Property insurer says it’s assuming 34,000 South Florida policies from Citizens. A sign that the market is improving? [South Florida Sun-Sentinel]

HCI Group, owners of Homeowners Choice Property & Casualty Insurance Co., says that 53,750 customers of state-owned Citizens Property Insurance Corp. — most of them in the South Florida’s tricounty region — have accepted its takeout offers.

Combined with takeouts by other companies and approval of six new insurers to operate in the state, HCI’s announcement was greeted as a further sign that Florida’s insurance market is improving.

In a news release, the company said that more than 70% of the customers who accepted would save money compared to Citizens’ projected renewal rates.

The company was authorized by the state Office of Insurance Regulation in September to assume 75,000 Citizens policies as part of Citizens’ renewed push to depopulate its book of business. HCI said it made 72,958 offers and achieved a 74% acceptance rate.

In an interview, HCI chairman and CEO Paresh Patel said the company’s technology “helped us select policies that make sense for us to take.”

Of the 53,750 policies that accepted the offer, 34,000 are in Broward, Miami-Dade and Palm Beach counties, he said.

The tricounty policies include 13,000 homeowner policies, 13,000 condo-owner policies and 8,000 dwelling/fire policies that owners of rental properties typically purchase, Patel said.

The company determined that 74% of its new takeout customers would save money compared to the premium it projected Citizens would charge them at their next renewal, Patel said.

“We’re hoping to give people joy at the renewal and not sticker shock,” he said. “It’s Thanksgiving week. We thought it would be nice to make some good news.”

In its third-quarter earnings call with investors on Nov. 8, Mark Harmsworth, HCI’s chief financial officer, estimated that the average premium for its Citizens takeout policies would be $3,700.

The assumptions will increase Homeowners Choice’s policy count by 64% over the 83,824 policies reported by the company on June 30. TypTap, another HCI subsidiary, reported 46,840 policies.

TypTap is approved to take out 25,000 Citizens policies in December and January, Patel said.

Homeowners Choice got its start depopulating Citizens policies in the late 2000s and into the early 2010s as Citizens’ policy count rose to nearly 1.5 million. It decreased takeouts as the Citizens policy count was reduced to 419,000 by 2019.

Now, with the Citizens policy count back up to 1.34 million policies, Homeowners Choice found “there’s new opportunity for us to depopulate from that pool,” Patel told investors during the earnings call.

Takeout rules have changed

In previous years, Citizens customers were allowed to reject any depopulation offer for any reason.

That was before a five-year string of hurricanes, lawsuits and insurer insolvencies forced nearly 1 million new insurance customers into Citizens since 2019.

Citizens renewed its depopulation push in June after the state Legislature enacted a law allowing the company to deny coverage to customers who receive an offer from a private market insurer that’s not more than 20% higher than Citizens’ projected renewal price.

Policyholders who receive a takeout offer are required to select their choice to accept the new company or stay with Citizens, if eligible, by working through their agent or logging onto www.citizensfla.com/online-choice.

Agents caution Citizens homeowners not to panic if they receive an offer from a company that projects a higher premium than Citizens.

Premiums quoted in letters by private insurers are just estimates and homeowners will still pay the premium they are currently paying Citizens until their next term begins. If the difference quoted at renewal exceeds Citizens’ renewal price by more than 20%, the customer will qualify to return to Citizens.

The Office of Insurance Regulation said it has approved 650,399 takeouts in 2023.

Through October, 125,848 policyholders have accepted the switch, according to information reported on Citizens’ website. Of those, 31,056 accepted offers with renewal projections lower than what Citizens is projected to charge.

Offers have been mailed to 179,747 Citizens customers, including the 72,958 by Homeowners Choice, prior to Tuesday’s assumption date. The total number who agreed to the assumption will be announced later, Citizens spokesman Michael Peltier said.

Good signs, but market faces ‘long road ahead’

Mark Friedlander, director of corporate communications for Insurance Information Institute, a trade group funded by large national carriers, said he was encouraged by the number of companies participating in the Citizens depopulation program.

But he noted several issues, including a company offering rates 300% to 400% higher than Citizens’ projected renewal premiums, others rescinding takeout offers after determining the acceptance rate was too high in some areas of the state, and continued growth of Citizens by 6,000 new policies per week in October.

“We have a long road ahead before Citizens reaches a manageable level of customers and decreases its risk exposure to avoid the possibility of a ‘hurricane tax’ being implemented for all Florida consumers,” he said.

As the state-owned “insurer of last resort,” Citizens’ claims-paying ability is protected by laws that require its own policyholders and most insurance customers across the state to pay emergency assessments if Citizens runs out of money paying claims after a major storm.

Yet Peltier said Citizens projects a decrease in its policy count in 2024, thanks to improved market conditions.

Insurance analysts attribute the increased interest in takeouts to growth within Citizens of less-risky properties. Many turned to the company after numerous insurers went insolvent, shed Florida policies, or sharply increased premiums.

Optimism is also fueled by reforms enacted by the state Legislature in 2022 that reduced financial incentives for third-party contractors and plaintiffs attorneys to sue insurers.

New companies approved to sell insurance in Florida

More Citizens takeouts have been approved by the Office of Insurance Regulation for December and January.

Among companies approved for takeouts is a newcomer, Orange Insurance Exchange, based in Alachua County. Headed by veterans from Tower Hill Insurance Group and the agency Cabrillo Coastal, Orange Insurance Exchange was approved to do business in Florida on Sept. 1 and on Oct. 6 was granted consent to take out 15,000 Citizens policies on Dec. 19.

It’s one of six companies approved by the office this year to enter Florida’s insurance market.

On Tuesday, the office announced approval of Condo Owners Reciprocal Exchange, formed by HCI Group, that plans to offer commercial condominium policies in 2024.

Here are the companies approved to assume policies in December and January. Offer letters will be sent in advance of the assumption dates.

Dec. 19

TypTap, 25,000

Slide, 75,000

Safepoint, 16,000

Orange Insurance Exchange, 15,000

Florida Peninsula, 15,000

Edison, 10,000

American Tradition, 12,000

Jan. 23

Slide, 75,000

Florida Peninsula, 30,000

Edison, 10,000

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at [email protected].

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