Allstate’s Florida Company Defends 54% Condo Rate Hike. Blames Reinsurance, Hurricane, Rapid Growth

When Allstate’s Florida unit, Castle Key Indemnity Co., entered the surging condominium insurance market in 2020, it looked like it had made a smart bet: Within two years, the carrier had added no fewer than 123,000 policies.

Then came reinsurance price increases and $56 million in hurricane losses. That forced widespread underwriting changes, a pull-back on coastal properties and thousands of non-renewals over the next 36 months — along with six double-digit rate increases, company officials explained at Florida Office of Insurance Regulation rate hearing in February.

The largest of those HO-6 rate requests, for 53.5%, affected some 67,700 condo unit owners. Another use-and-file request landed in November, for almost 14%, and is pending approval.

“We now know the price for…Coverage A was too low for the amount of coverage we were selling,” Castle Key’s chief actuary, Samantha Steiner, said at the hearing. “This was not known at the time of opening the book of business but was quickly discovered after seeing rapid growth.”

The 53.5% increase, while one of the largest requested by Florida insurers in recent years, was not as great as Castle Key could have asked for. The actuarily indicated rate was 59%, the filing shows.

“We fully recognize the disruption that these rate increases have caused for our customers,” said Patrick Weil, director of product management for Castle Key. “However, appropriate rate levels are critical to ensuring we are properly positioned to protect our policyholders.”

Steiner and actuary Allison Newhouse noted that the steepest increases have been for property owners in coastal areas and for those with higher amounts of hurricane coverage. Some policyholders have seen premium increases as much as 94% since the 53.5% increase kicked in last May. Hurricane premiums jumped an average of 69% while non-hurricane premiums climbed about 52%.

The average annual condo premium went from $1,339 to $2,055 with the increase.

The actuaries’ explanation did not sit well with one policyholder. Tracy Chandler, the only person other than company officials and regulators to speak at the hearing, said her condo unit is not near the coast and does not have a big policy limit on hurricane damage.

“I’m on a fixed income and my premium went up by $7,000,” Chandler said. “That caused a $600 monthly increase in my monthly mortgage payment.”

Company officials declined to respond to the woman’s comments at the hearing.

Brokers and condo association advocates in Florida have echoed Chandler’s concerns in recent months, noting that condo associations have seen insurance premiums skyrocket while carriers have drastically reduced coverage limits, leaving many owners without coverage.

A bill that would have allowed the state-backed Citizens Property Insurance Corp. to cover condo buildings that have a large share of rental units failed to advance in the Florida Legislative session this year after Citizens officials opposed it.

Steiner also noted that the 53.5% rate increase includes the moderating effect that Florida legislative reforms have had on insurers’ costs. But, so far, that hasn’t amounted to much. She said that Senate Bill 2A, approved in late 2022 to limit attorney fees and stem the flood of claims litigation, had reduced Castle Key’s loss experience by just 4.9% by mid-2023.

House Bill 837, a sweeping tort reform package approved a year ago, also has produced relatively minor improvements, so far.

“We are extremely grateful and optimistic about the impact that reform will have,” she said. “However, for property insurance, in particular, we don’t feel it has had any additional benefits outside of SB 2A.”