Florida Chief Financial Officer Jeff Atwater on Tuesday cautioned the state-backed property insurer to proceed with caution as it considers spending $350 million upfront to reduce its number of customers.
Speaking to reporters following a meeting of the governor and Cabinet, Atwater said he is generally supportive of efforts by Citizens Property Insurance Corp. to reduce its policy count by up to 350,000 by offering low-interest loans to companies willing to take on some of the business. Citizens now handles more than 1.4 million policies.
But Atwater said Citizens officials need to comb through the proposal to ensure success and should consider expanding the pool of potential borrowers to include newly formed companies that are currently barred from participating in the plan unveiled earlier this month by Citizens new president and CEO Barry Gilway.
Citizens has been trying to reduce its ranks. As part of that effort, the company announced in early August that 150,000 policies would be taken out by private insurers without the need for any incentives.
"I am glad they are pausing and coming back to show that it is mathematically the right thing to do and there is marketplace interest in taking these accounts and it make sense for us to go that route," Atwater said.
The Citizens plan would allow a qualified private insurer to borrow up to $50 million in exchange for taking Citizens policies for at least 10 years. The loans, referred to as surplus notes, would carry a low interest rate and be repaid to Citizens over 20 years. The loans are meant as an incentive for the companies, which would be taking on more risk.
Because the state-run pool charges premiums that are lower than a private company would offer, a gap exists between what a private insurer would have to charge to provide the policy and make a profit and what customers are paying now.
Gilway said the move would save the company billions of dollars in potential losses and more than $240 million a year in reinsurance costs.
The plan, which came together quickly after Gilway took the helm, has its critics. Sen. Mike Fasano, R-New Port Richey, and Rep. Frank Artiles, R-Miami, have both criticized the proposal.
Artiles says the proposal has not been properly vetted. During the Citizens board meeting, Artiles unsuccessfully urged committee members to postpone action for a couple of months to provide more time to look into the proposal and other options to depopulate Citizens.
On Tuesday, Atwater echoed that sentiment, saying the board should wait until at least December before proceeding with any plans. It should also work with the Legislature on any major revisions to its mission. The hurricane season runs through November.
If Citizens plans to go forward with the financing proposal approved this month, it should consider a wider range of companies to also include new capital companies that meet certain financial standards, Atwater said.
"I think the broadest potential of players that (the Office of Insurance Regulation) would evaluate is a good, healthy thing."