Citizens coverage cap eyed as insurance crisis worsens

Citizens is barred by law from providing what is known as a “replacement cost” coverage of more than $700,000 for homes, except in Miami-Dade and Monroe counties, where the limit is $1 million.

But as Florida’s property-insurance market has crumbled and home values have soared, many homeowners have been dropped by private insurers and cannot qualify for Citizens coverage because of the $700,000 cap.

Susanne Murphy, a deputy commissioner at the Florida Office of Insurance Regulation, said during a Citizens committee meeting Wednesday that regulators are analyzing whether they could increase the $700,000 cap in at least some counties.

State law would allow such a move if regulators determine that “there is not a reasonable degree of competition” in the counties. Such a finding is what allowed the $1 million coverage limit in Miami-Dade and Monroe counties.

“Whether there’s enough data to support that finding is what we’re trying to determine,” Murphy told members of the Citizens Market Accountability Advisory Committee. “The last time we did this (with Miami-Dade and Monroe), it was pretty clear … and I think that the data that we’ve looked at thus far is not as clear as it was years ago.”

Committee member Lee Gorodetsky, a South Florida insurance agent, said “clients can’t even squeeze into Citizens insurance, even though they want to or need to.” That has resulted, for example, in homeowners having to turn to what is known as surplus-lines coverage, which is largely unregulated and can include more conditions on policies.

Murphy, a member of the Citizens committee, said it will probably take another month before regulators decide on whether to lift the cap.

The discussion about the cap is more fallout from the troubled private insurance market, as carriers have shed policies and sought large rate increases to try to curb financial losses. Since February, five insurers have been deemed insolvent and placed into receivership.

Citizens, which was created as an insurer of last resort, has been flooded with policies during the past two years. As of Friday, it had about 1.02 million policies. By comparison, it had 499,056 policies on Aug. 31, 2020, and 687,079 policies on Aug. 31, 2021, according to data posted on its website.

The coverage cap also is tangled in longstanding efforts by state leaders to have homes insured in the private market, rather than by Citizens. Those efforts, in part, stem from concerns about financial risks if the state is hit by a major hurricane or multiple hurricanes.

Citizens policies had a $2 million coverage cap until lawmakers in 2013 passed a measure to gradually reduce it, with the $700,000 limit in place since 2017. Murphy said increasing the $1 million cap in Miami-Dade and Monroe counties — and potentially other counties — would require the Legislature to change state law.

Home values vary in different parts of the state, and most do not exceed $700,000. But the cap issue has drawn particular attention in high-value areas such as Broward and Palm Beach counties.

As an example, the metropolitan statistical area that includes Miami, Fort Lauderdale and West Palm Beach had a median sales price for existing single-family homes of $595,000 in July, according to the industry group Florida Realtors. In the area that includes Naples, Immokalee and Marco Island, the median sales price was $748,270.