Actuaries Learn About Florida Property Insurance Challenges

Exposed to devastating hurricanes and a surprising influx of sinkholes, Florida may have the most challenging market for homeowners insurance in the nation, panelists told members of the Casualty Actuarial Society Spring Meeting, held in Palm Beach last month.

A panelist from the state’s largest insurer said his company wants to shrink. Another, from one of the state’s smaller insurers wants his company to grow. Both agreed the market is an extraordinary one to negotiate.

Trying to grow are companies like Security First Insurance Co., where panelist W. Lockwood Burt is president. But it’s a challenge, he said. “You have to operate in an environment that is demanding and constantly changing.”

Burt’s company concentrates on newer homes more than five miles inland, particularly in the central part of the state. The company breaks its portfolio down to 17,000 discrete units, divided by zip code, whether the building is wood or masonry, and how old the property is. Those 17,000 units are monitored for changes daily and assessed for profitability every four months.

Trying to shrink is state-run Citizens Property Insurance Corp., the state’s largest insurer, where panelist Yong Gilroy is chief insurance officer. This year Citizens is growing by 3,400 policies a week, as State Farm Insurance has cut back and three smaller carriers were taken over by the state.

“We want to be the insurer of last resort,” Gilroy said.

But depopulation wouldn’t be easy, Gilroy said. The risks Citizens holds are ones the private market is reluctant to accept. In addition to high-risk coastal properties, Citizens also insures a large number of mobile homes and older buildings.

The state legislature has held Citizens’ rates in check since 2007. Its rates were capped from 2007 to 2009.

Both panelists agreed Citizens’ policies are underpriced. By 2010, Citizens’ actuaries indicated the company needed a 55.9 percent increase. Its rates rose 9.4 percent overall, with no policy getting an increase above 10 percent.

Meanwhile, private insurers’ rates have risen faster. The 10 largest private insurers increased rates 15.6 percent in 2010.

It’s not just hurricanes that make Florida property insurance tricky, said Burt. “Between January and June, the legislature can change the rules – and they do,” he said. “And from June to December, Mother Nature can change the rules.”

Topics Florida Carriers Property