Florida officials are voicing their concern over assessments of a possible coverage shortfall made by the state’s homeowner’s insurance provider, Citizens Property Insurance.
The insurer has enough financial resources to cover $15 billion in property damage, or what they consider a one-in-50 year hurricane event. Damages beyond that point, however, would require the insurer to levy the accounts of policyholders to offset the deficit. Considering the frequency and severity of natural disasters of late, this news has lawmakers worried over what troubles the hurricane season has in store.
Citizen’s estimates hinge on a projected surplus of $5.7 billion by the end of the year, as well as $2.9 billion in bonds and an additional $6.6 billion in rebates from the Florida Hurricane Catastrophe fund. There may be shortfall in the company’s estimates, as there are many fluctuations that can affect such projections, but officials are adamant in their belief that the $15 billion goal will be reached soundly.
Should the insurer incur any deficit, policyholders will be called upon to help bear the financial burden in the form of a 15% surcharge levied against their account. If a customer owns more than one account, the surcharge will be applied to their additional policies up to 45% of their combined premiums.
Florida’s Legislature has long believed that residents of the state should take a more active role in shouldering the finances of the state-backed insurance company. However, lawmakers had hoped that the issue would be resolved through legislative means rather than the urgency inherent with the hurricane season.
In the case of a severe hurricane, it is unlikely that Citizen’s will be able to bear the brunt of the financial impact. While the company would not be put out of business by the disaster, thanks to growth in recent years, policyholders would have to expect higher rates along with account surcharges.
