Florida Office Of Insurance Regulation Orders Citizens To Review Rates
Contact: Bob Lotane
Tallahassee – The Florida Office of Insurance Regulation (Office), today, issued an order to the Citizens Property Insurance Corporation (Citizens) to conduct a review of its rates to assure they meet statutory guidelines. The Legislature ordered Citizens to adjust its wind-only rates on July 1, 2004. Florida law required these rates to be both actuarially sound and to not be lower than the rates of the admitted voluntary market as of that date.
The order requires Citizens to review and adjust rates for its personal lines account policies (homeowners, dwelling fire and mobile home) and for its personal residential high-risk account policies (wind-only) to also meet this statutory requirement. These revised rates must be filed with the Office by December 31, 2004. Citizens commercial lines rates (condo association, apartment complex and homeowners association) have been filed and must be implemented by 1/1/2005.
Florida Insurance Commissioner Kevin McCarty said his order will both "satisfy the statutory mandates passed by the Legislature and also assure the financial solvency of Citizens in the future. Citizens and its predecessor entities were integral to the rebuilding of our insurance markets after Hurricane Andrew and have been key to dealing with this year's unprecedented string of catastrophic hurricanes."
There are certain territories in the Tampa Bay region where Citizens is specifically being ordered to implement recently approved rates. These areas have been of great concern because this is where Citizens policy growth has been exceptionally rapid. Citizens has shown significantly worse loss experience, due to claims filed for sinkhole damage, in Citrus, Lake, Pasco and Hernando counties and has been ordered to implement new rates to reflect these increased risks by December 15, 2004.
The order also requires Citizens to certify to the Office of Insurance Regulation that its rates are in compliance with Florida Statute 627.351(6)(d) twice annually and, if they are not, to revise and implement any necessary rate changes.
(d)1. It is the intent of the Legislature that the rates for coverage provided by the corporation be actuarially sound and not competitive with approved rates charged in the admitted voluntary market, so that the corporation functions as a residual market mechanism to provide insurance only when the insurance cannot be procured in the voluntary market. Rates shall include an appropriate catastrophe loading factor that reflects the actual catastrophic exposure of the corporation.
2. For each county, the average rates of the corporation for each line of business for personal lines residential policies excluding rates for wind-only policies shall be no lower than the average rates charged by the insurer that had the highest average rate in that county among the 20 insurers with the greatest total direct written premium in the state for that line of business in the preceding year, except that with respect to mobile home coverages, the average rates of the corporation shall be no lower than the average rates charged by the insurer that had the highest average rate in that county among the 5 insurers with the greatest total written premium for mobile home owner's policies in the state in the preceding year.
3. Rates for personal lines residential wind-only policies must be actuarially sound and not competitive with approved rates charged by authorized insurers. However, for personal lines residential wind-only policies issued or renewed between July 1, 2002, and June 30, 2003, the maximum premium increase must be no greater than 10 percent of the Florida Windstorm Underwriting Association premium for that policy in effect on June 30, 2002, as adjusted for coverage changes and seasonal occupancy surcharges. For personal lines residential wind-only policies issued or renewed between July 1, 2003, and June 30, 2004, the corporation shall use its existing filed and approved wind-only rating and classification plans, provided, however, that the maximum premium increase must be no greater than 20 percent of the premium for that policy in effect on June 30, 2003, as adjusted for coverage changes and seasonal occupancy surcharges. Corporation rate manuals shall include a rate surcharge for seasonal occupancy. To ensure that personal lines residential wind-only rates effective on or after July 1, 2004, are not competitive with approved rates charged by authorized insurers, the corporation, in conjunction with the office, shall develop a wind-only ratemaking methodology, which methodology shall be contained in a rate filing made by the corporation with the office by January 1, 2004. If the office thereafter determines that the wind-only rates or rating factors filed by the corporation fail to comply with the wind-only ratemaking methodology provided for in this subsection, it shall so notify the corporation and require the corporation to amend its rates or rating factors to come into compliance within 90 days of notice from the office. The office shall report to the Speaker of the House of Representatives and the President of the Senate on the provisions of the wind-only ratemaking methodology by January 31, 2004.
4. Rates for commercial lines coverage shall not be subject to the requirements of subparagraph 2., but shall be subject to all other requirements of this paragraph and s. 627.062.
5. Nothing in this paragraph shall require or allow the corporation to adopt a rate that is inadequate under s. 627.062.
6. The corporation shall certify to the office at least twice annually that its personal lines rates comply with the requirements of subparagraphs 1. and 2. If any adjustment in the rates or rating factors of the corporation is necessary to ensure such compliance, the corporation shall make and implement such adjustments and file its revised rates and rating factors with the office. If the office thereafter determines that the revised rates and rating factors fail to comply with the provisions of subparagraphs 1. and 2., it shall notify the corporation and require the corporation to amend its rates or rating factors in conjunction with its next rate filing. The office must notify the corporation by electronic means of any rate filing it approves for any insurer among the insurers referred to in subparagraph 2.