Citizens To Continue Insuring Construction
Written by Charlotte Libov on August 24, 2006
By Charlotte Libov
Citizens Property Insurance Co. will continue to write builders risk insurance after Dec. 31 if no private company emerges to do so, said a spokesman for the state-run insurer of last resort.
"There is no cutoff date," said Rocky Scott. He said the insurer’s board of governors will meet in late fall to reevaluate the situation.
"We’ll meet in November to see if there has been an entrance by any of the private-market insurers and see how it stands," he said. "If there is still no market, then the board can say there’s no market, and we’ll keep writing builders risk policies."
Builders risk insurance covers properties that are under construction, renovation or repair.
Mr. Scott said prices will continue to rise "because some of these policies haven’t been revised since the ’70s.
"It’s a tough market," he said. "A lot of it was that the builders had no place to go other than the surplus line market. I was talking to a builder who we were going to charge $55,000 for property insurance and $88,000 for the wind portion. The customer went out and shopped it and got one response for a surplus line company, and instead of $88,000, that would have been $500,000."
Citizens officials announced in June that the company would discontinue providing builders risk insurance July 15, but state insurance officials argued that would jeopardize the state’s construction industry. Citizens backtracked, announcing it would renew existing policies and write new ones until Dec. 31 at the earliest.
Mr. Scott said the company has 5,000 builders risk policies in force, insuring about $5.5 billion worth of property.
He said Citizens customers are facing particularly high increases in part because rates were artificially low for years. "When this got started, there were (Joint Underwriting Associations) formed in the ’70s, ’80s and ’90s. When Citizens was created, these policies all got folded in, so we really hadn’t reviewed them. When we looked at them, we found the rates needed to be justified."