Lisa Barton

As we head in to the new year, especially with record setting low temperatures all over Florida, it is hard to image that hurricane season will be on us again before we know it. But we live in a state where catastrophic losses can and do occur so insurance will continue to be a major issue for Florida Homeowners. Here are some of the issues facing us as we move into 2010:

1. Citizens Property Insurance:  This year, the first rate increase at state-subsidized Citizens takes effect since a freeze three years ago. The state is trying to end artificially low rates and bring actuarial soundness to Florida’s largest home insurer. Citizens still has 1 million customers, approximately 413,000 of whom have homes in the high risk areas on the coasts. After nearly four years without a significant storm, Citizens’ surplus is only $3.9 billion. It will take a long time for rates to get where they need to be but at least the process has been started.

2. State Farm: Florida’s largest private insurer will be staying although they will be cancelling 125,000 policyholders and increasing premiums for many of their remaining customers. This is good news for Florida. 

3. New Insurers:  New, smaller insurers have captured an increasing share of the Florida market but many customers are worried about the quality of the companies. Their worries are justified.  First Commercial, Coral, American Keystone, Edison, and most recently Magnolia have all failed in the past two years, years in which there were no major storms. 

4. Asssessment: Policy owners in Florida will continue to pay a 1% catastrophe fund tax on their premiums for the next 5 years, a hangover from the 2005 season.  Citizens is charging all Florida homeowners, not just its customers, a 1.4% assessment for seven more years.

5. CAT fund:  Had a hurricane hit Florida last fall when the credit markets were in turmoil, the catastrophe fund, which provides insurance to insurers, had no hope of selling enough bonds to cover its commitments to insurers. The projected shortfall was $18.5 billion if there was a major storm. The Legislature ordered the fund to charge more to build up cash fast. The charge will add $750 million to the fund over the next five years.