The Florida property insurance market is facing challenging times, but policyholders can rest assured that Citizens will continue to manage their claims and protect what, for many, is their most valuable asset.
Even before Hurricanes Ian or Nicole, many private insurance companies were facing financial challenges that prompted them to cancel or nonrenew policies. Companies that continue to write policies in Florida have made eligibility more restrictive. In a few extreme cases, some companies have become insolvent.
The result has been a rapid growth of Citizens. Since January 2021, Citizens’ policy count has more than doubled to nearly 1.2 million. That trend is expected to continue in 2023.
The good news is that Citizens is designed to adapt to changing market conditions. Citizens is a nonprofit organization and its annual rate increases, unlike private insurers, are capped by law (no more than 12% in 2023).
If a major storm or series of catastrophes exhaust Citizens’ surplus, Citizens is required to levy surcharges on its policies and assessments on most Florida insurance consumers to cure the deficit. These assessments can be substantial, especially for Citizens policyholders who face surcharges of up to 45% of their annual premium.
To shield consumers from this “hurricane tax,” Citizens has taken steps to protect its $4.4 billion surplus through multiple reinsurance arrangements. All told, Citizens has more than $11.2 billion in claims paying resources for 2022. But as Citizens’ policy count and exposure grow, the risk of surcharges and assessments also increases. The best way to reduce that risk is to improve the health of the Florida property insurance market.
Recent legislative changes are designed to reduce litigation and abuse by unscrupulous contractors, public adjusters and law firms – but those changes will take time to make an impact. Additional legislative changes are also expected in support of Citizens’ role as Florida’s insurer of last resort.
The bottom line is that Citizens will continue to serve its role as Florida’s residual insurer. As the private market improves, more options will become available for Citizens’ policyholders.
In the meantime, we’ve got your back.
