RESIDENTIAL CONSTRUCTION in Florida received a temporary reprieve in late July, when Citizens Property Insurance Corp. agreed to continue writing builders risk policies through the end of 2006.

In June, the nonprofit insurance company announced that it would stop writing new builders risk insurance policies July 15, prompting concern among the state's home builders, who are required by their lenders to carry the policies.

“The state has to make sure there's an insurer of last resort or face the consequences that its largest industry is about to stop developing,” asserts Doug Buck, governmental affairs director for the Florida HBA.

Citizens was intended to be the insurer of last resort when the state created it in 2002. But two destructive hurricane seasons dried up the Florida reinsurance market—essentially, insurance for insurers—and many private insurance companies have stopped offering coverage in the Sunshine State. Citizens' 6,000 builders risk policies, worth $4.5 billion in risk, are dwarfed by its more than 1 million homeowners' policies, representing another $400 billion.

When Florida's Office of Insurance Regulation (OIR) asked Citizens to justify its coverage of builders risk, the company found no statute that directs it to offer the coverage, says Rocky Scott, Citizens' public information manager. The company planned to halt new policies in July and discontinue all coverage as of Nov. 15. The OIRasked Citizens to reconsider when it became clear that the coverage would be nearly impossible to find in the private insurance market; even the unregulated surplus lines market had no coverage to offer, says Bob Lotane, an OIR spokesperson. The policies will likely be more expensive now, as the OIR told Citizens its rates were too low for the risk incurred, but “coverage will be available,” Lotane says.

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