Florida Consumer Advocate Calls for More Analysis of Citizens' Property Depopulation

By: Jim Turner | Posted: October 1, 2012 3:00 PM

Blue Tarp Rooftops
Florida Insurance Consumer Advocate Robin Smith Westcott says additional assurances are needed on the $350 million low-interest loans going to private insurers to help the state-backed Citizens Property Insurance Corp. to shed 350,000 policies.

However, one of the business lobbying groups that supports the depopulation program warns that bloated Citizens “is a ticking time bomb that must be defused now.”

With the Citizens board of governors set to meet on Oct. 9, Westcott fired off a question-laced letter to Citizens Chairman Carlos Lacasa on Monday that seeks to know if the program will reduce costs to consumers.

“The Office of the Insurance Consumer Advocate shares the board’s goal of depopulating Citizens and reducing the potential assessments on all property and casualty policyholders in the state,” Westcott wrote.  

“The surplus note take-out program tentatively approved at the last board meeting appears to advance this goal. However, Citizens must assure consumers and policymakers that a thorough cost-benefit analysis justifies the commitment of up to $350 million of Citizens’ surplus, as this program would allow.”

Among Westcott’s questions: How were the policies selected? Can a map be provided that specifically identifies the location of these policies? Has there been an analysis of the impact of the program on the marketplace?

Under the Citizens depopulation program approved last month, Citizens will provide the upfront capital, in the form of 20-year loans, to support the assumption of large blocks of Citizens’ personal residential policies by qualifying insurers.

The program has been estimated to reduce the emergency assessment tax by 38 percent if a one-in-100-year hurricane hit Florida.

Citizens developed the program after soliciting depopulation and risk-sharing ideas from private insurance companies that do business in Florida in
an effort to significantly reduce Citizens policy count, which currently stands at close to 1.5 million.

Citizens has estimated the reducing catastrophic risk through purchasing reinsurance coverage alone would cost Citizens approximately $240 million per year.

Sen. Mike Fasano, R-New Port Richey, and Rep. Frank Artiles, R-Miami, have previously expressed concern that the program was rushed to approval and audits should be conducted of the companies involved.

The low-interest loan program has the backing of Florida TaxWatch, Americans for Prosperity-Florida, and Associated Industries of Florida for relieving Citizens of thousands of policies and potentially reducing future hurricane tax assessments by an estimated $1.2 billion.

AIF President and CEO Tom Feeney quickly responded to Westcott on Monday by saying that the program could fall apart by delaying it until 2013.

“Citizens Property Insurance Corp. (Citizens) is a ticking time bomb that must be defused now; with more than 1.4 million policyholders, it has gone from being the insurer of last resort to being the largest insurer in Florida,” Feeney wrote. “Time is of the essence and this plan should not be delayed.

“The financial black cloud that hangs over every Floridian and all of our businesses is dark and getting darker. We are one big hurricane away from financial catastrophe due to the massive hurricane taxes that will be foisted on virtually every insurance policyholder in the state. Imagine while trying to rebuild our property and our businesses we learn we are going to be hit with a huge hurricane tax bill – possibly for years!

“A crucial consideration of the depopulation program is the timing of its launch and that is based on some very precise math. If we were to wait until next year, the plan simply would fall apart.

“Under Citizens depopulation plan, the loan amounts will guarantee that affected policyholders will see no rate increases and will allow Citizens to transfer almost 400,000 policies to Florida-based insurers. The amount of money that Citizens is loaning the participating insurers will have to be increased exponentially if the plan is delayed. The loan amounts are based on certain amounts of unearned premium being transferred with the policies, and those amounts decline every day and alter the calculations on which the plan was developed.

“Further, the participating companies need sufficient time to build adequate reinsurance programs for the coming hurricane season which will then have to be negotiated and placed in the spring for a June 1st start date. There simply would not be enough time to accomplish this if we delay any further.

“This plan was originally unveiled in April 2012, has been meticulously vetted by Citizens’ staff, and is still under review by its board. The process has not been rushed; rather, it has been comprehensive and methodical. To delay implementation any further would be tantamount to financial malfeasance.”

Reach Jim Turner at or at (772) 215-9889.

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