Commissioner McCarty Asks Citizens Property Insurance Corporation To Revisit Builders Risk Decision
TALLAHASSEE (July 20, 2006) – Florida's Insurance Commissioner Kevin McCarty today requested that Citizens Property Insurance Corporation (Citizens) revisit its earlier decision to stop writing builders risk insurance policies in Florida.
In a letter to Citizens board chairman Bruce Douglas, McCarty said that given the current insurance environment in the state the board should consider reversing its decision until a viable market is available or alternative solutions can be developed. He asked that current policies be renewed until the completion of the project and that new policies be offered until the end of the year.
McCarty also advised the Citizens board to take immediate steps to make sure that actuarially sound rates are being charged for builders risk policies. Builders risk policies insure residential and commercial projects that are under construction or renovation. A copy of McCarty's letter is attached below.
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July 20, 2006
Mr. G. Bruce Douglas
Chairman, Board of Governors
Citizens Property Insurance Corporation
101 North Monroe Street, Suite 1000
Tallahassee, Florida 32301
RE: Builders Risk Program
Dear Mr. Douglas:
I am writing to share with you concerns recently brought to my attention regarding the decision by Citizens Board of Governors (Board) to cease writing builders risk policies. The Office of Insurance Regulation (Office) concurs with the Board's decision to stop writing builders risk was the proper decision. Given the public outcry regarding the real and perceived risks that Citizens insurers, providing coverage to new construction in high risk areas that will likely end up in Citizens in the future is counterintuitive to the direction Citizens should be heading. However, given the contraction in the commercial insurance marketplace, it might not be prudent at this time to make such a change.
The Office requests the Board reconsider its decision to cease writing builders risk policies. The Office would be supportive of an interim solution to provide a transition for projects in process as well as projects currently in the planning stage and nearing the beginning of construction. To accomplish such a transition, the Office suggests that current builders risk policies be renewed until completion of the project and new policies be written through the end of the year.
If the Board elects to alter its decision regarding builders risk coverage, I strongly urge that an immediate evaluation of current builders risk premium rates be performed. This will ensure that all such policies are written at actuarially sound rates and not discourage voluntary writing. Furthermore, we would suggest that if builders risk rates are determined to be inadequate, Citizens implement actuarial sound rates on a use and file basis to ensure proper rates are implemented as soon as possible. I commit to review any filing in an expedient manner.
As noted above, the Office does not believe it is in the long term, best interest for a residual market entity to insure new construction in high risk areas. However, given the current insurance environment we are in, I request that the Board revisit its decision and consider an interim solution until such time that a viable market is available or alternative solutions, legislatively or otherwise, can be implemented.
If you have any questions, or if my office can provide any assistance, please feel free to contact me.
Kevin M. McCarty