Fla.’s Citizens Begins Offering Commercial Multi-peril

The Florida Office of Insurance Regulation approved a new multi-peril commercial insurance program for Citizens Property Insurance Corp.

The new multi-peril product provides up to $2.5 million in coverage. The policies will cover damage from wind as well as fire and other perils traditionally included in a commercial property insurance policy. The state has approved the policy forms and rates for Citizens to proceed with its program no later than Jan. 1, 2008.

Earlier this year, the Florida Legislature authorized Citizens to assume the policies of the Property and Casualty Joint Underwriting Association and to create a plan to offer commercial insurance to businesses.

“Adding Citizens to the mix of companies writing commercial multi-peril insurance is good for the competitive market,” said McCarty. “Everyone is familiar with Citizens, but this is an important step, because it is the company’s first coverage offering away from what had been its main niche of offering homeowners insurance statewide and commercial wind-only insurance only in the high-risk areas of the state.”

The OIR also approved a 15 percent rate increase for commercial wind-only policies. Effective Jan. 1, the increase will bring the cost of Citizens’ wind coverage closer to the cost of the wind portion of the coverage offered by private insurers in the rest of the state.

“Although no one likes to see a rate increase in our state’s current insurance climate, Citizens needs additional rate in order to better ensure its ability to pay commercial claims,” McCarty said.

Citizens Communications Director Rocky Scott said Citizens originally requested an average 300 percent rate increase, arguing that its commercial multi-peril rates had gone unchanged since 1980. He said legislation passed in 2005 legally requires insurers to charge actuarially sound rates and that the average 300 percent increase would have accomplished that mandate.

The OIR sets Citizens rates, as opposed to the voluntary market where the state regulators either approve or deny rates.

Jeff Grady, president of the Florida Association of Insurance Agents, said the Citizens increase equates to homeowners subsidizing businesses. Frustrated by the process but glad that the OIR only allowed 15 percent this year, Grady said, “At some point you have to recognize the difference between businesses and homeowners.”

Citizens completed two parts of a three-part plan by June: It assumed the policyholders of the PCJUA, and then it began to sell its temporary wind-only policy for businesses that are not located in the high-risk or “wind pool” area.

The third part of the plan was to develop a program that offers multi-peril property coverage for businesses throughout the state. Citizens filed its forms and rates in September to accomplish the plan’s third step.

As Citizens begins selling its new commercial multi-peril policy state-wide, the OIR also ordered it to stop selling its wind-only policies — business it had assumed from the PCJUA — in areas of the state outside the high-risk coastal areas. Citizens still offers wind-only coverage in the coastal “wind pool” area.