Citizens Property Insurance to Postpone Action on $350 Million Surplus Notes Depopulation Program, The News Service of Florida Reports
Dec 13, 2012
At a meeting of the Citizens Property Insurance Corporation (“Citizens”) Depopulation Committee today, December 13, 2012, Citizens’ Chief Financial Officer Sharon Binnun said that the insurer will postpone action on its proposed Surplus Notes Depopulation Program, which would dedicate a maximum of $350 million to support the assumption of Citizens policies by the private market.
A News Service of Florida report on today’s meeting is reprinted below.
CITIZENS TO POSTPONE ACTION ON LOAN PROGRAM
By MICHAEL PELTIER
THE NEWS SERVICE OF FLORIDA
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THE CAPITAL, TALLAHASSEE, December 13, 2012……….Citizens Property Insurance Corp will shelve a controversial $350 million loan program while it gathers data and looks at more options to reduce the number of policies in the state-backed insurer.
Citizens Chief Financial Officer Sharon Binnun told a Citizens’ panel Thursday that recent success in other depopulation efforts and uncertainty over the long-term success of those efforts make it wise to take a longer look at a recent proposal to provide long-term, low interest loans to companies willing to take riskier policies off the company’s books.
A handful of companies have already agreed to take out nearly 300,000 less risky policies from Citizens without the financial incentives.
Company officials say, however, that the surplus loan program should be revisited next summer, rather than scrap it entirely.
“It would be prudent for us as an organization to …. come next summer take all the things we learned and see where we stand,” Binnun said. .
Earlier this year, Citizens officials drew criticism after they proposed an effort to use $350 million in surplus funds to provide 20-year loans to companies that would take Citizens policies and keep them for at least 10 years.
Incoming House Speaker Will Weatherford was among a group of lawmakers that urged caution and further review.
Contrary to initial estimates, Citizens President Barry Gilway said Thursday the loan program as now structured is unlikely to entice many private carriers to take advantage of the loans.
Outside investment advisors are reviewing the loan program and expected to make recommendations early next year. Gilway, who took over in June and presented the loan program shortly after his arrival, said discussions with potential companies indicate that changes need to be made.
“I seriously doubt even if the surplus note program would proceed that we would have any real takers that meet the financial requirements that we believe would be necessary,” Gilway said.
Sean Shaw, a former Florida insurance consumer advocate who now works with a Tampa law firm that represents policyholders in lawsuits, applauded the decision, saying the proposal had not been fully vetted by the Legislature.
“The surplus lines program seems to be off the table, and that’s great news,” Shaw said in a statement.
The full Citizens Board of Governors is expected to vote on the proposal Friday.
The board is also expected to hear a proposal to set up a clearinghouse at Citizens to provide customers with more information up front on policy options.
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