Florida May Tap Surplus Lines to Depopulate Citizens

Florida lawmakers are considering allowing surplus lines carriers to help Citizens Property Insurance Corp. lose some of its 1.5 million policyholders. State Sen. Garrett Richter (R-Naples) and Rep. Jim Boyd (R-Bradenton) are sponsoring bills that would allow surplus lines insurers to directly assume Citizens’ policies.

At a Senate Banking and Insurance Committee meeting, Richter said bringing the surplus lines industry into the depopulation picture is another tool to help expand the private market. “If the members are serious about shrinking the size of Citizens, then they should vote for this bill,” he said.

Under the bill, surplus lines carriers would have to meet a number of conditions in order to assume Citizens’ policies including a higher minimum ($50 million) than they now must ($15 million). The insurer would have to maintain an A- or better financial rating from A.M. Best and enough resources to cover at least two projected 100-year maximum probable hurricane losses per hurricane season.

The bill specifies that coverage from a surplus lines insurer must be similar to one from Citizens and that policyholders be notified of any differences. In the event an admitted insurer and surplus lines carrier seek to assume the same policy, precedent would be given to the admitted carrier.

The bill is being backed primarily by GeoVera Specialty Insurance Co., which has 30,000 policyholders in the southeast and Midwest. Tim Meenan, of the Tallahassee, Fla., law firm of Blank and Meenan, which is representing the company, says the insurer is looking to assume up to 50,000 policies.

Surplus lines insurers typically only write multi-million dollar homes or large condominium and commercial buildings. But Meenan said that GeoVera targets older houses that most private insurers pass up and thus end up in Citizens.

While 30,000 or 50,000 assumed policies may be only a fraction of Citizens’ population, Meenan said there is potential for more surplus lines companies to get involved.

“We do believe that the surplus lines carriers could be part of an answer to Citizens,” Meenan said.

The lack of regulation of surplus lines makes some lawmakers and consumer groups wary of the bill. “I have a grave concern that we are starting down the road to take away consumer protections,” said Sen. Mike Fasano (D-New Port Richey). “There is a movement here to force consumers out of Citizens whether they want to or not.”

Topics Florida Carriers Legislation Excess Surplus