The rate hike could affect tens of thousands of people who live in condo buildings with $10 million or more in coverage, mostly in South Florida: 81 percent of Citizens’ 403 multi-peril policies are in Broward, Miami-Dade and Palm Beach counties.
There would be no rate change for 522 condo building policies that only cover windstorms.
Some of Citizens’ policies for windstorm coverage are more expensive than broader policies that cover more risks, according to Sharon Binnun, Citizens’ chief financial officer.
Citizens Board Member Tom Lynch said that doesn’t make sense because it allows some associations to pay less for more coverage: “This will try and balance that.”
A Citizens committee approved the increase Wednesday and the insurer’s board will consider it on Monday. The state-backed insurer’s rate hikes for high-value condo buildings don’t have to be approved by regulators, and they aren't subject to a 10 percent cap on annual rate increases, like other Citizens policies.
The proposed increase for multi-peril policies in Broward, Palm Beach, Miami-Dade counties and parts of Indian River and St. Lucie counties is 21 percent. The rate hike would take effect starting in March for new policies and April for policies that are up for renewal.
The increase for individual condo buildings could vary from the statewide or regional average. The increase is as high as 25 percent for parts of South Florida, according to a report by Citizens’ employees.
Citizens increased statewide rates for for condo buildings by 20 percent for both windstorm-only and multi-peril policies in late 2009 and early 2010.
Insurance agents and other industry officials have complained for years that Citizens' rates for condo buildings are cheaper than private insurers, and that's why it has about half of the state’s condo buildings have Citizens as of late last year.
The rates may be lower than those charged by private insurers, in part because Citizens doesn't earn a profit, advertise or buy reinsurance, catastrophe backup coverage. Instead, it can charge fees to all automobile and property insurance policyholders if a major hurricane triggers deficits.
To compensate for having lower rates, Citizens included in its recommended rates “expenses based on industry data rather than Citizens' actual” costs and costs for reinsurance similar to what private companies pay. It also included a 10 percent “contingency load,” which private insurers typically include in rates to address unforeseen risks.
The insurer's employees wrote in a report about the proposed rates that “consideration was also given to policyholder impact from the rate change.”
Gov. Rick Scott recently ordered Citizens to come up with a plan by early December to shrink the number of policies and financial risk to Floridians. Higher rates could do both. The insurer’s board plans to discuss other ways to do that at its meeting on Monday.
Information about the board meeting and how to listen to it live is available on its website.