Citizens Predicts $400 Million Deficit; Fla. Joint Selective Committee to Hear Recommendations Tomorrow

An estimated $400 million shortfall in Citizens Property Insurance Corp.’s high-risk account was confirmed yesterday by Citizens spokesman Justin Glover in meetings in Orlando with the company’s board of governors. The deficit makes it likely that policyholders throughout the state will have to pay to make up the difference. Last year’s hurricanes accounted for a $1.6 billion loss for the state-backed insurer of last resort.

If an audit shows those numbers to be correct, then Citizens will have to levy a 5.3 percent assessment on premiums for all insurance policies covering single-family homes, condominiums and apartments. That means an additional one-time charge of $106 for someone who pays $2,000 a year for insurance.

Citizens spokesman Justin Glover told the Fort Lauderdale Sun-Sentinel that the assessment isn’t definite. The company is awaiting results from an audit to verify the losses from the windstorm account, as well as an actuarial analysis, before making its final determination, Glover said. “Any numbers that are out there are speculative at this point,” he said.

But representatives of the state’s insurance industry groups point to the assessment as a sign that Citizens’ rates, already mandated by state law to be higher than those charged by private companies, are still too low.

Had the storms hit Broward and Miami-Dade counties, where Citizens has its highest concentration of policies, the assessment would have been much higher, Sam Miller, executive vice president of the Florida Insurance Council said. “[The assessment] demonstrates clearly that Citizens’ rates were not high enough to cover their losses.”

Unlike private companies, Citizens can assess policyholders from all the state’s insurance companies to cover its losses. The assessments would have been less likely had Citizens been able to tap the Florida Hurricane Catastrophe Fund, from which insurers can use money to help pay storm claims should insured losses exceed $4.5 billion. Insurers are pushing for a bill in the upcoming legislative session that would lower that amount to allow them to tap the fund earlier.

None of the four storms pushed Citizens past the amount of losses it needed to be able to use money from the catastrophe fund.

“[Citizens] shouldn’t be in a position where they pay out $1.6 billion in losses … and get no recovery from the Florida Hurricane Catastrophe Fund,” Miller said.

At the meeting the board approved changes to its policy governing private companies that take policies out of Citizens.

Under the changes private companies will now get less money for the policies, but have to keep them longer. The changes include requiring companies to keep policies they remove from Citizens for five years, rather than three, and companies would be limited to $100 per policy in bonus money for taking the policies.

The changes were proposed by state Chief Financial Officer Tom Gallagher, who also on Tuesday outlined a series of recommendations for Citizens that he hoped legislators would consider in the upcoming session.

Those include making Citizens a permanent “safety valve” for Florida property owners, capping windstorm coverage at $1 million, and creating an arrangement with private companies to reduce Citizens’ reliance on third-party adjusters.

The state’s Joint Select Committee on Hurricane Insurance will consider those recommendations, and many others, at its final meeting tomorrow in Tallahassee.

Topics Florida Catastrophe Hurricane