Florida insurance firms, not homeowners, reap benefit of $2 billion taxpayer-financed fund

TALLAHASSEE — Nearly five dozen Florida companies have submitted plans to tap into a $2 billion taxpayer-financed plan designed to shore up the struggling property insurance industry that would only save homeowners about 1% to 3% on their annual premiums.

That would barely make a dent in the double-digit increases in premiums millions of state homeowners have endured for years — if those companies actually extend those savings to their customers.

The law creating the fund provides no guarantees that the companies will pass on the savings to consumers. Many are simultaneously filing for rate increases to cover the higher cost of private reinsurance, which they buy to cover themselves in the event of major disasters.

Republican state Sen. Jeff Brandes of Pinellas Park said the situation illustrates just how little the Legislature has done for both the industry and homeowners alike.

He said the $2 billion fund is “like performing Stage 1 treatment on a Stage 4 cancer patient.”

The Reinsurance to Assist Policyholders, or RAP program, was approved during a special session called by Gov. Ron DeSantis in late May after the Legislature failed to address the property insurance crisis during the regular session. DeSantis signed it immediately into law.

Insurance companies that wanted to tap into it this year had to hustle if they wanted to meet the June 30 deadline to apply with the Office of Insurance Regulation, which is still sifting through the paperwork.

“OIR is expediting the review of these filings and ensuring submitted filings are in accordance with the recently passed legislation,” said Samantha Bequer, communications director for the Office of Insurance Regulation.

Opponents have called it an industry bail-out that won’t result in savings to consumers. It looks like they were right based on the savings companies are offering.

“This is not just what we feared, but what many legislators said would happen,” said Bill Newton, deputy director for the Florida Consumer Action Network, a grassroots nonprofit public policy advocacy group. “When you just put that much money down and say, ‘Here you go. Have a nice day,’ that’s what happens. But I’m sure they appreciate the thought.”

On a positive note, Newton said, this reinsurance plan is backed by Citizens Property Insurance, the state-backed insurer of last resort that has fast become the insurer of only resort for nearly 940,000 Florida homeowners and is expected to reach 1.2 million by the end of the year.

“As long as it can offer reasonably priced insurance, the market will be stable, sort of, and private companies will have to keep their rates down too,” Newton said. “Citizens is what holds it all together. Oh, and Citizens has been making money most years despite having the highest risk customers. Guess it is not that hard to make money in the insurance biz.”

Citizens recently asked for an 11% rate increase.

On average, Florida homeowners pay more than $2,000 above the national average for property insurance.

Insurance costs have risen since DeSantis was sworn in from $1,989 in 2019, according to the Insurance Information Institute, to a current average of $3,585, according to Insurify, which provides online rate comparisons.

Reinsurance is insurance for the insurance companies to cover claims they don’t have the capital to cover themselves. Reinsurance companies are not regulated by the state and have jacked up their fees as Florida’s insurers have become more dependent on them to cover catastrophic claims.

The RAP program provides a breather for those domestic insurers, allowing them to tap into the Florida Hurricane Catastrophe Fund earlier than normally allowed before they reach their maximum claims payouts.

The catastrophe fund kicks in when a hurricane causes $8.5 billion in damages and goes up to $17 billion, but insurers have to pay for it. RAP allows participating insurance companies to access that fund for free when damages hit $6.5 billion, instead of $8.5 billion.

That money won’t go to insurers unless there is an actual disaster, such as a major hurricane, and they need it to cover damage claims.

The 68 separate rate filings by 59 companies show how much they would theoretically save by tapping into that free money. The premium savings range from a low of 0.7% to a high of 3.9%, with most in the 1% to 2% range. Many of those rate changes wouldn’t take effect for months.

For the average homeowner, that means a savings of anywhere from $36 to $143 a year on a $3,585 homeowners policy that has gone up by almost $1,600 over the past three years.

The companies submitted pages of documentation and worksheets demonstrating how much savings they could pass on to their policyholders.

But the rate filings are all over the map. Some spelled out the dollar amount they could return to policyholders, while most only showed a percentage reduction of what they recouped that could be passed onto policyholders. Several shielded their plans as trade secrets, a tactic that troubled state Rep. Anna Eskamani , D-Orlando.

“Folks are in the dark and desire answers,” Eskamani said.

Some companies ran into trouble calculating their estimated premiums, damages and rate rollbacks, and state regulators had to point out and get them to correct their errors. In one case, Officials told Berkley it was using the wrong numbers on growth to determine insurance premiums and suggested a way to get a more reasonable estimate of savings.

At least one company, Foremost, ran numbers and decided it wasn’t worth it to participate until OIR officials convinced them otherwise.

Some companies applying for RAP have been struggling financially.

United Property and Casualty of St. Petersburg, one of Florida’s biggest companies with 180,000 policies, estimated an overall savings of 1.2.%

United stopped issuing new policies in February and is considering a sale or merger to stay afloat, insurance industry trade publications reported. It recently asked the state for a 15% rate hike.

Federated National and Monarch, which recently dumped tens of thousands of policyholders in Florida in a bid to stay solvent, calculated a premium savings of 0.8 % overall. Insurance ratings giant Demotech downgraded Federated’s stability rating in April from “exceptional” to “substantial.”

“Our fears are being confirmed that the special session was more about bailing out the insurance industry than giving consumers a break,” Eskamani said.

Republicans rejected at least a half dozen amendments in both the House and Senate to address rate hikes, including a 5% cap on increases, requiring insurance companies to pass down any savings from litigation reforms to consumers in the form of rate reductions or rebates and requiring data reporting in the bill to include the impact of climate change on rates.

“Citizens is becoming the insurer of only resort,” Eskamani said. “None of this is sustainable at all.”

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