Florida homeowners could be forced to pick up the tab on two failed insurance companies.
Insurance regulators could soon stake $168 million in assessments on Floridians’ property and casualty insurance bills to help pay for the loss of two insurance companies that collapsed this year.
The Florida Insurance Guaranty Association (FIGA), which picks up property and casualty insurance claims when insurance companies go insolvent, has asked the Office of Insurance Regulation (OIR) to levy a 0.7% assessment on insurance companies in 2022, which would give FIGA an additional $168 million. That would help offset a deficit that could grow to $226.4 million by the end of the year.
If OIR agrees to levy that on companies, policyholders will begin in November to see a line on their bill for 0.7% when they renew or buy a new property or casualty insurance policy other than auto insurance.
It would be the first time since 2012 that OIR has taxed Floridians directly to handle failed insurance companies.
FIGA picked up more than 1,300 unpaid claims and returned premiums after American Capital Assurance Corporation, commonly known as AmCap, and Gulfstream Property and Casualty Insurance Company were both liquidated this year. That placed an additional $415 million burden on FIGA’s section handling various insurance policies, including homeowners and private flood insurance.
Both insurance companies were liquidated after ratings agencies lowered their ratings this year in continuing financial aftermath from Hurricanes Irma and Michael in 2017 and 2018, which still roil Florida’s property insurance industry at large.
In a letter sent two weeks ago to OIR Commissioner David Altmaier, FIGA Executive Director Thomas Streukens requested OIR approve the 0.7% assessment, as FIGA’s Board of Directors agreed.
A Leon County judge declared AmCap insolvent in April. Gulfstream’s policies were canceled on Aug. 27, the day after the FIGA board certified the need to raise fees.
“These two insolvencies materially impacted FIGA’s projected cash flow needs and resulted in the need for Board action,” Streukens wrote.
In recent years, FIGA has been able to pay off abandoned claims without assistance. But the revenue from AmCap’s liquidation didn’t come close to paying off the claims it left behind.
FIGA’s deficit was already $142.7 million before FIGA took over Gulfstream’s claims, leading to the $226.4 million end-of-year projection.
Another devastating storm could take down more companies, exacerbating FIGA’s situation.
During the association’s Aug. 26 board meeting, staffers relayed that the agency would be out of cash by the end of next summer.
If OIR certifies the assessment, it would be the first time since 2012, when it levied a 0.9% assessment, that OIR has charged a similar fee on insurance companies. Before that, it was in 2009, after the 2008 recession, when it charged a 0.8% fee.
OIR does not have to levy the assessment. Gov. Ron DeSantis and the Cabinet, which includes Chief Financial Officer Jimmy Patronis, could potentially tell Altmaier to hold off on the assessment during the Cabinet meeting scheduled for later this month, having OIR work instead with the Legislature to patch the budget gap.
After strong hurricane seasons in 2004 and 2005, the Legislature lent windstorm and property insurers and the nonprofit Citizens Property Insurance Corp. a hand. However, the FIGA board last month rejected seeking a legislative bailout.
Moreover, the assessment is not on the agenda for the upcoming Cabinet meeting. In a statement to Florida Politics, Patronis reinforced his commitment to keeping Floridians’ insurance rates down.
“The CFO is committed to continuing his efforts to fight rate hikes through his ongoing legislative priorities including protecting consumers and fighting fraud, which affects every Floridian’s rates,” Patronis spokesperson Devin Galetta said.