Raising Insurance Rates

Citizens Insurance

In 2002, Díaz de la Portilla supported the creation of Citizens Property Insurance Corporation, which included a rate cap for insurers, further injecting the government into the insurance market.

SB 1418, Vote #6, 3/18/02, Passed 37-0, Díaz de la Portilla – ‘Yea’

The Florida Legislature gave final approval to Insurance Commissioner Tom Gallagher's plan to merge the state's windpool and residential JUA into a tax-exempt entity known as Citizens' Property Insurance Corp. ...

As for the merger plan, the centerpiece to the package is a 10% rate cap on the 40% rate increase that was scheduled to take effect July 1, affecting nearly 410,000 coastal residents, according to the department.

But challenges still exist, [Florida Insurance Council's Sam] Miller pointed out. The legislation, he said, requires a 25% reduction in the windpool's probable maximum loss in five years and a 50% reduction in 10 years. "But that 50% reduction won't happen, unless the (insurance) companies can get the rates they need" for risks in the coastal areas, he said.

BestWire, 3/22/02

Three years later in 2005, Citizens was found to have a $515 million deficit due to the 2004 hurricane season, leaving residents with the bill. In 2005, Citizens passed on a 6.8% assessment to balance their deficit, which affected the insurance policies of around 5.5 million Floridians. 

An independent financial audit has shown that Citizens Property Insurance Corp., Florida's state-run insurer of last resort, has a $515 million deficit in its high-risk account as a result of the four hurricanes that ravaged the Sunshine State in 2004.

Citizens spokesman Justin Glover said company officials would ask its board of governors on April 21 to approve the $515 million shortfall in the high-risk, or wind-only account.

Citizens estimates its total losses from hurricanes Charley, Frances, Ivan and Jeanne at $2.2 billion, with $1.6 billion coming from the high-risk account.

To replenish the deficit, and absent any relief, a one-time, 6.8% assessment will be charged on all Florida residential and commercial residential insurance companies, which then would pass on the assessment to their policyholders, Glover and industry officials have said. About 5.5 million policyholders in Florida would be affected by the surcharge.

BestWire, 4/19/05 

That next year, Citizens was found to have a $1.7 billion deficit from the 2005 hurricane season. Citizens again passed the buck through surcharges and assessments. 

The 2005 deficit for Citizens Property Insurance will likely be more than 50 percent higher than originally estimated, surpassing $1.7 billion.

That's bad news for all insured homeowners in Florida: By law, they have to pay the tab.

For sure, there will be a 10 percent surcharge on all homeowner policies this year, covering about half of Citizens' escalating deficit. That means an extra $100 charge for every $1,000 of premium.

To cover the rest of the shortfall, the state-run insurer will need to pass an emergency assessment -- and it could go as high as another 10 percent.

The bottom line: A homeowner with a $3,000 premium -- from any home insurer -- could be hit with about $600 in assessments, and that is on top of the string of double-digit rate increases that have been arriving in the mail.

Miami Herald, 3/24/06

After the hurricane season in 2005, insurance companies unable to compete with Citizens began leaving the state. After 2005, 1.5 million of the state's property insurance policies were with the state-run Citizens, putting the state at risk in during future hurricane seasons. 

After the severely damaging hurricanes that struck Florida in 2004 and 2005, many insurance companies began to pull out of the state in order to reduce or elminate hurricane exposures from their books of business. Hurricanes, along with sinkholes, escalating reinsurance costs and general market conditions, caused many leading carriers in the marketplace to reduce Florida property exposures.

What followed was many homeowners taking out policies with Citizens, the state's insurer of last resort. When Citizens was created in 2002 by the Florida Legislature to provide policyholders another choice for their property insurance, it had approximately 600,000 policies in force. After the 2004-2005 hurricane events, policy counts increased significantly to over 1.5 million policies written, or 26% of the entire Florida residential property insurance market.

PropertyCasualty360.com, 7/23/15

As acknowledged by then-State Representative Dennis Ross, Citizens became the largest insurer in Florida in coastal areas, putting the state on the hook for high-risk properties as other insurers left the state.

"The biggest problem is that Citizens has become the largest insurer on the coastal areas, and that is not what it was intended to be," [State Rep. Dennis] Ross said. "It was to be the carrier of last resort in the state. But many companies are reluctant to write policies in the coastal areas now."

Lakeland Ledger, 10/17/05

In 2004, Díaz de la Portilla supported a bill that allowed use of a $150 million loan from the catastrophe fund to provide financial assistance to homeowners. The loan repayment resulted in increased premiums on homeowner policies throughout the state.

HB 9A, Vote #13, 12/16/04, Passed 38-1, Díaz de la Portilla – ‘Yea’ (after Roll Call)

The Florida Legislature on Dec. 16 passed and sent to Gov. Jeb Bush a final package on multiple hurricane deductibles, which includes a $150 million loan from the Florida Hurricane Catastrophe Fund.

The loan would provide financial assistance to thousands of homeowners who faced more than one hurricane deductible during 2004's unprecedented four-hurricane season. The legislation also moves to a single-season hurricane deductible, effective May 1, 2005.

The Florida House and Senate passed H.B. 9-A, sponsored by Rep. Frank Farkas, R-St. Petersburg and Sen. Rudy Garcia, RHialeah, said Sam Miller, executive vice president of the Florida Insurance Council. Gov. Bush is expected to sign the bill in the next few days, he said...

As a result, the $150 million will be repaid to the cat fund, which will result in insurers raising premiums on homeowners policies, said Miller. The cat fund estimates there will be a statewide average increase of 0.5% in homeowners insurance rates to cover the repayment. It will be collected over five years, starting in 2006, according to Miller.

The PCI supported getting the funding from general revenue, but the Legislature "made a policy decision and that (the cat fund) is where they were going to get it," said Stander. "By using cat fund money, they are forcing us to raise rates on the consumer."

BestWire, 12/16/04