Growing losses and claims, higher rates among issues

The rising costs of property insurance, made worse by a crisis in the state-run Citizens Property Insurance Corp., will be one of 2006's most critical South Florida business issues.

The eight hurricanes that hit Florida in 2004 and 2005 produced huge increases in losses and claims for privately run insurance companies and Citizens, which provides policies for homeowners and businesses that cannot obtain coverage from other companies.

Citizens' board of directors is considering two rate increases for its policyholders - one to cover 2004 losses and the other to cover 2005 losses. For South Florida homeowners, Citizens' increases could be as high as 32 percent to cover 2004 and 67 percent for 2005.

Florida's Office of Insurance Regulation is required to approve increases at Citizens, which under state law must charge rates higher than those of private carriers.

Florida also is facing the prospect of growth at Citizens, as more insurance companies consider canceling policies while they handle growing claims and face the prospect of multiple hurricanes again in 2006.

The Legislature will consider a number of bills, with recommendations that include additional systems for providing back-up funds for Citizens and incentives for insurance companies to write more policies.

South Florida commercial property owners and businesses that lease space also are expecting rate increases. Insurance companies will set rates for those clients after they receive details of their own costs for 2006 re-insurance coverage. Many re-insurance firms will announce those rates early in January.

Meanwhile, disruptions from 2005's storms, particularly Hurricane Wilma, have prompted more South Florida businesses to consider adding business interruption insurance.

That coverage provides money to compensate for lost revenue and to pay employees for a pre-designated number of weeks if a business is shut down by a peril, such as a windstorm.