Florida property insurance: Citizens prepares to increase premiums – Palm Beach Post

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Florida’s insurer of last resort has surpassed 1 million policies for the first time since 2013. And, with the state of the private insurance market still in disarray, there are no signs that this growth trend is slowing down.
Citizens Property Insurance Corp. hit the milestone earlier this month, and as of Aug. 12, it stands at 1,005,000 policies. The state-backed government entity was established two decades ago by the Florida Legislature to provide coverage to property owners who cannot find insurance in the private market.
“When the market is healthy, Citizens gets smaller as private companies take advantage of good market conditions,” said Citizens spokesperson Michael Peltier. “When the market is in challenging times, we grow.”
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In Palm Beach County, the state’s third most populous county, there are more than 105,000 non-commercial Citizens policies. That’s as of ThursdayAug. 18, a nearly 60% increase from July 31 of last year, according to a Citizens spokesman.  
Industry experts continue to blame litigation and fraudulent roof claims for the crisis at hand. Five insurers have gone insolvent so far this year, pushing customers out into a depleted market or sending them to Citizens.
In good weather, with no imminent natural disaster, Citizens customers and the market as a whole “shouldn’t really notice” the number of policies it has, Peltier said.
“We’re designed to be able to handle policies, whether we have 500,000 policies or a million-and-a-half,” he said. 
But that view changes after a storm hits. If a hurricane or two hits Florida and causes property damage to the vast majority of Citizens policyholders, that could leave the insurance provider unable to pay out claims, and leave the rest of Florida residents to foot the bill, even if they don’t have a policy with Citizens.
With that many policyholders, Citizens has a risk exposure of $346 billion, but the ability to pay $13.4 billion in claims, said Mark Friedlander, spokesperson for the industry-backed Insurance Information Institute. While there are backstops in place to help pay property owners’ claims, Citizens can levy assessments onto its customers, or even extend them to other Floridians’ home, auto and renter’s insurance policies.
That happened after the state was hit by eight hurricanes during the 2004 and 2005 seasons.
Referred to as the “hurricane tax,” a 1% assessment was levied against policyholders of homeowners and auto insurance in 2007 to replenish the coffers of the Florida Hurricane Catastrophe Fund. That assessment was then raised to 1.3% four years later. The assessment ended in 2014, more than a year ahead of schedule, having raised between $350 million and $500 million each year.
“That’s a situation we would like to avoid,” Peltier said.
That period of time, between 2007 and 2013, was the last time Citizens had sustained more than 1 million policies, with the peaking hitting 1.5 million in 2012. 
But this time around, it isn’t nature causing trouble in the market.
“What we’re facing now is a man-made crisis,” Friedlander said. “That’s what makes the Florida crisis so unique.”
Peltier noted that the measures passed during the special legislative session this summer will “take some time to bear fruit.”
At the rate Citizens is growing, though, the insurance provider could hit 1.2 million policies by the end of the year and might reach a record number of policies this time next year, Friedlander added.
Insurance regulators approved rate hikes for Citizens policies at the start of summer. Citizens requested across-the-board increases to near the maximum allowed at 11%, but the most common type of insurance, known as homeowners multi-peril, will increase by 6.4%.
Rates for residential insurance will increase after Oct. 1, and commercial policies will increase Nov. 1. The increases will take effect after renewal.
For any homeowner worried their insurance company may be next on the chopping block, don’t panic, Friedlander said. Instead, he noted, make sure to keep your coverage and make sure you’re fully covered.
This probably isn’t the best time to go shopping for a new insurance provider if you don’t need to, Friedlander said. 
“It’s very difficult to move your coverage right now. It’s possible, but it’s very challenging,” he said. At the very least, have a conversation with your agent, he added.
While doing that, make sure your coverage is suitable to pay for increased costs due to inflation, he said.
“Florida remains the most volatile home insurance market in the country,” he said. “Until the market stabilizes and until private insurers say that this is a market they want to write risk in, we are going to continue to see the majority of new policies written by Citizens.”
Hannah Morse covers consumer issues for The Palm Beach Post. Drop a line at hmorse@pbpost.com, call 561-820-4833 or follow her on Twitter @mannahhorse.

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