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Citizens steels for flood of commercial business

TALLAHASSEE, Fla. – May 15, 2007 – Florida’s small-time commercial landlords and many of the small-business owners who rent space from them have been hit with the same fast-rising insurance premiums that have been shocking homeowners since a series of hurricanes raked the state in 2004-05.

Earlier this year, lawmakers handed the problem to Citizens Property Insurance Corp., the state-backed insurer of last resort, whose commercial coverage until now has been limited to high-risk coastal areas.

As a result, Citizens will offer windstorm coverage to commercial-property owners statewide starting June 1 – the official start of the 2007 hurricane season. It could find itself flooded with applications.

“We don’t know what to expect,” said Rocky Scott, a Citizens spokesman. “We think the business is going to be substantial. A lot of businesses out there are trying to cope with an insurance problem.”

As of April 30, Citizens had little more than 9,800 commercial policies in force – a total dwarfed by its residential portfolio of more than 1.2 million policies.

The state-supported insurer – which has ballooned since 2004 to become the largest property insurer in Florida and the fourth-biggest in the nation – has its work cut out for it, according to Jeff Anderson, president and owner of HD Realty in Longwood.

“It’s a big problem,” Anderson said. “People are getting canceled, having trouble getting coverage and getting huge premium increases.”

Anderson, who owns several rental homes and a few commercial buildings, said he has run across insurers who won’t issue a policy on a rental house now if the roof is more than 5 years old.

“You replace the roof whether it needs it or not, or you don’t get covered,” he said.

Linda Portka of Osceola County hasn’t had a big problem with her homeowners insurance – yet.

“The premium has gone up, but not a lot,” she said.

But the coverage on her family’s two commercial buildings in downtown St. Cloud is a different matter.

“That’s been a real nightmare,” Portka said.

She and her husband, their son and his wife jointly own the two small buildings. This year their property insurer canceled its coverage on the properties. The Fireman’s Fund policy, which covered hurricanes as well as perils such as fire and theft, had cost the small-time landlords $2,700 a year.

But the first quote for a replacement policy totaled $12,000. The second quote was worse: $18,000. Portka was finally able to get the buildings insured through Nationwide Insurance, with coverage comparable to the previous policy, for a $7,400 premium.

“It’s a shocker,” she said. “All the attention has been on homeowners insurance, [but] small investors are really getting hurt.”

“You can’t necessarily pass all the cost through” to the tenants, she added. “These are small businesses. They can’t pay it.”

Tell that to Jack Zimmer.

Zimmer, owner of the Loco Motion bicycle shops in Winter Park and Orlando’s Baldwin Park, said the annual rent at each of his two locations is up about 20 percent because of insurance-related “pass-throughs” from the landlord.

Worse yet, the Winter Park landlord also recalculated costs for previous years, going back to 2003 – and not just for insurance, but for expenses such as maintenance and taxes – and billed Zimmer retroactively.

“It was their miscalculation, but I had to pay it,” he said. “It puts the squeeze on the little guy. It’s a constant drain.”

The insurance crisis is “killing the small owner” of commercial properties, said Tony Long, president of the Osceola County Landlord Association. “We can’t absorb these insurance costs on top of big [property] tax hikes,” which the Legislature also wrestled with, unsuccessfully, during its regular spring session.

According to Sam Miller, executive vice president of the Florida Insurance Council, the state’s commercial insurers are simply doing what residential insurers have been doing with homeowners: reassessing their risk after back-to-back costly hurricane seasons in 2004-05.

During their special January session on insurance, state lawmakers ordered Citizens to expand its presence in the commercial-property market beyond the coasts.

The insurer is also absorbing a previous state effort to provide premium relief for commercial-property owners: the Florida Property Casualty Joint Underwriting Association.

That entity, known as “the JUA,” had a $1 million cap on its policies and, to qualify for coverage, a property owner had to have been rejected by three private insurers and one “surplus lines” company: an unregulated operator not subject to state rate controls.

“The JUA wasn’t doing the job,” Scott said.

Citizens will initially offer windstorm coverage up to $1 million on structures valued up to $10 million on a single policy. But starting Sept. 1, it plans to boost its damage limit to $2.5 million on structures valued up to $20 million.

Those limits clearly target small landlords.

“The big guys can take care of themselves,” Scott said. “Many can afford to self-insure and spread their risk.”

Mike Beale, the Orlando-based senior vice president of Florida operations for Highwoods Properties, a major real-estate-investment trust with holdings throughout the Southeast, said the company has a geographically diverse portfolio, with properties in both high- and low-risk areas.

“When you have as many properties as we do, our risk is spread,” he said. “We also self-insure to some extent.”

Citizens’ statewide offerings starting Sept. 1 will also include not just wind damage but other perils such as fire, theft and business interruptions, Scott said.

Citizens has opened a commercial-insurance office in Tampa. International Catastrophic Insurance Managers of Boulder, Colo., has been hired to issue policies and handle claims initially, but Citizens will eventually assume those functions, Scott said.

Citizens’ expanded role doesn’t sit well with the American Insurance Association, a national property-casualty-insurers trade group.

Julie Pulliam, the association’s Southeast public-affairs director, acknowledged in an e-mail that the commercial insurance market has tightened and become more expensive.

But expanding state-backed Citizens’ commercial business statewide and including multiple-peril coverage will likely do further damage to the private sector, Pulliam said.

Private insurers can’t compete with a tax-exempt entity that doesn’t charge rates accurately reflecting the risks and probabilities, she added, and that can hold state residents liable for financial shortfalls when claims exhaust resources. Florida residents have already had to pay special assessments added to their own insurance premiums to help make up Citizens’ previous deficits.

But Scott contends that Citizens is in the best shape ever.

It’s heading into this year’s hurricane season with about $8.8 billion available to pay claims, he said. By comparison, its total payout for the 2004 and 2005 storms that raked Florida totaled about $5.2 billion, he added.

Copyright © 2007, The Orlando Sentinel, Fla., Jack Snyder. Distributed by McClatchy-Tribune Information Services.
 

 

 

Foreclosures: Florida up slightly; nation down in April

IRVINE, Calif. – May 15, 2007 – Florida reported one foreclosure filing for every 510 households, and was seventh highest among the states, according to RealtyTrac. The state’s foreclosure activity increased less than 1 percent since March but was up nearly 72 percent from April 2006.

Nationally, the April 2007 U.S. Foreclosure Market Report shows a total of 147,708 foreclosure filings nationwide – default notices, auction sale notices and bank repossessions – reported during the month, down about 1 percent from the previous month but up 62 percent from April 2006. The report shows a national foreclosure rate of one foreclosure filing for every 783 U.S. households during the month.
 
“After hitting a two-year high in March, U.S. foreclosure activity slipped slightly lower in April,” says James J. Saccacio, chief executive officer of RealtyTrac. “Last year, foreclosure activity subsided somewhat during the spring and summer months, thanks in part to increased interest from buyers. Whether the decrease in April is the beginning of a similar trend this year remains to be seen, but we expect foreclosure activity to at least stay above last year’s levels for the remainder of 2007, fueled by a combustible mix of risky loans taken out in the last few years – many in the subprime market – and slowing home price appreciation.”
 
States with foreclosure rates (percentage) ranking among the nation's 10 highest in April were Nevada, Colorado, Connecticut, California, Ohio, Georgia, Florida, Arizona, Illinois and Michigan. In total number of foreclosures, Florida ranked second to California. States with foreclosure totals among the nation’s 10 highest in April were Ohio, Texas, Illinois, Georgia, Michigan, Colorado, Connecticut and Arizona.

© 2007 FLORIDA ASSOCIATION OF REALTORS® 

Foreclosures: Florida up slightly; nation down in April

IRVINE, Calif. – May 15, 2007 – Florida reported one foreclosure filing for every 510 households, and was seventh highest among the states, according to RealtyTrac. The state’s foreclosure activity increased less than 1 percent since March but was up nearly 72 percent from April 2006.

Nationally, the April 2007 U.S. Foreclosure Market Report shows a total of 147,708 foreclosure filings nationwide – default notices, auction sale notices and bank repossessions – reported during the month, down about 1 percent from the previous month but up 62 percent from April 2006. The report shows a national foreclosure rate of one foreclosure filing for every 783 U.S. households during the month.
 
“After hitting a two-year high in March, U.S. foreclosure activity slipped slightly lower in April,” says James J. Saccacio, chief executive officer of RealtyTrac. “Last year, foreclosure activity subsided somewhat during the spring and summer months, thanks in part to increased interest from buyers. Whether the decrease in April is the beginning of a similar trend this year remains to be seen, but we expect foreclosure activity to at least stay above last year’s levels for the remainder of 2007, fueled by a combustible mix of risky loans taken out in the last few years – many in the subprime market – and slowing home price appreciation.”
 
States with foreclosure rates (percentage) ranking among the nation's 10 highest in April were Nevada, Colorado, Connecticut, California, Ohio, Georgia, Florida, Arizona, Illinois and Michigan. In total number of foreclosures, Florida ranked second to California. States with foreclosure totals among the nation’s 10 highest in April were Ohio, Texas, Illinois, Georgia, Michigan, Colorado, Connecticut and Arizona.

© 2007 FLORIDA ASSOCIATION OF REALTORS®