John Thrasher, Bryan Nelson, AIF Back Citizens' Property Depopulation Loan Program
Around the State
A group of state lawmakers, business advocates and representatives of the insurance industry lined up Thursday behind a $350 million loan program proposed to shift about 300,000 polices from the bloated Citizens Property Insurance Corp. to private insurers.
The call comes despite concerns from the state’s chief financial officer and consumer advocate about rushing to implement the loan program by December, before numerous technical questions are answered. Others have expressed criticism that the program is simply a shift of money from Citizens’ reserves into private hands that only have to temporarily offer similar coverage.
Florida Sen. John Thrasher, R-St. Augustine, called for the proposal to be urgently embraced when depopulation comes before the Citizens board of governors on Tuesday. “We have dodged the hurricane bullet for a while, but we cannot enter another hurricane season exposed to fiscal catastrophe,” Thrasher said during a joint telephone media conference.
Associated Industries of Florida President Tom Feeney, who noted that some of his members are from insurance industries, said AIF may not always be “thrilled” by the actions of Citizens, but the loan program is “a good step in the right direction” to reduce the state’s catastrophic hurricane risk.
State Rep. Bryan Nelson, R-Apopka, the chairman of the House Insurance and Banking Committee, said he backs the loans not having to go before the Legislature for approval because lawmakers already are aware -- a similar proposal was discussed back in March, during the 2012 session. Citizens simply shouldn't wait until hurricane season is close to subject affected policyholders to a last-minute change, he said.
“I think we have a window of opportunity because of the lack of storms that we’ve had the past few years to change the course of Citizens and reduce the policyholder counts and put the policies back in the hands of the private sector where they have their own reinsurance and can take care of the losses and not be a burden on the folks in the state of Florida,” Nelson said.
Under the program, private insurers wouldn’t be allowed to increase rates on any former Citizens policyholder by more than 10 percent a year for three years and any rate adjustment after that would require prior approval from the state Office of Insurance Regulation.
The former Citizens customers who couldn’t afford the hikes after three years could jump back into the state program. However, for each policy that drops from private hands during the 20-year loan period, the private insurer would have to pick up a different Citizens policy.
With 1.4 million policyholders, Barry Gilway, Citizens president, said the loan program is an alternative to $2.4 billion that would otherwise be needed over 10 years to eliminate the same 40 percent assessment.
“It would be foolish not to move forward with this program,” Gilway said.
The program has been estimated to reduce the emergency assessment tax by 38 percent if a one-in-100-year hurricane should hit Florida.
Florida Insurance Consumer Advocate Robin Smith Westcott fired off a question-laced letter to Carlos Lacasa, Citizens Property chairman, 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?
Gilway said those questions will be addressed on Tuesday.
According to numbers released by the media call, since the average per policy premium in Citizens is $2,269, a customer who is removed from Citizens in December could avoid the first round of a pending Citizen policyholder assessment in the event of a one-in-100-year storm, avoiding a hurricane tax that could reach $1,021.
Dave Newell, director of education for the Florida Association of Independent Insurance Agents, also gave his support to the plan.
Sen. Mike Fasano, R-New Port Richey, and Rep. Frank Artiles, R-Miami, have also previously expressed concern that the program was rushed to approval and audits should be conducted of the companies involved.
The audits will take place, said Nelson, and all of Atwater's questions will be answered Tuesday.
Reach Jim Turner at email@example.com or at (772) 215-9889.