The state-backed Citizens Property Insurance Corp. on Tuesday received approval of rate changes for 2016, with some tweaks that are expected to spread additional costs to policyholders in coastal areas.
The Florida Office of Insurance Regulation approved the average rate changes equating to 1.8 percent on residential multi-peril accounts, an increase from the 1.3 percent requested by Citizens. The office also set an 8.3 percent increase for residential wind-only policies. Citizens had sought a 9 percent increase for the wind-only policies.
“The office modified some of Citizens’ recommended rates to address key issues cited as causes for increasing homeowners’ insurance costs for policyholders in South Florida and on the coast,” a release accompanying the order said.
The new rates will vary by county and depend on a property’s location, the home’s style, and the type of policy. Citizens’ policyholders in Southeast Florida have better chances of seeing rate increases than homeowners in other parts of the state.
Even with the average rate increases, Citizens expects rates to come down for about 60 percent of its policyholders. The order includes no changes for sinkhole coverage, while increasing rates on mobile home coverage.
The order, which came two weeks after a public hearing on Citizens’ 2016 rate proposal, also advises Citizens not to pass to policyholders all the costs of buying reinsurance but to treat that as an expense, noted Citizens spokesman Michael Peltier. Reinsurance is effectively backup coverage for insurers to help cover large claims.
Florida insurance consumer advocate Sha’Ron James had asked Insurance Commissioner Kevin McCarty to “strongly consider” the large amount of reinsurance purchased by Citizens before making any decision on the company’s requested rate hike.
Citizens President and CEO Barry Gilway argued during last month’s public hearing that a “disturbing” rise in water-damage claims in South Florida had driven the need for much of the proposed rate increases.
Citizens entered the six-month Atlantic storm season with a $7.5 billion surplus, the highest in its history, and $3.9 billion in reinsurance coverage from private, offshore firms.
The new rates go into effect Feb. 1.
“Today’s decision by the Office of Insurance Regulation reflects Citizens’ success in reducing exposure and returning to its role as the state’s insurer of last resort,” Gilway said Tuesday in a release.
The rate proposal comes as Citizens has dropped from 1.5 million policies in 2012 to 589,456 policies as of July 31. Gilway said he expects the number of policies to be just above 500,000 by the end of the year.