DeSantis warns that Florida’s largest property insurer is ‘insolvent’

Citizens Property Insurance Corp, often called “the insurer of last resort,” has requested a 13.5% percent rate hike.

Citizens Property Insurance Corp. (CPIC) has been declared “insolvent” by Gov. Ron DeSantis, who warns that the insurer could face bankruptcy if a major hurricane hits. The insurer was created in 2002 to provide both windstorm coverage and general property insurance for homeowners who could not obtain insurance elsewhere

If Citizens was to collapse, it could prove devastating for Florida homeowners already burdened with skyrocketing property insurance costs. In 2023, for example, the average annual premium for Florida homeowners was $10,996, which is more than four times higher than the national average of $2,377. 

If the state’s largest insurer exhausts its reserves, policyholders will be required to pay a special assessment of up to 45% of their premiums, as Florida law mandates. These are charges that must be paid in addition to regular policy premiums when additional funds are needed to pay claims due to a storm or other catastrophic events. 

Such an outcome could lead to policyholders throughout the state, even non-Citizens customers, getting saddled with additional charges to cover the claims.

In a hearing last week, Citizens, which is often called “the insurer of last resort,” said it needs a nearly 93% increase to match the competitive market, but at this time has requested a 13.5% percent rate hike.

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Brian Donovan, Citizens’ chief actuary, said that the 13.5% hike would increase the average price of homeowners’ multi-peril policies, the insurer’s most common type of policy, from $3,560 to $4,041 per year.

Florida law caps annual increases for Citizens’ customers. For 2025, the law would allow a maximum 14% increase for owner-occupied primary residences. But increases could be as high as 50% for those owning a second home.

Property owners would not be the only ones affected by the proposed rate hikes.

“Even if they rent, people are also paying those high property insurance rates,” Orlando Democratic Rep. Tom Keen told Floricua. “They’re just paying it via the landlord, as opposed to directly to an insurance company. So, it’s reflective of high rents. Housing affordability is linked directly to those high insurance rates.”

In recent years Citizens has become the largest carrier in the state, with nearly 1.2 million policies as of last week.

The Florida Office of Insurance Regulation has to sign off on the requested increases. A decision on whether the rate hike is approved is expected by August 26.

A growing concern

Critics blame Gov. Ron DeSantis for the state’s property insurance woes. Under the Republican’s watch, home insurance premiums have risen dramatically, escalating after a special legislative session in May 2022, when Republican lawmakers approved a $2 billion reinsurance reserve which protects insurers from bankruptcy in the event of a cataclysmic event. 

Despite the promise that this move would provide economic relief for consumers, costs for policyholders have risen and rate increases have outpaced any savings derived from the fund.

In a report published last year, titled How Ron DeSantis sold out Florida Homeowners, a group of nonprofits pointed out that the insurance industry has been a major contributor to DeSantis over the years, to the tune of more than $9 million.

Hurricane Debby made landfall in the Florida Big Bend area as a Category 1 hurricane Monday, bringing with it what forecasters warned could be life-threatening storm surge and potentially catastrophic rainfall. Estimates noted that historically a storm like Debby would result in insured losses of less than $1 billion. But as Florida braces for the potential impact of a future Category 5 hurricane, many worry about the state’s financial resilience.

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