MARATHON -- Greater Marathon Chamber of Commerce CEO Daniel Samess is sounding the alarm bell about an unwritten new Citizens Property Insurance Corp. rule against writing windstorm policies for short-term vacation rentals.

"What we are already seeing is people that are looking to buy property to use it as a vacation rental are getting denied insurance by Citizens and therefore can't get mortgages," Samess said last week.

According to Joe Roth, head of the Regan Insurance Agency in Tavernier and Marathon, the rule isn't written into the Citizens manual. But Roth and others say company representatives are telling agents that they won't write policies on homes licensed to be rented out on a weekly basis.

"It's almost like an unwritten edict right now," Roth said.

The change is part of a Citizens effort to reduce some 678,000 policy holders from its rolls, a move advocated by Gov. Rick Scott, who wants to reduce the exposure of Florida's quasi-public windstorm insurer of last resort.

Statewide, Citizens has 1.5 million policy holders. But it's especially vital in the Florida Keys, where private companies have all but dropped out of the windstorm market. Citizens writes 95 percent of the windstorm policies in the Keys, according to the advocacy group, Fair Insurance Rates in Monroe.

Samess said that the new Citizens policy could have a major impact on the Keys vacation rental industry, especially in the Middle Keys, where rentals of seven days or less aren't as tightly regulated as they are in other parts of the island chain.

There are more than 1,100 licensed vacation rental properties in Marathon, Duck Key and Key Colony Beach, Samess said. Using figures provided by the Monroe County Tourist Development Council, he estimates that in 2010 those homes brought some $90 million into the Middle Keys economy.

"There's a real trickle down effect," Samess said.

Vacation rentals are also an economic player in Islamorada, where village regulations allow up to 331 short-term licenses annually. In Key Largo, rules are much stricter, with rentals of less than 28 days banned.

Middle Keys real estate agents already say the new policy, which was applied this year, is costing them sales.

"We've lost at least three transactions in the last 30 days," Coldwell Banker Schmitt Real Estate Co owner Brian Schmitt said.

The Marathon and Lower Keys Association of Realtors has received seven reports in the last month from agents who say they've lost sales due to new Citizens polices, Association Executive Tammy Hollander said.

Short-term rentals, however, aren't the only coverage Citizens has begun avoiding. As of Jan. 1, the company is no longer taking on properties in coastal regions with replacement values of more than $1 million and is no longer providing builder's risk insurance. Also on the chopping block, according to FIRM, are condos in buildings in which at least 25 percent of the units are used for vacation rentals.

Not everyone is especially concerned about the various new restrictions, however.

Patti Stanley, owner of the vacation rental company Island Villa Rentals and chair of the Islamorada district advisory board of the Monroe County TDC, said that contrary to popular opinion, companies other than Citizens will sell windstorm insurance in Monroe County. Policies for agencies such as Lloyds of London may cost more, she said, but the difference isn't as much as people think.

In addition, Stanley added, home buyers can adapt to the changes at Citizens by purchasing different categories of insurance.

"I've never known a sale that couldn't go through because of insurance," she said.

But Heather Carruthers, a Monroe County Commissioner who is also the president of FIRM's board, said windstorm rates at alternative companies are in fact much higher than those at Citizens. And since banks typically require proof of insurance prior to providing mortgages, if Citizens persists in not writing policies on vacation rentals, it could have a destabilizing effect on the Keys real estate market.

"The real concern of FIRM is that people are not going to be able to get mortgages to buy properties," Carruthers said.

rsilk@keysnews.com