Citizens Property Insurance: Litigation Trends and Growth Expectations

Citizens Property Insurance: Litigation Trends and Growth Expectations

June 12, 2023

I'm getting a lot of questions from different people about several ongoing things that are happening at Citizens Property InsuranceIn recent developments, Citizens Property Insurance, the state-backed carrier aka Carrier of Last Resort, has highlighted significant changes in litigation patterns while also requesting the maximum rate increases allowed. Additionally, a major takeout of Citizens policies has been approved. Let's dive into the details...

Litigation Shifts

  • New lawsuits have decreased by 21% compared to the same period last year.

  • Only 4% of lawsuits were filed without a reported dispute prior, a 71% decrease due to the new presuit notice law.

  • Assignment of Benefits (AOB) lawsuits have reduced by 44% compared to last year.

  • Lawsuits with representation at First Notice of Loss (FNOL) have increased again, after a decline last year.

  • Non-litigated claims have risen by 79% from April 2022, primarily driven by claims related to Hurricanes Ian and Nicole, as well as an increased policy count.

Rate Hike Request

  • Citizens has presented its case for an overall average rate increase of 13.3% over 14 different rate filings.

  • This is the maximum allowed under the legislatively-mandated rate glide path.

  • The elimination of one-way attorney fees and AOB contracts are seen as game-changers that will benefit the insurance market over time.

  • Excessive litigation has led to a doubling of Citizens' policy count from about 610,000 to over 1.2 million in just two years.

  • The increased policy count has exposed Citizens to larger losses from recent hurricanes, resulting in a 33% decrease in surplus and the likelihood of a required assessment if a moderately sized storm occurs this season.

  • Citizens' ability to charge actuarially-sound rates is crucial for market recovery and promoting depopulation.

  • Even with the requested rate increase, Citizens' policyholders will still pay, on average, about 44% less than those in the private market.

OIR Decision and Growth

The Florida Office of Insurance Regulation (OIR) is expected to make a decision on the rate hike request during the summer.
In the meantime, Citizens is experiencing steady growth, adding about 8,000 policies per week. By the end of the year, Citizens is projected to have a policy count of 1.7 million and $645 billion in total insured value.

Takeouts and Policy Assumption

Recently, OIR approved the takeout of 26,000 Citizens policies by two private insurance carriers. The percentage of policies assumed by acquiring companies has historically been around 10% of the targeted number, which means rates will increase during the depopulation. Reforms implemented in 2022 aim to increase this percentage by requiring private insurance coverage to be at least 20% more expensive than the current Citizens' policy.

In Conclusion

The recent developments surrounding Citizens Property Insurance signify a positive shift in litigation patterns and its pursuit of rate increases to ensure financial stability. The efforts to reduce litigation, promote depopulation, and encourage private market growth are crucial for Citizens' role as a true insurer of last resort and to minimize potential storm assessments on taxpayers.