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Hurricane Guide 2006	Hurricane Preparation Guide 2006

Ill winds for homeowners

Two years of devastating storms have forced more Floridians to get their homeowner's insurance from the state-run Citizens Property Insurance Corp.

By TOM ZUCCO
Published April 16, 2006

First, a little history.

Three years ago, homeowners insurance was something most Floridians rarely thought about, and the term "citizens" had nothing to do with premiums and deductibles.

Now people flock to public meetings to protest insurance bills that have doubled and sometimes tripled. More than three-quarters of a million Floridians can't even get private homeowner's insurance. And Citizens, as we've come to know, is the bulging state-run insurer of last resort that's awash in red ink and making everyone pay for it.

Even the people who run Citizens Property Insurance Corp. wish it would go away.

How did we get to this point?

The eight hurricanes that struck Florida since August 2004 not only caused about $29-billion in insured losses, they played havoc with the state's insurance industry.

And the state's ever-growing sinkhole problem has made matters even worse.

All of those losses not only eat up Citizens' reserves. They prompted dozens of private insurers to either stop writing new policies, stop renewing old ones, or both. And with no private insurers willing to pick up the orphaned policies, Citizens was forced to grow like an over-inflated tire.

Citizens now adds about 30,000 new policies a month and insures nearly 820,000 Floridians - about one homeowner in five.

Though it's somewhat comforting that there is at least a backstop, by law Citizens must charge rates that are higher than the top 20 private insurers. So it's a very expensive backstop.

Citizens is also required by law to levy an assessment if any of its accounts has a deficit. And after property losses from the 2004-05 storms, those deficits were huge.

Most of the deficit comes from Citizens' high-risk account, which covers windstorm losses for coastal properties. The company already has received money from the Florida Hurricane Catastrophe Fund and from private reinsurance to help pay its claims, but it hasn't been nearly enough.

As a result, Citizens has already assessed all Florida homeowners, regardless of their insurance companies, for $515.5-million in 2004 losses.

Another Citizens assessment is expected to cover a $1.73-billion deficit from last year's storms.

Citizens officials have said that homeowners could expect to pay an extra 11 percent on their insurance premiums, or $110 for every $1,000 of premium homeowners pay, to cover losses from the 2005 season.

But by the time all the numbers are in, say Citizens officials, the 2005 deficit may be even higher.

There is a little good news. The 2005 surcharge won't hit all in one year. Citizens' board can portion out an emergency assessment over several years.

But the point is that the cost of property insurance in Florida is soaring, no matter who your carrier is, and there is little relief in sight.

"You can't sugarcoat this," Gov. Jeb Bush said in March. "The price of insurance is going to have to go up, plain and simple.

"When you have losses that far exceed the amount of premium dollars that you take in on a consistent basis, that's not a viable business model.''

So what's a homeowner to do?

If you find yourself without property insurance, you have several options, including shopping around yourself, hiring an insurance broker to do it for you, and asking your mortgage company to recommend companies that still write new policies.

But beware: The odds are good that you'll end up with Citizens, especially if you live in Pinellas and western Pasco counties.

The state and Citizens both want the same thing: to bring private insurers back to market and shrink Citizens as much as possible.

But how that happens is the key question. For now, the focus is on finding a source of money, making homes more able to withstand hurricane-force winds, and getting out of the business of covering high-end properties and vacation homes.

The state House of Representatives' Insurance Committee recently approved a bill that would use state sales tax revenue generated by hurricane rebuilding efforts to cover a portion of the Citizens shortfall. If it becomes law, it could decrease future assessments for homeowners.

"We need immediate rate relief for Florida's property owners,'' said Tom Gallagher, the state's chief financial officer, "which can be accomplished by using surplus sales tax revenue to offset insurance assessments.''

Gallagher pointed to the 2004 storm season, which generated an additional $751.9-million collected by the state from sales of plywood, tarps, generators and other hurricane recovery items. The extra sales tax revenue is spread over two fiscal years: $319.8-million in 2004-2005 and $432.1-million in 2005-2006.

Other ideas include capping claims in Citizens' windstorm policies at $1-million, shifting all windstorm coverage to the Citizens pool and allowing private insurers to administer it, and creating a national catastrophic fund.

But one thing seems certain, given the recent hurricane activity.

"High rates may not be the best answer,'' House Insurance Committee Chairman Dennis Ross, R-Lakeland, told the Times recently. "But it may be the only answer.''

Tom Zucco can be reached at 727 893-8247 or tzucco@sptimes.com.

[Last modified April 13, 2006, 16:11:36]