Citizens Board of Governors Recommends Rate Changes

On Tuesday, the Citizens Property Insurance Corporation Board of Governors (Board) recommended that the Citizens staff file with the OIR to charge new business the actuarially indicated rate increases but cap any decrease to a 0% change. In addition, the Board recommended that the OIR approve an overall rate increase for renewal business of 7.2% for personal lines policies and an overall 8.3% increase for commercial policies. If approved by the OIR, the new rates will go into effect on August 1, 2021. The Board also approved a recommendation to consider other options for policies in Monroe County.

Roger Desjadon of Florida Peninsula Insurance Company and Tom Gallagher of People’s Trust Insurance Company testified before the Board and warned the Board that the current trends are not sustainable. Gallagher thanked Board for moving toward making rates closer to being actuarily sound. He explained to the Board that Citizens, as created, was intended to be a true insurer of last resort and could not charge rates competitive with the private market but that statutory changes have made the Citizens rates competitive with the private carriers. Desjadon said that private insurers cannot compete with the rates charged by Citizens. He noted that the Citizens rates would be much higher if Citizens had to purchase reinsurance at the level required of private insurers.

In December, the Citizens staff recommended an overall rate change of 4%. For all lines combined, the uncapped rate indication was 17.1%. Due to the gap between the uncapped rate indication of 17.1% and the proposed increase of 4.0%, the Board directed the staff to revisit the proposed rate changes and bring a new recommendation to the Board. During today’s meeting, the staff explained three changes used to make new recommendations:

• Risk Factor – Add a “risk factor” that recognizes the cost of risking Citizens’ surplus to storms and allows Citizens to set aside additional premium to help prevent assessments.
• Use Higher Selected Hurricane Model Result – Use the two highest hurricane model results rather than using the average of four models.
• Cap all policy level decreases at 0% – For individual policies, if the indication was negative, cap those decreases at 0%. 

Based on these changes in how the rate was calculated, the Board recommended that the OIR approve an overall rate increase for renewal business of 7.2% for personal lines policies and an overall 8.3% increase for commercial policies. If approved by the OIR, the new rates will go into effect on August 1, 2021.

The Board also recommended that the Citizens staff file with the OIR to charge new business the actuarially indicated rate increases but cap any decrease to a 0% change. Uncapping the rate for new business and capping the rate decrease at 0% indicated a rate difference of 21.2%. The Board urged OIR to maintain caps for new business in Monroe County at 10 percent over the rate charged to renewing policyholders.

Once Citizens makes a rate filing with the OIR, the OIR is required to consider the Board’s recommendations and issue a final order establishing the rates within 45 days after the recommended rates are filed.

The slides used during the staff presentation on rates is found here.