Soaring Rates Push Condos To Pursue Self-Insurance

By Randy Diamond Palm Beach Post Staff Writer

The Palm Beach Windstorm Self Insurance Fund hopes to start operations within four to six weeks, insuring 50 mid-and high-rise condominium buildings in Palm Beach, North Palm Beach and South Palm Beach. At least two other condo groups in other parts of Florida are pursuing similar self-insurance plans.

The fund's pitch to condos: Insurance rates about 25 percent less than Citizens Property Insurance Corp. As private insurers fled the market in the wake of 2004 and 2005, both gruelling hurricane years, the state-sponsored insurer became virtually the only option.  

''This is the way to make insurance reasonable for people on the beach,'' said Morris Horowitz, vice president of the fund and a resident of the Barclay Condominium in South Palm Beach. ''It's a whole new ball game.''  

The fund will operate as a non-profit, mutual company. It will collect premiums from the condo owners, hold them in reserve and use them to buy reinsurance -- insurance for insurance companies -- in case a unit suffers a loss. It also will be able to assess owners a surcharge if there is not enough money to pay claims.  

Horowitz's nine-story building has seen its insurance, which covered basic elements, such as structure, roof, foundation and grounds, go from $125,000 three years ago to $350,000 today.

Residents of the 208 units have had to pay a $1,000 assessment on top of a 30 percent to 40 percent increase in monthly maintenance fees to pay for the higher insurance rates. At the same time, Horowitz's maintenance has gone from $560 a month to $700 in the past few years.  

Horowitz, 83, who retired as an insurance agent in Long Island and New York City, has spent much of his recent time convincing condominium associations that his idea will work.  

While he has persuaded officials of fellow condo associations to sign up, Horowitz said, getting approval from the state Office of Insurance Regulation has not been easy.  ''They have been giving us such a hard time," he said. "They kept on asking us to file form after form.''  

Tom Zutell, a spokeswoman for the agency, said regulators support the concept and will work with the fund to help it get approved.  

But Zutell said regulators insist that every resident in a building covered by the fund be notified of the switch to the new entity, something the Palm Beach County startup initially resisted.  

Zutell also said there are risks associated with self-insurance.  

For instance, unlike Citizens, whose funds can be replenished by assessments on insurance policies throughout Florida, or private insurers, who are backed by a state guaranty, the insurance fund would be on its own, he said.  

''They could go belly-up and you could lose your home,'' Zutell said.  

Bill Graham, a Tallahassee lawyer representing the fund, said the fund has agreed to the notification. Graham said he was hopeful an agreement can be reached within the next month or so. 

Horowitz said the fund will insure only condos at the lowest risk of major damage -- buildings of concrete and steel.  

Condos also will have to agree to a 5 percent deductible, and most damage in prior storms would have fallen under that mark, he said.  

While the fund will be able to hit residents with a surcharge, he said, they would be limited. A typical resident might see maximum surcharges of $1,000 from two major storms, he said.  

Reinsurance and premiums would cover the rest, said Horowitz, who could not provide exact figures. He said the cost will depend on how many buildings agree to join the fund.  

Horowitz said one of the key reasons the fund will be able to charge less than Citizens is that the new entity would be exempt from state assessments imposed on condo associations by the state guaranty fund, Citizens, and the state reinsurance fund. The Palm Beach County group is not the only association attempting to enter the self-insurance game.  

The Continental Group, which manages 1,200 Florida condo buildings, has developed its own fund that it hopes to launch soon. It plans to cover about 50 complexes, the same number as the Palm Beach County fund.  

Tom Roses, president of Continental's property management group, said it has not yet been determined whether the condos selected will be in one county or spread across South Florida.  

Continental also is telling residents of their potential risk: Individual condo owners could face assessments of as much as $10,000 if the fund was hit with major damage from a storm.  

Continental's plan also needs the approval of insurance regulators.  

A third group of condo complexes, in Broward County, also is expected to submit a fund proposal in the next few months.