Florida’s insurer of last resort surpassed 1 million policies for the first time since 2013. And with the state of the private insurance market still in turmoil, there’s no sign that this upward trend is slowing down.
Citizens Property Insurance Corp. reached the milestone earlier this month and as of August 12 stood at 1,005,000 policies. The state-backed government entity was created two decades ago by Florida Legislation to provide coverage to property owners who cannot find insurance on the private market.
“When the market is healthy, Citizens gets smaller as private companies take advantage of good market conditions,” said Citizens spokesman Michael Peltier. “When the market is in challenging times, we grow.”
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Palm Beach County, the third most populous county in the state, has more than 105,000 non-commercial civil policies. This is from Thursday August. 18, a nearly 60 percent increase from July 31 last year, according to a Citizens spokesperson.
Industry experts continue to blame litigation and fraudulent roofing claims for the current crisis. Five insurers have failed so far this year, pushing customers into a depleted market or sending them to the Citizens.
In fair weather, with no immediate natural disaster, Citizens customers and the market as a whole “shouldn’t really notice” the number of policies there are, 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 perspective changes after a storm hits. If a hurricane or two hits Florida and causes property damage to the vast majority of Citizens policyholders, it could leave the insurance provider unable to pay claims and leave other Floridians footing the bill even if they don’t have a Citizens policy.
With so many policyholders, citizens are exposed to $346 billion in risk but the ability to pay out $13.4 billion in claims, said Mark Friedlander, a spokesman for the industry-backed Insurance Information Institute. While there are safeguards in place to help pay out claims to property owners, Citizens may impose assessments on its clients or even extend them to the home, auto and renters insurance policies of other Florida residents across its entire portfolio .
This came after the state was hit by eight hurricanes during the 2004 and 2005 seasons.
Called the “Hurricane Tax,” a 1 percent assessment was imposed on homeowner and auto insurance policyholders in 2007 to replenish the coffers of the Florida Hurricane Catastrophe Fund. This estimate was then raised to 1.3% four years later. The assessment ended in 2014, more than a year ahead of schedule, with between $350 million and $500 million raised each year.
“That’s a situation we’d like to avoid,” Peltier said.
That time period, between 2007 and 2013, was the last time citizens held more than 1 million policies, with a peak of 1.5 million in 2012.
But this time it’s not nature that’s causing problems in the market.
“What we’re facing now is a man-made crisis,” Friedlander said. “That’s what makes the crisis in Florida so unique.”
Peltier noted that the measures were passed during this summer’s special legislative session it will “take some time to bear fruit.”
At Citizens’ rate of growth, however, the insurance provider could reach 1.2 million policies by the end of the year and could hit a record number of policies by this time next year, Friedlander added.
Interest rates for citizens are also rising from October 1
Insurance regulators approved rate hikes for civil policies at the start of the summer. Citizens has asked for across-the-board increases to near the maximum allowed of 11 percent, but the most common type of insurance, known as homeowners, will increase by 6.4 percent.
Rates for home insurance will increase after 1 October and commercial policies will increase from 1 November. Increases will be effective upon renewal.
For any homeowner worried that their insurance company could be next on the chopping block, don’t panic, Friedlander said. Instead, he noted, be sure to keep your coverage and make sure you’re fully covered.
This is probably not the best time to go shopping for a new insurance provider if you don’t have to, Friedlander said.
“It’s very difficult to move your coverage right now. It is possible but very challenging,” he said. At the very least, talk to your agent, he added.
While doing so, make sure your coverage is adequate 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 private insurers say this is a market they want to write risk in, we will continue to see most new policies written by citizens.”
Hannah Morse covers consumer issues for The Palm Beach Post. Drop her a line at [email protected], call 561-820-4833 or follow her on Twitter @mannahhorse.