State targets storm insurance

The Florida State Legislature filed draft legislation dealing with windstorm insurance and started meeting Monday on one of the biggest issues facing the state but there are no specific bills related to Citizens Property Insurance Corp., the main windstorm carrier in the Florida Keys.

The session comes as Florida Keys property owners are again facing significant windstorm insurance rate increases and such increases are impacting the Keys ability to remain affordable for homeowners and renters.

The bills deal with such topics as roof coverage and deductibles, attorneys fees and legal issues, and a $2 billion expansion of the state’s catastrophe fund. The state Senate’s Appropriation Committee was discussing the bills on Monday and several senators did bring up how the proposed bills will freeze or reduce rates.

Sen. Jim Boyd, R-Bradenton, directed the discussion of the bills on Monday and said the bills could result in rate changes in 18 to 24 months, but without the bills being directly tied to Citizens Property Insurance Corp. and its rates, the bills most likely would not affect any of the rates of policyholders in the Florida Keys.

Boyd and other senators made the case that rate increases are caused by homeowners and their attorneys fraudulently file claims and lawsuits against insurance carriers. However, several consumer advocates contended Monday that the insurance carriers are at fault as well because they won’t pay legitimate claims and force property owners to sue the companies to have their claims paid. The advocates claim if the carriers were quicker to settle or resolve claims, the legal fees would not be as expensive.

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.

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, according to FIRM (Fair Insurance Rates in Monroe).

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 a 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.

C i t i zens Propert y Insurance Corp. held a virtual rate hearing in March and again FIRM representatives questioned how the company was calculating rates — especially in Monroe County, where building codes are some of the toughest in the state. FIRM sent 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.”

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 confi-dence 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.”

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’s participation in the CRS may help offset some of the increases policyholders in unincorporated areas will see from Risk Rating 2.0.

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