Citizens Insurance weighs hefty rate hike in Florida today

The Miami HeraldJune 26, 2013 

As the board of Citizens Property Insurance Corp. convenes Wednesday in Miami to consider rate increases for 2014, the much-maligned state-run insurer of last resort is bent on reducing its size and risk profile.

Financially, Citizens is in a sweet spot: It is sitting on a huge surplus — $6.3 billion at the end of 2012, up $707 million from a year earlier. The company could pay claims as high as $14.04 billion — up $2 billion from a year earlier.

“We’re in the best financial position we’ve ever been in,’’ Citizens’ departing chief financial officer Sharon Binnun said in an interview with the Miami Herald. “If an Andrew hit us, we’d barely have to levy any assessments.’’

But some of the methods it is using to reduce risk have evoked ire from homeowners. And insurance rates are calculated on the risks that lie ahead. “It took us six years to build up that surplus, and once it’s gone, it’s gone,’’ Binnun said.

Citizens’ board Wednesday will consider two sets of data in mulling rates for next year: One is based on its own calculations of how much it needs to cover risks; the other is based on the state Office of Insurance Regulation’s figures, which are lower.

The board will weigh 2014 rate increases averaging 6.6 percent to 8.8 percent statewide for full homeowners’ coverage, except sinkholes. Citizens is asking to raise windstorm-only rates on homeowners around the state by the maximum allowable amount of 10.7 percent.

Sinkhole rates, which aren’t subject to a cap, could go up much more. With Florida’s streak of luck in dodging a major hurricane since Wilma’s wallop in 2005, a key headache for Citizens has been coping with a spate of sinkhole claims.

The board’s meeting comes as Citizens is continuing efforts to get rid of hundreds of thousands of policyholders. Last year, Citizens pared back the number of policyholders by 145,580 policies, a 10.7 percent reduction from 2011.

To shrink its risk, Citizens is creating a clearinghouse to review new applications for residential coverage. And it’s working aggressively to find private companies to “take out’’ its policies. In a controversial deal — Heritage Property and Casualty Insurance Co., a St. Petersburg-based company that was created last year and made major political contributions to Gov. Rick Scott — will get up to $52 million from Citizens to assume up to 60,000 Citizens’ policies.

Citizens is also dumping homeowners with higher-value homes.

Under a state law passed this year, Citizens will be barred from insuring homes over $1 million beginning next year — leaving most Miami-Dade waterfront properties and those in upscale neighborhoods such as Coral Gables struggling for alternatives. That cap that will be lowered by $100,000 annually to reduce the maximum value to $700,000 by 2017.

“The thinking was those with homes over $1 million would be able to avail themselves with options besides Citizens,’’ Citizens’ spokesman Michael Peltier said.

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