New law changes property insurance choices

Snowbirds and others who own second homes in Highlands County will be allowed to buy property insurance from surplus line carriers when HB 1635 becomes law July 1.

The rates are often less expensive than "admitted" insurers that are closely regulated by the Florida Office of Insurance Regulation, but collecting from such insurers after storms can be problematic, critics of the new law say.

Florida Gov. Ron DeSantis, who signed the bill in March, hopes to depopulate the state's Citizens Property Insurance Corporation (CPIC), which provides property insurance for homeowners who can't find coverage in the private market. Huge claims payouts during decades of hurricanes led some insurance firms to declare insolvency. Others have stopped writing policies in Florida altogether.

Some 1.3 million property owners inhabit CPIC's swollen insurance rolls, which strain the state's coffers, so the new law is considered a good way to get folks off Citizens and onto surplus line carriers, said Mark Friedlander, an analyst with the Insurance Information Institute in north Florida.

"If people find a surplus line carrier who charges 20% within the rate Citizens charges, they have to buy insurance from that carrier," Friedlander said.

Some 77,000 of those who have CPIC coverage include Highlands County, non-homesteaded, mobile home owners. They must abandon Citizens coverage if they find a carrier that charges rates that are 20% higher than Citizens.

"The smaller insurance companies were going out of business due to the large volume of claims, which left Citizens as the only source of insurance," said Tom Cooper, who lives in Sebring Village. His home in Fort Myers was destroyed in Hurricane Ian. "They gave me an estimate of $800 a year – but did not offer flood insurance."

Citizens, knowing homeowners had few options for insurance, offered "skyrocketing premiums," Cooper said.

Cooper's home was damaged by water, so his furniture, clothes, and other interior items were destroyed. Therefore, he wanted to reduce his insurance to cover just the structure.

"The Indian Creek property was covered by Citizens and they would not allow us to reduce the coverage limits," Cooper said. "I'm not sure of the rationale, but they simply would not allow us to hold liability coverage alone. So we canceled the insurance altogether in April."

Another property owner warned against surplus line carriers.

"Normal carriers in Citizens pay into the Florida Insurance Guaranty Association, which ensures open claims will be paid if the company goes out of business," he said.

Friedlander, however, said surplus line carriers are regulated by the Florida Surplus Lines Service Office in Tallahassee.

"They are the state's regulatory authority over all surplus lines insurers operating in Florida," he said.

For those who are shopping for property insurance for their second home, ask a property insurance broker about the new law.