Condominium
and homeowners associations that have added storm shutters, reinforced
doors or roofs and put in impact-resistant glass to make their buildings
more storm-resistant can get a bigger break on their windstorm
insurance.
Citizens Property Insurance, the state-run
insurer, in September began offering discounts of up to 45 percent for
taking mitigation steps. As with hurricane coverage for single-family
homes, apartments and condo units, the insurer was required to double
mitigation credits it offered the associations.
The Office of Insurance Regulation required all
insurance companies offering windstorm coverage on condominium
communities with multiple buildings and homeowner associations to double
their mitigation credits as of Sept. 1.
The deeper discounts are a boon for all homeowners
in these developments, but especially those in South Florida. After the
2004 and 2005 storms, rates on windstorm insurance for these
associations doubled -- and in some cases even tripled. Citizens, as the
insurer of last resort at the time, took up many of the riskiest
properties along the coast -- and throughout the state.
Now agents are worried about a negative impact on
Citizens because the deeper discounts could attract more policyholders
at a time when the insurer would like to shed policies.
Though premium rates in the private market have
eased in the past 12 months, Citizens' rates are frozen by law and tend
to be the lowest in many areas of the state. The state-run insurer is
also more competitive now with private carriers. Changes in the law last
year now allow Citizens to provide total coverage for these
associations.
So agents aren't surprised when clients are eager
to consider a policy from Citizens to save some dollars, even though
they could find coverage in the private market as well.
Evan Glassman, an agent with Advanced Insurance
Underwriters in Hollywood, says he's nervous about adding risk to
Citizens, which is the largest insurer in the state. However, ``as an
independent agent, it's our job to shop the entire marketplace and
present every option available and present the pros and cons to our
clients.''
Glassman said by taking advantage of the
mitigation discounts, the premium for one client, a small condo
development, dropped to $25,000 with Citizens from $45,000 with a
private carrier affiliated with Zurich Insurance. Many individual
homeowners as well as condo associations may have been eager to switch
from Citizens because now the insurer's own policyholders are required
to make up a big chunk of any future deficit the company may face after
a huge hurricane. The higher requirement was put in place by lawmakers
last year.
But tough economic times could make some
associations more willing to accept the risk of a big assessment in the
future versus the benefit of lower premiums today.
''We're going to see a rush back into Citizens,''
said Dulce Suarez-Resnick, an agent with Brown & Brown Insurance's
HBA Division in West Miami-Dade. ``In part, the economy is driving
everything. These associations are trying to save where they can.''
She notes that many associations have many empty
units, so collecting the full amount of maintenance fees they had
budgeted for isn't possible. So many are coming up short to cover
insurance payments and upkeep on their buildings. ``They have to trim
budgets where they can. You can't turn off the electricity in the common
areas for a few hours to save money.''
For associations that are hard-pressed, any
savings can be significant.
Resnick said the homeowners association in Doral
where she lives saw their premiums shrink to about $80,000 from a high
of $134,000 a couple of years ago due to the mitigation discounts and
slightly lower rates. The higher credits are available on buildings
valued under $10 million, which tend to be garden-style condo projects.
A Citizens' spokesman said since the deeper
mitigation discounts just went into effect two months ago, the company
hasn't seen a sharp increase in new condo policies so far.
However, the insurer has been feeling the pinch of
having to credit back the deeper discounts to homeowners who have taken
the needed steps to harden their homes and buildings.
Sharon Binnun, Citizens' chief financial officer,
told a meeting of the company's board of governors last week that she
expects about 50 percent of the company's windstorm policyholders to
receive the mitigation discounts next year. That means the insurer will
have to credit back about $640 million in premiums.
Citizens won't allow condo associations to switch
back to the company before their current policy expires just to capture
the bigger mitigation discounts. The changeover must be done at renewal.
Associations already covered by Citizens also have
to wait until renewal time to apply for the bigger discounts.