When Jonathon Rice received a notice from Citizens Insurance informing him about an offer from a private insurer interested in taking over his business, he was not expecting to come across something called a “hurricane tax.”
“It’s absurd,” Rice exclaimed.
The pamphlet explained that in the event the state insurer of last resort, Citizens, were to run out of funds, possibly due to extensive claims following a severe storm, they might resort to a tax or assessment to replenish their finances.
This assessment for Citizens policyholders could reach a staggering 45% of their premiums.
“It just doesn’t add up. I’m already paying over $5,000, so if a storm hits anywhere in Florida and they can’t manage their budget, it would be an additional 45%,” Rice expressed his frustration.
Citizens is on the verge of implementing a 12.5% rate hike in December, and its rapid acquisition of policies, now nearing 1.4 million, coupled with the risk of substantial claims, is causing concern.
“Citizens has made it clear in 2023 that they are approaching a situation where they may have to introduce the hurricane tax,” noted Mark Friedlander of the Insurance Information Institute. “This is clearly an incentive for Citizens customers who are selected for depopulation to seriously consider the take-out offers.”
These take-out offers are being extended to reduce Citizens policies by transferring them to private insurers. However, in many cases, these offers are costly, and Citizens customers can decline them if the offer exceeds 20% of their current premium.
In dire financial circumstances, the assessment program also includes the possibility of imposing surcharges on all private insurance policies in the state, including those for renters, automobiles, and boats.
“We must make every effort to minimize the risk to Floridians of facing an emergency assessment,” stated Citizens CEO Tim Cerio to the insurer’s Board of Governors this week. “It’s simply responsible stewardship on our part.”
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