Case Law Update: Citizens Property Insurance Rate Increase Caps Extended

Background of Citizens Property Insurance Corporation Rate Filings

On September 2, 2022, the Florida Office of Insurance Regulation (OIR) issued a significant Final Order regarding Citizens Property Insurance Corporation's rate filings that fundamentally altered the landscape of property insurance rate increases in Florida. This order addressed multiple rate filings submitted by Citizens for both residential and commercial property coverage.

Citizens Property Insurance Corporation serves as Florida's insurer of last resort, created by statute to ensure an orderly market for property insurance when coverage cannot be obtained in the voluntary market. The 2022 rate filing order reflects the ongoing challenges facing Florida's property insurance market.

Key Legislative Changes and Rate Increase Structure

The Florida Legislature amended Florida Statute 627.351(6)(n) during the 2021 legislative session, implementing a graduated rate increase cap structure that significantly impacts policyholders and the broader insurance market. The amendment increased the single policy annual rate increase cap from 10% to 15% over a five-year period through yearly incremental increases.

Annual Rate Increase Caps

The order establishes the following annual rate increase limits for Citizens policies:

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

These caps apply to all lines of business written by Citizens, with the notable exception of sinkhole coverage, and exclude coverage changes and surcharges.

Actuarial Requirements and Regulatory Framework

The order reaffirms that Citizens' rates must remain actuarially sound and comply with Florida Statute 627.062. Additionally, Citizens must file recommended rates annually with the OIR, which has 45 days to issue a final order establishing the rates. Importantly, Citizens cannot pursue administrative challenges or judicial review of the OIR's final rate orders.

Hurricane Loss-Projection Model Integration

The order requires consideration of the public hurricane loss-projection model under Florida Statute 627.06281 when establishing windstorm portions of Citizens' rates, provided the Florida Commission on Hurricane Loss Projection Methodology has found the model accurate and reliable. Citizens may combine public model results with private model results for rate calculations.

Impact on Public Adjusters and Claims Professionals

This rate structure has significant implications for public adjusters and claims professionals working in Florida's property insurance market. The graduated increase structure creates predictable premium escalations that will affect policyholder retention and coverage decisions.

Market Dynamics

As Citizens implements these rate increases, more policyholders may seek to return to the voluntary market if competitive options become available. Public adjusters should anticipate potential changes in claims volume as policyholders adjust coverage levels or seek alternative carriers.

Claims Processing Considerations

The rate increases reflect underlying cost pressures in the Florida property insurance market, including construction costs, litigation expenses, and catastrophic loss exposure. These factors may influence claims handling procedures and settlement negotiations.

Practical Takeaways for Industry Professionals

Public adjusters and claims professionals should consider several key points when working with Citizens policyholders:

• Premium Planning: Advise clients about the predictable rate increase schedule through 2026
• Coverage Reviews: Annual policy reviews become more critical as premiums increase
• Market Monitoring: Stay informed about voluntary market availability as rate gaps may narrow
• Documentation: Maintain thorough documentation for claims given the evolving regulatory environment

Long-term Market Implications

The structured rate increases represent an attempt to balance Citizens' financial stability with policyholder affordability. However, the 15% annual cap beginning in 2026 may not be sufficient if catastrophic losses or other market factors require greater rate adjustments.

The order also includes provisions for cash buildup factor increases under Florida Statute 215.555(5)(b), providing additional financial tools for Citizens' management.

How Louis Law Group Can Help

Navigating Florida's evolving property insurance landscape requires experienced legal counsel who understands the regulatory framework and its impact on policyholders and industry professionals. Louis Law Group's property damage attorneys stay current with OIR orders and regulatory changes that affect claims handling and coverage disputes.

Whether you're a public adjuster seeking guidance on regulatory compliance, a claims professional dealing with coverage interpretation issues, or a policyholder facing claim disputes, our experienced team can provide the legal support you need. Contact Louis Law Group at (833) 657-4812 to discuss how we can assist with your property insurance legal needs.

Source: OIR Orders & Memoranda - Citizens Property Insurance Corporation Residential Property and Commercial Property Rate Filings