Florida Keys face insurance rate hike

TALLAHASSEE — Florida Keys homeowners and property owners are once again facing significant insurance rate increases, as much as 50% for people who don't live in their Keys home full-time.

Citizens Property Insurance Corp., the main windstorm carrier in the Keys, has proposed a roughly 16% increase overall for single-family homes, but second homeowners could see as much as 50% increase because they are not covered by a 15% annual cap, according a proposal the Citizens Board of Governors approved Wednesday, June 19.

Citizens has proposed a 20.9% increase for windstorm coverage for Keys condominium owners, with as much a 50% increase for condos in which they are not a person's primary residence, according to the board's proposal

While saying Florida's insurance market is improving, the Citizens Property Insurance Corp. Board of Governors approved a proposal last week that would lead to customers across the state seeing double-digit rate increases in 2025.

The request will now go to the state Office of Insurance Regulation, where that agency's actuaries will review and could "tweak" the proposal, Citizens spokesman Michael Peltier said. The Office of Insurance Regulation will also hold a public hearing before establishing Citizens' 2025 rates, which are scheduled to go into effect in January.

Key West attorney and developer Robert Spottswood serves on the Citizens Property Insurance Corp. Board of Governors and voted in favor of the rate increase.

"I voted in favor of it not because I wanted to, but because that's the mandate," Spottswood said. "Citizens is required to have actuarially sound rates based on the probable maximum loss in a one-in-100-year storm as determined by the latest hurricane loss modeling. ... The board is doing the best job it can and the staff is doing the best job it can to meet the state mandate. ... The rates as approved are actually below actuarially sound because of the glide path and the rate cap. I have asked the board and staff to look at alternatives because Floridians are being crushed by the cost of insurance."

One of the alternatives Spottswood wants more information on would be working with the banking industry to require less wind insurance coverage where the value of the land is sufficient to cover the cost of outstanding debt on the property, rather than its full insurable value, he said.

"Have we got to the right solution? No. There has to be something better," Spottswood said.

Mel Montagne, board president of the insurance watchdog group FIRM (Fair Insurance Rates in Monroe), questioned why the Keys has "the second-highest rate increase for all personal lines combined, second only to Glades (County). Monroe is at 16.6% with 18,042 policies and Glades is at 18.1% with 480 policies — why are they even there," he asked.

"While all of these recommended rate changes are capped due to the glide path, non-residents will see dramatic increases and since we have such a high number of those, we need to pressure Citizens to give us those numbers so that we can prepare folks," Montagne added. "In addition, if the main issue continues to be re-insurance, then we really need to get into the nuts and bolts of the Florida Hurricane Cat Fund and see how it can be revamped to take on more re-insurance."

People need to ask Citizens what CAT models were used to get to these rates, Montagne said.

The rate increases will continue to have an impact on affordable housing groups such as the nonprofit Habitat for Humanity, as the group funds its own loans under strict income guidelines and homeowners cannot afford to absorb these as well as insurance increases, Montagne said.

"We could have a future with no affordable/workforce housing in spite of having a multitude of building permits," he said.

The proposal the Citizens board passed, in part, would lead to an average 13.5% rate increase for the most-common type of Citizens policy, known as homeowners' "multi-peril" coverage. Condominium-unit owners would see an average 14.2% increase.

Across all personal lines of insurance — a category that includes policies for homeowners, condominium-unit owners, renters and mobile homes — the average increase would be 14%.

Actual increases for customers would vary based on factors such as where properties are located. A state law will cap increases at 14% for primary residences and 50% for non-primary residences, such as second homes.

Rate hikes would have far-reaching effects, as Citizens is the largest insurer in the state, with about 1.2 million policies. In some parts of Florida, residents say they have few — if any — alternatives for coverage.

Also, Citizens policyholders have seen rate increases in the past. As an example, information presented during the recent meeting said regulators approved an average 12.6% increase for homeowners' multi-peril and wind-only policies that took effect this year.

Brian Donovan, chief actuary for Citizens, said the insurance market has seen "drastic improvements" during the past year, after lawmakers passed an overhaul that included curbing lawsuits against insurers. But Citizens officials also say the state insurer often charges lower rates than private insurers, reducing the incentive for homeowners to shift to the private market.

State leaders have long sought to hold down the number of Citizens policies, in part because of financial risks if Florida gets hit by a major hurricane or multiple hurricanes. But the number of policies soared in recent years as private insurers dropped customers and raised rates because of financial problems.

Citizens reached as many as 1.412 million policies in fall 2023 before seeing reductions because of what is known as a "depopulation" program designed to shift policies into the private market. It had 1,202,696 policies as of Friday, June 21, according to data posted on the Citizens website.

The depopulation effort likely will be on hold during the next few months, as private insurers look to avoid taking on more risks during hurricane season. But Citizens President and CEO Tim Cerio said last week that new estimates show that Citizens could have fewer than 1 million policies by the end of the year.

"Hopefully, October, November, December will be very active (for depopulation)," said Jennifer Montero, Citizens chief financial officer. "That's the expectation."

Citizens board member Charlie Lydecker pointed to signs that Florida is creating a "potentially more stable marketplace."

"Our real dream is depopulation and reduced rates," he said.

Information from the News Service of Florida was used in this report.