TALLAHASSEE – Nearly five dozen Florida companies have filed plans to tap into a $ 2 billion taxpayer-funded plan designed to support the distressed property insurance industry that would save homeowners only 1% to 3% about on their annual awards.
That would barely dent the double-digit increases in premiums millions of state-owned homeowners have endured for years if those companies actually extended those savings to their customers.
The law establishing the fund does not provide guarantees that companies will pass savings on to consumers. Many are simultaneously calling for tariff increases to cover the higher cost of private reinsurance, which they buy to cover themselves in the event of a major disaster.
Republican state senator Jeff Brandes of Pinellas Park said the situation illustrates how little the legislator has done for both industry and homeowners.
He said the $ 2 billion fund is “like performing Phase 1 treatment on a Phase 4 cancer patient.”
The reinsurance to assist policyholders, or RAP program, was approved during a special session convened by Governor Ron DeSantis in late May after the legislature failed to address the property insurance crisis during the regular session. DeSantis immediately converted it into law.
Insurance companies that wanted to tap into this year had to hurry if they wanted to meet the June 30 deadline to apply with the Office of Insurance Regulation, which is still sifting through the paperwork.
“The OIR is accelerating the review of these documents and ensuring that the documents submitted comply with recently passed legislation,” said Samantha Bequer, communications director for the Office of Insurance Regulation.
Opponents have called it an industry bailout that won’t translate into savings for consumers. It seems they were right based on the savings offered by the companies.
“This is not just what we feared, but what many lawmakers have said would happen,” said Bill Newton, deputy director of Florida Consumer Action Network, a nonprofit public policy advocacy group. “When you put so much money down and say, ‘Here you go. Have a nice day, “that’s what happens. But I’m sure they’ll appreciate the thought.”
On a positive note, Newton said, this reinsurance plan is backed by Citizens Property Insurance, the state-backed insurer of last resort that has quickly become the only resort insurer for nearly 940,000 Florida homeowners and is expected to reach 1.2 million by the end of the year.
“As long as it can offer reasonably priced insurance, the market will be stable in some ways, and even private companies will have to keep their rates low,” Newton said. “Citizens are what holds everything together. Oh, and Citizens has been making money for most of the years despite having the highest risk clients. I guess it’s not that hard to make money in the insurance business.
Citizens have recently called for an 11% rate hike.
On average, Florida homeowners pay more than $ 2,000 more than the national average for property insurance.
Insurance costs have increased since DeSantis was sworn in from $ 1,989 in 2019, according to the Insurance Information Institute, to a current average of $ 3,585, according to Insurify, which provides online rate comparisons.
Reinsurance is insurance for insurance companies to cover claims that do not have the capital to cover themselves. Reinsurance companies are not regulated by the state and have raised their taxes as Florida insurers have become more dependent on them to cover catastrophic claims.
The RAP program offers a break to those national insurers by allowing them to tap into the Florida Hurricane Catastrophe Fund earlier than normally allowed before they reach maximum claims payments.
The disaster fund comes into play when a hurricane causes damages of $ 8.5 billion and goes up to $ 17 billion, but insurers have to pay for it. RAP allows participating insurance companies to access that fund for free when damages reach $ 6.5 billion, instead of $ 8.5 billion.
That money won’t go to the insurers unless there’s a real disaster, like a major hurricane, and they need it to cover their damage claims.
The 68 separate tariff statements from 59 companies show how much they would theoretically save by tapping into that free money. Savings on premiums range from as low as 0.7% to as high as 3.9%, with most in the 1% to 2% range. Many of these rate changes would not take effect for months.
For the average homeowner, that means savings of between $ 36 and $ 143 per year on a $ 3,585 property policy that has risen nearly $ 1,600 over the past three years.
The companies presented pages of documentation and spreadsheets showing how much savings they could pass on to their policyholders.
But rate statements are all over the map. Some spelled out the dollar amount they could return to policyholders, while most showed only a percentage reduction of what they recovered that could be passed on to policyholders. Many have protected their plans as trade secrets, a tactic that has troubled state representative Anna Eskamani, D-Orlando.
“People are in the dark and want answers,” Eskamani said.
Some companies have had trouble calculating estimated premiums, damages, and rate reimbursements, and state regulators have had to point out and get them to correct their mistakes. In one case, officials told Berkley that he was using the wrong growth numbers to determine insurance premiums and suggested a way to get a more reasonable estimate of savings.
At least one company, Foremost, ran the numbers and decided it wasn’t worth attending until OIR officials convinced them otherwise.
Some companies applying for RAP have experienced financial difficulties.
St. Petersburg-based United Property and Casualty, one of Florida’s largest companies with 180,000 policies, estimated an overall savings of 1.2%.
United stopped issuing new policies in February and are considering a sale or merger to stay afloat, insurance industry publications reported. He recently asked the state for a 15% rate hike.
Federated National and Monarch, which recently dumped tens of thousands of policyholders in Florida in an effort to remain solvent, calculated a total savings of 0.8%. Insurance rating giant Demotech downgraded Federated’s stability rating in April from “exceptional” to “substantial”.
“Our fears were confirmed that the special session was more about bailing out the insurance industry than giving consumers a break,” Eskamani said.
Republicans have rejected at least half a dozen amendments in both the House and Senate to address rate hikes, including a 5% cap on rate hikes, which require insurance companies to pass all savings from litigation reforms underneath to consumers. form of tariff reductions or discounts and require reporting of data in the bill to include the impact of climate change on tariffs.
“Citizens are becoming the insurer of the only resort,” Eskamani said. “None of this is sustainable.”