Article Courtesy of The Sun Sentinel
Despite storm-free seasons,
Florida insurance still pricey
June 3, 2015
Living in a (semi)-tropical paradise has a price —
and apparently, not even going nine years without a major hurricane
strike will change that..
While Florida's property insurance market has stabilized somewhat since
eight storms battered the state in 2004 and 2005, as storms such as
Hurricane Wilma caused billions in damages, the state still has some of
the nation's highest homeowners insurance rates. A recent national
report showed that Florida's average homeowner premium of more than
$2,000 a year is twice the national average.
Consumers are benefiting from this because the state's "hurricane tax" —
surcharges related to those previous storms — is disappearing from their
insurance bills. The charge is added to all insurance bills, including
auto insurance, if Citizens or the catastrophe fund lack sufficient
money to pay off storm claims.
And Insurance Commissioner Kevin McCarty insists that lower rates are
coming because one of the main expenses for insurers — reinsurance — has
been dropping. Reinsurance is the millions an insurer spends with an
out-of-state or foreign company to provide the company financial backing
in case of major claims.
McCarty's office notes that the report assembled by the National
Association of Insurance Commissioners is based on 2012 data.
"I fully expect insurers to submit lower rate requests and pass along
savings to consumers as market conditions strengthen and reinsurance
rates go down," McCarty said in a statement.
But that probably won't be the case for Citizens, which was designed to
be the insurer of last resort for property owners who couldn't get
private policies. It grew dramatically following the storms of the last
decade as other insurers left the state.
"We were out of control," Gilway said.
Since becoming governor, Scott pushed to have Citizens reverse that
trend. Homeowners have been steered out of the company into private
insurance companies. The result is that Citizens has gone from nearly
1.5 million policyholders to slightly under 600,000 policies.
Many remaining customers live near the coast or in South Florida. But
Gilway notes that as Citizens shrinks it is left with the policies that
private insurers are less likely to want. And these policy holders will
continue to see increases in the future including the next round in
"If you buy a coastal home, you should expect to pay an appropriate rate
for exposure to that home," Gilway said. "The hurricane risk, the wind
risk and the flood risk clearly is significantly higher along the
The reasons for Florida's high rates have triggered endless argument
among state lawmakers and others in the last two decades. But the
biggest expense remains the cost of reinsurance.
Jay Neal, president and CEO of the Florida Association for Insurance
Reform, says state officials could do more to push down rates for
Neal notes that elected officials have focused on doing everything they
can to reduce the prospect of surcharges, or the "hurricane tax."
But Neal's group said rates would come down if the reinsurance sold by
the "Cat Fund" was available to private insurers more easily. Currently,
companies have to pay off billions in claims before the state fund kicks
in, forcing them to buy a large amount of private reinsurance year after
"Whether there's a storm or not they have that expense," Neal said.
"They keep saying we have to spread this risk. The reality is they are
asking us to pay 10 percent more every year from now on to avoid the
chance to pay 2 percent more after a storm."