Case Law Update: Citizens Property Rate Filing Order Sets 2023 Limits

Citizens Property Insurance Rate Increase Framework Established

The Florida Office of Insurance Regulation (OIR) has issued a comprehensive Final Order regarding Citizens Property Insurance Corporation's rate filings, establishing the regulatory framework for premium increases that will significantly impact Florida property owners and their insurance costs through 2026. This order implements legislative changes that increase the annual rate cap from the previous 10% to a graduated system reaching 15% by 2026.

Background and Legislative Context

Citizens Property Insurance Corporation was created by statute to serve as Florida's insurer of last resort, ensuring an orderly market for property insurance when private market options become unavailable or unaffordable. The 2021 Florida Legislature amended section 627.351(6)(n), Florida Statutes, to address Citizens' growing exposure and the need for actuarially sound rates.

The legislative change recognized that Citizens had grown far beyond its intended role as a residual market, necessitating rate adjustments to better reflect actual risk and encourage movement of policies back to the private market.

Key Statutory Requirements

Under the amended statute, Citizens' rates must meet several critical requirements:

• Actuarial soundness: Rates must be based on sound actuarial principles and comply with section 627.062, Florida Statutes
• Annual filing requirement: Citizens must file recommended rates annually with the OIR
• 45-day review period: OIR has 45 days to review and issue a final order on rate recommendations
• No appeal rights: Citizens cannot pursue administrative challenge or judicial review of OIR's final rate orders

Rate Increase Cap Structure

Graduated Annual Increases

The Final Order establishes a graduated rate increase cap system that provides predictability while allowing Citizens to move toward actuarially sound rates:

• 2022: 11% maximum increase
• 2023: 12% maximum increase
• 2024: 13% maximum increase
• 2025: 14% maximum increase
• 2026 and beyond: 15% maximum increase

These caps apply per individual policy and exclude coverage changes and surcharges, with sinkhole coverage exempt from the limitations.

Additional Rate Considerations

Beyond the base rate increases, the order permits Citizens to implement additional adjustments for:

• Cash buildup factor: Increases reflecting the corporation's cash accumulation pursuant to section 215.555(5)(b), Florida Statutes
• Premium tax: An amount equal to the premium tax under section 624.509 to augment Citizens' financial resources
• Hurricane modeling: Consideration of the public hurricane loss-projection model when establishing windstorm rates

Impact on Public Adjusters and Claims Handling

Increased Policy Values and Claim Costs

The substantial rate increases authorized under this order will directly impact property damage claims handling in several ways:

• Higher policy limits: As rates increase, many policyholders may adjust their coverage limits, affecting potential claim payments
• Affordability concerns: Some policyholders may reduce coverage to manage premium costs, creating potential coverage gaps
• Market dynamics: Rate increases may drive some policies back to private markets, changing the mix of Citizens claims

Claims Documentation and Valuation

Public adjusters working with Citizens policyholders should be aware that:

• Rate increases reflect Citizens' assessment of actual risk exposure
• Higher premiums may indicate properties in high-risk areas requiring more thorough damage documentation
• Policyholders may be more sensitive to claim outcomes given increased premium costs

Practical Implications for Policyholders

Budget Planning

Property owners with Citizens policies must plan for significant premium increases through 2026:

• Cumulative impact: A policy subject to maximum increases each year would see rates rise approximately 79% from 2022 to 2026
• Cash flow planning: Property owners should budget for these increases when planning property expenses
• Coverage evaluation: Regular review of coverage needs becomes critical as costs increase

Market Options Assessment

The rate increases are designed to encourage movement to private markets where available:

• Policyholders should regularly shop for private market alternatives
• Rate increases may make previously unavailable private options competitive
• Working with knowledgeable agents becomes increasingly important

Regulatory Framework and Oversight

OIR Authority and Process

The Final Order demonstrates OIR's comprehensive authority over Citizens' rates, including:

• Rate review: Detailed examination of actuarial assumptions and methodologies
• Timeline enforcement: Strict adherence to the 45-day review period
• Final authority: Unreviewable rate determinations

Hurricane Modeling Integration

The order specifically addresses the use of the public hurricane loss-projection model, requiring Citizens to:

• Consider public model results for windstorm portion of rates
• Potentially combine public and private model results
• Maintain rates at or above actuarially sound levels regardless of model results

Claims Professional Considerations

Understanding Citizens' Role

Public adjusters and claims professionals must understand Citizens' unique position in Florida's insurance market:

• Residual market function: Citizens serves policyholders who cannot obtain private coverage
• Public purpose: Ensuring orderly market for property insurance
• Rate constraints: Limited by legislative caps despite actuarial requirements

Policy Terms and Coverage

The rate filing order affects various Citizens policy forms:

• Residential property policies
• Commercial property policies
• Multiple coverage types and endorsements
• Different territorial and risk classifications

Long-Term Market Implications

Private Market Development

The graduated rate increases serve multiple policy objectives:

• Reducing Citizens' market share over time
• Encouraging private market participation
• Improving overall market stability
• Better aligning rates with actual risk

Future Considerations

Beyond 2026, the 15% annual cap remains in place unless further legislative action occurs. This framework provides:

• Continued pressure for market normalization
• Ongoing incentive for private market alternatives
• Predictable rate trajectory for planning purposes

How Louis Law Group Can Help

Navigating Citizens Property Insurance claims requires understanding both the unique aspects of Citizens as a government entity and the standard principles of Florida property insurance law. As Citizens implements these significant rate increases, policyholders may face additional challenges in claims handling and coverage disputes.

Louis Law Group has extensive experience representing policyholders in Citizens claims, from routine property damage to complex coverage disputes. We understand the regulatory framework governing Citizens and how it affects claim handling, settlement negotiations, and coverage determinations.

Our team works closely with public adjusters and policyholders to ensure Citizens meets its obligations under the policy terms, regardless of rate pressures or market conditions. Whether dealing with hurricane damage, other natural disasters, or coverage disputes, we provide the expertise needed to protect policyholders' rights.

Contact Louis Law Group at (833) 657-4812 for experienced representation in your Citizens Property Insurance claim. Don't let rate increases or regulatory complexity prevent you from receiving the full benefits of your coverage.

Source: Florida OIR - Citizens Property Insurance Corporation Residential Property and Commercial Property Rate Filings (9-2-2022)