The prospect of a major storm has weighed heavily on Florida's lawmakers and insurance regulators. After the 2005 hurricane season, a number of companies in the state that offered homeowners insurance closed their doors. Private insurers have been loath to return, and homeowners have been left with one choice: Citizens Property Insurance Corp. The state-run company has grown exponentially over the past few years; the carrier that was supposed to be the last-resort for Floridians now boasts about 1.5 million policyholders.
In our last post, we were discussing one of the many legislative proposals designed to fix the problem that Citizens has become. This proposal specifically addresses the way the company makes up a shortfall: the assessment scheme. It's important to remember that assessments are levied for three accounts: personal lines, commercial lines and coastal.
The bill would eliminate the 6 percent assessment level in the personal and commercial lines accounts. The assessment for the coastal account would go down to 2 percent. And, the bill would allow Citizens to levy these assessments when the company projects a deficit, rather than when the deficit is incurred.
The result would be less strain on private insurers and the possibility of even larger assessments for Citizens policyholders. The elimination of the 6 percent levy would mean that Citizens would not have that quick infusion of cash from private insurers; the only way to make it up would be an increase in the assessment for Citizens policyholders. The complexities of the assessment scheme could also mean lower payments for Citizens policyholders over a longer period of time.
We'll finish this up in our next post.
Source: Insurance Journal, "Florida May Change Citizens' Policyholder Assessments," Michael Adams, Feb. 28, 2012