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Rate Cap Awaits Governors Signature

May 27th, 2009 by flanews

With just five days until hurricane season, legislation to lessen the states exposure is still awaiting the governors signature. The bill will allow state run Citizens Property Insurance to raise rates 10 percent a year. As Whitney Ray tells us, charging Citizens customers more will lighten the burden on the state, and private insurance customers if a big storm hits.

The state has promised to back more than 400 billion dollars in hurricane exposure through Citizens Property Insurance, but Citizens customers only contribute two billion dollars in yearly premiums. Floridas Chief Financial Officer says thats a problem.

Certainly a category 3 storm hitting a heavily populated area in our state is going to wreak havoc, cause billions of dollars worth of damage and then will put us into a financing situation, said Sink.

If Sinks scenario played out everyone will have to pay more.

Citizens policyholders could see their rates increase up to 45 percent and then assessments on everyone elses homes, and even their cars, could go up by 18 percent. Part of the problem is Citizens rates have been frozen since 2007.

Their rates arent actuarially sound, theyre too low. To raise them where they need to be would be too much it would be 40 to 50 percent possible, said NAIFA Florida Spokesman Bob Lotane.

Legislation to cap the increase at 10 percent a year is awaiting the governors signature. Crist is likely to sign the bill, even though he thinks the risk to the state has been exaggerated.

I think we are in pretty good shape, Crist said.

A ten percent a year increase will slowly force people out of Citizens, and increase the chances Florida can keep its promise to the customers who remain. The legislation also allows the state to decrease the amount of money in the Florida Catastrophe Fund. Decreasing the fund would force insurance companies to buy reinsurance from the private market and pass some of the cost on to consumers

Posted in Charlie Crist, Hurricane Season, Insurance, Legislature, State News | No Comments »

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