Citizens Insurance could affect tourism
Living in paradise isn't always carefree. There's always something trying to implode our flip flop lifestyle. This time it's Citizens Insurance, the state run insurer, again.
With the beginning of hurricane season less than two months away and our annual visitors beginning to dissipate, Citizens Insurance is getting our attention for the second time this year. In February it attempted to introduce surplus lines of insurance into the insurance marketplace as a way to off load policies from Citizens to private insurers. After the heart was cut out of the bill by consumer groups who objected to homeowners not having a say in Citizens moving them to a surplus lines insurers, the bill was put on hold in the Florida House. Now Citizens has come up with another way to improve its bottom line and/or get rid of policies.
In February the Citizens board of directors approved a plan that would impact any condo complex with more than 25 percent short-term rentals defined as renting for less than one month. The proposal would consider these types of condo complexes to be commercial operations subject to a cap of $1 million per building. Since it's not unusual for condo buildings to be valued above $1 million, especially waterfront, this would have substantial consequences.
If this is approved, condominium associations would be forced to get additional insurance from the unregulated surplus lines market that was just rejected by the Florida legislature. It is estimated that rates for this additional insurance could be 400 percent greater than Citizens' rates. So how will this proposal if approved affect Anna Maria Island and all the other barrier islands in Florida that are heavy with short-term rental condos?
Worst case scenario is a tremendous increase in insurance premiums for condominium associations that have short-term rentals. The additional expense will of course be passed on to potential renters, invariably having a detrimental effect on Florida tourism. Some condo associations might consider capping the number of short-term rental units in order to maintain their current Citizens' rate.
However, changing condo rules isn't such an easy thing. Every association has its own percentage criteria which must be met before important regulations can be amended. Getting owners, especially ones who are receiving substantial income from renting their condo units, to agree is no easy task. There also could be a legal issue in restricting current owners who bought under existing condo regulations, which could result in some type of a grandfather clause being adopted.
Citizens has submitted its proposal to the state Office of Insurance Regulation for review and typically it has 45 days to make suggestions. It is expected that the plan will be approved.
When the proposal is adopted, Citizens will discontinue coverage for any condo complex with more than 25 percent short-term rentals as policies come up for renewal. It is planning on relying on condo associations to self-report the percentage of rentals and will follow up with inspections.
Once it has been determined that an association qualifies as a commercial property, it will be provided with a 100 day notice that it is not being renewed. During this time, it can apply for $1 million coverage per building with the Citizens commercial insurance program and add additional private insurance coverage.
Since Anna Maria Island is one of the epicenters of short-term rentals along with other Florida beach areas, you'll probably be hearing a lot more about this. Hang on to your flip flops. It's going to be a bumpy ride.
