Florida Citizens Property Insurance Corp. on Aug. 20 made its case to regulators for an average 7.5 percent rate hike, while acknowledging what the CEO of the state-run insurer calls a "difficult and delicate exercise."
The largest insurer of property in the Sunshine State says it is asking for an increase of 6.5 percent in homeowners insurance rates, which would add $96 million in premium.
In his opening remarks, CEO Barry Gilway (pictured) said that while last-resort insurer is striving to become more actuarially sound, it recognizes the financial impact on its policyholders. Still, the entity also has an "obligation to all Florida policyholders who will be called upon to pay assessments in the event our financial resources are exhausted."
After years of mandated rate freezes, lawmakers have recognized the risk and consequences of artificially suppressing the insurer's rates and put the insurer on a "glide path"—allowing it to raise rates no more than 10 percent per policyholder.
Gilway says the plan is working. In 2011 Citizens needed a rate increase of 56 percent to achieve actuarially soundness. In 2014 it is 18.3 percent, Gilway adds.
Despite Citizens being in the "best financial position ever to pay claims after a major hurricane," with a surplus of about $6.3 billion, according to Actuarial Research Manager Paul Kutter, it "remains only a bad storm season away from breaking the bank and being forced to assess all Florida policyholders," added Gilways.
Kutter said Citizens is looking for an average statewide rate increase of 24.8 percent, or an additional $15 million to Citizens' coffers, for sinkhole claims. The risk has become one of Florida's most expensive to insurers and in 2008 Citizens collected just $191 million in premium but paid $1.2 billion in sinkhole claims.
Homeowners with the bigger sinkhole risk will be paying the most. Hillsborough County residents are being asked to absorb a 50 percent hike for sinkhole coverage.
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