'Obscene' Insurance Rate Increase Ahead for Condo Owners

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April 28, 2006
By JIM SAUNDERS and JIM HAUG 

TALLAHASSEE -- As Florida lawmakers struggle with a growing property-insurance crisis, hundreds of condominium buildings in Volusia and Flagler counties will get hit by massive rate increases.

Citizens Property Insurance Corp., a state-backed insurer that sells policies in high-risk areas, approved a proposal Thursday that would lead to average windstorm-rate increases of as much as 222 percent for condos in beachside areas of Volusia County and 190 percent in coastal Flagler County.

The increases would not affect individual condo units but would jack up the amount residents have to pay to insure buildings and common areas. Volusia and Flagler condos in coastal areas would face increases far higher than the statewide average of 148 percent.

Bruce Douglas, chairman of the Citizens board of governors, tried to put the increases in the context of the huge risks Citizens faces in insuring hurricane-prone areas.

"The percentage of increase in rates, obscene as they are, is nothing (compared) to the risk," Douglas said.

The decision to increase condominium rates would affect more than 1,100 policies in Volusia and Flagler counties, with the actual amount of the increases depending on the way buildings are constructed. Justin Glover, a Citizens spokesman, said state insurance regulators are expected to approve the increases because they are based on rates approved for a private insurer.

Douglas said the goal of Citizens is to have fewer policies, as the state tries to rebuild the private insurance market. But with the 2006 hurricane season starting June 1, he said it will "be a testing year for the entire industry and the state."

Approval of the increases came as the state House debated a bill aimed at fixing a property insurance system that has been clobbered by eight hurricanes during the past two years. With losses topping $30 billion, insurers have sought wide-ranging rate increases, dropped policies and, in some cases, pulled out of the state.

This week, the state said it likely will have to take over three companies that combine to sell about 280,000 property-insurance policies. State officials expect Citizens to have to pick up many of those policies -- adding risk to a program that has already run up an estimated $2.2 billion in deficits during the 2004 and 2005 hurricane seasons.

The three companies, Southern Family Insurance Co., Atlantic Preferred Insurance Co., and Florida Preferred Insurance Co., are part of the Tampa-based Poe Financial Group. As of Dec. 31, the companies had only 3,075 policies in Volusia and Flagler counties, state figures show.

Lawmakers plan to pass an insurance-reform bill before the annual legislative session ends next Friday. But as they try to keep insurance companies from fleeing the state, it has become increasingly clear that rates will continue climbing for property owners.

Senate President Tom Lee, R-Brandon, said it will take "a lot of courage" for lawmakers to take steps that will bolster the insurance system.

"It's a massive challenge for this Legislature, and we have to deal with it," Lee said.

Citizens, which sells policies in areas where private companies refuse to do business, is one of the most-controversial issues in the legislative debate. Citizens is required by law to charge the highest rates in the state to avoid competing with private insurers and repeatedly has sought premium increases since the 2004 hurricanes.

Also, insurance policyholders throughout the state -- including those who are not Citizens customers -- were hit with a one-time, 6.8 percent charge to cover a $515 million Citizens' deficit from 2004. Lawmakers might spend as much as $920 million in tax dollars to help defray an estimated $1.7 billion deficit from 2005, though policyholders statewide likely will have to pay the rest.

The House bill would take steps to try to reduce Citizens' risks, including barring the program from insuring coastal homes valued at more than $1 million. But as an example of the political trickiness of the property-insurance issue, the ban on million-dollar homes has drawn opposition from some South Florida lawmakers whose districts include large numbers of expensive properties.