Florida Peninsula Windstorm Insurance Rates Devastate Monroe County Property Owners

Prepared by the Grassroots Organization F.I.R.M.Fair Insurance Rates in Monroe May 17, 2006

April 18, 2023 2

Background - Monroe

Monroe County is the southernmost county in the state of Florida. Key statistics:

2004 Estimated Population: 78,284 (a 1.6% decline since the 2000 Census)

51,563 Housing Units, 35,086 Households 79.8 Persons per Square Mile (vs. 296.4 state-wide) Median Household Income: $42,238 (1999); $55,000

estimated by officials today 2.23 Persons per Household Per Capita Money Income: $26,102 (1999) 62.4% Homeowners (vs. 70.1% state-wide) 75% of Monroe County is water. The County is also

known as the Florida Keys.SOURCE: Monroe County Official Website, Census Data

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BackgroundFlorida Peninsula Insurance (1)

Citizens Property Insurance became the windstorm insurer of last resort in Monroe County by state statute in 2002.

Florida Peninsula Insurance (FPI) has been permitted by the State to operate as a “take-out” company in Monroe County, and has picked up approximately 2,500 policies from Citizens throughout the County.

Re-insurance for small companies is extremely difficult to acquire, but could be provided for “Limited Apportionment Companies” through the Florida Catastrophe Fund. Though they would have qualified, FPI did not apply for this status, and are therefore seeking to increase rates.

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BackgroundFlorida Peninsula Insurance (2)

FPI has filed for a rate increase of 91.8% state-wide, and 96.37% in Monroe County for a whopping $41.06 per thousand dollars of coverage, the highest in the state.

Consumers had no choice in being assigned to FPI, and once assigned, are not permitted to move back into Citizens.

FIRM believes the rates proposed by FPI are outrageously excessive, discriminatory and certainly not affordable – to the point where they will cause foreclosures in the County.

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Proposed FPI Windstorm Insurance Rates in Selected Coastal Counties

from Florida Peninsula Insurance rate filing effective June 16, 2006

Duval $4.74

Broward

$17.85 to $29.43

Sarasota

$12.76 to $13.56

Escambia

$10.55 to $20.18

Charlotte

$14.76

Palm Beach

$20.88 to $25.66

Dade

$21.78 to $36.90

Collier

$23.68

Monroe $41.06

Franklin

$19.78

Volusia

$4.19 to $7.81

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Proposed FPI Windstorm Premiums based on $350,000 of Coverage

from Florida Peninsula Insurance rate filing effective June 16, 2006

Duval $1,659

Broward

$6,248 to $10,301

Sarasota

$4,466 to 4,746

Escambia

$3,693 to 7,063

Charlotte

$4,166

Palm Beach

$7,308 to $8,981

Dade

$7,623 to $12,915

Collier

$8,288

Monroe $14,371

Franklin

$6,923

Volusia

$1,467 to $2,734

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Real Cost of FPI Windstorm Insurance In Monroe County (1)

The proposed FPI rate is double the Citizens rate disapproved by Insurance Commissioner Kevin McCarty on May 1, 2006.

The average house in the Keys is only 1,200 square feet, and the going rate for construction in the Keys is $300 to $400 per square foot.

The real cost of FPI coverage for an average Keys home would be $17,245 per year, excluding additional fees, taxes and surcharges.

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Real Cost of Windstorm Insurance in Monroe County (2)

The proposed FPI rates mean that the owner of an average 1,200 square foot residential property in the Florida Keys will pay $1,437 PER MONTH in windstorm premiums alone.

These FPI windstorm premiums represent 31.2% of median household income on average.

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Escalating windstorm premiums are exacerbating Monroe County’s affordable housing crisis.

Entry-level home ownership will become out of reach for most young families.

Rents will rise dramatically (increases of as much as $1,000/month) as landlords pass on FPI premium increases to tenants.

This huge increase in windstorm premiums is likely to trigger foreclosures throughout the Keys.

Effect of Skyrocketing Windstorm Premiums on Monroe County (1)

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The Florida Keys are losing the very individuals that make them a viable community.

Recruitment and retention in key public service arenas (health care, police, etc.) is increasingly difficult.

One in six Monroe County teachers will have to be replaced this year.

Hourly workers in the tourism industry – the economic engine that drives the Monroe County economy – can no longer afford to live here.

Retirees and long-term residents on fixed incomes cannot pay these exorbitant insurance premiums.

Effect of Skyrocketing Windstorm Premiums on Monroe County (2)

“The very fabric of the Keys is unraveling – and these outrageous windstorm rates are a big cause of it.”

Key West Mayor Morgan McPherson

April 18, 2023 11

Escalating rates are impacting the real estate market for primary home buyers. The cost of windstorm insurance is becoming a “deal-breaker”

in real estate transactions. Windstorm insurance is required by mortgage lenders.

Second home buyers (many of whom live elsewhere in Florida) are increasingly turning to destinations like Costa Rica for vacation and retirement homes. Second home owners (“snowbirds”) bring considerable capital

and disposable income to the Keys – as they do throughout the state – and are an important part of our economy.

Sellers seeking to realize the equity in their homes cannot do so because buyers cannot justify spending so much money on something they may never need.

Effect of Skyrocketing Windstorm Premiums on Monroe County (3)

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More and more of the very wealthy – who may not have a mortgage on their homes – are choosing to become self-insured, further reducing the risk pool.

Those long-term residents in family homes with no mortgage may choose to go un-insured for windstorm. What happens when their homes are severely damaged? Is

this a recipe for a government bail-out? Such folks may not be able to procure any other type of

homeowner’s insurance, as companies increasingly require windstorm coverage before they’ll offer protection from fire, theft, liability, etc.

Effect of Skyrocketing Windstorm Premiums on Monroe County (4)

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Storm Frequency

Many areas outside of Monroe County have experienced tropical storms as frequently as or more frequently than Monroe County.

City years between tropical storms

Hollywood 2.60

Deerfield Beach

2.60

Boca Raton 2.60

Ft. Pierce 2.65

Florida City 2.65

Key West 2.70

Miami 2.70

Ft. Lauderdale 2.70

Stuart 2.75

Lake Worth 2.75

Spring Hill 2.75

Jupiter 2.87

Pensacola 2.93

Jacksonville 3.00

Marathon 3.14

SOURCE: www.hurricanecity.com

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Storm-worthiness

Monroe County is especially well equipped to deal with hurricanes. Monroe County has the strictest building codes in the state

of Florida, requiring buildings to withstand 150MPH gusts. Key West has the largest wood-frame historic district in the

nation, with thousands of homes that have withstood storms for over a century and a history of construction to endure the sometimes harsh environment.

Many historic homes have been significantly reinforced over the past 30 years.

The low population density of the Keys translates into fewer housing units and lower potential storm exposure.

State-wide, politically motivated “carve out” areas with less stringent building codes are susceptible to greater storm damage, the costs of which must be subsidized by other policy holders.

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Insurance Claims Per Policy in Selected Counties – Wilma & Katrina

CountyCitizens Policies

in Force (HRA)

Citizens Windstorm

Claims

Calculated Claims per Policy

Broward 66,425 $518,800,000 $7,810

Palm Beach 58,352 $259,040,000 $4,439

Dade 85,270 $1,537,460,000 $18,030

Collier 9,388 $103,140,000 $10,986

St. Lucie 1,652 $9,380,000 $5,678

Monroe 24,632 $45,470,000 $1,846

Property damage per insured property from the same storms is lower in Monroe than elsewhere in Florida.

Wilma and Katrina are prime examples.

SOURCE: Citizens Property Insurance

NOTE: Claims data is not yet available from Florida Peninsula for these storms. However, as FPI has “taken out” accounts from the Citizens High Risk Accounts, this data is valid to demonstrate comparative pay-outs by storms.

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Conclusions

Consumers were placed in FPI without their consent.

FPI had the opportunity to address its re-insurance dilemma through the CAT Fund but chose not to do so.

Proposed rates are neither experience-based nor justifiable. They are excessive, unfairly discriminatory and unaffordable.

April 18, 2023 17

Solutions

OIR disapproval of FPI’s proposed 6/16/06 rate hike.

A change in policy to allow those consumers placed into FPI without their consent to return to Citizens, and a halt on any further transfers from Citizens to FPI.

A long-term solution that either spreads the risk or equalizes windstorm rates state-wide, recognizing our shared potential exposure.

April 18, 2023 18

Summary

Monroe County is in a crisis of affordability, terribly exacerbated by windstorm insurance rates that are excessive, unfairly discriminatory and, particularly in the case of FPI, unconscionable.

This crisis must be addressed immediately or the economic and cultural infrastructure of the Florida Keys – America’s 2nd most favorite vacation destination, steward of the only living coral reef in North America, historically rich and culturally diverse – will disintegrate.

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About F.I.R.M

Fair Insurance Rates in Monroe is a grassroots organization established in late February, 2006, by a group of Key West neighbors concerned about their ability to continue to live in the Keys in the face of windstorm bills they’d received with outrageous premium increases.

FIRM is non-partisan. FIRM has nearly three thousand members throughout

the Keys to date and is growing. FIRM members are unpaid volunteers who love their

communities and want to remain in them. For more information, visit www.FIRMkeys.org.

Prepared by Heather Carruthers with assistance from Kim Mack and Al Sachs, FIRM members