This Blog was written by Julie Patel and published in the Sun Sentinel:
Citizens Property Insurance plans to discuss raising rates for condominium associations with $10 million or more in coverage by a statewide average of 19 percent for policies that cover a broad range of risks such as fire, theft and hurricanes.
The proposed rate change for policies that only cover windstorms is zero. Citizens increased statewide rates for condo buildings by 20 percentfor both windstorm-only and multi-peril policies in late 2009 and early 2010.
The rate hike could affect tens of thousands of people because Citizens has 925 high-value condo building policies, including about 44 percent that cover broader risks, not just windstorms. The buildings pay premiums of $142 million and are vulnerable to $28.6 billion in worst-case losses.
Insurance agents and other industry officials have complained for years that Citizens’ rates for condo buildings are cheaper than private insurers and that’s why it has about half of the market share as of late last year.
Citizens’ rates for high-value condo buildings aren’t subject to the 10 percent cap on annual rate increase for its other policies and they don’t have to be approved by regulators. But the rates may be lower than those charged by private insurers in part because Citizens doesn’t have to earn a profit or advertise and it doesn’t have to buy reinsurance, catastrophe backup coverage, and can instead charge fees after a storm to help pay claims.
To compensate for that, Citizens included in its recommended rates “expenses based on industry data rather than Citizens’ actual” costs and costs for reinsurance similar to what private companies pay. It also built in a 10 percent “contingency load,” which private insurers typically include in rates to address unforeseen risks.
The insurer’s employees wrote in a report about the proposed rates that “consideration was also given to policyholder impact from the rate change.”
Citizens’ underwriting and actuarial committee meets at 2 p.m. today to discuss the rates. Information about the meeting and how to tune in is available on Citizens’ website.
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