Citizens Insurance coverage limits hitting South Florida homeowners the hardest

'Florida’s property insurance market is facing a crisis not seen since the collapse of the market after Hurricane Andrew,' one expert says.

In an aerial view, homes are under construction in the Coconut Grove neighborhood on Feb. 18, 2022 in Miami. Miami is now the least affordable housing market in the nation, passing New York City.

In an aerial view, homes are under construction in the Coconut Grove neighborhood on Feb. 18, 2022 in Miami. Miami is now the least affordable housing market in the nation, passing New York City. Photo by Joe Raedle/Getty Images

For a growing number of Florida homeowners, Citizens Property Insurance – the state’s “insurer of last resort” – is the only affordable policy available. Now, many of these homeowners are facing a problem: They’re receiving notices of non-renewal because the replacement values of their homes increased in value to more than $700,000. 

It’s not like homeowners can take a pass: If you have a mortgage, you must also have homeowners’ insurance. In a state often plagued by hurricanes, it’s a must have. But in all Florida counties except Miami-Dade and Monroe, if the replacement value of a home increases to more than $700,000, it’s no longer covered by Citizens. (In those two southernmost counties, the replacement value is $1 million.) 

Lawmakers didn’t want Citizens to be insuring McMansions and other expensive homes so they capped the value of homes covered. Because of economic factors beyond the control of most families, however, a growing number of homeowners, politicians and insurance executives now are asking the Office of Insurance Regulation and the Florida Legislature to raise the eligibility cap for the rest of Florida, according to Citizens spokesperson Michael Peltier.

Here’s why: When homeowners get a notice that Citizens will no longer offer them homeowners’ insurance, they’re forced to look for coverage from carriers that, if they can find it, charge much higher rates and may not provide as good coverage. “We encourage our policyholders to talk with their agent to check out their options,” Peltier says. Otherwise, homeowners have to show they still fall under the home value cap to stay with Citizens. “If it is properly documented, we will accept it,” Peltier adds.

The $700,000 amount doesn’t necessarily mean this is a problem that only affects the well-off. In South Florida especially, there have been dramatic increases in the market values of homes. For example, there has been a 46% increase in Broward County from last year to this year in the number of homes valued at more than $700,000, according to Citizens records. In Palm Beach County, the increase was 65 percent. “The replacement value of home changes by region,” Peltier says.

Another insurer is calling it quits in Florida

Insurance woes in Florida increased this week as Bankers Insurance Group decided to leave the state's insurance market, the latest in a long line of insurers that has given up on the Sunshine State in recent months. And on Wednesday, the Florida Office of Insurance Regulation said it was establishing a temporary arrangement for reinsurance – insurance for insurers – through Citizens "in the event of disruptive financial rating downgrades."

The "unprecedented solution would allow insurers to meet an exception offered by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to ensure Floridians can maintain coverage during hurricane season," the office said in a bulletin. In other words, the state will pay any claim by a homeowner covered by an insurer that goes belly up this year through the end of the current hurricane season on Nov. 30. 

“Florida’s property insurance market is facing a crisis not seen since the collapse of the market after Hurricane Andrew 30 years ago," Logan McFaddin, vice president of state government relations for the American Property Casualty Insurance Association, told City & State. "Seven insurers have gone insolvent in the last two years even though Florida has not experienced a direct hit from a hurricane since 2018. Many other insurers have been unable to renew existing policies, restricted new business, and cancelled some existing policies mid-term, leaving hundreds of thousands of policyholders seeking coverage with limited options in the marketplace."

State Rep. Robin Bartleman, a Weston Democrat, says she’s received several phone calls from people who had been denied coverage by Citizens. The insurer, which is adding a mind boggling 8,000 new policies a week, has roughly 977,000 policies as of July 22, up from 754,000 policies on Jan. 1 – an almost 30% increase, according to Peltier. 

“People are shocked to find out the cost to build their house,” Bartleman says. “I cannot believe it costs more in Miami-Dade to rebuild than in Broward. I don’t think there is a difference in the Broward and Miami-Dade market in cost. We need to look at what is taking place with Citizens and home insurance because the problem will only get worse.”

How we got here 

When Citizens began in August 2002, there was no eligibility limit. The goal was to provide home insurance for people who could not afford it in the private market. Then lawmakers found out more than 5,000 homes valued at over $1 million were being insured by Citizens. These homes were owned by people who could afford to buy insurance on the private market. By 2013, legislators realized there were 1.5 million Citizens policy holders and many of those could be getting insurance on the private market.

During a special session earlier this year, lawmakers didn’t directly address the growth of Citizens and its premiums. They did make changes that involve the broader market, such as allowing insurance policies to include new deductibles for roof damage, imposing restrictions on insurers that seek to refuse to write or renew policies based on the ages of roofs and placing additional restrictions on what are known as “bad faith” lawsuits against insurers.

But Bankers, for instance, said in a statement that those recent legislative measures "unfortunately failed to adequately address the immediate financial challenges faced by property and casualty insurers, including combating fraud and litigation which exponentially outpaces every other state."

Last month, Citizens President and CEO Barry Gilway told the Consumer Services Committee of his company’s Board of Governors he hopes the changes will “stabilize the market.” He primarily pointed to part of the legislation that set aside $2 billion to provide additional reinsurance for other firms that otherwise might not be able to buy the crucial backup coverage on the private market. 

But Gilway added that most insurance-based legislation that passes doesn’t have “a real impact” until it goes through the entire insurance policy cycle, “which as you know, is a minimum of 16 to 18 months … So nothing immediate,” he said.

The legislature and governor set a $1 million eligibility cap and also a provision to reduce the cap by $100,000 each year to $700,000 by 2017. This law allowed the Office of Insurance Regulation to keep the cap at $1 million in counties that were found to have a lack of competition. It found that there was little competition in Monroe and Miami-Dade counties.

What happens next will be up to the Legislature and the Office of Insurance Regulation, Peltier says. “They make the decision on what will happen with caps.” But state Rep. Chip LaMarca, a Lighthouse Point Republican, wants to raise the limit to $1 million to rebuild: “If you have a house that costs over $700,000 to replace you can’t get insurance or it is very hard to get insurance.”

And the Florida Association of Insurance Agents also supports Citizens raising the cap to $1 million because it helps consumers who don’t have any other options, says Kyle Ulrich, the organization’s president & CEO. “While it won’t have an impact on the competitiveness of the insurance market, this is a reflection of the unique situation we find ourselves in,” he says. 

The News Service of Florida contributed background to this story. 

David Volz has been a reporter for numerous community news publications throughout South Florida over the past two decades, as well as the South Florida Sun-Sentinel, Miami Herald and South Florida Business Journal. He covers city government, schools, sports, culture, faith groups and workplaces.

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