PROPERTY INSURANCE COMPANIES FAIL AS INSURERS scramble for new coverage

Many Floridians are seeing their insurance companies go bankrupt. JIRSAK/Shutterstock

Tens of thousands of Floridians are struggling to insure their properties as a number of companies in the state go into liquidation. As a result, it leaves many opting for a policy of last resort at Citizens, which recently announced it would be increasing its rates.

Plantation Key resident Kim Harrington was one of 20,000 policyholders in Weston who were warned they had just 30 days to find a new insurance policy. The insurance company went into liquidation on August 8. Harrington said he didn’t believe it.

“I don’t have the extra funds to pay for my storm twice. I just thought this can’t be real. Nothing that bad can really happen,” Harrington said. “The email said if you do nothing you will have no insurance and then your mortgage company will choose a non-preferred carrier and then you will be in big trouble.

“The email said you have to take care of it, you have to pay again and reapply,” she continued. “Not only that, it said I needed to get a new roof inspection and a new wind reduction system, which I was already fully covered by the now defunct company. I thought it was all a big mistake when I got the email.

Weston was declared bankrupt after the Florida Office of Insurance Regulation (OIR) found the company insolvent. The OIR said it had sufficient grounds to initiate criminal proceedings.

“The company has ceased issuing new insurance coverage and, pursuant to applicable law and court orders, Weston’s policies are being canceled effective 12:01 a.m. on September 7, 2022; unless otherwise terminated prior to that date,” Weston said in a statement on its website.

Since last February, five insurance companies have been declared bankrupt. Weston is joined by Southern Fidelity Insurance Co., Lighthouse Property Insurance Corp., Avatar Property & Casualty Insurance Co. and St. John’s Insurance Co. About 80,000 Florida residents had a policy with Southern Fidelity, 27,000 with Lighthouse, 37,000 with Avatar Property & Casualty and 160,000 with St. John’s.

Mel Montan, president of Fair Insurance Rates in Monroe (FIRM), said the lack or unaffordability of reinsurance for insurance companies and fraud are two reasons that lead to bankruptcy problems.

“That’s something we don’t have here, which is cheating. But this is happening on the mainland. It was a huge problem for all carriers outside of Monroe County.”

Florida’s growing property insurance crisis prompted state lawmakers to return to the capitol in May for a special session. Within three days, the House and Senate approved legislation that authorized a $2 billion reinsurance fund for insurance companies. Known as a policyholder assistance reinsurance program, insurers can purchase insurance to insulate them from risk. A stipulation to the program requires insurance companies to lower rates for policyholders.

For some insurance companies, the program was either too little or too late, Montand said. Insurance problems continued in the months that followed, leaving many policyholders, including Harrington, to return coverage to Citizens. In August 2020, citizens had a total of 499,056 policies. A year later, that number jumped to 687,078. As of last August, Citizens said it had 1.02 million policies.

“Citizens was the only company I could use,” Harrington said. “I have already applied, paid and received new coverage. But I had to fight for the funds.”

Citizens Property Insurance Corporation was authorized by the state legislature in 2002 to provide property insurance protection to people who are eligible to obtain coverage through the private market but are unable to do so. Citizens was formed by the merger of the Florida Residential Property and Casualty Joint Underwriting Association and the Florida Windstorm Underwriting Association (FWUA), which was established in 1972 as an insurer of last resort to provide wind-only coverage in Monroe County.

A not-for-profit company, Citizens is financed by the premiums of the insured persons. However, Florida law also requires Citizens to impose assessments on most Florida policyholders if they experience a deficit as a result of a devastating storm or series of storms.

Montan said the rest of the state continues to deal with unaffordable insurance “with all the fraud coming home.” This forces viable insurance companies to demand double-digit increases to keep pace with losses.

Monroe County residents insured through Citizens are feeling some of these effects through rate increases. OIR recently approved a series of rate increases for citizen policyholders that range from 6.4% to 10.7% depending on the length of coverage. The most common type of insurance, known as homeowner multiperil, increased 6.4%. Montan said those rates could be even higher once fees and surcharges are put in place.

“Our good friends at Citizens insured us for wind and the X-Wind policy. We have never faced the issue of transfer of benefits and lawyers down here. But that doesn’t really stop the rate increases coming from the citizens every year at the 9% and 10% they tell you the increase is. This is an increase in the base rate. By the time that invoice hits your inbox, it’s probably 12% or 13% after adding in all the fees, surcharges and garbage.”

FIRM offers a Property Insurance Consumer Guide at firmkeys.org to help consumers make choices about property insurance in Monroe County.

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