House, condo owners face spikes of 30% or more
By Charles Elmore
Palm Beach County’s southern coast might have been spared a direct hurricane strike in recent years, but residents are getting pounded by an insurance maelstrom only growing in intensity as the start of storm season approaches June 1.
Home insurance costs for many are spiking 30% or more, agents say — and even doubling or tripling for some condo dwellers.
“They’re obviously in a lot of shock,” said Steven Kirstein, owner-agent at Kirstein Insurance Services in Boca Raton, describing the customer reactions he is encountering. “No one likes it.”
Insurers are not renewing tens of thousands of policies. Two have gone out of business since February alone. And those remaining are often demanding tough new terms or vastly scaling back what they will cover.
Further shrinking the options: The state’s insurer of last resort, Citizens Property Insurance Corp., does not cover properties worth more than $700,000. Given the rocketing surge in home values, that leaves fewer and fewer properties eligible near the coast. Owners must scramble for whatever they can find — such as “surplus lines” insurers, whose rates are not regulated by the state.
Condo owners can feel the pinch in multiple ways. They might pay not only for policies to cover the contents of their individual units, but also assessments to a condo association to handle insurance for outer structures and common areas and the cost of any improvements made to those.
In Delray Beach, downtown condo unit owners including Vern Torney felt stunned to realize association assessments could roughly double from $530 per month to more than $1,000. That prospect arrived suddenly after an insurer threatened not to renew coverage unless owners replaced metal roofing about 20 years old, he said.
People who lived there thought the roof was fine and even understood it was supposed to last up to 50 years, only to have the insurer insist on the change before hurricane season. That left owners scrambling to assess their options, such as how to pay for it, late into April.
“‘Sticker shock’ fits here,” Torney said. “It’s also sort of out of the blue. Just a few months ago we didn’t realize the insurance company was not going to renew us. We were just blindsided on this roofing project and the cost of it. It’s very disruptive.”
Conditions have become so jarring that state legislators plan to meet in a May 23-27 special session to address property insurance, though it is far from clear if there is an easy fix or consensus on what to do.
From climate threats to contractor lawsuits to soaring property values to inflation in construction and repair materials, a host of issues are swirling together at once for the insurance industry and its customers in Florida.
The stream of Palm Beach County customers flowing into Florida’s last-resort insurer, Citizens, shot up 57% in one year to more than 87,000 by mid-April.
“The Florida property insurance market is in crisis and on a trajectory toward collapse,” said Mark Friedlander, Florida-based director of corporate communications for the industry-funded Insurance Information Institute.
The average home premium in Florida, about $3,600, is the highest in the nation, and it rose 25% in 2021, compared to 4% nationally, he said. The state is projected to average 30% to 40% increases in 2022, he said.
State-run Citizens is adding more than 6,000 policies a week and recently passed 800,000 customers statewide, President Barry Gilway said. He expects Citizens to swell to more than 1 million customers by year’s end.
“Policyholders in southeast Florida continue to see a very tight market, with many private companies non-renewing policies or placing further restrictions on what they will cover,” Citizens spokesman Michael Peltier said.
Owners of single-family homes pay Citizens an average of $3,806 annually in Palm Beach County, up about 8% from last year. Condo residents pay an average of $1,398 to cover the contents of their individual units, a 10.8% rise from 2021.
That’s just a county average. Premiums can run higher near the coast.
Citizens seeks max increase
Buckle up for more. In its latest rate filing, Citizens seeks permission from regulators to raise premiums close to 11% statewide, its legally allowed maximum, by August.
Citizens officials said they posted a $166.5 million underwriting loss last year, though the company’s investment portfolio more than offset that to produce net income of $81.1 million. The insurer also has $6.5 billion in reserves to help cover future claims.
Not every private insurer has proved to be so stable in a Florida market heavily reliant on smaller, homegrown companies. In February, St. Johns Insurance Co., with 160,000 customers, became the fifth Florida-based insurer to be liquidated since 2019.
That was followed in March by an order of liquidation for Avatar Property & Casualty Insurance Co., affecting more than 37,000 customers.
Then came reports Lexington Insurance Co., which specializes in covering homes worth $1 million or more, is pulling out of Florida. That affects an estimated 8,000 affluent customers. A company spokesman did not respond to a request for comment.
While no major hurricane has recently hit the most heavily populated southern end of the state, storms have made landfall in other places including the Panhandle.
Fix eludes lawmakers
Incandescent real estate sales along Florida’s southeast coast during the pandemic have sent home values to record highs. Supply-chain issues have pushed up the cost of construction materials. That means properties can quickly get much more expensive for insurers to repair or replace.
Meanwhile, the Surfside condo collapse near Miami last year brought renewed attention to risks for seaside structures, which were already under scrutiny as communities weighed how to respond to rises in sea level and other climate issues. State lawmakers failed to reach agreement in the spring’s regular legislative session on a range of insurance, safety and inspection proposals.
Many insurers have been trimming their risks in coastal counties. Homeowners Choice Property & Casualty Insurance Co., for example, entered 2022 with 12,485 customers in Palm Beach County, down from 14,020 a year earlier, according to a state database.
Then there are the financial ripple effects of weather catastrophes in other parts of the nation and world, affecting the cost of reinsurance — insurance that insurers buy — and insurers’ overall appetite for risk.
“Insurance rates continue to climb as home prices increase and unexpected events like tornadoes continue around the country,” said Bill Sample, senior loan officer for Choice Mortgage in Boca Raton. “It is going up like everything else unfortunately.”
That’s why insurance agents are having more difficult conversations than they might prefer lately.
“It happens every single day,” Kirstein said.
Mary Hladky contributed to this story.
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Mention should surely be made of the massive amount of fraud and litigation that is a huge contributor to the issues. Florida's insane legal setup for insurance disputes, even after some partial reforms, is generating enormous legal costs. Turns out all the "free roofs" folks have been getting, after responding to a billboard encouraging them to file a claim vía a lawsuit, are not free after all. We are all paying, not just for the "free roofs" but for the lawyers and the adjusters as well.