September 8, 2022
Tens of thousands of Floridians are scrambling to insure their properties as a number of companies in the state enter liquidation. As a result, it’s leaving many to choose a policy of last resort in Citizens, which recently announced it would be increasing its rates.
Plantation Key resident Kim Harrington was one of the 20,000 Weston policyholders who were alerted that they had all but 30 days to find a new insurance policy. The insurance company entered liquidation on Aug. 8. Harrington said she was in disbelief.
“I don’t have extra funds to pay my windstorm twice. I just thought this can’t be real. Nothing this bad can really happen,” Harrington said. “The email said that if you don’t do anything, you’re going to not have insurance and then your mortgage company will select a carrier that’s not preferred, and then you’ll be in big trouble.
“The email said you have to take care of this, you have to pay again and apply again,” she continued. “Not only that, it said I had to get a new roof inspection and a new wind mitigation, which I was already fully covered under the now-defunct company. I thought it was all a big mistake when I got the email.”
Weston was placed into receivership after the Florida Office of Insurance Regulation (OIR) determined that the company was insolvent. OIR said there were sufficient grounds to institute delinquency proceedings.
“The company has ceased issuing new insurance coverages and, pursuant to applicable law and court orders, Weston’s policies are cancelled effective 12:01 a.m. on September 7, 2022; unless otherwise terminated prior to that date,” a message on Weston’s website reads.
Since last February, five insurance carriers have been declared insolvent. Joining Weston are Southern Fidelity Insurance Co., Lighthouse Property Insurance Corp., Avatar Property & Casualty Insurance Co. and St. John’s Insurance Co. Some 80,000 Floridians had a policy with Southern Fidelity, 27,000 with Lighthouse, 37,000 with Avatar Property & Casualty and 160,000 with St. John’s.
Mel Montagne, Fair Insurance Rates in Monroe (FIRM) president, said lack of availability or unaffordability of reinsurance for insurance companies, and fraud are two causes that are leading to insolvency issues.
“It’s something we don’t have here, which is fraud. But it’s happening on the mainland. That’s been a huge problem for all the carriers not in Monroe County.”
A growing property insurance crisis in Florida had state legislators coming back to the capital in May for a special session. In a three-day period, the House and Senate approved legislation that authorized a $2 billion reinsurance fund for insurance companies. Known as the Reinsurance to Assist Policyholders Program, insurers can purchase insurance to insulate them from risk. A stipulation to the program required insurance companies to reduce policyholders’ rates.
For some insurance companies, the program was either too little or too late, Montagne said. Insurance issues continued in the months that followed, leaving many policyholders including Harrigton to revert coverage to Citizens. In August 2020, Citizens had a total of 499,056 policies. A year later, that number jumped to 687,078. As of last August, Citizens said it had 1.02 million policies.
“Citizens was the only company I could use,” Harrington said. “I already applied and paid and got new coverage. But I had to scramble for the funds.”
Citizens Property Insurance Corporation was authorized by the state Legislature in 2002 to provide property insurance protection to people who are entitled to obtain coverage through the private market but are unable to do so. Citizens was created from the merger of Florida Residential Property and Casualty Joint Underwriting Association and the Florida Windstorm Underwriting Association (FWUA), which was created in 1972 as an insurer of last resort to provide wind-only coverage in Monroe County.
A not-for-profit company, Citizens is funded by policyholder premiums. However, Florida law also requires Citizens levy assessments on most Florida policyholders if it experiences a deficit in the wake of a devastating storm or series of storms.
Montagne said the rest of the state continues to deal with unaffordable insurance “with all the fraud coming home to roost.” That’s forcing viable insurance companies to request double-digit increases to stay ahead of losses.
Monroe County residents insured through Citizens are feeling some of those effects through rate increases. Recently, OIR approved a series of rate increases for Citizens policyholders that vary from 6.4% to 10.7% depending on time of coverage. The most common type of insurance, known as homeowners multiperil, increased by 6.4%. Montagne said those rates could be even higher once fees and surcharges are tacked on.
“We’ve had our good friends at Citizens insuring us for wind and the X-Wind policy. We’ve never faced the issue of assignment of benefits and attorneys down here. But it doesn’t really stop the rate increases coming from Citizens every year to the tune of 9% and 10%, which is what they’re telling you is the increase. That’s a base rate increase. By the time that invoice gets to your mailbox it’s probably 12% or 13% once all the fees and surcharges and garbage added in.”
FIRM offers a property insurance user’s guide at firmkeys.org to help consumers make choices about property insurance in Monroe County.