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Citizens votes to ask for rate hike

And the 15.4 percent jump, which needs approval, won't even cover the risk, says the state's insurer of last resort.

JACKSONVILLE - Citizens Property Insurance Corp. will ask to raise its Florida homeowners rates by at least 15.4 percent, but the company's board chairman said Thursday that isn't high enough to pay for the risk it faces because of hurricanes.

The Citizens board also voted to seek at least a 16.2 percent increase for its homeowners in high-risk areas. Those increases will simply bring rates for the state-created company above those of private insurers, which is required by law. Citizens, which sells property coverage to people who can't get it from traditional insurers, will recommend another increase next month to reflect the true actuarial risk it faces.

Rates are "obscenely high in relation to historic rates, but so are the hurricanes, so are the risks," said board chairman Bruce Douglas. "When it comes to rates, we have never filed actuarially sound rates . . . The rates don't merit the risks."

By law, Citizens has to have actuarially sound rates and it is analyzing where rates should be set to meet that requirement. An analysis Citizens released last month recommended an 80 percent increase for windstorm coverage in high-risk coastal areas.

The increases have to be approved by the state Office of Insurance Regulation.

Douglas said Citizens' goal is to cut its number of policies in half. If rates aren't high enough, private insurers will stay out of Florida because they won't be able to make a profit.

"Our rates, if they were so ridiculous, you would see the voluntary market coming in and selling insurance in Florida," he said.

Only one board member, Julio Rebull Jr., voted against the recommended increases, arguing that it makes little sense to sell insurance to people who can't get it elsewhere at a price they can't afford.

"The more I think about this, the more trouble I have doing this," he said.

In addition, Citizens executive director Bob Ricker said it is too early to say how high an assessment will be needed on all policies to restore reserves being depleted by Hurricane Wilma claims.

About 105,000 claims have been filed with Citizens since the Oct. 24 storm and that number is expected to rise to as high as 130,000, Ricker said. There are a wide range of estimates on how much the storm will cost Citizens and the assessment will depend on the final figure. An average estimate is about $1.1-billion.

"We are handling this storm, we are handling it very well. Having said that, it is taxing every resource of our company," Ricker said.

Florida Chief Financial Officer Tom Gallagher is proposing that sales tax collected from hurricane rebuilding be used to offset insurance assessments.

Asked by a board member if there was anything Citizens could do to also lower the assessment, Douglas said, "Not a thing."

U.S. House members Ginny Brown-Waite, R-Brooksville, and Clay Shaw, R-Fort Lauderdale, filed a bill Thursday to create a federal reinsurance catastrophe fund as a backstop helping to pay claims from major disasters. The filing came on the heels of a two-day conference in California in which insurance commissioners from several states, including Florida, appealed for federal intervention to help states cope with overwhelming losses from hurricanes, earthquakes, tornadoes and other natural disasters. This year is the most costly on record for insured losses largely because of Hurricane Katrina.

[Last modified November 18, 2005, 01:27:15]