Florida insurance companies, not homeowners, benefit from $2 billion in taxpayer-funded fund – Orlando Sentinel

TALLAHASSEE — Nearly five dozen Florida companies have filed plans to join a $2 billion taxpayer-funded plan designed to shore up the struggling property insurance industry that would save homeowners only about 1 percent to 3 percent of annual premiums. their premiums.

That would hardly affect the double-digit premium increases millions of statewide homeowners have endured for years — if these companies actually pass those savings on to their customers.

The law creating the fund makes no guarantees that the companies will pass the savings on to consumers. Many simultaneously file for rate increases to cover the higher costs of private reinsurance they purchase to cover themselves in the event of major disasters.

Republican state Sen. Jeff Brandes of Pinellas Park said the situation illustrates how little the Legislature has done for both industry and homeowners.

He said the $2 billion fund was “like giving a stage 1 treatment to a stage 4 cancer patient”.

The policyholder assistance reinsurance, or RAP, program was approved during a special session called by Gov. Ron DeSantis in late May after the Legislature failed to address the property insurance crisis during the regular session. DeSantis signed it into law immediately.

Insurance companies that wanted to use it this year had to hurry if they wanted to meet the June 30 deadline to apply to the Office of Insurance Regulation, which is still reviewing the documents.

“OIR is expediting the review of these applications and ensuring that the filings are consistent with recently enacted legislation,” said Samantha Becker, director of communications for the Office of Insurance Regulation.

Opponents have called it an industry bailout that won’t lead to savings for consumers. It looks like they were right based on the savings companies are offering.

“This is not only what we feared, but what many legislators said would happen,” said Bill Newton, deputy director of the Florida Consumer Action Network, a nonprofit public policy group. “When you just put this much money in and say, ‘Here. Have a nice day, it’s happening. But I’m sure they appreciate the thought.”

On a positive note, Newton said, this reinsurance plan is backed by Citizens Property Insurance, the state-backed insurer of last resort that has quickly become the sole insurer for nearly 940,000 Florida homeowners and is expected to reach 1.2 million by the end of the year.

“As long as it can offer insurance at reasonable prices, the market will be stable, sort of, and the private companies will also have to keep their rates low,” Newton said. “Citizens are what hold it all together. Oh, and Citizens makes money most years even though it has the highest risk customers. I guess it’s not that hard to make money in the insurance business.

Recently, citizens demanded an increase in the rate by 11%.

On average, Florida homeowners pay more than $2,000 more than the national average for property insurance.

Insurance costs have risen since DeSantis was sworn in from $1,989 in 2019, according to the Insurance Information Institute, to a current average of $3,585, according to Insurify, which provides online price comparisons.

Reinsurance is insurance for insurance companies to cover claims that they do not have the capital to cover themselves. Reinsurance companies are not regulated by the state and have increased their fees as Florida insurers have become more dependent on them to cover catastrophic claims.

The RAP program provides a breath of fresh air for these local insurers by allowing them to tap into the Florida Hurricane Catastrophe Fund earlier than normally allowed before reaching their maximum claim payouts.

The catastrophe fund kicks in when a hurricane causes $8.5 billion in damage and reaches $17 billion, but insurers have to pay for it. The RAP allows participating insurance companies to have free access to this fund when claims reach $6.5 billion, instead of $8.5 billion.

This money will not go to the insurers unless there is an actual disaster, such as a major hurricane, and they need it to cover damage claims.

The 68 separate interest rate statements from 59 companies show how much they would theoretically save using this free money. Premium savings range from a low of 0.7% to a high of 3.9%, with most in the 1% to 2% range. Many of these rate changes won’t go into effect for months.

For the average homeowner, that translates to savings of $36 to $143 a year on a $3,585 homeowners policy, which has risen nearly $1,600 over the past three years.

The companies provided pages of documentation and worksheets showing how much savings they could pass on to their policyholders.

But submitting percentages is everywhere. Some indicated the dollar amount they could return to policyholders, while most only showed a percentage reduction of what they recovered that could be passed on to policyholders. Several hid their plans as trade secrets, a tactic that troubled state Rep. Anna Escamani, D-Orlando.

“People are in the dark and they want answers,” Escamani said.

Some companies encountered problems in calculating their estimated premiums, damages and interest refunds, and state regulators had to point them out and force them to correct their mistakes. In one case, officials told Berkeley they used the wrong growth numbers to determine insurance premiums and suggested a way to get a more reasonable estimate of the savings.

At least one company, Foremost, did the math and decided it wasn’t worth participating until OIR officials convinced them otherwise.

Some companies applying for RAP are experiencing financial difficulties.

United Property and Casualty of St. Petersburg, one of Florida’s largest carriers with 180,000 policies, estimated total savings of 1.2 percent

United stopped issuing new policies in February and is considering a sale or merger to stay afloat, insurance industry publications said. It recently asked the government for a 15% rate hike.

Federated National and Monarch, which recently dumped tens of thousands of policyholders in Florida in an effort to stay solvent, estimated premium savings of a combined 0.8 percent. Insurance rating giant Demotech downgraded Federated’s stability rating in April from “outstanding” to “significant.”

“Our fears are being confirmed that the special session was more about bailing out the insurance industry than giving consumers a break,” Escamani said.

Republicans have rejected at least a half-dozen amendments in both the House and Senate to deal with rate hikes, including a 5 percent cap on increases, a requirement that insurance companies pass on any savings from litigation reforms to consumers in the form of of rate cuts or rebates and requiring data reporting in the bill to include the impact of climate change on rates.

“Citizens become the resort’s only insurer,” Escamani said. “None of this is sustainable at all.”

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