(Citizens Property Insurance)
A graphic shows the difference in property insurance rates offered by private insurers and Citizens Property Insurance by county, according to data from July 2022.
Last month’s edition of the Biscayne Times featured a cover story on South Florida homeowners struggling to pay off mortgages to opt out of a pricey insurance market, or moving out of the state altogether. This month, we spoke to those on the other side of that, the insurers.
What we found as the insurance companies reflected on a tumultuous year for property insurance is that, maybe – just maybe – hope may be in order.
Market Improvements
For a while, it seemed that Florida’s private insurers were becoming insolvent left and right – reducing business in the state or pulling out altogether as risks and losses outweighed their ability to pay claims. As the market shrinks, homeowners are flocking to the state’s designated public insurer, Citizens Property Insurance, whose rates are often cheaper than those offered by private compan
(Citizens Property Insurance)
A graphic shows Citizens Property Insurance’s client load over the years, including an overestimated projection for the end of 2023 made before depopulation efforts kicked in.
ies.
“We were created to be the insurer of last resort,” said Michael Peltier, Citizens media relations manager. “We figure that if we were playing that role specifically, we’d probably have between 450,000 and 600,000 policies. We’re now at about 1.26 million.”
Although still concerningly high, the company’s client load is less than what it would have been if it weren’t for the state’s efforts toward depopulation. Under the program, private insurers make an application with the Office of Insurance Regulation (OIR) seeking out policies to offload from Citizens. The OIR then reviews those applications and chooses whether to send an authorized order to the public insurer for a certain amount, often in the tens of thousands.
(CITIZENS PROPERTY INSURANCE)
Michael Peltier, Citizens Property Insurance Media Relations
“Those companies then come in, take a look at our portfolio and choose the policies that best fit what they’re looking for to shore up their own policy portfolio,” said Peltier.
(Wikimedia Commons)
Hurricane Andrew, a 1-in-43-year storm, caused significant damage to South Florida in 1992, though Citizens Property Insurance says it would be able to provide coverage for a hurricane with a lesser chance of occurring.
In October 2023, Peltier estimates that about 99,000 policies were transferred to the private market from Citizens. In November 2023, approximately 93,000 were transferred. A press release dated Dec. 7, 2023, stated that Citizens Property Insurance was able to offload a total of 223,307 policies to the private market in 2023, more than the amount offloaded from 2016 to 2022 combined. The press release noted the change as a sign of market improvement and risk reduction.
Depopulation data for the month of December 2023 was not available by press time.
In any case, the overall trend caused Citizens to change its end-of-year projection earlier last year from 1.7 million policies and $675 billion in total exposure to 1.22 million policies and $551 billion in exposure.
The effort to reduce Citizens’ client load and diversify the market is further supported by a change Florida lawmakers approved in December 2022, requiring homeowners to accept offers by private insurers if the rates offered are within 20% of those proffered by Citizens. There had otherwise been very little incentive for an individual to abandon Citizens’ relatively low rates, which are capped annually by the state.
Comparing Rates, Assessing Risk
Monarch National Insurance Company, a Tallahassee-based private insurer, is one of about a dozen companies that have participated in Citizens’ depopulation program. The 6-year-old company has made offers to roughly 50,000 policyholders from June 2023 to January 2024, according to Monarch’s vice president of growth, Kerrie Ruland.
(Courtesy of Kerrie Ruland)
David Lockhart, President & CFO of Monarch National Insurance
President and CFO David Lockhart says the key is to assess which of Citizens’ risks are worth taking and at what cost. In many instances – about 98% of the time, says Lockhart – Monarch has made offers within 20% of Citizens’ rates.
“It is a fine line when we’re looking at taking out risks from Citizens, selecting risks that we’re comfortable taking at a rate that will not shock the consumer when they get their renewal offer from us,” said Lockhart.
Lockhart has found that those risks which can be supported safely at lower rates are those on newer houses, which are oftentimes built according to updated codes and standards that focus on resiliency and sustainability. Even older homes, such as those designated as historic, tend to be constructed with more durability.
“In the middle is where it gets a little tough, whether that be from construction materials, construction quality …” said Lockhart.
The most important thing for a homeowner, insurers say, is not to rule out any options. In some instances, Monarch and other private insurers have been able to offload clients from Citizens at even lower rates than those offered by the public insurer. But even if the rates are higher, says Peltier, the coverage might be better.
Plus, Citizens Property Insurance will be requiring flood insurance for several additional policyholders over the next few years. The requirement won’t apply to those covered by private insurers.
Peltier’s advice is as follows: Talk to your insurance agents and then talk to other insurance agents. Always open your mail for updates coming in from Citizens or for alternative offers from private insurers; Those offers will be returned to the market if letters go unanswered.
“Consumers are very well educated when it comes to insurance now,” said Ruland. “They’ve had to become educated. Whereas a consumer may have gone with a name brand 20 years ago and stayed with them every renewal without question, each year they find themselves having to shop for better rates or different coverage because the market has been so volatile over the last couple of years.”
Help Still Wanted
Despite much-needed improvements, the market is still as volatile as homeowners fear. Peltier says Citizens is gaining thousands of policies every week, and inflation is causing premiums to rise even higher than what the rate hike cap would otherwise allow.
“Insurance is very expensive in Florida, much, much more than the national average, and our CEO has said, ‘We get it.’ The problem is that Citizens, as a state-created entity, we are required to create rates that are actuarially sound, meaning that our premiums cover our losses,” said Peltier.
In fact, he added, the rates are artificially low in some parts of the state.
And although an increased client load only furthers the risk that Citizens will have to levy emergency assessments to even non-Citizens policyholders, the rumors that the insurer could ever go broke are simply untrue, Peltier said. Tim Cerio, Citizens president and CEO, last year said that the insurer has enough reserves to cover a 1-in-100-year storm, noting that Hurricane Andrew and Hurricane Ian were 1-in-43-year and 1-in-20- to 1-25-year storms, respectively.
“We are here for our policyholders,” said Peltier. “We will always be able to pay clients. We are structured and have the mechanisms in place so that we will always pay claims.”
There is also speculation that property insurance relief may be a topic of debate this month during the 2024 legislative session, with some expecting a discussion on expanding the Florida Hurricane Catastrophe Fund to lessen reinsurance costs for insurers.
“Hopefully with all the changes we can stabilize the market again,” said Lockhart. “I’m not sure we’ll ever get back to average premiums of 1,500 bucks, but at least stabilize it and stop seeing the price increase that we have seen over the past couple years.”