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Citing a flood of new policies entering Citizens Property Insurance Corp. and a growing disparity between its rates and rising rates of private insurance companies, the board of Florida’s insurer of last resort voted unanimously to postpone final action on its proposed 2021 rates.

Citizens’ Board of Governors called the company’s growth unsustainable at its meeting Wednesday and said steps need to be taken now to ensure that Citizens maintains its role as the state’s insurer of last resort. They directed staff to work with the Florida Office of Insurance Regulation (OIR) to seek ways to bring Citizens rates more in line with private market carriers while staying within the statutory glidepath for current policyholders.

Citizens rates are capped on the glide path of 10% per year, meaning the company cannot raise them more than that, which has made the residual insurer a competitive alternative to the current private market.

“Over the past 18 months, Citizens has become the insurer of first resort,” said Chairman Carlos Beruff at his first meeting as chair. “This is not its statutory mission and we must take steps immediately to reverse this trend and protect Floridians who are ultimately on the hook if Citizens is unable to pay claims.”

Since May 2019, Citizens’ policy count has increased from 420,000 to 537,000. During that time, private companies have returned to OIR with multiple requests for rate increases in an effort to shore up their financial positions after suffering losses over the past five years, including a $1.2 billion operating loss for the industry through the third quarter of 2020.

Unlike private companies, Citizens is prohibited by statute from increasing rates by more than 10% annually for any individual policy. In recent years, the result has been a widening gap between Citizens rates and those private companies need to charge for comparable coverage. Citizens said that as a result, its rates in any given region are lower 91% of the time, up from 80% in 2019.

Citizens actuaries had proposed a package of 2021 rates that called for an average increase of 3.7% for personal lines policies – multiperil coverage for homeowners, renters, condominium unit, dwellings, and mobile homes. But the board approved the 2021 rate package for informational purposes only and directed staff to meet with OIR to determine if additional options are available to raise rates further.

“We’ve become the 800-pound gorilla,” Beruff said. “That is not what we are supposed to be, but that has happened.”

Among potential options available to Citizens is a list of recommendations included in a Florida State University study looking at ways Citizens exposure could be reduced. Among those recommendations is a suggestion also raised by Senator Jeff Brandes, R-St. Petersburg, that Citizens charge new customers actuarially sound rates instead of glidepath-capped rates available to renewal policyholders.

Board members will return January 26 to approve a final package of 2021 rates that take into account any additional adjustments OIR will allow to move Citizens closer to actuarially sound rates.

“The Florida Office of Insurance Regulation looks forward to discussing with Citizens their 2021 rates,” OIR said in a statement.

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