May 29, 2023

Florida property insurance market is ‘unhealthy,' Citizens chief warns

Homeowners are again starting to flock to the state-backed property insurer of last resort as the private market becomes economically stressed, the president of Citizens Property Insurance Corp. warned Wednesday.

Citizens President and CEO Barry Gilway pointed to an “unhealthy” private market that is leading to increased policies at Citizens, with the problems due primarily to litigation and rises in costs of reinsurance, which insurance companies buy to help cover losses.

“The growth is becoming extraordinary,” Gilway said during an online meeting of the Citizens Board of Governors. “And you can gloss over these numbers, but the impact they have on the overall operations is significant.”

After peaking near 1.5 million policies in 2012, Citizens has spent years trying to shed policies and move them into the private market. A healthy number for Citizens is considered around 420,000 policies, or roughly the amount it had in 2019.

But Gilway said Citizens likely will be above 540,000 policies by the end of this year, moving from 4% of the market to 5%. In South Florida, Citizens will account for about 17% of the market.

With a number of major companies scaling back coverage in South Florida or deciding they won’t cover homes older than 10 years, the forecast has Citizens growing to 625,000 policies next year, or 6% of the market, Gilway said.

Citizens is back above 500,000 policies for the first time since 2015. Citizens stood at 499,056 policies as of Aug. 31, and Gilway said the company has been netting 2,500 to 3,000 new policies a week.

“This is exacerbated because nobody’s leaving (Citizens), because there’s no capacity in the overall marketplace,” Gilway said.

Citizens' rate proposals for 2021 are expected to be released before a December Board of Governors meeting.

Citizens is also expected by the December meeting to receive a study from Florida State University’s Florida Catastrophic Storm Risk Management Center that is looking at steps to further reduce exposure and actions the Legislature can take to slow the movement of policies from private insurers to Citizens.

While Citizens has a 10% cap on annual rate increases, excluding coverage changes and surcharges, private companies have been seeking rate increases of 12% to 30%.

The Florida Office of Insurance Regulation held a public hearing Tuesday on a proposal by First Community Insurance Co. to raise rates by an average of 24.5%.

Last year, the Citizens board approved a statewide average increase of 8.2% for homeowners, condominium owners and renters.

Tags: News Service of Florida

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