EDITORIAL: We'll all soon be paying more to help insurers

OUR POSITION: Charges Florida will levy on all homeowners policy holders this fall to cover costs of claims should be a one-time event.

We've often mentioned the catastrophic financial consequences if Citizens insurance, the state-backed insurer of last resort, goes broke. Thanks goodness that's not happening right now, but the fear is justified after Insurance Commissioner Mike Yaworsky announced a plan to charge all homeowners a 1% fee to cover losses by insurance companies who have gone belly-up this year.

Monday's announcement came after Florida Insurance Guaranty Association requested the 1% surcharge — called an emergency assessment — to cover costs of claims. FIGA is a nonprofit agency that handles claims when insurance companies go under in Florida.

This year, seven property insurers have been declared insolvent, according to a Jim Saunders News Service of Florida story.

One of the largest, United Property & Casualty Insurance Co., is turning over hundreds of millions of dollars in unpaid claims to the state.

So how does the state pay that off? With our help.

The plan announced Monday requires FIGA to borrow $150 million to pay the claims. Then, $750 million in revenue bonds will be used to pay off the short-term financing to settle any remaining claims. Money from the 1% assessment on our homeowners policies will pay off the bonds.

And, if you're not feeling the pain yet, the FIGA said the 1% assessment will continue until the bonds have been paid in full.

"The emergency assessment is necessary to secure funds for the payment of covered claims, to pay the reasonable costs to administer such claims, including claims resulting from insurance companies that have become insolvent or may become insolvent as a result of losses incurred due to hurricanes including but not limited to Hurricanes Irma, Michael and Ian, and to secure bonds issued to generate revenues to pay claims," FIGA Executive Director Corey Neal wrote in an April 4 letter, according to the NSF story.

This scenario has been building for a long time. Legislators met in a special session in 2022 to try to work out solutions for soaring insurance rates but ended up mostly giving insurance companies cover from lawsuits. Lawmakers pleaded for patience, saying the laws they passed would take a couple of years to ease rates.

The assessment is nothing new.

FNS reports that the FIGA collected a 0.7% assessment in 2022 and began collecting an additional 1.3% assessment on July 1, 2022, that will end June 30. And, policyholders will absorb another 0.7% assessment that will end Dec. 31.

None of these assessments, to our knowledge, are well publicized and some policy holders may not even realize they are paying the extra fee if they do not carefully scrutinize their policies

Legislators and insurance executive alike have raised a red flag about the dangers of Citizens some day not having the money to pay claims from an extraordinary catastrophe as the company's policy holders reach record levels of 1.248 million clients as of April 7.

Right now, Citizens is in good shape and has paid, or is in the process of paying, its hurricane claims from 2022. But, if it is not able to shed some of its policy holders to private insurers and continues to pick up new clients, the breaking point could be near.

We don't like assessments that add to policy holders' burden because insurance companies fail to meet their obligations. We urge lawmakers to make this a one-time assessment and to continue seeking answer to Florida's troubled insurance market.