Citizens Property Insurance Corp. has no choice but to accept the states vast reduction in the rate increase requested for sinkhole coverage for now, while hoping to return with better numbers in July.
The state Office of Insurance Regulation late Monday night lowered the requested sinkhole rate request for Citizens from an average of 447 percent to 32.8 percent, declaring Citizens failed to provide enough credible data under Senate Bill 408, which passed last session, to justify the full increase at this time.
The state insurance regulators also cut Citizens requested 21.2 percent statewide hike for homeowners with multihazard policies to 6.2 percent.
A spokeswoman for the state-backed insurer expressed hope that the legislative efforts from earlier this year will help combat the growth of sinkhole claims in Florida and that Citizens will be able to improve the company's financial position.
We believe this increase, which is most of the phase-in requested, will provide additional premiums while allowing time for the SB 408 provisions to have an impact on sinkhole losses, Christine Ashburn, director of Legislative and External Affairs for Citizens, stated in a release.
The legislation was designed to reduce fraud and increase competition in the insurance industry. In the area of sinkhole coverage, the bill seeks to require insurers to maintain higher levels of capital, while closing loopholes that invited fraudulent claims.
Insurance Commissioner Kevin McCarty said Tuesday that the actions of the Citizens board of directors the night before a public hearing last week in Tampa factored into the lower sinkhole rate.
If you look at what Citizens board members did the Monday (Sept. 12) before that hearing, they put in a cap, and what they put in the cap is very similar to what we ultimately approved, McCarty said.
State insurance regulators were deluged Sept. 13 in Tampa by angry residents and state lawmakers protesting the rate-hike request, and announced they would make a decision by Monday on the requested spike by the state-backed property insurer that had a high of 2,226.1 percent in Orange County.
The night before the Tampa meeting, Citizens board members tried to temper some of the growing anger by agreeing to cap the proposed hike at 50 percent in the coming year, seeking the additional increase in following years.
State regulatory officials noted that while the severity of sinkhole claims has increased, Citizens failed to provide enough data to support the claim justifying the full increase.
McCarty said its difficult to forecast the impact of Mondays decision.
I think companies are going to be cautious to see how these legislative changes ultimately pan out, he said.
Florida Chief Financial Officer Jeff Atwater called Citizens request too aggressive.
I thought it was a very solid ruling, Atwater said. This was too aggressive of a rate increase that was being asked for.
Gov. Rick Scott said Tuesday he hadnt seen the numbers, but wanted rates that are fair to both citizens and Citizens.
Reach Jim Turner at email@example.com or at (850) 727-0859.