Citizens Insurance surplus could be tapped
Mar 28, 2008
Miami-Herald–Mar. 28, 2008
BY BEATRICE E. GARCIA
Money earmarked to pay future Citizens Property Insurance claims could end up funding a program to provide additional capital for young insurers and start-ups.
A bill passed Thursday by the Florida House’s Jobs and Entrepreneurship Council would take $100 million from the surplus the state-run insurer has set aside to pay claims.
A similar proposal was included in an extensive bill introduced in the Senate Tuesday, but it contained no provision for funding. The Senate bill would look to find nonrecurring revenue to provide the money for the program.
Established in 2006, the $250 million capitol build-up program has good support in Tallahassee because, so far, it has provided additional reserves to 13 new or recently established companies.
One big supporter is House Speaker Marco Rubio, who is eager to bring new companies into Florida.
”This program encourages the growth of private insurance companies instead of the continued growth of Citizens,” Rubio said in his speech when the legislative session opened early this month.
The capital build-up program’s goal was to match money being pumped into local insurers. Thirteen companies borrowed $247.5 million from the state. The firms added $296 million of their own capital.
Three of the companies that tapped the program — American Integrity Insurance, First Home Insurance and Florida Peninsula — have taken just over half of the policies to come out of Citizens in the past 15 months.
The logic for using Citizens’ surplus to continue this program is that the takeouts have reduced the state insurer’s overall exposure.
But Citizens has a different take on the proposal.
Lawmakers ‘ought to be careful when they’re invading Citizens’ surplus,” said Bruce Douglas, chairman of Citizens’ board of governors.
He noted that $100 million would cover about 7,000 claims for Citizens. The less cash in Citizens’ hands if a big storm hits Florida, the greater the chance the insurer will run out of money to pay all the claims. If that happens, the company adds surcharges to all of its policyholders.
But if the law is passed, Citizens ”would live within the intent of the statute,” Douglas added.
Both bills likely have one or more committee stops in their respective chambers and could be substantially revised if they make it to the floor for a full vote.