Key findings

• The Milliman study shows that recently passed Florida legislation will mean that homeowners will pay less for property insurance. Motorists and small business owners will pay more if an average to large storm hits.
• The biggest beneficiaries will be homeowners living in southern coastal counties with estimated premium reductions reaching $1,096 in Dade County and $1,587 in Monroe County under a no hurricane scenario.
• Homeowners in non-coastal or northern counties will see only modest reductions in premiums, under a no hurricane scenario.
• Motorists receive no direct benefit from the legislation, but could see a net increase in 2008 assessments that range from $45 to $182 per vehicle, depending upon location, if an average to large storm hits. Total assessments for motorists could reach 20% of the total auto premium per year.
• Small business owners will receive no direct benefit from the legislation, but could see an increase in assessments ranging from $171 to $402 per year if an average to large storm hits.
• The approximately 30% of Florida households who rent will not see any direct benefit but could see their auto insurance costs rise if a storm hits.
• Under the new law, Citizens will suffer a deficit of $3.7 billion and the FHCF will suffer a deficit of $22.3 billion if a 1-in-25 year hurricane hits Florida.
• To pay for claims resulting from a large storm Citizens and the FHCF will likely have to raise capital in bond markets. The amount of total capital needed after a storm could be very large — as much as $26 billion from a 1-in-25 year storm to $69 billion from a 1-in-250 year event. A bond offering that large may take time to arrange, could negatively affect how quickly financial obligations can be paid, and may have to be guaranteed by the state, which could negatively impact the state’s credit rating.
• By reducing premiums in high-risk areas, future development in storm prone regions is made cheaper. Increased development of high-risk areas will raise losses from future storms, which will in turn increase future assessments and rates for all areas.
• To pay off losses from a large storm, consumers would be required to pay approximately 10 percent extra for up to seven years in the case of the FHCF and approximately another 10 percent for eight years in the case of Citizens. Consumers could be facing additional charges of about 20 percent for a number of years.
• If large storms hit in consecutive years, policyholders could face multiple additional charges on their policies and could see these charges exceed 20 percent and/or last for even more years than the seven to eight years projected by the Milliman report.