Surcharge Will Raise Florida Property Insurance Rates by 1%

A plan that would result in customers throughout Florida paying more on their bills due to property insurer insolvencies was approved by state insurance regulators last week.

A request by the Florida Insurance Guaranty Association to levy a 1% emergency “assessment” to reimburse claim costs was granted by insurance commissioner Mike Yaworsky in an order.

According to the order, insurers must begin collecting the assessments from policyholders in October and remit the funds to the Florida Insurance Guaranty Association.

The state established the Florida Insurance Guaranty Association, also known as FIGA, as a nonprofit organization to manage claims when insurers go bankrupt. In light of the property insurance sector’s recent financial issues, it has released a number of analyses. Since the beginning of 2022, seven property insurers have been adjudicated insolvent.

The emergency assessment after the bankruptcy of United Property & Casualty Insurance Co. was accepted by the FIGA board on March 31. It is anticipated that FIGA will handle hundreds of millions of dollars in claims as a result of the insolvency that resulted in the appointment of a receiver for the company in February.

FIGA is taking out a $150 million short-term loan as part of the strategy that regulators approved last week to help settle claims. The short-term borrowing will thereafter be repaid, along with any outstanding claims, by issuing revenue bonds up to the amount of $750 million. The bonds will be repaid using money from the assessments, according to Jim Saunders of The News Service of Florida.

The 1% assessment, according to the FIGA website, will last until the “bonds have been paid in full.”

“The emergency assessment is necessary to secure funds for the payment of covered claims, to pay the reasonable costs of administering such claims, including claims resulting from insurance companies that have become insolvent or may become insolvent as a result of losses incurred due to hurricanes including but not limited to Hurricanes Irma, Michael, and Ian, and to secure bonds issued to generate revenues to pay claims,” FIGA Executive Director Corey Neal wrote in an April letter.

The assessment will occur at a time when premiums for property insurance are skyrocketing across the state. The assessments will not apply to auto insurance, but they will be taken on a number of other insurance plans.

In 2022, FIGA also collected a 0.7% assessment. According to data on the agency’s website, it started collecting an additional 1.3% assessment on July 1, 2022, and it will do so until June 30, 2023. Additionally, policyholders will be subject to an additional 0.7% charge this year, which will expire on December 31.

Due to financial difficulties, private property insurers have canceled hundreds of thousands of policies and requested significant premium increases during the previous two years. The issues in the sector have resulted in FIGA assessments as well as significant expansion at the state-backed Citizens Property Insurance Corp.

Many state officials have long issued warnings that if Citizens does not have enough cash on hand to cover claims, it may be forced to levy fees on policyholders all around the state. After Hurricanes Ian and Nicole last year, citizens, who had 1.248 million insurance as of April 7, did not need to rely on evaluations.

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