South Florida's business owners, like homeowners, aren't seeing relief from soaring windstorm rates.
What may be around the corner for them: rates that could double or even triple. Some insurers covering commercial property, including shops, restaurants, hotels and offices, have requested rate increases ranging from 142 percent to 225 percent. The state has 34 recent filings from 10 insurers, most from the Hartford Financial Group companies.
These come at a time when insurance at any price is still hard to find. The stakes are huge for South Florida's economy, fueled by thousands of small- and medium-sized companies already struggling with the slumping real estate market and high cost of living. Rising insurance premiums not only strain their balance sheets, the extra costs ripple into consumers' pockets.
Frank Nero, president of the Beacon Council, Miami-Dade's economic development agency, said a recent survey of business owners found that the cost of property insurance, along with property taxes and the county's transportation infrastructure, are among their top three concerns.
''It's something everybody has on their radar screen,'' says Nero's Broward counterpart, Broward Alliance President Jim Tarlton. Businesses are also concerned about the toll of rising homeowner rates on their employees, he said.
Like homeowners, businesses were supposed to see some rate relief from the insurance-reform bill passed during a special legislative session in January.
State regulators expected insurers to reduce businesses' rates by up to 59 percent. That's because insurers could stock up on lower-cost reinsurance -- backup coverage for insurers -- from the Florida Hurricane Catastrophe Fund and pass on savings to policyholders.
Insurers did buy reinsurance from the fund, but some are still seeking triple-digit increases. The Office of Insurance Regulation will hold public hearings on these requests in mid-August.
Although rates haven't eased since the insurance crisis hit businesses hard last summer, agents say some insurers have been more flexible in writing policies. And insurers aren't shedding large numbers of policies as they were then.
Yet many insurers are increasingly selective about the coverage they offer. Some won't cover windstorm damage; others avoid property coverage altogether.
That's what happened to Steven Gissin, who owns Heaven Cycle, a motorcycle accessories store on Bird Road in Miami. After providing a full policy for 10 years, Federated dropped Gissin's shop last year, wanting to write only liability coverage.
Gissin ended up with a policy -- minus windstorm coverage -- from a surplus lines company, an insurer whose rates aren't set by state regulators. At $5,000, the property policy alone cost $2,000 more than what he previously paid for full coverage. Initial quotes on his policies, which renew next month, are higher than what he paid last year. Like many small-business owners, he may have to make a choice: Raise prices and risk losing customers or absorb the costs -- again.
''I thought things would be better this year,'' says Gissin.
Nestor Rivero, owner of Tropical Insurance in West Miami-Dade, says he's considering selling his small office building on Coral Way because he can't keep up with insurance and tax bills.
This year, he has gone without windstorm insurance because he couldn't afford the $16,000 premium on hurricane coverage and a 10 percent deductible -- $55,000. The premium for just fire and liability coverage was a more reasonable $4,000 on his 5,500-square-foot building.
''This building was supposed to be my retirement fund. But my only solution may be to sell the building,'' Rivero said. He worries he couldn't pass on all of the costs of maintenance, taxes and insurance to his tenants, who may have to pass on those costs to their customers. He already passed on the tax increases. ``If I had to do it for insurance, my tenants would leave.''
Pablo Conde, president of A&A Underwriters in Miami, finds that some insurers will cover a building's full value for fire and theft, and then negotiate on the windstorm part of the policy, if they're willing to write policies at all.
Sometimes clients will limit hurricane coverage because they can only afford so much insurance. Others have raised deductibles to keep premiums manageable.
''You only pay for exactly the amount of insurance you need and look at deductibles and limits carefully. In the past, you might have overinsured yourself, but not today,'' said Ricky Arriola, president of Inktel Direct, a printing facility in West Miami-Dade.
Nowadays, agents say, risk-averse private insurers prefer newer buildings -- those constructed after 2001, when the state's more stringent building code was put in place -- and locations far from coastal areas.
While private companies are stepping back from the market, surplus lines carriers have moved in to fill the gap.
Already, seven new surplus lines companies have been approved to sell commercial insurance in Florida this year, according to the Florida Surplus Lines Office.
Among the new companies are Ironshore Insurance Ltd., a Bermuda-based surplus lines company that started with nearly $1 billion in capital, and Delaware-based Praetorian Specialty.
Many private commercial carriers that are renewing selectively, such as The Hartford and Zurich American, have sister companies in the surplus market. Those insurers are writing plenty of coverage, agents say.
These surplus carriers include Empire Indemnity owned by The Hartford, Lexington Insurance owned by AIG, and Scottsdale Insurance owned by CNA.
MOVEMENT IN D.C.
A development last week in Washington could potentially help very small businesses. A U.S. House committee passed a bill that would extend the National Flood Insurance Program to include windstorm protection, although the proposed coverage limits for businesses are low. The bill faces stiff resistance from Republicans, insurers and some consumer groups.
One big change coming to the market, thanks to a law passed in the regular session: In September, Citizens Property Insurance will begin writing much more business coverage. It will cover up to $2.5 million per policy.
Owners who need more coverage can buy in the private or surplus marketPreviously, the state-run insurer could only offer wind policies of up to $1 million in the state's designated wind-pool area, roughly east of Interstate 95 in South Florida.
Relief can't come soon enough for many businesses.
''Insurance is the oil that keeps the economy going. You couldn't build anything or run a business without it. But it's very frustrating now to find the coverage clients need,'' says Conde.