Citizens Property Insurance Corporation, Florida's state-owned insurer, has recently received approval from the Florida Office of Insurance Regulation to stop insuring homes with limits exceeding $1,000,000. The Company stopped accepting new business applications for these high-limit policies on January 18, 2012 and will begin non-renewing in-force policies on May 1, 2012.
Citizens was created in 2002 as the "insurer of last-resort" for personal and commercial property. Due to artificially low rates and a lack of private insurance capacity for low-value homes, the number of policyholders has doubled in the past two years and Citizens continues to gain about 1,000 new policyholders every day. Governor Rick Scott has been vocal about his desire to return Citizens to a true insurer of last-resort. To that end, this is the first of several reforms that are being discussed.
Affected policyholders should have little trouble finding coverage in the private market, though rates and deductibles will be higher. Private market rates and terms will vary widely between insurers and properties. Homes with hip-shape roofs, impact glass/shutters and hurricane straps will do better than those without these features. Policyholders should expect to be contacted by Citizens and your Agent to discuss alternatives well in advance of the renewal date.
If you have a mortgage or equity line on your home, it is important to ensure replacement coverage is obtained on or before the date your Citizens policy expires. Otherwise, the bank will place very expensive forced placed coverage for you until you obtain your own policy. In general, this is a meaningful change, but it is in no way a "knockout blow" for high value homes. Lee County currently accounts for about 4% of Citizens' 1.45 million homeowner policies state-wide. In our region, many owners of these homes began self-insuring about three years ago when Citizens first required shutters and impact glass for all homes with limits exceeding $750,000. Coverage still remains available in Southwest Florida and capacity will likely increase. Adequacy of private market capacity is a standard consideration of the Office of Insurance Regulation any time an insurer requests to reduce its business or exit the market. However, this is likely one of several changes intended to shrink Citizens' business and restore the company to a true market of last resort.
This week Sen. Alan Hays (R Umatilla) introduced SB5784 which would further reduce eligibility, restrict the coverage offered by Citizens (making its products less attractive) and increase premiums. While this bill is unlikely to pass during an election year, Gov. Scott has instructed Citizens to search all alternatives to reduce its size that do not require legislative approval.
Christopher W. Heidrick, CPCU, CFP is an island resident and the Principal of Heidrick & Co. Insurance based on Sanibel. He is also a member of the Legislative Committee for the Florida Association of Insurance Agents.