Insurance Journal
March 29, 2017
Citizens Property Insurance Corp. will post a net loss for 2016, its first loss in more than a decade, as water loss claims, assignment of benefit (AOB) abuse and litigation costs increasingly impact the company’s bottom line, according to a statement from the Florida state-run insurer.
The Citizens Board of Governors was told Wednesday the state’s insurer of last resort will post a $27.1 million net loss for 2016, its first since 2005. The company said the loss comes despite minimal damage from Hurricane Matthew, the first major hurricane to impact Florida in 11 years.
Without significant statutory reforms, Citizens will be forced to pass those higher costs on to its customers in the form of higher rates for the foreseeable future, said Citizens Board of Governors Chairman Chris Gardner.
“Every year, we rely on standardized, accepted actuarial principles to set our rates,” Gardner said “Last year, the same principles that provided rate decreases to our customers in recent years translated into hikes for 84 percent of our policyholders. Without legislative changes, that trend will continue.”
Citizens said the percentage of nonweather-related water claims – burst pipes, sudden dishwasher leaks, etc. – that move to litigation has skyrocketed, with each litigated claim raising the average claim cost by $20,000 or more. Citizens passes on these costs to Citizens policyholders.
