Citizens Property Insurance leaders grouse over rate decision, eye next Legislative Session

Citizens Property Insurance Corporation Chairman Carlos Beruff isn’t pleased with some aspects of regulators’ decision to grant the company a partial rate increase, and he wants the Legislature to change the law to allow it to charge some homeowners more next year.

“One of the things that makes no sense that we approached (the Office of Insurance Regulation) about was the ability to not go below zero,” Beruff said during a Citizens board meeting Wednesday.

He was referring to OIR’s decision on Citizens’ rates, which allowed for a statewide average 6.4% increase on a typical homeowner policy, but also required a reduction in premiums for about 55,000 homeowners because costs related to lawsuits have fallen since the start of the year. Citizens had asked for a statewide rate increase of 10.7%.

Beruff also bemoaned the practice of taking over the policies of failed companies and being required to charge a lower premium.

“The other thing this company does that is foolish is we’re forced to take over failed policies, failed companies,” Beruff said. “We have to lower the premium from $4,000 to $2,500 … only a government restricted agency would be so foolish to operate that way.”

Beruff ordered staffers to petition the Legislature to change the law next year to prevent the rate decreases on some homeowners and allow Citizens to charge more on policies it takes over from failed companies.

Citizens is a state-run company started by lawmakers in 2002 to act as an “insurer of last resort” for homeowners who couldn’t find affordable coverage in the private market.

A surge in roof and water claims in recent years, combined with an increase in lawsuits, led to operational losses. Although the total number of lawsuits has started to drop, the failure of four property insurers this year means the growth in policies at Citizens has skyrocketed.

In June 2020, Citizens’ policy count stood at less than 475,000. Now it is above 900,000 and is projected to hit 1 million before the end of the year.

The increase in policies means an increase in risk, and therefore an increase in the likelihood a large hurricane could wipe out Citizens’ ability to pay claims and trigger assessments on all homeowners.

Citizens president and CEO Barry Gilway told the board Citizens would have $900 million more in revenue if their rates were “adequate.” Still, Citizens is in a stable position, even if a large hurricane were to hit, he said, because of its reinsurance coverage in the Florida Hurricane Catastrophe Fund, or Cat Fund, and the private market.

“When you take a look at the claims paying capacity of $6.7 billion in surplus, $4 billion in the Cat Fund, $2 billion-plus in traditional placement — Citizens is in a phenomenal financial position,” Gilway said. “And frankly, we’re prepared for whatever comes.”