Fla. Homeowners’ Policies to be Reassessed, Double-Digit Rate Hikes Possible

October 4, 2004

The year ahead could be a shocker for homeowners in Florida, a state accustomed to skyrocketing insurance rates, due to the recent barrage of hurricanes that hit the state.

To keep insurance companies in town and writing policies, some analysts are predicting double-digit rate increases on homeowners’ insurance next year. And that would be on top of a special assessment on all Florida property owners to help pay $1.8-billion in claims expected at Citizens Property, which insures property owners who cannot find coverage on the open market.

“It’s not inconceivable that once the dust settles, the industry will look for 15 to 20 percent rate increases on top of what they would have taken in a normal year,” said Christopher Winans, an insurance industry analyst for Lehman Brothers.

Others predict widespread rate increases of as much as 30 percent.
Inland counties and southwest Florida residents will likely see the biggest jump in rates as insurers reassess where they face risk of widespread wind damage.

Sam Miller of the Florida Insurance Council, which represents insurers doing business statewide, called a report that rates might rise up to 30 percent “pure idle speculation. There isn’t anyone, anywhere who can know what is going to happen and can reasonably speculate on what is going to happen.”

Yet, state regulators anticipate rate hike requests to come flooding into their office by year’s end. And that’s not the only problem.
As claims from the four storms push toward 2-million, insurers are confronting a major drain on their financial reserves and their manpower. One small insurer, American Superior Insurance Co., last week voluntarily consented to be placed under state control and may be liquidated. It blamed a deluge of claims primarily from Hurricane Ivan.

Most insurers, particularly larger ones, have insisted they won’t desert Florida. But that doesn’t mean carriers won’t accelerate a pullback in writing policies in high-risk areas. State Farm, the largest private carrier in Florida, hasn’t written homeowners policies in Pinellas County since 1995 and has no plans to start now.

Florida Chief Financial Officer Tom Gallagher, whose office regulates insurance, said that one of his top priorities is to make sure homeowners have access to affordable insurance.
But to do that, he says, state legislators will have to address some troubling flaws in the system that were unveiled by Charley, Frances, Ivan and Jeanne.

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