A Florida insurance executive heading the state's residual market insurer warned an industry conference that homeowners' premium prices for some coastal locations in 2006 could rise by triple digits.
Robert Riker, president and executive director of Citizens Property Insurance Corp. in Florida, the state's insurer of last resort, said, "We're looking at a statewide average increase…of 60 percent, with many coastal areas receiving triple-digit increases."
Mr. Riker, was describing the indication from a two-part rate filing for Citizens, Florida's, during a session on catastrophe management at the 17th Annual Property-Casualty Insurance Conference in New York on Friday.
His discussion came in response to a question from a frustrated audience member, who described himself as an executive from an insurance company in the Northeast. He asked whether Citizens had incentives in place to try to depopulate the residual market mechanism.
"We can not get adequate price [and] we can't compete with the FAIR plan," the insurer representative said.
Mr. Riker responded: "The best thing we can do is to keep pushing to get a better rating structure in place. That has to be appropriately applied, more importantly, to the voluntary companies," than to FAIR plans like Citizens.
With loss costs going up in catastrophe models, and rating agency analyses prompting reinsurers to set aside more capital for property catastrophe risks, "reinsurance rates are going to go up," he said.
If primary rates in the voluntary market can't rise also, the disconnect between what reinsurers will charge and what primary companies can charge will widen==and a FAIR plan like Citizens will grow, he said.
Noting that Citizens is trying to do its part, he said the insurer is calculating rates, for the first time, based on actuarial indications of loss costs, resulting in the 60 percent average indication.
"We expect a lot of discussion over that," he said, noting that, for this reason, the filing contemplates a two-phase increase, with a 15-16 percent hike based on Citizens' usual formula approach going through first. The ability to push that small increase through was viewed as "a sure thing," he said.
"But we will fight very hard to get as much as that rate as we can," he said, explaining that the second filing is for the balance of the actuarial indication.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.