In Florida, homeowners may soon face a significant increase in their insurance premiums, after the board of governors of the distressed insurer, the insurer of last resort, approved a significant 14% increase in interest rates. This increase, the highest the state allows, is intended to stabilize Florida’s insurance market and ease the financial burden on Citizens Insurance, the state’s insurer of last resort. The state’s governor, Ron DeSantis, has referred to the insurer as “insolvent” in the past.

Recent years have seen Citizens become the largest property insurer in Florida, accounting for 18% of the market, but state officials have been actively moving policies from Citizens to private insurers to mitigate the financial risks associated with major hurricanes. Since October, more than 400,000 insurance policies have moved to the private market. “We’ve seen more than 400,000 citizens’ policies move to the private market. Why is this a good thing? First, it removes citizens’ exposure to risk, but second, it shows that the private market is healthier,” explained Mark Friedlander of “We’ve seen over 400,000 citizens’ policies move to the private market. Why is this a good thing? First, it removes citizens’ exposure to risk, but second, it shows the private market is healthier.” Insurance Information Institute.

Friedlander stressed that this rate hike is necessary to enhance the competitiveness of Florida’s insurance market. “You’re buying Citizens insurance at a discount. A lot of people may not think that; they think, ‘I’m paying too much, what are you talking about?’ But you’re buying Citizens insurance at an artificially low price.”

Laura Bongarzon, a West Palm Beach homeowner, has felt the impact of rising insurance costs firsthand, telling CBS12 News she saw insurance premiums that were $2,800 in 2020 jump to $5,987 this year.

For homeowners like Bongarzone, the proposed increase presents a difficult scenario. “You’re basically a hostage. You can go anywhere, no one’s going to write insurance anymore, and if you go somewhere else, it’s even more so,” she said.

The proposed rate hike, which needs approval from both the Board of Governors and the Office of Insurance Regulation, could take effect on January 1, 2025. This would represent the largest average rate increase and the second double-digit increase in Citizens Insurance’s history.

“These are very positive indicators that we are creating an environment where there is a more stable market within the state of Florida, and there is more competition,” commented Charlie Lydecker, president of Risk Partners and a member of the Board of Governors.

Citizens Insurance, which covers 1.2 million policies, was originally designed for homeowners unable to secure insurance in the private market. However, with private insurers canceling policies and raising prices, citizens have become the less expensive option. “They can’t charge what we refer to as actuarially sound rates, which means that if they were a private insurer, they would have charged much higher rates over the last several years just based on market conditions and risk exposure,” Friedlander noted.

Despite rising interest rates, the private insurance market has seen smaller increases this year, indicating its health is improving. “The bottom line is that the private insurance market is becoming healthier,” Friedlander added. “That is why they are able to adjust interest rates now to very moderate levels.”

However, its power for new insurers entering the market has been called into question. “We show that traditional insurers are exiting high-risk areas, and new, lower-quality insurers are entering and filling the gap,” the summary of the Harvard/Columbia/Fed study said. “These new insurers serve riskier areas, are less diversified, have less capital, and 20% of them become insolvent.”

Citizens Insurance expects to attract thousands of new customers during hurricane season, although downsizing efforts have been halted during this period. “Our real dream is to reduce the population and lower the rates,” Lydecker noted.

While the proposed rate hike is less than half what would be needed without a cap, the Board of Governors expects the number of policies could fall to less than 1 million. The Florida Office of Insurance Regulation still has to approve the increase, but it may come back for adjustments and resubmission.

As the country navigates these changes, homeowners are left searching for viable insurance options amid a volatile market landscape.