TALLAHASSEE — Florida Keys property owners are facing another possible increase in their windstorm insurance rates as the state’s insurer of last resort is considering raising rates, as it is grappling with a surge in new customers, adding more financial liability to the company.

Last week, Citizens Property Insurance Corporation’s Board of Governors postponed final action on proposed 2021 rates and directed staff to work with the Florida Office of Insurance Regulation to seek ways to bring the nonprofit company’s rates more in line with private market carriers while staying within the statutory glidepath for current policyholders, according to Citizens representatives.

Board members will reconvene Jan. 26 to approve a final package of 2021 rates that take into account any additional adjustments OIR will allow to move Citizens closer to actuarially sound rates, the company stated in its latest press release.

Citing a flood of new policies entering Citizens and a growing disparity between Citizens’ rates and the higher rates generally charged by private companies, a unanimous board said Citizens’ growth is unsustainable and steps need to be taken now to ensure that Citizens maintains its role as the state’s insurer of last resort, company representatives said.

“Over the past 18 months, Citizens has become the insurer of first resort,” Citizens Chairman Carlos Beruff said. “This is not its statutory mission and we must take steps immediately to reverse this trend and protect Floridians who are ultimately on the hook if Citizens is unable to pay claims.”

Since May 2019, Citizens’ policy count has increased from 420,000 to 537,000, according to the company. During that time, private companies have returned to OIR with multiple requests for rate increases in an effort to shore up their financial positions after suffering losses over the past five years, including a $1.2 billion operating loss for the industry through the third quarter of 2020.

Unlike private companies, Citizens is prohibited by statute from increasing rates by more than 10% annually for any individual policy. In recent years, the result has been a widening gap between Citizens rates and those private companies need to charge for comparable coverage, company representatives said. As a result, Citizens rates in any given region are lower 91% of the time, up from 80% in 2019.

Citizens actuaries had proposed a package of 2021 rates that called for an average increase of 3.7% for personal lines policies – multi-peril coverage for homeowners, renters, condominium unit, dwellings, and mobile homes.

Instead, the board approved the 2021 rate package for informational purposes only, directing staff to meet with OIR to determine if additional options are available to raise rates further, company representatives said.

“We’ve become the 800-pound gorilla,” Beruff said. “That is not what we are supposed to be, but that has happened.”

Among potential options available to Citizens is a list of recommendations included in a Florida State University study looking at ways Citizens’ exposure could be reduced. Among those recommendations is a suggestion also raised by state Sen. Jeff Brandes, R-St. Petersburg, that Citizens charge new customers actuarially sound rates instead of glidepath-capped rates available to renewal policyholders.

The Florida Keys insurance watchdog group FIRM (Fair Insurance Rates in Monroe) is monitoring the possible increases and FIRM representatives said “the 10% glidepath that caps the amount by which Citizens can increase rates each year will be eliminated on new policies if the legislation passes.”

Monroe County residential rates have not had an increase since 2017. Prior to 2017, Citizens had regularly recommended nearly the full 10% increase on Keys policies.

“We encourage everyone to stay informed and continue to support FIRM in its fight on behalf of all Monroe County residents,” FIRM stated in its latest email blast.

Property insurance, which is required to obtain and keep mortgages, is one of the most expensive issues facing Keys property owners. The Keys have some of the highest insurance costs in the state which severely impact the affordability of living in the Keys.

More information on FIRM can be found at firmkeys.org.

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