Florida Owners Could See Potential Surcharge on Property Insurance Policies

Gayle Kurtzer-Meyers

Florida property owners could be assessed a surplus charge on their policies.Photo byg/felixmizioznikov for Shutterstock.com

You may have noticed that property insurance in Florida has been becoming increasingly complex and challenging for policyholders. Recently, the Sunshine State of Florida has been hit hard by natural disasters, including devastating hurricanes and floods, significantly damaging homes and properties.

Floridian homeowners started to worry about their housing claims soon after the Governor of Florida, Ron DeSantis, declared insurance insolvency of Citizens and inability to pay all claims from a major disaster. Addressing WZVN TV 7 news in Naples, he said, "I think most people know Citizens has not been solvent. If you did have a major hurricane hit with many Citizens property holders, it would not have much to pay out."

How solvent if a storm hits

Remember, Citizens Property Insurance Corp. is a government entity that provides insurance policies for homeowners who cannot find affordable coverage elsewhere. Surprisingly, Citizens Property Insurance Corps, the state-run insurance company, secured over 1.2 million homeowner policies last week. But still, Floridian tackles the question; is there enough funding if a storm hits?

According to Florida Optional Reinsurance Assistance (FORA), hurricane Ian's insured losses, including flood damage, have been clocked at more than $60 billion by some estimates. After the head-scratching comments of DeSantis, many house owners are complaining that their home repairing process is delayed as they have received little or no payouts on their insurance claims. Additionally, Citizens Corporation has limits coverage to $700,000 per home in most parts of the state, which means most of the house owners' claims can only be partially covered.

Many property owners are concerned about what will happen in the event of another disaster.Photo byJohn MiddelkooponUnsplash

Citizens Insurance could levy a surcharge on policyholders.

There has always been a risk of a sudden increase in your premiums after a significant statewide disaster for Citizens' policyholders. Besides that, Citizens saves a certain percentage of its premium income to pay for future storm claims, but a catastrophic storm or hurricane could wipe out all those reserves. Consequently, which makes Citizens Insurance levy surcharge called assessments on policyholders, the deficit in accounts is eliminated.

Assessments On Property Insurance

Media Relations Manager of Citizen, Michael Peltier adds in favor of DeSantis, "The governor is correct in that if Citizens exhausts its surplus and has a deficit, we are required to levy assessments on our policyholders and most other Florida insurance consumers." Likewise, many property insurance experts expect a significant influx of surcharges on house owners.

The assessments are believed to charge policyholders up to 45% of their policy premium. In other words, if you pay a bonus of $1,000, you could face a rise of $450 one-time surcharge on top of your premium.

Although, policyholders outside South Florida may experience a decrease in rate. However, near the South Coast, such as Miami, vulnerable areas are projected to face rate hikes of about 10% yearly.

On March 31, 2023, the FIGA (The Florida Insurance Guaranty Association) Board of Directors approved a 1% emergency assessment on its members. This FIGA's emergency assessment could surcharge 70% of the evaluation on their policyholders from January 1, 2023, to December 31, 2023.

A significant influx of surcharges in the insurance industry

Citizens Property Insurance has seen a significant influx of 1.2 million customers in the last two years. "It has become the primary insurer in many places," said the president of Palmer Insurance Agency, Josh Palmer. Furthermore, it has been declared by UPC (United Property And Casualty Insurance Company) that insolvency in Florida after losses from Hurricane Ian and storm damage increased to $1.5 billion, which is about $500 million higher than previously projected by the insurer. Unfortunately, the funds are dangerously low, which means

  • If Citizens need more money to pay claims, the customers can be assessed up to 45% of their current premium.
  • If more money is needed, then Citizens can assess all homeowners in the state up to 2% through their insurance carrier.
  • If more is needed, they can assess every insurance policy up to 30% for several years, including renters and auto insurance.

Steps toward controlling risk

"The arrangement is set up is that Citizens would use its $6.7 billion surplus to back up claims that were, you know, that would, that would be maybe affected by an insolvency." -Michael Peltier, Citizens Spokesperson.

The two significant steps I gathered from the meeting toward controlling the risk of levying extra charges involved tax-exempt measures and Lightning Re Ltd. (Series 2023-1).

Tax-exempt surcharge

Floridian insurers must pay a state tax of a 1.75 percent surcharge for each policy. Citizens being a tax-exempt organization, these 1.75 percent surcharges will be utilized in financial resources to pay claims.

At the Friday afternoon Citizens' Board of Governors' meeting, the board approved the corporation to secure an extra $500 million in reinsurance protection. Moreover, the Citizens' Board of Governors voted to spend more than $170 million over the next three years on $500 million in reinsurance bonds. Staff members assumed that would help the insurer avoid an assessment of policyholders.

Lightning Re cat bond March 2023

This new Lightning Re Ltd. (Series 2023-1) catastrophe bond features an industry loss trigger to provide significant coverage to avoid Citizens' higher-than-market rates and reduce future reinsurance costs. Sources said the index attachment point would be $51.5 billion of aggregate losses. In comparison, the cat bond would exhaust its coverage at an index value of $66 billion, with a $2 billion per-event franchise deductible in effect. In addition, Florida Citizens more than doubled the target size for this new cat bond, with between $400 million to $500 million of reinsurance now sought from the issuance. At the same time, the price guidance has been reduced from 11% to 11.5%, indicating strong investor demand and execution.

Citizens staff added that if Citizens stepped away from the Lightning Re deal now, the insurers would likely risk losing support from the cat bond market. However, Citizens Chairman of the Board Carlos Beruff disagreed by saying, "To me, it's throwing money, you know, in the garbage."

At the end of the emergency board meeting on Friday, Citizens' governors voted 5-2 to endorse the Lightning Re bond plan.

What can you do as a policyholder?

Citizens' 2023 budget indicates it will have $407 million in net income this year. If approved, the surcharge could add high costs to policyholders struggling to make ends meet. In addition, your current premium could be surcharged as much as 45%. One solution to avoid extra charges on premiums is to find a home insurance policy in a standard admitted market. While your current Citizens policy could be less expensive now, it could cost you a lot of money in the future. However, it is your only option, and it is better to be insured than uninsured.

Insurance experts advise that you should wait to take immediate action. However, it does not hurt to shop around if you are concerned about rising rates.

"It's always worth calling your insurance agent. Get several new quotes, and shop the policy. Although it could be very challenging to find rates better than citizens,." Mark Friedlander, Insurance Information Institute's Director


In conclusion, the potential surcharge on policyholders in Florida by Citizens Insurance is a cause for concern. However, there are ways you can manage the possible assessment and explore alternative insurance options to reduce costs. It's essential to stay informed and keep an eye on any updates or changes in the insurance industry in Florida to make informed decisions about your coverage.

"The problem is, we're in the market now, and if we pull out of the market right before pricing,then we're going to have a hard time going back into that same market and expecting them to get on board again and go through this again.So probably we'd not have the capital market opportunity this year." -Jennifer Montero, Citizens CFO.

This article is for informational purposes only. It should not be considered financial, insurance, real estate, or legal advice. The market fluctuates; therefore, not all information will remain the same. Consult an attorney before making significant decisions.

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I am a Licensed Community Association Manager for the State of Florida and a published author. My top articles are about Florida RE, property management, and the many beautiful venues and activities available in the Sunshine State. Thank you for reading my work and joining me on the journey.

Kissimmee, FL

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