Citizens Property Insurance Corp., Florida’s state-backed insurer, proposed an average rate increase of 13.5 percent to ensure actuarial soundness and financial stability, influenced by legislative reforms and cost adjustments.

Citizens Property Insurance Corp., Florida’s state-backed insurer, proposed an average rate increase of 13.5 percent for policyholders during it’s Board of Governor’s (BOG) meeting on Wednesday.

The Board of Governors unanimously ratified the recommendations, sending the increase to be deliberated by state regulators.

The decision aims to address an untapped rate indication of 27.8 percent across all business lines, the BOG stated, ensuring actuarial soundness and financial stability. Brian Donovan, Chief Actuary at Citizens, presented the proposal, noting an inclusion of anticipated savings from eliminating Assignment of Benefits and one-way attorney fees. The proposed adjustments also consider reinsurance costs for significant storm events, despite Citizens’ limited purchase of reinsurance for primary commercial policies

One factor influencing the proposal is the improvement in litigation rates. In 2015, nearly half of all claims resulted in litigation, but by 2023, this had dropped to one in 10. BOG members largely attributed the reduction legislative changes, particularly Senate Bill 2A. Last year, the largest line of business had a rate indication of 91.5 percent, which dropped to 12.6 percent post-adjustment. This year, the unadjusted indication is 40.9 percent, further reduced to 25.2 percent after adjustments.

“The reforms passed in 2022 have had a tremendous impact,” Citizens spokesperson Michael Peltier told The Capitolist. “SB 2-A, which was passed by the Florida Legislature in December 2022, has had a material impact on Citizens’ rate need. For example, for the 2025 HO-3/HW-2 proposed rates, the effect has lowered the uncapped rate need by 38 percent.”

The rate proposal also addresses the statutory requirement for Citizens’ rates to be non-competitive. Competitive analysis indicated that substantial rate increases are necessary. For instance, in Miami-Dade County, despite an actuarial indication suggesting a 4 percent decrease, a 14 percent increase was recommended to ensure Citizens’ rates are higher than those of competitors.

Discussions during the meeting also touched on the distinction between primary and non-primary risks. Non-primary homes, such as secondary residences, experienced a lower rate indication this year due to a 50 percent cap implemented last year. Conversely, primary homes face a 14 percent cap on rate increases, while non-primary homes may see higher increases. This distinction presents a strong impact on mobile homes and condos, where non-primary risks are more prevalent.

Board members praised the positive impact of SB 2A on reducing rate indications and fostering a more stable insurance marketplace in Florida. They also explored the feasibility of Citizens focusing solely on wind-only insurance policies. However, initial analyses indicated such a move would be cost-prohibitive under current conditions.

The board unanimously approved the proposed rate changes, which will now undergo further analysis before final implementation in 2025.

The Florida Legislature has gradually increased the rate hike cap from 10 percent in 2022 to 15 percent by 2026, aiming to reduce dependence on Citizens and boost competition among private insurers.