As state-run Citizens Property Insurance Corp. reluctantly pads its lead as the largest property insurer in the state, its risk exposure is also piling up at record levels.
That exposure last week had ballooned to $396.5-billion on 1.3-million policies, nearly twice what it was at the end of 2005.
The insurer of last resort also has to change the way it charges customers for its policies next year, taking into account whether property owners use a home as a permanent residence.
What does all this mean for policyholders? Higher rates for most, and as much as a 90 percent assessment for some if the state is hit by a series of major storms next year.
"This is an indication of what we've been saying about how troubled this market is," Citizens spokesman Rocky Scott said Monday. "We don't have an insurance crisis in Florida; we have an insurance catastrophe."
Which Citizens policyholders take the biggest hit next year will have a lot to do with the homestead exemption. Citizens had not drawn distinctions between homestead and nonhomestead property. But the Florida Legislature changed that in May, placing a greater burden on owners of nonhomesteaded property such as vacation homes and rental property.
And not just in higher rates.
Each time there is a shortfall in any of the three Citizens accounts, an assessment process will be triggered. First to be assessed are nonhomesteaded policyholders, followed by homesteaded policyholders, policyholders in all Citizens accounts and, finally, all policyholders of any insurance company.
"If you get repeated deficits in all three accounts, you potentially expose owners of nonhomesteaded properties to a 90 percent assessment of their premiums," Scott said.
Citizens took in 72,000 policies in September and is quickly approaching 1.5-million policyholders, well ahead of the nearly 1-million policies held by second-ranked State Farm. Most of Citizens policies are in high-risk areas abandoned by private insurers, but a growing number of new policies are outside that area.
The company will take in close to $4-billion in premiums this year, but when compared to its mammoth exposure, $4-billion becomes a relatively small number.
Citizens is also charged for the first time with verifying which of its properties have the homestead exemption and which don't. The company recently sent 180,000 letters to policyholders asking if the property was exempted, and soon plans to send out about 300,000 more.
The process is slow, Scott said, because Citizens has about 750 employees, far fewer than private companies that have a similar number of policyholders.
Earlier this year, regulators granted Citizens an average statewide rate increase of 25.9 percent, which goes into effect Jan. 1.
But the company, which by law must have rates as high as the top 20 insurers in a given territory, will ask for another, as yet unspecified, rate increase sometime before March based on standards that were also changed by the Legislature last spring.