Citizens Property Insurance CEO Barry Gilway Discusses Priorities, First Month on Job
Jul 11, 2012
Citizens Property Insurance Corporation (“Citizens”) is an organization under fire tasked with the formidable job of raising property insurance premiums in a struggling environment where rate change likely will happen slowly.
That was the 30-day assessment of Citizens’ new President and CEO Barry Gilway, who met with media members today, July 11, 2012, for the purpose of fielding questions about his first month as leader of Florida’s “insurer of last resort.” Mr. Gilway is the former CEO of Mattei Insurance Services and boasts a career in the insurance industry spanning more than 40 years.
“It’s one of the most challenging positions I have ever been asked to take on,” Mr. Gilway said of his new job at Citizens. “The last three weeks have not lessened my impressions that that’s going to be correct.”
Mr. Gilway lauded his staff as “truly exceptional people” doing “truly exceptional” things, and used terms like “incredible” and “staggering” to describe their work.
“I am just incredibly pleased to be able to work with a Board that truly and absolutely understands insurance,” Mr.Gilway said. But, he admitted all is not rosy.
“I am not naïve. I know we have problems,” he acknowledged, conceding that Citizens faces many confounding challenges, with the foremost being how to reach actuarially-sound rates without sending the Florida economy into a disastrous tailspin.
“Rates, they clearly are the 1,000-pound alligator in the room,” Mr. Gilway admitted.
How to fix the problem is the key, he added.
“No one believes we should make massive changes that will have a detrimental impact on the economy,” he said. “I have not heard anyone suggest that we simply file for actuarially-sound rates. The impact in select counties would be untenable.”
He added, “You will not see a gloom and doom scenario.”
Future pertinent discussions should focus on how long Citizens should take to achieve actuarially-sound rates and what actions are needed to move forward, he said. An upcoming July 16, 2012 Board of Governors rate workshop in Miami will provide Citizens with a chance to illustrate what is happening with rates, including the effect of skyrocketing sinkhole and water seepage claims, he said.
In regard to depopulation, Citizens will probably not make an immediate “huge impact” in reducing policy count, but would expect to head toward that goal over a few years, he said.
“I believe if we can get a little closer to rate adequacy, then we can attract private markets back to the state,” Mr. Gilway said.
Asked if rates in Florida are inadequate, his answer was mixed.
“Yes and no,” he said. “It varies from area to area.” He said the vast majority of rates are not far from adequacy, but certain issues such as spiraling sinkhole claims unbalance the entire system.
Legislators have a wide range of opinions on how to address rates, but seem to agree the issue must be handled in a measured way, he noted.
“We need to look at matter of degree,” Mr.Gilway said. He has begun meeting with legislators to assemble a legislative package that will address rates and fraud.
In regard to cost cutting, Mr. Gilway said he “sees an ability to refine” Citizens’ budgeting process. Notably, he defended recent travel expenditures by Chief Financial Officer Sharon Binnun, who traveled extensively overseas when finalizing the recent bond issue.
When asked to define “actuarially-sound” rates in layman’s terms, he acknowledged that Citizens needs to do a “far better job” in working with customers, explaining issues and steering clear of “insurance-speak.”
“I am walking away with some good ideas,” he said.
Mr.Gilway cited the following topics as key areas to be addressed:
- Depopulation: The focus on depopulation must be intense, with a willingness to explore opportunities to move policies to alternative marketplaces, he said.
- Public Education: Customers need to better understand why Citizens is making so many changes to policies in its effort to depopulate. Policyholders need to better understand the coverage differences and financial risk associated with Citizens policies, specifically the assessment risk, he said. “To me it doesn’t come together at this point,” Mr. Gilway said. “It’s just not a concise picture yet in terms of where we are taking this company.” One initiative he hopes to launch is the building of closer working relationships with independent insurers and consumer groups.
- Risk Transfer: In May 2012, Citizens entered the catastrophe bond market with the issuance of $750 million in bonds, making it the largest insurance-linked security deal of its kind. However, it seems there is little public understanding of what the bond issue means, Mr. Gilway stated. “What it has done for Florida is reinforce the fact that we have outside risk transfer opportunities,” he said.
- Opportunity in Coverage Arena: Citizens needs to outline where it is heading, and specifically needs to design and stabilize a basic insurance product that provides coverage required by statute, and which the secondary mortgage market deems necessary, Mr. Gilway stated.
- Legislative Change: The Legislature needs to address issues of fraud and how potential loss to Citizens can be lowered, Mr. Gilway said.
After Mr. Gilway answered several questions, the meeting concluded.
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