Florida Homeowners Rates Could Triple, Citizens Warns

Mr. Riker was describing the indication from a two-part rate filing for Citizens during a session on catastrophe management at the 17th Annual Property-Casualty Insurance Conference, held recently in New York.

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 cannot get an adequate price [and] we can't compete with the FAIR plan," the insurer said.

Mr. Riker responded that "the best thing we can do is to keep pushing to get a better rating structure in place," adding, "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-to-16 percent hike based on Citizens' usual formula 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 of that rate as we can," he said, explaining that the second filing is for the balance of the actuarial indication.

Insurer of last resort says premiums statewide might rise 60 percent on average