Florida Keys News
Thursday, February 21, 2013
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FIRM studies Citizen rates
Says insurer's risk model 'exaggerated'

More than two weeks before the deadline to respond, five companies have already told Fair Insurance Rates for Monroe that they're interested in undertaking a planned study of windstorm insurance rates in the Keys, FIRM announced at an informational meeting Tuesday at the Murray E. Nelson Government Center in Key Largo.

FIRM put out a solicitation for the estimated $485,000 study on Feb. 8, with responses due on March 8. Though FIRM will oversee the study, it is to be financed by the state-run Citizens Property Insurance Corp., which holds 91 percent of all windstorm policies in the Keys, according to FIRM.

Leaders of the grass-roots advocacy group believe the study will confirm that the risk models Citizens uses to set insurance rates in the Keys are exaggerated.

If that prediction turns out to be true, they believe the risk analysis could lead to a drop in Citizens' local rates, which are the third-highest of any county in Florida. Even better, private insurance companies could decide to re-enter the Keys market.

"We believe that getting an accurate risk analysis for the Keys will help us find options that won't rely either on the state or on Citizens Property Insurance," FIRM President Heather Carruthers, who is also a Monroe County commissioner, said at Tuesday's meeting.

She also said she expects several more companies to enter the fray ahead of the March 8 deadline to submit qualifications to conduct the windstorm risk analysis.

The five companies that have stated an interest are Risk and Reliability Engineering, Aon Benfield, AIR Worldwide, GLE Associates and Wingerter Laboratories Inc.

The analysis, which FIRM expects to complete in November, will come as Citizens continues efforts to reduce its insurance rolls while increasing rates.

Last year, Citizens implemented rules against writing policies for homes used as vacation rentals as well as homes valued at more than $1 million. The company is also no longer providing builder's risk insurance.

In addition, Citizens has begun pushing some policyholders over to private firms. Furthermore, the insurance carrier implemented an aggressive reinspection program last year, hitting more than 250,000 homeowners statewide and increasing premiums by an average of $800, according to a Miami Herald/Tampa Bay Times investigation.

Those increases came on top of a 10 percent increase on Keys windstorm premiums that Citizens implemented last year.

The cost-saving measures didn't extend to the company executive suite, however. Even while raising rates and slashing its rolls, company executives spent lavishly on travel, racking up $1.3 million in expenses between January and August of last year, according to a report from the Florida Inspector General's Office. In one example, CFO Sharon Binnun spent three nights at a Bermuda resort for $633 per night.

But even as news of the expenditures was reported across the state, Citizens President Barry Gilway was handing out handsome raises. Binnun's salary was bumped 14 percent, to $255,000, late last year. Other top Citizens executives received similarly large raises.

On Wednesday, Gov. Rick Scott called the raises "outrageous," according to the Herald/Times, and said they should be rescinded.

At Tuesday's meeting, Carruthers steered clear of discussing the insurance carrier's salary and travel expense debacles. But she did say that during the Florida legislative session that begins March 5, FIRM plans to fight new efforts to increase Citizens' annual cap on rate increases from the existing 10 percent to 13 percent.

The grass-roots organization also has enlisted Rep. Holly Raschein, R-Key Largo, to push for more availability of coverage in the Keys. In particular, FIRM would like to see Monroe County excluded from the new Citizens' directives not to write insurance for $1 million-plus homes, vacation rentals and builder's risk.

This month Raschein wrote Citizens' Gilway, asking him to resume builder's risk coverage in the Keys. She said she is anticipating the other exclusions to be addressed in a bill that House Insurance Committee Chairman Bryan Nelson, R-Apopka, is expected to submit.

Raschein has submitted a bill of her own that would reform the Florida Commission on Hurricane Loss Projection, including making the commission meet annually rather than every two years.

rsilk@keysnews.com

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