538.

Among bay area counties, Citizens in June had proposed average rate cuts for multi-peril homeowners policies of 8 percent in Hillsborough; 8.8 percent in Pinellas; 5.9 percent in Pasco; and 9.4 percent in Citrus. Hernando County policyholders faced an average increase of 0.4 percent.

Citizens spokesman Michael Peltier said Friday afternoon that it appears those rates were approved as filed, though a formal county-by-county breakdown of approvals was not immediately available. The only slight tweak, he noted, is that the insurer is no longer planning to raise sinkhole rates in Hernando. Earlier, it suggested a 10 percent increase.

The new rates are effective Feb. 1 for both new personal lines policies and renewals.

Citizens, which insures those who cannot find coverage in the open market, is the largest property insurer in Florida with more than 933,000 policies as of July 31. That includes more than 200,000 personal lines policies in Tampa Bay.

Florida Insurance Commissioner Kevin McCarty held a rate hearing for Citizens on Aug. 27 and accepted consumer feedback as part of a 45-day review process.

A rate decision for Citizens' commercial accounts is still pending.

Since 2010, state legislators have allowed Citizens to raise its rates up to an average 10 percent a year. For most property owners, the insurer says, rates have caught up to become "actuarially sound." In other words, the higher rates now reflect the risk of insuring those properties.

In making its filing, Citizens cited several triggers for lowering premiums:

• Florida insurers haven't had to pay hefty hurricane claims since recovering from the storms of 2004-2005.

• Citizens is paying less for sinkhole claims after state legislators in 2011 changed the rules, largely limiting payouts in standard policies to cases of catastrophic ground collapse.

• The insurer is paying much less this year for reinsurance, an added layer of coverage that insurers buy to help pay catastrophe claims. Those savings are passed on through lower rates.

For similar reasons, most private insurers statewide have filed for rate cuts over the past year.

"The bottom line is that today's approval of our recommended rates, with some minor adjustments, reinforces the fact that the property insurance market continues to improve across the board in Florida," Citizens president and CEO Barry Gilway said.

Since peaking at a near-term high of 1.5 million policies two years ago, Citizens has been actively trying to push homeowners into the private market. On Thursday, McCarty's office approved letting a dozen private insurers assume more than 425,000 policies from the company, the single largest one-time policy removal.

A smaller Citizens is a plus for everyone in the state since, by law, every Floridian with an insurance policy is at risk of being assessed if Citizens is unable to pay all its claims after a major hurricane.

However, many homeowners have expressed concern that some of the small Florida-based private insurers picking up those policies have neither the financial capacity nor experience to deal with a major storm.

Eight Florida-based insurers that took out Citizens' policies over the past 10 years have failed — half of them during this hurricane-free stretch — even though state regulators had assured they were fiscally sound. McCarty blamed the failures in part on high sinkhole payouts before the legislative changes took effect.

Contact Jeff Harrington at jharrington@tampabay.com or (813) 226-3434. Follow @JeffMHarrington.