Property Insurance: General

Citizens Property Insurance Corporation payments and other expenses from the 2004/2005 hurricane seasons as of December 31, 2007.

Submitted to the House Insurance Committee on March 24, 2008.

Citizens 2004/05 Losses as of 12/31/07


Citizens: If 2004/05 Losses Occurred Today 

Special report to the House Insurance Committee from Citizens Property Insurance Coerporation. Citizens was asked to calculate what its losses from the 2004 and 2005 hurricane seasons if the storms had struck with today's Citizens exposure.

If 2004/05 Losses Occurred Today  

Average Homeowners Insurance Premium
And Increases from 2002 to 2007

From "Managing Large-Scale Risks in a New Era of Catastrophes," March 2008, the Wharton School at the University of Pennsylvania, page v.

Florida has experienced the greatest absolute increase in the average homeowners premium among the four states studied (Florida, New York, South Carolina and Texas), from $723 at the start of 2002 to $1,465 in the first quarter of 2007. In coastal areas, premiums have tripled or even quadrupled for some homeowners.

Nevertheless, at the end of 2006, insurers had a $11.6 billion cumulative deficit on their Florida’s homeowners business based on the period 1992-2006. Higher insurance premiums, coupled with no hurricane losses in 2007 in Florida have improved insurers’ long-term performance, but companies are still extremely concerned about the future of their operations in this state.”


Satus report on Florida Building Code and Florida Building Commission. From House Insurance Committee staff analysis of HB 269, under consideration during the 2008 session.

Florida Building Code Update, 2/27/08



Here is a House Insurance Committee update on Citizens Property Insurance Corporation, including background on Citizens assessment authority. It is from the staff analysis of HB 269, introduced during the 2008 regular session to create the Citizens Property Insurance Corporation Mission Review Task Force.

Citizens Update, Feb. 27, 2008


Prepared by the Florida Insurance Council, February 26, 2008

What others are saying

Residential hurricane insurance rates are going down

•    Office of Insurance Regulation Commissioner Kevin McCarty to the Senate Select Committee on Property Insurance Accountability: All homeowners’ insurers, approximately 120, reduced rates by a statewide average of 15 percent last year in Presumed Factor filings. Consumers will see this rollback implemented as policies are issued or renewed between June 1, 2007, and June 1, 2008. An additional rollback, averaging 1 percent, is surfacing through the second set of filings required by HB  1A, the True-Up filings. Total statewide savings are averaging 16 percent. OIR is not insisting on minimum rollbacks of 24.8 percent, the much-publicized “Presumed Factor” released last spring.

•    J. Robert Hunter, director of insurance for the Consumer Federation of America and one of the insurance community’s harshest critics, before the Senate Select Committee on Property Insurance Accountability January 22, 2008: Hunter identified average savings from HB 1A so far at 14 percent, with numbers still being developed. He stands by the 24.8 percent Presumed
Factor Report benchmark he helped develop, Hunter told senators, but “14 percent is nothing to sniff at. It is a lot of  money.”  Was HB 1A worthwhile for consumers? Absolutely, Hunter contended, stating, Florida consumers are saving “hundreds of  millions of dollars.”

•     Senate Banking & Insurance Chairman Bill Posey, R-Rockledge: “Rates are down, despite what you read in the newspaper. I don’t think there have been any big rate increases since we passed our law.”

•    Belinda Miller, Office of Insurance Regulation Deputy Commissioner for Property & Casualty Insurance: “The big increases you read about in the newspapers have not gone into effect,” Ms. Miller told the Senate Banking & Insurance  Committee on January 8, 2008.  “The message is, the vast majority of companies in Florida, Florida companies (domestics) in  particular, made their filings in compliance with HB 1A.”  Commercial insurers (stores, shopping centers, etc.) are expanding their writings and reducing their rates.

•    Chief Financial Officer Alex Sink: Ms. Sink has stated in several media interviews she sees private insurers who reduced their writings beginning in 2006 assuming new business again and rates coming down. This truly is a bright spot in the Florida property insurance market, she says.

•    J. Robert Hunter before the Senate Select Committee: He too sees commercial insurance rates coming down in Florida significantly.

•    Scott Johnson, Florida Association of Insurance Agents, speaking to the Board of Citizens Property Insurance Corporation January 25:  “In commercial, we are hearing of rate reductions up to 30% or 40% off last year.”

Florida domestics, Florida-based insurance companies, are aggressively expanding and competing with Citizens Property  Insurance Corporation. They are now an important element in the Florida market.

•    Bruce Douglas, chairman of the board of Citizens Property Insurance Corporation: Citizens’ growth has been modest  over the last year, far from the dramatic, continued growth that had been projected. The total risk count has hovered about 1.3 million and 250,000 policies have been assumed by private insurers. Much of what was in or could have gone into Citizens
is being insured by the surging domestic insurance component, he said.

•    Belinda Miller, OIR deputy insurance commissioner, noting the importance of Florida domestics before the Senate Banking & Insurance Committee:  Their combined 37 percent market share is extremely significant, she said. Smaller insurers  have become a major force in Florida. Some of the largest companies have reduced their exposure, but not “packed their bags.”

Florida domestics have picked up the slack, keeping Citizens Property Insurance Corporation from being much larger than it would be otherwise.

•    The Consumers Coalition on Insurance, a group directed by the Florida Consumer Action Network, in an op-ed on the Florida hurricane insurance market: “The promise of profits brought other small insurers into the state cautiously; indeed, Citizens announced a decline in the number of policies it carries. We encourage these private insurers to keep coming.”

HB 1A did produce lower hurricane insurance premiums.

The insurance community has responded with significant rate reductions - an average of 16 percent in filings finalized so far, Insurance Commissioner Kevin McCarty reports.  Every residential property insurer doing business in Florida reduced its rates effective June 1, 2007, as a result of the Presumed Factor Filings - the first of two filings required in HB 1A and by
the Office of Insurance Regulation. Insurers had to adopt the OIR Presumed Factor rollbacks, which varied geographically with a statewide average of 24.8 percent, or satisfy OIR that different numbers were appropriate.  True-Up filings, the second set, reflecting actual, not presumed, 2007 reinsurance costs, had to be submitted by September 30 of last year.

Commissioner McCarty reported to the Select Senate Committee on Property Insurance Accountability February 4 that final savings are averaging 16 percent so far. Every company reduced its rates through the Presumed Factor Filings and the statewide average was a 15 percent rollback. An additional 1 percent rollback is being produced through the True-Up filings.

McCarty said 118 homeowners’ insurance companies have made Presumed Factor/True-Up Filings. Final agreements have been reached with 68 companies, representing 58 percent of the homeowners market producing the 16 percent average rollback.

Filings by the remaining companies were denied by the Office of Insurance Regulation and are now in court or negotiation or are still under review. OIR reports that most of the pending filings involve additional rollbacks.

Some insurers proposed rate increases in their True-Up filings, citing higher reinsurance costs and needs and other special circumstances,. True-Up filings that offset a significant amount of the earlier required rollback were disapproved by OIR.

Some companies have appealed disapprovals to the state Division of Administrative Hearings as allowed by state law or begun negotiations with OIR. In the interim, these companies must operate on their Presumed Factor reduced rates. 

Most homeowners also are seeing rate relief through increased wind mitigation credits for homes constructed under the Uniform  Statewide Florida Building Code or retrofitted. This is being greatly aided by the legislative support of the My Safe Florida Home program.

Commercial market expanding and rates declining

The Florida Association of Insurance Agents reported to the Citizens board in late January anecdotal information of rates for commercial property & casualty dropping 30 to 40 percent upon renewals in recent months.

Citizens reports no increase in its commercial wind policies with a continuing trend of about 300 new or renewed policies a month. The High Risk Account, which provides the commercial wind coverage in coastal areas, is remaining steady at about 3,600 commercial risks on an annual basis. Florida Office of Insurance Regulation officials were concerned there would be a
significant increase.
The Florida Property & Casualty Joint Underwriting Association was activated in 2006 when commercial insurers did begin to take significant cuts in coverage and rates spiked. It provided hurricane coverage outside the coastal High Risk Account in Citizens. The commercial JUA was transferred to Citizens by the Legislature last year.  As of January 31, 2008, Citizens had
489 policies in force for businesses previously covered by the PCJUA. This represents a 51 percent reduction from June, 2007, when the commercial JUA was at its peak in number of policies.

Under the commercial JUA transfer, Citizens was to offer an all-perils commercial property and casualty policy, whereas it had covered only wind in the past.

Citizens has been forced to delay the launching of this commercial all-perils policy and there has been no hue and cry, it reports. Businesses are once again finding ample coverage and good rates in the private market.

Florida domestics taking up the slack

Florida domestics are once again a significant force in the Florida property insurance market, as they were prior to Hurricane Andrew. Universal Property & Casualty Insurance is now the fourth largest hurricane insurer in Florida, behind Citizens, number one, State Farm, number two, and Allstate, number three. Universal has 6.8 percent of the market share or 364,000 policies.

The Office of Insurance Regulation reports that other Florida domestics have 2.8 million policies or 37 percent of the market. Domestic insurers have 3.2 million policies or 44 percent market share, compared to 1.3 million policies or 21 percent market share for Citizens; 16 percent market share or 1 million policies for State Farm; and 331,000 policies or 6.3
percent market share for Allstate. (This data is through the third quarter of 2007.)

Florida domestics’ market share is almost double what it was in 2005.

Florida OIR reports that 28 new property insurance writers came to the state from January 1, 2006, through December 31, 2007. These are so-called “admitted insurers” whose rates are established by OIR. Another six surplus lines carriers began to write in the Florida market. These new players produced $3.65 billion in new capital, OIR reports. They are largely small
Florida-based insurers, or domestics.

This expansion by domestics is fueled, in part, by the $250 million Capital Build-Up Incentive Program established by the 2006 Legislature, providing low interest capital loans to insurers under certain circumstances. In addition, smaller existing  companies and start-up companies are not over-exposed like established and larger insurers and can selectively write new
business. They are doing that, often at rates significantly lower than rates from Citizens Property Insurance Corporation.

Thirteen companies qualified for capital loans from the program, the Florida Association of Insurance Agents notes in Market Watch, February, 2008. These companies have the ability to write up to 1.7 million policies.

Citizens President Bruce Douglas: Florida domestics are writing new business and competing with Citizens. Citizens’ growth has been modest the last year, largely because of Florida domestic insurers. Almost 250,000 policies were removed from Citizens in 2007 and many more did not go into Citizens due to the level of private market activity, mainly among domestic

"Agents report that numerous carriers are aggressively writing personal property in all areas of the state, including coastal areas,” FAIA notes in Market Watch. “However, it is domestic companies, rather than national companies, that are carrying the weight.”

Key domestics include Florida Family Insurance, American Keystone Insurance, American Strategic Insurance, Florida Farm Bureau Insurance Company, American Integrity Insurance, Florida Peninsula Insurance, Royal Palm, St. Johns and Universal Property & Casualty.

Private reinsurance rates declining for the second straight year

(Anti-trust restraints prohibit the Florida Insurance Council from collecting data from reinsurance companies. The report below is based on information provided to FIC by brokers and information reported in the trade press.)

Florida hurricane insurers cover their risks through reinsurance from the Florida Hurricane Catastrophe Fund and additional reinsurance from private markets in Bermuda, London and Europe. The fact that there were no U.S. landfalls during the 2007 hurricane season, as there were no storms in 2006, is producing a steady decline in premiums for private market catastrophe reinsurance.

Reinsurance brokers report projections of 10 to 15 percent drops in rates and up to 20 percent in some cases as direct insurers throughout the Atlantic and Gulf coast states negotiate contracts for the 2008 hurricane season. No Florida-specific numbers are yet available, but hopefully comparable price reductions will be seen here. Private reinsurance rates declined 10 to 20 percent in Florida in 2007.

These two good years followed hurricane seasons without major U.S. landfalls and a 76 percent average increase in catastrophe reinsurance rates in Florida in 2006. This dramatic spike, which helped produce dramatic increases in rates charged by direct insurers in Florida, was a response to horrific losses the worldwide reinsurance market experienced in 2005, especially from Hurricane Katrina.

What do two years of private reinsurance market rate rollbacks mean for premiums paid by Florida homeowners? If all things were equal, it should mean rate rollbacks because insurers normally pass along private reinsurance rate increases and  reductions.

Some insurers never recovered their increased reinsurance costs from the 2006 spike and are before the state Division of  Administrative Hearings in disputes involving 2007 private insurance costs. The immediate impact from lower private catastrophe reinsurance premium will vary from company to company.

Any decline in private insurance costs is good for Florida insurance consumers, however, and good for the overall Florida market and consumers.