Citizens Property Insurance Corporation Proposes $1.5 Billion, 7 Percent Cut to Storm Risk Exposure
Dec 15, 2011
The following article was published in The Sunshine State News on December 15, 2011:
Citizens proposed $1.5 billion, 7 percent cut to storm risk exposure
By Jim Turner
Florida’s supposed “insurer of last resort” has moved to shave 7 percent of its risk, including $1 billion in coverage from properties that overlook the Atlantic Ocean and Gulf of Mexico, as a means to truly regain that moniker.
The Citizens Property Insurance board of governors on Wednesday supported a series of measures — both in-house and through legislative action — to revamp the state-backed provider, with a goal of reducing the number of overall policies from 1.5 million to 800,000.
One board member, during the meeting at the Peabody Hotel in Orlando, called the steps “potentially significant progress.”
Last week, Gov. Rick Scott questioned why residents of Florida should continue to subsidize property insurance for ritzy homes built in high-risk areas.
Told that Citizens Property Insurance is woefully overexposed, Scott told reporters after the Dec. 6 Cabinet meeting that the insurance program needs to be fixed.
“Let’s make a decision. If all of us believe that it makes economic sense that, if someone wants to build a home in an area that it is difficult or impossible to get insurance, should be we subsidizing that?” Scott said then.
Among the proposed changes would be shaving Citizens’ overall peak storm risk from $7.5 billion to $6 billion. Of that total, $1 billion in risk would be cut from properties in coastal areas.
“That may not be a mile, but it’s more than an inch. That’s a dent in the problem,” board member John Rollins said.
With storms and other coverage, such as sinkholes, Citizens’ 1.5 million customers have the state facing exposure to $500 billion in potential claims.
The board agreed to request legislators to allow rates to be adjusted to more actuarially sound figures through five steps, including making the Citizens’ rates no long competitive with private insurers.
A similar effort, SB 1714, died in the Senate in the spring.
Outside the meeting, Sen. Mike Fasano, R-New Port Richey, a frequent critic of Citizens, first requested Citizens President Scott Wallace to appear before the Senate Banking and Finance Committee as the Legislature begins the regular 60-day session next month.
“I have received a torrent of phone calls, emails and letters from homeowners and insurance agents requesting that I find out why Citizens is conducting business in ways that, in some cases, are inconsistent from one homeowner to another,” Fasano stated in a release. “For example, I have received complaints that roof replacement rules appear to be applied inconsistently.”
He added that further inconsistency appears in costs associated with carports, screen porches, and sinkhole claims and coverage.
However, Sen. Garrett Richter, R-Naples, chairman of the banking committee, responded that there will not be enough time for to interview Wallace.
Instead, Fasano will submit written questions to Wallace while still pushing for a public hearing.
Citizens board Chairman Carlos Lacasa has said legislative action is needed to reduce the liability cap, just one of the potential options to revamp the program that has grown more reliant upon non-Citizens customers to keep the rates low for its customers.