Own a home valued at $700,000 or more and insured by CItizens? Get ready to find a new insurer.
After reducing its policy count by more than two-thirds over the past four years, state-run Citizens Property Insurance Corp. continued to shed its risk load by securing approval last week to drop 1,752 high-priced homes after their policies expire next year.
As of Jan. 1, homes with insurable values between $700,000 and $799,999 will no longer be eligible for coverage through Citizens. In Broward County, 324 homes will become ineligible for Citizens coverage. In Palm Beach County, 362 will become ineligible.
But those customers shouldn’t have problem finding another insurer. Insurance agents in South Floridea say private carriers are competing to cover homes in higher price ranges in Broward and Palm Beach counties.
The eligibility cap reduction, approved by the Office of Insurance Regulation, is the final step of a multiyear “step-down” process intended to move high-end properties off Citizens’ books and into the private market.
In 2012, Citizens reduced the eligibility cap from $2 million to $1 million and prevented renewal of 4,219 wind-only policies.
A 2013 state law authorized further eligibility reductions for all personal residential accounts: from $999,999 to $899,999 in 2015 and to $799,999 in 2016. By next January, when the cap drops to $699,999, the number of high-priced homes prevented from renewal by the eligibility cap reductions will total 7,861 statewide and 2,783 in Broward and Palm Beach counties, according to data provided by Citizens.
State regulators exempted Miami-Dade and Monroe counties from the caps after finding too little competition from private carriers there.
Jay Neal, president and CEO of the Florida Association for Insurance Reform, said there’s no shortage of private carriers in Broward and Palm Beach counties willing to insure expensive homes, even if they are in high-risk coastal areas.
Neal said his home, located in a coastal zone, is valued at $550,000 and costs about $2,400 to insure.
Paul Handerhan, the association’s vice president for public policy, said owners of expensive homes tend to keep their properties maintained and have the financial means to make emergency repairs. That means insurers see them as better risks, he said.
“These are the homes they want to insure,” he said.
Robert Norberg, an agent for Arden Insurance in Lantana, said most standard carriers are willing to write up to $1 million or more, with unregulated surplus carriers such as Lloyds of London insuring higher-priced homes.
Excluding high-priced homes is part of Citizens’ multipronged strategy to reduce its risk exposure as the state-run “insurer of last resort.” A large policy pool leaves Citizens vulnerable to paying huge claims after one or more catastrophic storms. And if Citizens has to borrow money to pay claims, it has the authority to repay that money by levying assessments on all Florida property insurance customers, whether or not they are insured by Citizens, as well as additional assessments only on Citizens policyholders.
If a major hurricane had struck while Citizens insured 1.5 million homes, policyholders statewide could have faced $9.5 billion in assessments, Citizens spokesman Michael Peltier said.
Other elements of the risk reduction strategy include transferring policies to the private market through Citizens’ depopulation and clearinghouse programs.
Since 2012, the number of policies written with Citizens has decreased from roughly 1.5 million to 490,000.
Citizens’ risk exposure declined from about $500 billion in 2012 to $142 billion in 2016. The company did not have statistics on Wednesday revealing how much risk has been avoided through the step-down program. But assuming the 1,752 homes losing coverage eligibility on Jan. 1 is worth an average of $750,000, Citizens will shed another $1.3 billion.
If a homeowner that can’t get renewed by Citizens has trouble finding a private insurer, FAIR is willing to reach out to their networks of insurers and help find coverage, Neal and Handerhan said. “We’ve actually helped people who have had trouble in the past,” Neal said.
Not finding an insurer is rarely seen as a viable option, even for owners of homes at those levels, Handerhan said. Homes with mortgages are required to carry insurance, and very few homeowners who own their homes outright choose to self-insure, he said.
The 2013 state law allowed counties to request to be shielded from the eligibility cap if the Office of Insurance Regulation determines “there is not a reasonable degree of competition.”
In 2014, regulators exempted Miami-Dade and Monroe counties from the cap after a study found that among homes insured for $900,000 to $1 million, Citizens insured 96.8 percent in Monroe and 62.5 percent in Miami-Dade.
If the two counties had not been exempted, 585 homes in Miami-Dade and 264 homes in Monroe would lose eligibility on Jan. 1, reducing Citizens’ risk exposure by another $594 million.