Transcript Windstorm Insurance Rates Create Crisis in Monroe County

Windstorm Insurance Rates
Create Ongoing Crisis
in Monroe County
A Presentation to Key West City Commission
Prepared by the Grassroots Organization FIRM
Fair Insurance Rates in Monroe
August 3, 2009
FIRM (Fair Insurance Rates in Monroe)
on behalf of Monroe County
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FIRM is a grassroots, 501c4 non-profit organization
that in conjunction with Monroe County, and actuarial
and legal assistance presented testimony to the Office
of Insurance Regulation (OIR) in 2006 resulting in a
32% windstorm rate rollback for all Monroe County
residential property owners.
Subsequently, FIRM lobbied the Florida Legislature to
freeze the rates for 3 consecutive years at a 2007
savings of $110.6 million, 2008 savings of $153.7
million and 2009 savings of $143.3 million for Monroe
County residents and property owners.
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July 18, 2015
Taxpayers are the Government
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Residents and property owners pay taxes and
insurance in Monroe County and both expenses have
been extremely high and, for many, unaffordable.
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The County and municipalities have a responsibility to
the economic welfare of the taxpayers to effect change
when a county-wide financial crisis arises for its citizens.
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Monroe County residents and property owners have
benefitted, financially, from the windstorm insurance
savings because of FIRM’s work, jointly with Monroe
County, and the expert advice of Actuary Allan
Schwartz, and Atty. Tim Volpe, in 2006.
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July 18, 2015
Savings to the Taxpayers
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Due to the joint presentation on August 1, 2006, the Office of Insurance
Regulation (OIR) ordered Citizens Property Insurance Corp. (CPIC) to
reduce Monroe County residential windstorm premium rates. The
disposable income savings to Monroe County residents and property
owners, over the last 4 years, are highly significant.
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Based on an average $350,000 insured structure
Year
2006
2007
2008
2009
Total County
Savings
$33.7 mil
$110.6 mil
$153.7 mil
$143.3 mil
Savings/$1000
insured value
$3.99
($20.91$16.92)
$12.30
($26$13.70)
$18.30
($32$13.70)
$18.30
($32$13.70)
# CPIC MC
27,000
25,700
24,000
23,000
wind policies
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July 18, 2015
Without FIRM, Monroe County,
and Actuarial and Legal
Expertise in 2006, for example….
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A $350,000 insured structure one year wind insurance
premium would have cost
$9,100 instead of $4,795 in 2007
$11,200 instead of $4,795 in 2008
$14,000 instead of $4,795 in 2009
$14,000+ instead of $5,275 in 2010
Inasmuch as most properties are mortgaged, those
owners are required to carry windstorm insurance.
If owners cannot prove insurance, mortgage companies
force coverage at as much as twice the cost.
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July 18, 2015
Proposed Citizen Property Insurance
“Actuarial Sound Rates” for
Monroe County Residents
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CPIC proposes that a 100% increase is equal to an “actuarial
sound” windstorm rate for Monroe County. Given that increase on
the 2007 frozen, reduced rate of $13.70 per $1,000 insured value,
our rate would almost double in 6 years due to compounding
$13.70 + $1.37 = $15.07 x 350 = $5,274.50 annual premium 2010
$15.07 + $1.51 = $16.58 x 350 = $5,803.00 annual premium 2011
$16.58 + $1.66 = $18.24 x 350 = $6,384.00 annual premium 2012
$18.24 + $1.82 = $20.06 x 350 = $7,021.00 annual premium 2013
$20.06 + $2.01 = $22.07 x 350 = $7,724.50 annual premium 2014
$22.07 + $2.21 = $24.28 x 350 = $8,498.00 annual premium 2015
$24.28 + $2.43 = $26.71 x 350 = $9,348.50 annual premium 2016
(Source: Preliminary CPIC increase information – July 2009)
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July 18, 2015
What does this mean to
Monroe County residents?
With our county’s building codes, a complete building loss, or even damage up to
an insured’s out-of-pocket costs, due to wind damage, is highly unlikely.
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After storm damage caused by wind, the insured still must meet their deductible
after having paid their annual premium.
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For example in 2010, a $350,000 insured building with a 10% deductible could
pay $5,274.50 premium & up to $35,000 out-of-pocket for damage before they
could expect to receive any compensation from their Citizens Property
windstorm policy.
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The average wind damage claim in Monroe County during Hurricane Katrina
was $915 and for Hurricane Wilma was $931.
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Therefore, Monroe County continues to pay significantly higher wind premiums
than dollars received in wind policy claims.
(NOTE: Before mitigation credits)
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July 18, 2015
What else does this mean
to our County?
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Insurance costs affect real estate values.
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In 2006, real estate sales agreements were falling through when
buyers realized the exorbitant cost of windstorm insurance.
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If these insurance costs go unchallenged and rates are allowed to
increase unchecked, sellers will have to reduce the price of their
properties to motivate buyers.
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Lowering sales prices devalues neighborhoods by affecting all
comparable properties, insured or not.
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Lowering insurance rates make it a more affordable purchase.
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Insured properties protect families, the asset, and are more likely to be
maintained.
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Lower insurance rates will help real estate be more attractive to
buyers.
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July 18, 2015
Monroe County
Residential, Condo, and
Commercial Properties
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The Office of Insurance Regulation evidentiary hearing
August 1, 2006, was provided to specifically address
residential windstorm insurance rates, as required by the
OIR.
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As of June 2009, Monroe County CPIC insured policies
totaled 25,024; of which 22,902 (91.5%) are residences,
401 (1.6%) are condos, and 1721(6.9%) are commercial.
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The greatest percentage of CPIC policies are residential.
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In past years, the Monroe County windstorm insurance
policy percentages for residential, condominium, and
commercial classifications vary little from the above
percentages.
Slide 9
July 18, 2015
Monroe County
Residential, Condo, and
Commercial Properties
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FIRM continues its stand today that in Monroe County, due to
strict building codes and other factors, a building is a building is
a building, regardless of its use.
In 2007, FIRM requested Monroe County commercialresidential (condo) and commercial windstorm policy
information from their owners.
Although the information has been very slow, and minimal in
coming from condo and commercial property owners, FIRM’s
analysis provided the same result - that these windstorm rates
were also too high.
Condominium rates came down in 2008 due to mitigation
credits recalculated by CPIC.
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July 18, 2015
Actuarial and Legal
Expertise
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FIRM and Monroe County, on behalf of all residents, must
present to the OIR at a public hearing within 45 days of CPIC’s
new rate filings submitted July 31, 2009.
In order to present the most accurate and verifiable information,
we need actuarial and legal assistance.
In 2006, Allan Schwartz, Actuary; and Atty. Tim Volpe were
contracted by Monroe County to assist in our evidentiary hearing
presentation, funded by county and municipality taxpayers.
The result was a windstorm insurance rate reduction of 32% for
which county residents and property owners have benefitted
from hundreds of millions of dollars in savings for 2006, 2007,
2008, and 2009.
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July 18, 2015
Taxpayer Return on 2006
Actuarial and Legal Investment
At an insurance premium savings of $445
million to Monroe County taxpayers from
2006 through 2009 because of the
combined efforts of FIRM, the County, and
the actuarial and legal assistance…
 Monroe taxpayers realized in excess of a
2,542% return on their investment over the
4 years (or 635% return per year).
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July 18, 2015
Need more reasons?
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In this depressed economy……
Let’s help keep the cost of living in the Keys down.
Collectively, we have a responsibility to do all we
can to help our residents and property owners,
And this is what we, as residents and property
owners, expect from our elected officials.
It’s the right thing to do
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July 18, 2015
Summary
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Time is of the essence.
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The 2009 public hearing is the one and only opportunity to
address CPIC’s “actuarially sound” filed rate increase.
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We need actuarial and legal expertise to produce the best
presentation on behalf of all County residents.
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We are already into the 45 day period in which the public
hearing will be scheduled.
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Monroe County insurance rates affect real estate values and
the cost of living for all of us.
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July 18, 2015
On behalf of all Key West City
Residents and Property Owners
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FIRM respectfully requests that the Key West City Commission,
today, approve the suggested city contribution to help fund the
contracts with Mr. Allan Schwartz, Actuary; and Atty. Tim Volpe to
expedite the creation of the public hearing presentation.
The BOCC of Monroe County had pre-approved funding these
contracts which were reviewed yesterday.
FIRM attended the August 3 county meeting in Marathon to
answer any open questions.
FIRM has contacted each municipality to assist in funding this
effort and, to date, Key Colony Beach has made the financial
commitment.
The City of Marathon will be addressing this request at today’s
meeting being held at this time.
The Village of Islamorada and the City of Layton have yet to
respond.
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July 18, 2015
Thank You
FIRM is grateful for this opportunity to
present to you on behalf of all Key West and
Monroe County residents and property
owners.
 And… if you aren’t a member of FIRM,
become one today at www.FIRMKeys.org
 Membership is free and the savings to each
of us is priceless.
 We’re all in this together.
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July 18, 2015