A few months ago we took the unusual position of commenting on something other than a local Martin County economic issue. In that case, a 6.8% assessment was being tacked onto the average homeowners’ insurance policy premium by the Florida State Treasurer/Insurance Commissioner to support the Citizens Property Insurance Corp. (CPIC). At the time, the CIPC was focusing on a $500 million loss in covering damage to otherwise uninsurable homes and businesses caused by the 2004 hurricanes. That assessment amounted to about $60 per year for the “average Florida homeowner”, and we estimate nearly double that amount for Martin County’s homeowners. Our then-stated objection was: “… establishing the precedent of a bureaucratic state agency being able to impose a sizeable ‘tax’ with little justification, discussion or accountability”.

Apparently our concern was well founded. On November 10 th Tallahassee media reported that the CIPC’s loss for 2005 is now estimated to be $1 billion dollars, and possibly as much as $2 billion. If these losses are as high as currently predicted, Florida’s homeowners could be saddled with a 11% “one-time assessment” in 2006, in addition to the 6.8% already approved and being added to our policy premiums.

For those not familiar with the CIPC, Florida Statute created it in 2002 to be the insurer of last resort for Floridians who have been unable to obtain insurance from commercial sources. The bill establishing the Corporation was sponsored by representatives from southeastern Florida including Key West, Miami Beach and Palm Beach – coastal areas subject to catastrophic hurricanes with expensive properties at risk. In essence their bill/statute says that, if you have property that is sufficiently at risk for hurricanes or other hazards for which you cannot obtain insurance, but can be approved for or have financing, CIPC is there for you.

In theory the State should only write as many policies as absolutely necessary and not be competitive with normal insurance companies. Their premiums should be greater than commercial rates and set high enough to discourage customers and cover the increased losses that are inevitable. Obviously this is not the case. In the three years since its inception CIPC has already grown from the 520,000 residential and commercial properties assumed from previous State sponsored programs in the summer of 2002 to more than 740,000 last August. As of the end of October it was up to “nearly 800,000”. At the same time they have run up estimated losses of up to $2.5 billion dollars, and are currently defending a class action lawsuit that would require them to cover flood losses as well.

At present the CIPC has the power under the statutes to make up their losses by assessing commercial insurance companies who then assess their Florida policyholders. These commercial companies are already under pressure from heavy losses and raising the rates on their own customers. Some companies have recently notified local residents that they will not be renewing current policies and/or are not taking new customers. This can only foretell a further acceleration in those looking to CIPC for coverage and the probability of even greater losses.

We have no problem with the CIPC as long as it is self-sustaining. Rates must be kept high enough to cover the extra risks they are required to insure. We look at these assessments as nothing but another tax on our homeowners -- one that tends to benefit those not exercising self-restraint and good judgment in their selection of home or business properties. If you agree with our position, by all means let your State Representatives know. The Honorable Gayle Harrell at 873-6500, the Honorable Joe Negron at 221-4904, the Honorable Richard Maycheck at 595-1391, and the Honorable Ken Pruitt at 334-4100

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We would like to thank the Martin County School Board and Superintendent for hosting our 10 November Board Meeting. They provided an excellent briefing on policies, financing and capital improvements and answered our many questions on those topics. We certainly appreciate their efforts.