Statewide 16.1 Percent Rate Hike Approved for Citizens

May 22, 2006

An order approving a Citizens Property Insurance Corp.’s request for a rate hike has been approved by Florida Insurance Commissioner Kevin McCarty, and will result in a combined average rate increases for homeowner’s policies of 16.1 percent on a statewide basis. Rates for mobile home policies will increase by 6.7 percent, and there will not be any increase for condominium unit policies.

The Office of Insurance Regulation increased the rate for dwelling fire policies by 21.5 percent to ensure that these rates were actuarially sound. McCarty entered an order approving the state’s insurer of last resort’s top 20 filing and actuarial filing with an exception for Monroe County.

After experiencing eight major hurricanes during the last two years, Citizens accumulated a $1.7 billion deficit. As required by statute, Citizens assesses insurance companies that may “recoup” or pass that assessment on to policyholders through a surcharge. However the 2006 Legislature appropriated $715 million to pay down the deficit, which is expected to reduce what was expected to be a 20 percent assessment down to an estimated 3.5 percent levy.

“I am very pleased that the Legislature allocated a portion of the sales tax revenue surplus to provide rate relief to all Florida policyholders,” McCarty said. “However, we still need to take strong measures to ensure that Citizens’ rates are actuarially sound to minimize future assessments.”

Citizens Corporation made its top 20 filing in December to guarantee that its rates were non-competitive and higher than the top 20 carriers in the private market and filed its actuarial filing in January to make certain that Citizens’ rates were actuarially sound. These filings are statutorily required under Section 627.351(6)(d), Florida Statutes. Citizens made the December filing under Florida’s “use and file” provision and implemented the rate adjustments as of April 15th. The most recent rate adjustments based on the actuarial filing will be implemented for personal lines policies during August and September of 2006.

“Our actuarial staff has rigorously examined these rates, and I am confident the approved adjustments achieve adequate rates given the risks involved. Citizens did not receive approval for all rate adjustments requested,” McCarty added.

The order signed by Commissioner McCarty requires Citizens’ to follow specific rate-making methodology in addition to approving rate adjustments. It requires Citizens to use a wind-only ratemaking methodology in this and future actuarial rate filings that combines the rating calculations for the personal lines accounts with the high risk accounts.

In addition to the normal rate review procedures, the Office’s staff utilized the public hurricane model. The rate adjustments based on the actuarial filing were not available by county at the time of the press release. However, the rate approvals based on the Top 20 filing are available by county and are on the OIR website at:

The Office ordered these rate adjustments, and told Citizens to submit another top 20 rate filing in 90 days to verify that rates are non-competitive. Previously the Office requested that Citizens file a separate filing for Monroe County, as this county will not be utilizing rates based on the top 20 insurers.

Source: Florida Office of Insurance Regulation

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