Allstate’s Castle Key Plans to Drop 33,000 Condo Policies in Florida

At least one of Allstate Insurance group’s Florida subsidiaries plans to non-renew 33,000 Florida condominium policies, starting in June.

In a notice sent to Florida agents this month, Allstate said its Castle Key subsidiary had sent a letter Jan. 11 to the Florida Office of Insurance Regulation about dropping the coverage. The letter was marked “trade secret,” so details about the policies were not made public by the OIR.

Allstate, which changed the name of its Florida subsidiaries in 2009, did not indicate if Castle Key Insurance Co., Castle Key Indemnity Co., or both, are included in the action.

“The entire industry is experiencing significant cost pressures,” due to more-frequent storms and higher cost of repairs, reads the bulletin from Caren Latona, Allstate’s Central East Zone sales director, and Shannon Bauer, Southeast regional sales manager.

“We proposed pausing renewals on select condominiums in Florida because the cost to insure those homes greatly exceeds the price of their policies,” Allstate’s news media team said in an email.

The OIR may still disapprove the withdrawal, but Allstate’s memo to agents sounded confident that regulators would allow it. The carrier said it will provide customers with the required 120-day notice prior to non-renewal dates. Agents may continue to write condos through Citizens Property Insurance Corp., the memo added.

The move is another squeeze on Florida condominium owners, which have seen other carriers non-renew, raise premiums, or require more inspection and safety data in the wake of the 2021 collapse of the Champlain Towers South near Miami Beach. The late-night collapse killed 98 people and led to significant legislative reforms, requiring more frequent inspections and more repair funding to be reserved by condominium associations.

Castle Key, which can be written only by Allstate agents, does not write master condo policies, so condo associations are not affected, but unit owners’ personal policies will be, explained Travis Moore, a consultant who represents condominium interests.

Unit owners could soon see higher premiums. By moving to Citizens, condo units will now face the added cost of flood insurance. Senate Bill 2A, adopted in the Florida Legislature’s special session in December, now requires all Citizens policyholders to also obtain flood insurance, regardless of elevation.

As of the third quarter of 2022, Castle Key Insurance and Castle Key Indemnity reported a combined total of 322,504 policies in force in Florida and $462 million in total written premium, according to the Florida Office of Insurance Regulation. Castle Key Indemnity was ranked the seventh-largest property insurance carrier in Florida for Q3 last year, according to OIR data.

The news may not be surprising, after Allstate Corp. said last fall that it had incurred a net loss of $694 million for Q3. All of it has raised concerns in the industry that more nonrenewals by Allstate or other carriers may be coming in 2023.

The news marks at least the seventh major carrier to non-renew policies in Florida’s distressed insurance market since late 2021. That includes six insurers that have gone insolvent and one that is in an orderly runoff. Last June, Allstate announced it was suspended writing new Florida condominium business, Florida’s former deputy insurance commissioner, Lisa Miller, reported.

Senate Bill 2A and previous reforms are expected to stabilize the market, reduce reduce litigation costs, and help prevent further market withdrawals from the Florida market. But officials have said it may be another year or two before the full effect is felt.

Just before the nonrenewal announcement, Castle Key Indemnity Insurance also filed for 14.9% rate increase for its condominium program.