Wind damage during Hurricane Charley in 2004. Just a fateful reminder of what can happen on a barrier island in Florida.

BY LIZA STROUT - Two years ago it was retrofitting openings and installing hurricane shutters. Everyone with a home valued over $750,000 was required to update to Miami-Dade standards to keep their Citizens’ insurance coverage.

This year, Citizens’ Property Insurance, the state’s “insurer of last resort,” has announced that they will not be renewing windstorm policies and multiperil policies that include wind coverage on homes valued over $1 million.

According to Italiano and Citizens’ Insurance, it has been common knowledge that the insurer has been attempting to reduce the number of polices, but the first that anyone, even those in the insurance business, heard of this latest plan was Friday the 13, when a memo went out.

Even the State Association of Insurance Agents, which has a Citizens’ liaison, did not know that this change was coming.

Nat Italiano, owner of Italiano Insurance Services, Inc., is the ninth largest writer of wind riders in the state of Florida. Approximately 200 of his clients will be affected by the change.

“People are worried,” said Italiano. “They are worried and they are angry. My clients were very upset two years ago when they were forced to put opening protection on their homes. It was a very bad time in the economy and many clients had suffered large loses in the market and in their retirement plans and could not afford to do it. A few of my clients did not install the newly stipulated ‘opening protection’ for their home and went without hurricane (windstorm) coverage. Thank goodness we were not hit by any hurricanes.”

Italiano went on to explain that there are very few insurers who are willing to write windstorm coverage on the island, one of them being Lloyd’s of London. In his experience, Lloyd’s premiums will be around three times higher than Citizens,’ with a higher deductible.

“Citizens’ has continually made changes over the last 10 years that have made it very challenging for my agency,” Italiano said. “They have had large rate increases, then large rate decreases, and then complained that their rate was inadequate,” said Italiano. “By law, Citizens’ cannot have more than a 10% rate increase in any one-year period. They argue that this has made their rates inadequate. This is the justification that has been used by the Florida Governor and Citizens’ Board to ask for this reduction in maximum coverage.”

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“They have added and then removed credits for certain building characteristics, such as the shape of the roof, number of garage doors, and more, and then changed them several times. Two years ago, Citizens’ required that every one of their policies had to be rewritten, making us fill out brand-new applications for every client. At the same time, they required opening protection on all homes with an insurable replacement cost of $750,000 and over. Now they are going to cancel a large chunk of my client base…. I am not a happy camper.”

Citizens’ currently writes approximately 1.5 million polices in Florida. Their total financial exposure is $508.5 billion. They have approximately $5.742 billion in surplus.

If a 1-in-a-100-year storm hits Florida, they would also be able to collect $6.726 billion from the Florida Catastrophe Fund and another $575 million in re-insurance.

This would leave Citizens’ with a $10 billion shortfall. If this happens they could assess every Citizens’ policyholder $1,100 and every private market policyholder $433. The reduction in coverage limit will reduce Citizens’ exposure by $17 billion and eliminate 7,500 policies.

Jeff Grady, President and CEO of the State Association of Insurance Agents, said that many homeowners, will have to go to the unadmitted (unregulated) market. These insurers do not go before the Office of Insurance Regulation, and can cover claims however they want and charge whatever rate they want. These are the same companies that you hear about athletes insuring their arms and legs with.

He went on to explain, “Florida is probably the state that has the most business with these companies, because of the hurricane risk. They come with a higher premium, sometimes up to three times as high as in the admitted (regulated) market. Some homeowners won’t even be able to get coverage through them.”

Grady continued, “Barrier islands and the Keys will probably have it worst. Many of the people aren’t only with Citizens’ because of the price, but because they are the only option. Those people are going to have to raise their hands and voices if they want to get attention at the state level.”

( 10 Votes )