Citizens’ Property Insurance planned loan program derided as ‘corporate welfare’
Sep 7, 2012
The following article was published in The Florida Current on September 7, 2021:
By Gray Rohrer
Citizens Property Insurance Corp. board members voted Friday to move forward with a plan to use surplus funds to lend up to $350 million to private companies that take over their policies, but not before the plan was criticized as “corporate welfare” by one of the state-run company’s biggest detractors.
“As I sat here and listened to the board today give out one of the biggest bailouts in Florida’s history, corporate welfare I’ll call it, I received an email from an individual asking me ‘What’s going on? My premium continues to go up,’” said Sen. Mike Fasano, R-New Port Richey.
Citizens president and CEO Barry Gilway sees the program as a “great opportunity” to entice private companies to take on Citizen policies and reduce its risk.
Gov. Rick Scott and other lawmakers have urged Citizens, which has 1.4 million policies and is the largest property insurer in the state, to reduce its exposure and the potential for assessments on non-Citizens customers after a large storm. Gilway estimated that if the program was fully implemented, Citizens could reduce the level of assessments after a catastrophic hurricane by $1.17 billion.
Board members directed Citizens staff to draft loan documents for companies that would be used in the program, and while remaining details have to be hammered out, here are the current parameters of the program:
20-year loans would be given to companies that meet financial requirements, which include a minimum $25 million surplus and $50 million in direct premium in the past two years.
The size of the loan would depend on the amount of policies and risk taken out of Citizens, as calculated by the new premium the company would have to pay into the Florida Hurricane Catastrophe Fund, multiplied by 4. The maximum loan for any one company would be $50 million, but a company with multiple holding companies would be eligible for multiple loans.
- Companies would have to keep the policies for at least 10 years.
- Interest on the loan would be a 2 percent variable rate.
- Citizens would hold back 5 percent of the loan to adjust for customers that opt out of the takeover program.
- Citizens would forgive up to 20 percent of the principal of the loan for each year in the first five years if a hurricane hits the state.
- Companies would have to use 40 percent of the loan amount to pay for reinsurance costs.
Board members also approved a new plan to tie travel expenses to the standards set by the state for in-state travel and by the U.S. Department of State for international travel. The new policy was introduced in response to an article in The Miami Herald detailing extravagant spending by Citizens staffers and board members. Gov. Scott asked the Inspector General’s office to conduct an audit of Citizens spending in response to the article.
View the original article here: http://www.thefloridacurrent.com/article.cfm?id=29262173