Advocate Urges Closer Look At Citizens Rate Hike
TALLAHASSEE (CBSMiami/NSF) — Florida's new insurance consumer advocate wants Insurance Commissioner Kevin McCarty to "strongly consider" the large amount of reinsurance purchased by the state-backed Citizens Property Insurance before making any decision on the company's requested 3.2 percent rate hike.
Consumer advocate Sha'Ron James also asked McCarty in a letter Monday to review Citizens' debt financing and water-loss claims before setting rates for 2016.
Reinsurance is essentially backup coverage purchased by insurers.
"Although Citizens' private risk transfer/reinsurance program has contributed to a 100 percent annual assessment reduction, the purchase of additional reinsurance has led to the need for increased premiums, despite the decrease in the number of policies and the significant reduction in reinsurance costs worldwide," James wrote to McCarty. "Therefore, the Office (of Insurance Regulation) should strongly consider and fully assess whether Citizens' reinsurance program exceeds the level of adequacy needed to fulfill its obligation to its current policyholders and to the consumers of the state of Florida."
The Office of Insurance Regulation is reviewing the proposed rate hike, which on average comes to 3.2 percent. The new rates would vary by county and depend on a property's location, the home's style, and the type of policy.
Citizens President and CEO Barry Gilway argued last month that a "disturbing" rise in water-damage claims in South Florida has driven the need for the proposed rate increase.
Citizens entered the six-month Atlantic storm season with a $7.5 billion surplus, the highest in its history, and $3.9 billion in reinsurance coverage from private, offshore firms. The reinsurance is intended to protect policyholders across Florida from having to pay assessments for storm damages on Citizens covered property.
The new rates, if approved by the state regulators by the second week of September, would go into effect Feb. 1. The rate proposal comes as Citizens has dropped from 1.5 million policies in 2012 to 589,456 policies as of July 31. Gilway said he expects the number of policies to be just above 500,000 by the end of the year.
The News Service of Florida contributed to this report.
