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Citizens may seek record rate hike

Most of Citizens Property Insurance Corp.'s 1.3-million policyholders could be hit by a proposed 55.8 percent average statewide rate increase starting March 1 because of a change in state law.

By TOM ZUCCO, Times Staff Writer
Published November 17, 2006

Most of Citizens Property Insurance Corp.'s 1.3-million policyholders could be hit by a proposed 55.8 percent average statewide rate increase starting March 1 because of a change in state law.

That's on top of the 25.9 percent average statewide increase Citizens is already scheduled to start collecting Jan. 1.

Taken together, some homeowners in parts of Pinellas, Pasco and Hernando counties could see a near-doubling of premiums that already are among the highest in the Florida insurance market.

That's the good news. Those rate hikes pale in comparison to another Citizens proposal - to hit commercial policyholders with a statewide average 610 percent increase in March.

During a conference call Thursday of Citizens' actuarial and underwriting committee, the members recommended the record rate increases to comply with new requirements in state law.

The new rate hikes will be presented to Citizen's board of governors Dec. 7. If approved, the rate request will be sent to state regulators.

If regulators give their okay, the added rate increases would go into effect March 1.

All Citizens policyholders will be affected by the new rates, but the steepest of the residential increases would apply to homeowners in Citizens' "high risk account" or HRA. Citizens, the state-run insurer of last resort that has ballooned into the largest property insurer in Florida, has about 400,000 policies in HRA accounts.

The net effect of the dual January-March increase is that homeowners who have Citizens policies and live in coastal sections of Pinellas could see their premiums rise a total of 97.4 percent. In coastal Hernando, the increase would be 59 percent, and in coastal Pasco, 55 percent.

Business owners would fare much worse. In coastal Pinellas, the county's 561 commercial property owners who have Citizens policies could see their premiums jump 969 percent, making the average yearly premium soar from $1,514, to $16,190.

Citizens' 161 commercial policyholders in coastal Pasco and Hernando could see increases of about 420 percent.

The Jan. 1 rate hike of 25.9 percent is the result of a regular rate filing Citizens made in late 2005. The second increase planned for March, committee members explained, is the result of a change this year in state law that requires Citizens not only to charge rates that are actuarially sound, but also factor in costs of reinsurance - insurance for insurers - that have skyrocketed this year.

However, Citizens buys no reinsurance from the private market and has no plans to do so. It relies instead on assessments and reinsurance from the state-supported Florida Hurricane Catastrophe Fund, or CAT Fund.

"But Senate Bill 1980 now requires Citizens to set its rates as if it were buying reinsurance at the same levels as in the private market," said Citizens chief actuary John Rollins.

The rates that will be implemented Jan. 1 were filed in December 2005, Rollins said. "We didn't know much about our 2006 reinsurance costs then, which is what we are attempting to replicate in this filing."

Rollins also said a change in the way hurricane catastrophe models predict future damage also played a major role in setting the rate.

"But the bottom line," said committee member Bill Sanders, "is that the biggest producer of this increase is reinsurance."

The committee tied its staggering 610 percent average commercial rate increase to the Property and Casualty Joint Underwriting Association, which was formed last spring to provide commercial insurance to small businesses that can't find it in the private market. To date, it has written just 188 policies. Citizens, however, has 16,827 commercial policies, nearly all of them in coastal areas.

The commercial rate increase would bring Citizens' rates more in line with those of the PCJUA, committee members said, meaning Citizens would no longer act as a competitor.

But committee members seemed most concerned about the fate of residential policyholders, including some in Escambia, Miami-Dade and Broward counties who could see their combined rates climb as much as 118 percent.

"There's going to be a lot of heat," said committee chair Richard DeChene, "as to how can you file any kind of increase two months after the first one."

If you're a business owner who has Citizens Property Insurance and want to talk, contactTom Zucco at zucco@sptimes.com or 727 893-8247.

[Last modified November 17, 2006, 14:53:49]