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Insurance rates weigh heavily on homeowners
By Paige St. John
Published: Sunday, December 26, 2010 at 1:00 a.m.
Last Modified: Sunday, December 26, 2010 at 12:02 a.m.
Even before recent rate increases, parts of Florida had become the most expensive places in the world to insure a home.
And now, with the state still locked in an economic downturn, the burden is growing heavier.
In Monroe County, Florida regulators have approved private insurance rates as high as $13,000 a year on a $150,000 house -- more than a standard mortgage.
Premiums elsewhere on the coast, including in Sarasota County, have doubled and tripled in the last five years.
"How much longer will I be able to afford to live here?" asked Scott Snyder, a Sarasota homeowner who since 2003 has bounced between four insurers, including one that failed, while his premium climbed from $1,350 to $2,644.
The crisis is worse than you know.
A Herald-Tribune analysis of quarterly policy data shows more homeowners have lost coverage in the past five years than after Hurricane Andrew, the biggest disaster in state history.
Even with backup coverage available from the state, there are 200,000 fewer homes insured today by a regulated carrier than five years ago.
Those remaining in the private market pay more for less coverage: Deductibles for hurricane damage have doubled or more for the vast majority of policyholders. Policy exclusions have expanded to include pool cages. Now carriers are rapidly dropping sinkhole coverage, requiring homeowners who want it to buy it back at a separate price.
"People have accepted, sadly, the premiums they are now paying and are not yelling and screaming as they were in the past," said Sen. Mike Fasano, a New Port Richey Republican who opposes proposals to ease regulation of home insurance rates.
"But that doesn't mean we don't have a crisis right now."
The rate increases have been driven largely by changes in how property insurance works in Florida.
As national carriers fled the state, Florida has encouraged the growth of small start-up companies that operate with little capital and rely largely on offshore reinsurers to carry their hurricane risks.
The trade is expensive. To attract investors, reinsurers charge five to 10 times more than they expect to lose.
The result is a dramatic increase in the amount of Florida premium shipped offshore, out of reach of regulators and policyholders.
In its yearlong investigation, the Herald-Tribune found some Florida insurers continuing to pay more than 50 cents for $1 of offshore protection, a bill that comes due again each year.
Florida insurance companies have little choice but to pay such rates because they do not have enough capital to survive a hurricane on their own.
"The guys getting the money are not in Ormond Beach. They are in Bermuda and London," said Locke Burt, a former state senator and president of Security First Insurance.
"We can't control reinsurance. We have to just pay it."
http://www.heraldtribune.com/article...p=all&tc=pgall
By Paige St. John
Published: Sunday, December 26, 2010 at 1:00 a.m.
Last Modified: Sunday, December 26, 2010 at 12:02 a.m.
Even before recent rate increases, parts of Florida had become the most expensive places in the world to insure a home.
And now, with the state still locked in an economic downturn, the burden is growing heavier.
In Monroe County, Florida regulators have approved private insurance rates as high as $13,000 a year on a $150,000 house -- more than a standard mortgage.
Premiums elsewhere on the coast, including in Sarasota County, have doubled and tripled in the last five years.
"How much longer will I be able to afford to live here?" asked Scott Snyder, a Sarasota homeowner who since 2003 has bounced between four insurers, including one that failed, while his premium climbed from $1,350 to $2,644.
The crisis is worse than you know.
A Herald-Tribune analysis of quarterly policy data shows more homeowners have lost coverage in the past five years than after Hurricane Andrew, the biggest disaster in state history.
Even with backup coverage available from the state, there are 200,000 fewer homes insured today by a regulated carrier than five years ago.
Those remaining in the private market pay more for less coverage: Deductibles for hurricane damage have doubled or more for the vast majority of policyholders. Policy exclusions have expanded to include pool cages. Now carriers are rapidly dropping sinkhole coverage, requiring homeowners who want it to buy it back at a separate price.
"People have accepted, sadly, the premiums they are now paying and are not yelling and screaming as they were in the past," said Sen. Mike Fasano, a New Port Richey Republican who opposes proposals to ease regulation of home insurance rates.
"But that doesn't mean we don't have a crisis right now."
The rate increases have been driven largely by changes in how property insurance works in Florida.
As national carriers fled the state, Florida has encouraged the growth of small start-up companies that operate with little capital and rely largely on offshore reinsurers to carry their hurricane risks.
The trade is expensive. To attract investors, reinsurers charge five to 10 times more than they expect to lose.
The result is a dramatic increase in the amount of Florida premium shipped offshore, out of reach of regulators and policyholders.
In its yearlong investigation, the Herald-Tribune found some Florida insurers continuing to pay more than 50 cents for $1 of offshore protection, a bill that comes due again each year.
Florida insurance companies have little choice but to pay such rates because they do not have enough capital to survive a hurricane on their own.
"The guys getting the money are not in Ormond Beach. They are in Bermuda and London," said Locke Burt, a former state senator and president of Security First Insurance.
"We can't control reinsurance. We have to just pay it."
http://www.heraldtribune.com/article...p=all&tc=pgall
Florida has gotten off relatively easy since the last round of hurricanes hit in 2005. Think what the rates would be if they'd had another Katrina type storm!
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