Florida property insurers have another cost increase to manage after the Florida Hurricane Catastrophe Fund was approved for a premium increase.
The fund’s governing body, the State Board of Administration, this month gave final approval to the formula used to determine the increase, which includes a 5.6% hike in average rates. But average payments to the Cat Fund will also increase by 6.3% to cover the projected increase in exposure and the higher cost of property repair and replacement, fund officials said.
Overall, the average change in premium for participating insurers for 2022-2023 will be 12.26%, reads a memo from Cat Fund Chief Operating Officer Gina Wilson. That will increase revenue to the fund, from $1.219 billion to $1.37 billion.
The higher rates were expected. The Cat Fund’s advisory committee in March recommended the changes. But there was some speculation that the board would back off the rate hike in light of the steep rise in the cost of reinsurance from the private market this year and after some insurers criticized the methodology used to calculate weather losses to insurers.
But the board, made up of Florida’s governor, the state’s chief financial officer and the attorney general, moved ahead with it at its June 22 meeting – with no discussion.
Some Florida insurers may choose to pass the higher costs on to policyholders. Others may decide to absorb the cost, said Emilie Oglesby, external affairs manager for the State Board of Administration.
Premiums paid by insurers to the Cat Fund represent about 7% or $209 of the average residential homeowners’ premium of approximately $2,886, Wilson’s memo explains. “Therefore, the increase in FHCF rates by 5.64% could potentially translate to an average increase of 0.0564% or $11.79 for personal residential homeowners’ premiums.”
The methodology behind the rate calculations has come under fire from some insurance executives, who said that too much emphasis had been placed on one hurricane-loss model that predicts larger storm losses than other models.
“The FHCF could have decided to ignore that model,” or could have averaged the results of all seven approved models, said Melissa Burt DeVriese, president of Ormond Beach-based Security First Insurance said in April. “Since that wasn’t done, the reinsurance costs paid to the FHCF by Florida’s consumers increased by $150 million.”
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