JACKSONVILLE, Fla. – Floridians are in the midst of hurricane season and a property insurance crisis.
Forecasters believe it could be one of the worst seasons in decades and that has some experts warning that a direct hit from a major hurricane could bankrupt the state-run property insurance company.
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Florida’s insurance market is showing signs of improvement, but a major hurricane could change things.
That’s why Florida Democrats met on Wednesday morning to discuss the looming threat of hurricane season that could spell bad news for Florida homeowners.
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Jacksonville City Councilman Rahman Johnson joined the conversation.
“We are also facing in this state, and specifically in this city, an acute affordable housing crisis. In Jacksonville, over 30% of our residents spend more than half of their income on just housing. That combination of high housing costs and the damage of hurricane exacerbates the prices,” Johnson said.
Citizens is the state’s largest property insurer in Florida. Created in 2002, the insurer was supposed to be a last resort option for property owners who couldn’t find coverage in the private market.
In the event of a major hurricane, state leaders warn that Citizens Property Insurance claims-paying fund could be exhausted.
“We are one bad hurricane away from bankrupting our state,” said Nikki Fried, Florida Democratic Party Chair.
Citizens held more than 1.2 million policies as of April, that includes about 40,000 Jacksonville-area homeowners.
News4JAX asked a non-partisan party to help make sense of those numbers. Mark Friedlander with the Insurance Information Institute said the state-run insurer has more policies than what is ideal.
“They have a long way to go to get to what they call manageable risk. That would be about 400,000 to 500,000 total policies,” he said.
Friedlander said Citizens is overexposed but consumers don’t need to worry about their claims going unpaid this hurricane season.
“The bottom line is Citizens could never go bankrupt like a private insurer is declared insolvent. It’s not possible. But the hurricane tax is a possibility. We hope we don’t see it ever again. But it’s a worst-case scenario only. And it would allocate funds to Citizens to pay off its claims. But bankruptcy is a really strong term. And that’s just absolutely impossible,” Friedlander said.
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The hurricane tax is a backstop to ensure Citizens doesn’t ever run out of money.
The state insurer is required by law to tax its customers if funds set aside to pay claims have been exhausted after a major storm. That means customers could be on the hook to pay surcharges of up to 15% per account.
The last time a hurricane tax was imposed was in 2005, when 10 hurricanes left Florida residents paying off Citizens’ $1.7 billion tab through 2015.
The company expects a $6.3 billion surplus by the end of 2024.