December 4, 2021

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Insurance surge slams AMI condos

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Runaway costs went through the roof.

A Bradenton Beach condominium complex was blindsided by a 337% annual increase in the price of its property insurance this year and the condominium association’s insurance agent said other island complexes could be hit with similar price hikes.

Frank Witzmann, president of the Runaway Bay Condominium Association, told The Islander Oct. 27 the complex’s insurance agent, Mike Angers, received a letter of non-renewal from American Coastal Insurance Co. July 28, 65 days before the association’s legally-mandated renewal deadline.

“In the non-renewal letter, the reason they did not renew us, they claimed our roofs were in poor condition. And they have never set foot on our roofs. They have no idea what our roofs’ conditions are,” Witzmann said.

Following the news, Angers, vice president of the Sarasota division of Brown & Brown Insurance, scrambled to put together a coverage package before an Oct. 1 deadline.

Nearly three dozen carriers refused to insure Runaway Bay due to the age and wooden-frame construction of its buildings, its 13-year-old roofs and the complex’s location on a barrier island.

At the end of September, days before the deadline, Angers secured a layered insurance package comprised of seven “excess” carriers — carriers whose policies are not backed by the state.

The layered package cost $581,260, up from $172,152 the year before.

Witzmann said the association, which planned for a 6% increase in its approximately $1 million operating budget, is facing a 42% increase.

“So (resident’s monthly) assessments obviously go up, roughly 42%, and this has a huge effect. We have people who don’t rent, people who live here, who are seniors on retirement incomes. This is a big hit. We had some sleepless nights,” Witzmann said.

Angers, who has specialized in condo complex insurance policies for 26 years, said Oct. 26 that the market has hardened — fewer carriers are willing to provide coverage, especially on high-risk barrier islands, and those that do offer policies with more stringent underwriting guidelines and charge abnormally high rates.

In particular, roofing guidelines have become stricter, Angers said.

Whereas carriers used to routinely insure properties with 20- and 25-year-old roofs, they now scrutinize decisions on roofs 15 years old and younger.

A factor driving up market prices and motivating carriers to narrow their underwriting guidelines is fraudulent roof damage claims stemming from Hurricane Irma in 2017.

There was a three-year window to file claims related to the storm and, in September 2020, carriers were flooded with large, unexpected claims, Angers said.

“So, now they have a bad history of claims on the catastrophic events. They have all these lawsuits they didn’t plan on that are backing them up, and they’re not getting a good return on the investment in the market. Those three items there, that gives us a hard market,” he said.

Witzmann said the association’s board approved a task force of five owners who will pursue strategies to bring down the complex’s property insurance costs.

“Next October, we do not want to be in this situation. This is not sustainable,” he said.

In the past, Citizens Property Insurance Corp., established as a nonprofit windstorm and property insurer of last resort by the Florida Legislature in 2002, provided a reliable safety net for Floridians.

However, like other carriers in the recent past, Citizens has tightened its underwriting guidelines, especially on the age and construction of roofs, Angers said.

“So, now, what was the avenue of last resort can decline you as well, making it really, really tough on the consumer,” he said.

Angers suggests condo associations that aim to bring down property insurance prices lobby state legislators to relax the underwriting guidelines of Citizens, a government-run program.

“I think that’s the only way they’re going to get anything together because they’re not the only ones having this problem and this is the tip of the iceberg,” Angers said.

“The market is turning and, every day, I open up my emails and it’s getting worse. We need Citizens to relax their guidelines so people can get in that can’t get coverage elsewhere, or else they will be sitting uninsured,” he said.

On Oct. 26, Angers notified a condo association on Longboat Key that the organization is facing a “hefty increase” in the price of its property insurance.

Insurance carriers mitigate risk by setting “capacity” guidelines within zip codes — meaning they cap the amount of insurance they can write on an annual basis in those areas.

The majority of condo associations renew their insurance policies between January and June, and Angers said that if market conditions don’t improve, associations could be left uninsured as carriers reach capacity.

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