The governing board for the state-backed Citizens Property Insurance Corp. at least temporarily backed off a proposal Thursday to begin charging rates for new business next year at rates higher than allowed by law.
Although existing Citizens policyholders are protected from large premium increases by a 10 percent statutory cap, the insurer wanted to test what one member described Thursday as an ambiguity in the law to pursue higher rates on customers who contract with the company after Jan. 1, 2013.
Chief Financial Officer Jeff Atwater and state Sen. Mike Fasano, R-New Port Richey, were among those cautioning the board Thursday against going ahead with such an increase.
“The removal of the cap for new business is beyond the scope of legislative intent,” Atwater wrote in a terse three-paragraph note to Citizens’ Board Chairman Carlos Lacasa of Miami. “I would urge the board to carefully consider the policy implications.”
Atwater served as president of the Florida Senate in 2009 and 2010 when a 10 percent cap was established and said it was not contemplated that it would be interpreted for selective application, resulting in two sets of rates for Citizens customers.
“The intent of the legislation we passed took into account all policies, all policies,” Fasano told the board. “Nowhere will you find that someone suggested … that this would only deal with existing policies.”
Citizens interim President Tom Grady told the board that it must be more outspoken in making a case for charging actuarially sound premiums in exchange for the risk it accepts in its role as the insurer of last resort. Citizens’ has grown rapidly despite efforts to depopulate hundreds of thousands of policies.
“They continue to treat policyholders like math problems,” said Sean Shaw, a Tampa attorney who represents homeowners. “Citizens policyholders are real people with nowhere else to turn.”
Citizens is Florida’s largest property insurer with nearly 1.5 million policyholders. It has added 443,000 policies in the past 28 months despite hopes to cutting back to limit the risk to Florida citizens.
Citizens was created by the Legislature in 2002 to provide insurance to homeowners in high-risk areas and those who cannot find coverage in the private market. It was largely an offshoot of an underwriting association formed by the state in the aftermath of Hurricane Andrew in August 1992.
The fiscal viability of Citizens rests with Florida residents who would make up any losses through a statewide assessment.
Florida residents with auto, residential or commercial property insurance policies already pay a 1 percent assessment to shore up the Hurricane Catastrophe Fund tagged with huge losses after the 2004 and 2005 hurricane seasons.
The nonprofit company with more than 900 employees at offices in Jacksonville, Tallahassee and Tampa is run by an eight-person board of governors appointed by the governor. Grady recently took over recently for Scott Wallace, who had led the company for five years.
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