Insurance increases on horizon

The continual increases in windstorm property insurance rates has motivated some advocates and elected officials to call on the state Legislature to at least start discussing the growing issue when it meets later this month in special session.

Property owners across the state, including the Florida Keys, are experiencing significant increases in windstorm insurance by the state’s insurer of last resort, Citizens Property Insurance Corp. Keys condo owners are facing at least a 10.7% increase this year and single-family homeowners are facing at least 9.9% increase, according to Citizens Property Insurance Corp.

As of Thursday, the state Legislature only planned to discuss redistricting of the state’s voting maps, despite calls from advocates and some elected officials to discuss and address steadily increasing windstorm insurance rates.

“I thought we would really go back this year for insurance,” Florida Keys State House Rep. Jim Mooney, R-Islamorada, said. “Certainly something has to be done for windstorm. ... I think we should be having the discussion but I don’t think they will until after the election. ... It’s frustrating.”

The Florida Keys has not received the credit it deserves when it comes to having one of the most stringent building codes in the state, Mooney added.

Citizens Property Insurance Corp. held a virtual rate hearing last week and again representatives with Fair Insurance Rates in Monroe (FIRM) questioned how the company was calculating rates, especially in Monroe County where building codes are some of the toughest in the state. FIRM sent it a written comment to the latest Citizen’s rate proposal, which is currently before the Florida Office of Insurance Regulation.

“Let me be clear, FIRM opposes any and all rate increases for Monroe County. I am frankly upset that in spite of Citizens rate recommendations, the Citizens Board has decided to adopt the maximum allowable statewide increases of 11% for this year and 12% for next year,” FIRM board President Mel Montagne wrote. “Citizen’s statutory language — in section 1 enabling Citizens, the word affordable is used six times and while some on the Citizens board would argue against that, they cannot simply ignore the legislation. Additionally, and against accepted actuarial practice, rate decreases are capped at 0%. In essence, there are no rate decreases even if the numbers reflect that.”

RAISING CONCERNS

FIRM listed “very specific reasons to oppose the latest rate increase,” including concerns about flawed rate models.

Hurricane peril rates drive the overall Citizens premium for many policyholders, particularly in coastal territories, according to FIRM. As Florida law requires, projected hurricane losses from accepted scientific simulation models are considered. Citizens has used several models accepted by the Florida Commission on Hurricane Loss Projection Methodology. Rate indications have now gone from a median of all four models to using the third and fourth-highest hurricane model, according to FIRM.

“The reasoning cited by Citizens for this is adverse selection and increased litigation due to the assignment of benefits legislation,” FIRM wrote. “There is no adverse selection if there are no choices such as in Monroe County and Monroe County does not have an assignment of benefits problem. This skews rate indications higher and is not a true blended rate.

“There should be a confidence factor assigned to each model based on past storms, the true losses from said storms and how close these models came to the actual loss numbers. Since 2000, we have had approximately 124 named storms, tropical storms and tropical depressions which should supply enough data for each model to report how close their projections actually came to the losses.”

In December, Citizens Property Insurance Corp.’s Board of Directors approved a statewide windstorm insurance rate increase that is 4% higher than what its staff had recommended. The board modified the staff’s actuarially determined recommendations to account for the wide gap between Citizens’ premiums and those charged by private insurance companies in the same market.

Board members modified a staff recommendation, changing it to statewide increase of 11% for policies renewing from Aug. 1 to Dec. 31, 2022, and 12% for policies renewing after Jan. 1, 2023, to comply with new caps put in place by the Florida Legislature earlier this year.

DOUBLE SHOT The windstorm rate increases are proposed at a time when Keys and Florida residents are also facing rising flood insurance rates, as the Federal Emergency Management Agency has implemented a new rate program called Risk Rating 2.0.

Risk Rating 2.0 will affect most Florida Keys National Flood Insurance Program (NFIP) policyholders. FEMA fundamentally changed how it will rate a property’s flood insurance risk and prices with its Risk Rating 2.0 methodology. Current NFIP policyholders throughout Monroe County will see changes in their policy when renewed. Flood Risk Rating 2.0 is a nationwide FEMA initiative, not just in Monroe County. Monroe County. Monroe County’s participation in the CRS may help offset some of the increases policyholders in unincorporated areas will see from Risk Rating 2.0.

In 2021, there were 30,799 active NFIP policies throughout Monroe County per FEMA’s data. According to FEMA’s data, 90.9 percent of policyholders will see an increase, and 9.1 percent will see a reduction or no change. Individual policyholders should contact their insurance agent about how this will affect their premium.

“The impacts of Risk Rating 2.0 are heavily skewed against coastal communities. The County will continue to be a part of the nationwide discussion and its effects on Monroe County policyholders,” said Monroe County Legislative Affairs Director Lisa Tennyson. “Protecting affordable flood insurance is the number one federal legislative priority for Monroe County and has been since the Biggert-Waters reform in 2012.”

FEMA’s new methodology for determining NFIP policy premiums reflects a property’s individual flood risk, including the frequency and types of flooding, such as storm surge, coastal erosion, and heavy rainfall — and the distance to a water source along with property characteristics, such as elevation and the cost to rebuild. An elevation certificate on file with an insurance agent may help in some cases.

Per federal statutes, NFIP, a federal program, caps annual increases at 18% for primary residential properties and 25% for second homes and commercial properties. Risk Rating 2.0 increases cannot exceed the rate caps; however, Tennyson stresses that the current annual rate caps are already unaffordable for most Monroe County homeowners.

“Nationwide, the average policy is about $800; in the Florida Keys, people pay $3,000, $4,000, $5,000 for their policies. Annual rate increases of 18% are unstainable,” she said. “Monroe County’s main focus continues to be on lowering the rate caps to under 10%.”

With a maximum benefit of $250,000, the actual beneficiaries of this program are working and middle-income homeowners and commercial property owners in coastal communities. Most multimillion-dollar homes in coastal areas are privately insured.

FEMA’s Zip code data for existing single-family home policies can be found at http://www/no.floods.org/rr2sfh.

More information on FEMA’s program can be found at https://www.fema.gov/flood-insurance/risk-rating.

GOOD NEWS

There is some good news in Monroe County when it comes to flood insurance rates.

Through the accomplishments of county government staff and Monroe County’s Community Rating System (CRS) consultant Lori Lehr, NFIP policyholders in unincorporated Monroe County will see a 35% discount as policies renew. Taking effect April 1, the Class 3 rating for Monroe County increases annual savings to flood insurance for 14,123 policyholders in unincorporated Monroe County to $7.8 million annually. There will be an average annual savings of about $551 per policyholder. Cumulatively to date, the County has saved policyholders approximately $26.8 million by its participation in this program, according to the county.

“Unincorporated Monroe County joined a very elite group of other communities in a Class 3 or lower designation,” said Emily Schemper, Director of Planning and Environmental Services. More information on the local CRS program can be found at http://www.monroecounty-fl.gov/crs.

By comparison, Key West is Class 5 and receives a 25% discount. Islamorada is a Class 6 and receives 20% discount. Layton is a Class 6 and will receive a 20% discount. Marathon is a Class 6 and receives a 20% discount and Key Colony Beach is a Class 7 and receives 15% discount. Individual policyholders are experiencing the direct benefit of the discounts on their individual flood policies.

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