After the catastrophic storms of 2004 and 2005, all Floridians are experiencing the financial hardship caused by the instability of the insurance market. Individual rates have dramatically increased, as have the risks associated with insuring property in Florida. As private insurers continue to leave the market, Florida’s Citizens Property Insurance Corporation is forced to insure a majority of the homes in Florida.

What You Need to Know

In 2002, the Florida Legislature created the federally tax-exempt Citizens Property Insurance Corporation (Citizens), to provide wind, hurricane, and hail policies for residential and commercial properties unable to obtain insurance and help lower costs by issuing tax-free bonds, capping windstorm rate increases and offering consumers a choice to remain in the state's coverage when private options are unavailable.

Citizens offers three types of property and casualty insurance, a statewide account covering individual owners, a statewide account covering joint and commercial owners, and a High-Risk Account offering wind-only policies to individual joint or commercial owners in specially designated areas determined to be particularly vulnerable to severe hurricane damage. In these “wind-only” zones, private insurers may offer other peril coverage, but are not required to provide windstorm coverage.

Property is eligible for coverage with Citizens only if there is no other offer from an authorized insurer. The insurance agency and agent must use reasonable efforts to place personal or commercial insurance applicants with an authorized insurer prior to placing the risk with Citizens, or face termination or suspension of the agent appointment.

The eight 2004-2005 hurricanes caused nearly $36 billion in estimated total Florida property losses across 2.8 million claims. Insurers’ losses from the hurricanes as well as meteorological expectations that the increase in hurricane activity will continue for the foreseeable future have caused both insurers and re-insurers to reevaluate their tolerance for risk and the related amount of additional capital they are willing to commit to Florida. Some insurers have added new underwriting restrictions to reflect changes in their exposure tolerance. Others have not renewed or cancelled policies. Still others have raised rates.

Citizens have taken on a greater amount of the insurance market in Florida. As of December 31, 2006, Citizens had 1,298,922 policies in force, making it the largest insurer in Florida. Currently, Citizens is receiving an average of 70,000 new applications per month.

As a result of 2005 storms, Citizens incurred more than $2.6 billion in losses. Because of these losses and insufficient premiums to pay those claims, Citizens had a shortfall of $1.7 billion in 2006.

In an attempt to provide relief from the insurance issue, the legislature held a special session from January 17- 22. The session expressly focused on lowering current property insurance premiums and reducing the future rate of growth of insurance costs. It also addressed improving the availability and stability of property insurance in Florida and with the state’s building code.

updated 1/24/2007