2024 Wind and Flood Insurance Update
Welcome to a quick overview of the current state of wind and flood insurance in the Florida Keys. Let’s explore recent changes, ongoing efforts, and how they affect residents and policies in our beautiful community.
Citizens – Wind
In December 2022, the Florida legislature passed Senate Bill 2A, focusing on insurance affordability and availability. A key change mandates policyholders under Citizens Property Insurance Corporation to carry flood insurance.
The coverage requirements are as follows:
- Starting January 1, 2024, structures with a dwelling replacement cost of $600,000 or more must have flood insurance.
- Starting January 1, 2025, structures with a dwelling replacement cost of $500,000 or more must have flood insurance.
- Starting January 1, 2026, structures with a dwelling replacement cost of $400,000 or more must have flood insurance.
- From January 1, 2027, all structures, regardless of value, are mandated to carry flood insurance.
Flood policy limits should meet or exceed Citizens Separate Coverage A (building coverage) and C limits (contents coverage).
The National Flood Insurance Program (NFIP) sets a maximum of $250,000 for building coverage and $100,000 for contents. For instance, if your wind policy covers an $800,000 building and $100,000 contents, you can match the contents but won’t reach the building limit.
Customers are cutting costs by choosing not to insure contents on both their flood and wind policies. This move aims to lower the overall expenses of these insurances. Despite legislators intending to benefit everyone by mandating flood insurance, it seems to be having the opposite effect.
Citizens 20 Percent Rule
From the recent legislative session emerged the Citizens 20% rule, compelling Citizens policyholders to transition to a primary market carrier if its premiums are within 20% of Citizens’ upon renewal. This shift is evident in ongoing depopulation efforts across the state. Unlike the past, where insured individuals could choose to remain with Citizens or switch to ABC Insurance Company, now, if the premium is no more than 20% higher than Citizens, the insured must switch to ABC Insurance Company. Essentially, this approach opens the door for insurance companies to enter Florida. These companies can leverage the Citizens database, setting their pricing at, for example, 19% of Citizens’ rates, implementing a rate increase, and pulling policies from Citizens.
Citizens Primary Residence Versus Non-Primary Residence.
Regarding Citizens’ differentiation between primary and non-primary residences, for a primary residence, the policy will adhere to the current capped rate increase. However, with the latest rate adjustments from December 16th, 2023, the homeowner’s wind policy sees a 10.8% rate increase, whereas the non-primary rating rule imposes a 48.2% base rate change. When additional fees are factored in, the overall rate increase for non-primary homes surpasses 50%.
A primary residence is defined as the policyholder’s main home occupied for more than 9 months a year. Citizens is cross-referencing property appraiser information and, surprisingly, checking voting record databases for verification, prompting requests to insurance agents for proof of primary residence from their clients.
FEMA 2.0
Concerning FEMA’s underwriting program, FEMA Risk Rating 2.0 has posed challenges for Monroe County. Florida, along with nine other states, has initiated a federal lawsuit against FEMA, citing that elevated insurance rates might drive residents out of the state due to affordability issues. While this impact is not as pronounced in Monroe County, it’s evident in other regions of the state. Additionally, the program is expected to dampen property values, especially in areas where flood insurance is mandatory.
Under Risk Rating 2.0, continued credits for the Community Rating System (CRS) are eliminated until the policy reaches its full risk rate. This process may take several years, given that flood insurance can only impose a maximum 18% annual increase on any policy. Consequently, many customers might not receive credits for an extended period.
What our Local Representative our doing for Insurance in the Florida Keys
Our local representatives are actively involved in advancing two bills—one championed by Rep Mooney and the other by Senator Rodriguez. These bills share a common goal: the reinstatement of the 10% rate cap for Monroe County. While Citizens is expected to resist alterations to their existing rate increases, our representatives are steadfastly pushing for a return to the 10% rate cap.
Given Monroe County’s designation as a County of Critical State Concern and the limited competition in the area for windstorm insurance beyond Citizens, the urgency for these legislative changes is heightened.
Furthermore, our representatives are advocating for an expansion of the coverage cap from $1.0M to $1.5M through this legislation. They are also pushing for the elimination of the flood insurance requirement for properties in an X zone or those elevated at least one foot above the base flood elevation. Additionally, there is a proposal to remove the mandate that flood insurance must mirror wind insurance, opening the door for lower or no content coverage on flood insurance.
Summary of Insurance
In summary, the landscape of wind and flood insurance is undergoing notable transformations, influenced by legislative decisions and program changes. Navigating this evolving scenario requires vigilance and adaptability from both policyholders and insurance agents.
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