Florida’s state insurance regulators have approved a plan that will result in policyholders paying additional charges on their insurance bills due to property-insurer insolvencies.
Insurance Commissioner Mike Yaworsky issued an order last week allowing the Florida Insurance Guaranty Association (FIGA) to collect a 1 percent emergency assessment to cover the costs of claims.
Starting in October, insurers will collect the assessments from policyholders and send the money to FIGA.
FIGA is a non-profit agency established by the state to handle claims when insurers become insolvent. It has issued a series of assessments in recent years in response to financial problems in the property-insurance industry. Since early 2022, seven property insurers have been deemed insolvent.
On March 31, FIGA’s board approved seeking the emergency assessment following the insolvency of United Property & Casualty Insurance Co. This insolvency is expected to result in FIGA handling hundreds of millions of dollars in claims.
Under the approved plan, FIGA will borrow $150 million in short-term financing to help pay claims and issue up to $750 million in revenue bonds to pay off the short-term financing and remaining claims. The assessment proceeds will be used to pay off the bonds.
The 1 percent assessment will continue until the bonds have been paid in full, according to FIGA’s website. FIGA Executive Director Corey Neal explained in an April 4 letter to Yaworsky that the emergency assessment is necessary to secure funds for covered claims, pay reasonable administration costs, and secure bonds to generate revenue for claim payments.
This assessment comes as property-insurance policyholders throughout Florida face soaring premiums. Assessments will also be collected on various types of insurance policies but will not apply to auto insurance.
FIGA collected a 0.7 percent assessment in 2022 and began collecting an additional 1.3 percent assessment on July 1, 2022, which is scheduled to end on June 30. Policyholders will also be hit with another 0.7 percent assessment ending on Dec. 31 this year.
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Private property insurers have dropped hundreds of thousands of policies and sought significant increases over the past two years due to financial problems. These issues have led to explosive growth at the state-backed Citizens Property Insurance Corp.
State leaders have warned that if Citizens does not have enough money to pay claims, it could have to collect assessments from policyholders throughout the state. As of April 7, Citizens held 1.248 million policies and did not require assessments after last year’s Hurricane Ian and Hurricane Nicole.