Citizens Property Insurance loan program gets business, lawmaker backing but showdown looms
Oct 4, 2012
The following article was published in The Florida Current on October 4, 2012:
By Gray Rohrer
A major business lobby and two influential Republican lawmakers urged Citizens Property Insurance Corp. board members to move full speed ahead with their plan to loan up to $350 million in surplus to companies looking to take out their policies. Another GOP legislator, however, has vowed to stop the plan in the courts.
“Frankly, I believe those who would delay this are playing poker with Florida’s economy,” Sen. John Thrasher, R-St. Augustine, said during a conference call with reporters Thursday.
Rep. Frank Artiles, R-Miami, has submitted public records requests for documents surrounding the loan program, known as surplus notes, and has criticized the very idea of using surplus money as an incentive to shed policies. He told The Florida Current he would file an injunction in Leon County Circuit Court to stop the program from being implemented.
“I will file an injunction. I’ve already said this to the chairman and the board members of Citizens: ‘You have no authority to do this,’” Artiles said.
But former House Speaker Tom Feeney, now the president and CEO of Associated Industries of Florida, also backed the loan program, saying, “We have simply the worst-run property and casualty insurance market that I’m aware of in the free world.”
Thrasher is on one side of a split faction of Republican lawmakers that seeks to reduce the size of Citizens, which has 1.4 million policies and is the largest property insurer in the state. Along with Gov. Rick Scott, they fear a one-in-100-year storm would wipe out its ability to pay claims, leaving Citizens and non-Citizens customers alike with hefty assessments on their policies.
Citizens has become too large because the private market can’t compete with the rates of the state-backed company, this faction contends. Those rates are held artificially low by a 10 percent annual cap put in place by the Republican Legislature in 2009, after a two-year rate freeze.
Rep. Bryan Nelson, R-Apopka, who voted for both the rate freeze and cap and is the chairman of the House Insurance and Banking Subcommittee, said the Legislature put in emergency measures after a series of severe storms in 2004 and 2005 sent the property insurance market into a tailspin.
Since then, Nelson said, his colleagues have been trying to “dial it back”. But, thwarted by Artiles and like-minded legislators opposed to lifting the cap, Citizens has resorted to eliminating or reducing coverage on secondary structures such as screened-in patios and carports with no corresponding drop in premium.
Members of Citizens’ Depopulation Committee will meet Tuesday to refine the details of the surplus notes program. The current plan calls for private companies to take out enough policies to reduce Citizens’ probable maximum loss by $2 billion and keep the policies for at least 10 years in order to qualify for the low-interest 20-year loan. The companies must meet certain financial requirements, but can raise rates above the 10 percent cap after three years and can be reimbursed up to 20 percent of the principal of the loan each of the first five years should a hurricane strike.
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