Ho-hum hurricane seasons help Citizens retire surcharge early
Storm trackers are watching Hurricane Rachel make her way toward Mexico — the west coast of Mexico, that is. Floridians have no cause for worry from this storm at this time. With just a few days left in September, usually the busiest month during the Atlantic hurricane season according to the NOAA, the state has dodged the four named storms this year, apparently continuing our winning streak.
Citizens Property Insurance Corp. is celebrating the multi-year reprieve by ending the “hurricane tax” imposed in 2007. The 1 percent surcharge was slated to expire in 2017. Citizens has spent the last couple of years rebuilding its reserve and cutting costs to pay off its debt early. Homeowners and auto insurance policyholders will be off the hook in July 2015.
The state-backed insurance company incurred the debt paying claims from Hurricane Wilma. The storm resulted in more claims than the insurer could pay, so Citizens had to borrow the balance. When hit with a shortfall like that, the company can impose a surcharge on all property and auto policies — even policies from other insurance companies.
The Florida Legislature has pressed Citizens to cut back on expenses and to continue with aggressive depopulation plans for the last few years. Shifts in the market and the state’s hurricane risk rating had kept private insurance companies away from the Sunshine State or forced them to increase their rates — homeowners saw Citizens as the cost-effective alternative. That, however, does not jive with the Legislature’s intention to create an insurer of last resort for state residents.
The constant worry was that the company would not be able to meet its claim obligations if another storm hit, triggering another assessment. Several quiet hurricane seasons in a row have helped Citizens recover while private insurance companies tested the waters.
In January 2015, homeowners and auto policyholders will also see a decrease in premiums. Earlier this year, Citizens announced that the 1.3 percent surcharge will be retired. The revenue from that surcharge, however, did not go to Citizens’ debt. It went instead to Florida’s Hurricane Catastrophe Fund.
Source: The Florida Times-Union (Jacksonville.com), “Florida’s ‘hurricane tax’ on home and car insurance soon to disappear,” Sept. 25, 2014
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