Although Florida has missed hurricanes for the last 5 years, insurance rates are on the rise with the state run insurer, property insurance plans. When asked what would make the company sound, Financial Officer, Sharon Binnun, responded a rate increase of approximately 55%. With about 18% of the total residents in the state covered by the company, it now risk not having enough money to pay the claims should we be hit by a major storm . What effect will this have on Jacksonville Real Estate? Read more below.
Officials: Citizens would need 55 percent rate hike to be fully sound
TALLAHASSEE, Fla. – Jan. 13, 2011 – Newly elected Gov. Rick Scott wants to raise rates at Citizens Property Insurance Corp. to make them “actuarially sound,” but doing so would require homeowners covered by the state-run insurer of last resort to absorb a whopping 55 percent rate increase, officials said Wednesday.
That was the estimate given by Citizens Chief Financial Officer Sharon Binnun in response to questioning from members of the Florida House of Representatives’ Banking & Insurance Subcommittee on Wednesday.
Citizens is currently prohibited from raising rates by more than 10 percent a year, under restrictions lawmakers imposed in the aftermath of the 2004 and 2005 hurricane seasons, when eight storms hit the state in two years.
Citizens has ballooned into the largest insurance company in Florida since those storms, as private insurers have dropped policies and fled the state. Citizens has nearly 1.3 million policyholders, about 18 percent of the total residential exposure in the state.
The vast majority of its customers are in coastal areas; 42 percent are in Miami-Dade, Broward and Palm Beach counties.
If Citizens isn’t permitted to charge actuarially sound rates, it risks not having enough money to pay claims following a major storm or storms. And Citizens would have to make up that shortfall by taxing all of the state’s insurance policyholders – even those covered by private companies.
Binnun told lawmakers that Citizens currently has enough cash on hand and so-called “reinsurance” coverage to absorb a 1-in-10-year-sized storm (think Hurricane Wilma of 2005) or a 1-in-25-year storm without charging non-Citizens policyholders.
But if the state were to be hit by a 1-in-50-year storm (Hurricane Andrew size), Binnun estimated that private-insurance customers would be hit with assessments equal to about 10 percent of their premiums to bail out Citizens.
Copyright © 2011 The Orlando Sentinel, Fla., Jason Garcia, The Orlando Sentinel, Fla. Distributed by McClatchy-Tribune Information Services.