Condos, apartments new Citizens targets

Article Courtesy of The Daytona Beach News-Journal

By Lloyd Dunkelberger

Published January 22, 2014


TALLAHASSEE -- In a renewed effort to reduce the size of the state-backed Citizens Property Insurance, lawmakers are turning their attention to policies for condominiums, apartment complexes and commercial property.

Senate Banking and Insurance Chairman David Simmons, R-Altamonte Springs, this week outlined proposals that would move many of those policies out of Citizens and into private insurance companies.

The proposals include a plan to use the new Citizens Clearinghouse, which this month will begin offering private policies to Citizens’ residential customers, to also cover condominiums, apartments and other commercial residential properties.

Another would cap coverage of condo complexes at $10 million. The commercial residential properties currently have no cap and Citizens is covering some 323 buildings — many likely beachfront towers — valued at more than $25 million.

The bill would also remove the 10 percent annual cap on premium increases from commercial properties insured by Citizens, allowing the rates to increase more rapidly to a level considered more “actuarially sound.”

Building on a major Citizens bill passed last year — which included the clearinghouse provision for homes — Simmons said the new measures were aimed at reducing “a significant amount” of potential liability for Citizens if the state is struck another major hurricane. A further reduction in Citizens’ size would also reduce the potential for assessments on all Florida insurance policyholders if they have to make up a deficit in the state-backed insurer.

Citizens President and CEO Barry Gilway said the insurer supported expanding the clearinghouse to other properties. He said Citizens has made “huge progress” in reducing its storm exposure, dropping from $510 billion in recent years to $330 billion.

Condominiums and other commercial residential properties represent some $93 million of that remaining exposure, he said.

The clearinghouse for homeowners is scheduled to start by Jan. 27, with four private carriers offering policies to Citizens’ customers, Gilway said. Under the law, new Citizens customers have to accept private coverage if the clearinghouse premiums are within 15 percent of the government-backed policies, while existing customers who renew their policies will be moved to private companies if the rates are equal or lower than the Citizens’.

More private companies are expected to join the clearinghouse in the coming year, Gilway said.

But Gilway said it would take about 18 months to add the commercial residential policies to the clearinghouse, because the policies are more complex than homeowner policies.

Sen. Gwen Margolis, D-Miami, who represents many coastal properties in her Miami-Dade County district, questioned the impact on condominium owners and coastal businesses.

“I’m just concerned until I see some numbers,” Margolis said.

Sen. Nancy Detert, R-Venice, said removing the annual premium cap for commercial non-residential buildings could also impact condominium owners since common buildings, such as a clubhouse, would fall into that category and rate hikes would be passed on to members of the condominium association.

But Detert also acknowledged the need to continue to reduce Citizens, designed as the “insurer of last resort” but expanded as lawmakers responded to a devastated insurance market following a series of hurricanes.

“I think we need to gird our loins and prepare for screams from people who will be affected,” Detert said. “But rate is based upon risk. ... If you’re sitting on the beach you’re more at risk than the people in Arcadia. We are not going to make everybody happy on this.”

Sen. Tom Lee, R-Brandon, a former Senate president, reminded his colleagues that lawmakers had a hand in keeping Citizens’ rates affordable. He said the Senate needs to “be sensitive to both the political and the economic implications of this.”

He suggested if a law is passed, it could take effect on Jan. 1, which would be “a more appropriate date for some people” and would also put it past November’s general election.