Florida’s Citizens Property Insurance Corporation is asking the regulator to approve average rate increases of 14.2%, to cover off rising costs, including from reinsurance, and to bring its rates closer to the private market.
Florida Citizens CEO Tim Cerio explained at a Board meeting this week that the insurers’ rates are “artificially low” and encouraged steps to be taken to reduce the size of Citizens role in the Florida property insurance market.
Citizens needs to return to the role of the insurer of last resort, he said, and actuarially sound rates must be charged so that Citizens is no longer so competitive on pricing, versus the private market.
Florida Citizens has an accepted glide path for rates that it is allowed to follow, that limits Citizens’ annual rate increases to no more than 12% in 2023, or 13% in 2024, for most of its policies.
Some expenses are allowable and as a result Florida Citizens rate filings will propose 14.2% for personal lines and 12.3% for commercial.
Part of the rate increases are to cover increased reinsurance costs that Citizens is facing, although at such low rate increases it’s unlikely this is being covered particularly well, given the glide path restriction.
As we reported earlier this week, Citizens is budgeting to spend another $725 million in premium to secure a further $4.2 billion of reinsurance and risk transfer for 2023.
That’s on top of the recent spend to secure the insurers first industry loss trigger catastrophe bond, the $500 million Lightning Re deal.
While the Florida Citizens Board is approving the maximum rate increase request that is allowable, under the glide path rule, this still falls far behind the rate increases being asked for by other Florida focused property insurers.
In fact, First Community Insurance Company has been seeking a 44.8% statewide average increase in their homeowners rates from the regulator, while the Kin Interinsurance Network secured a 61.5% statewide average increase for its homeowners policies in the last year.
Florida Citizens policy count has risen from 569,868 on March 31st 2021, to 1,223,204 in the last week.
The insurer anticipates hitting 1.5 million policies before the end of 2023, as its significant growth is set to continue.
“CEO Cerio said, “The larger we grow, the greater our exposure, and the greater our exposure, the greater the potential financial burden on the taxpayers of Florida, people who aren’t even Citizens customers,” referring to the chance of assessments.
All of which makes securing the necessary reinsurance protection even more important this year, as with exposure significantly higher and still growing along with the policy count, Florida Citizens is perhaps more exposed to needed assessments than ever before at this stage, making risk transfer a key tool for the insurer.
Citizens previous CEO had forecast a chance of more meaningful policy depopulation towards the end of this year for the insurer.
Which presents an opportunity to reinsurance and ILS capital to support take-outs from the insurer.
Now, with legislation meaning any policyholder that gets an offer from the private insurance market within 20% of the Citizens price must take it, Citizens still needs these rate rises to ensure depopulation goes to plan, as if its rates remain too far below private carriers the chances of many choosing to leave what is often perceived as a source of cheaper cover appear slim.
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