Insurers seeking Citizens Property Insurance cash cited

Dec 9, 2012

The following article was posted to on December 9, 2021:

Insurers Seeking Citizens Cash Cited

By Charles Elmore

Two companies named as potential players in a controversial plan to cash eight-figure checks in exchange for taking Citizens insurance customers have been hit with penalties for not complying with an existing state loan program, records reviewed by The Palm Beach Post show.

Citizens executives say their $350 million proposal to give private insurers loans up to $50 million each from ratepayers’ money would be an innovative, safe way to get private companies to take on up to 350,000 customers from the state’s last-resort property insurer.

But state officials on Friday approved nearly $800,000 in penalties for Tower Hill Signature Insurance Co. of Gainesville because it failed to maintain a minimum $50 million surplus, or cushion to pay claims. That safeguard is required under a taxpayer-funded loan program launched in 2006.

American Integrity Insurance Co. of Tampa was late on a payment and assessed fees.

“These are the last companies we would want to be loaning any money to,” said state Rep. Mike Fasano, R-New Port Richey. He called the $350 million plan a “scam.”

Another question is whether the results of loan programs match advertised benefits. Thirteen companies taking $250 million in 20-year state loans said in 2006 they expected to add 1.7 million customers — from Citizens or elsewhere. But nearly all have fewer total customers in 2012 than they proposed to add. Citizens has grown to 1.5 million customers from 1.2 million in that span.

As the Citizens board prepares to meet Friday, its executives last week told a legislative panel why it makes good sense to spend what amounts to virtually all its projected money left after expenses in 2013, $350 million, as 20-year, potentially forgivable loans to get private insurers to take a big chunk of its 1.5 million customers.

Citizens President Barry Gilway says it has “staggering” potential to reduce the company’s risk exposure.

In September, the state’s Office of Insurance Regulation said four companies had expressed interest in removing policies from Citizens under its proposed “surplus note” program: American Integrity Insurance Co. (50,000 policies), Tower Hill Preferred Insurance Co. (43,250), Tower Hill Select Insurance Co. (38,212) and Tower Hill Signature Insurance Co. (49,825).

For those who took part, complying with the surplus provision of the earlier state program is a requirement for participating in the new plan, Citizens spokeswoman Candace Bunker said Friday.

“Citizens will absolutely not allow any company to participate without being in full compliance,” Bunker said. “This is an ironclad requirement that will not be weakened.”

Citizens received inquiries and an indication of potential interest from several insurers though Tower Hill was the only group that “formally expressed an interest,” Bunker said. The program is modeled so that 350,000 policies would be removed, she said.

Nearly 400,000 Citizens customers are already getting the chance to move to new carriers late this year and early 2013 without loan incentives, the largest potential exodus in at least four years.

Citizens officials proposed moving ahead with the “surplus note” plan to mixed reviews before a House subcommittee last week. Some board members have called for moving ahead with the program, with or without further legislative involvement, by early 2013. One of two outside financial reports on the plan may not be ready until January.

Tower Hill completed its purchase of one of the 13 participants in the 2006 plan, Royal Palm Insurance Co., early in 2011, and renamed it Tower Hill Signature Insurance Co. In 2006, Royal Palm expected to add nearly 145,000 customers with the aid of state loans. Tower Hill Signature had 74,523 customers as of June 30.

The company fell short of the $50 million surplus requirement for three quarters ending June 30 and regulators approved penalities of about $789,000 in higher interest, said Carolyn Morgan, director of property and casualty financial oversight for the state’s Office of Insurance Regulation, in a letter to program administrators Friday.

“As part of the turnaround of this troubled insurer, this company did fall below the minimum requirement of the loan program of $50 million in adjusted surplus,” said Joel Curran, Tower Hill’s chief underwriting officer. At the end of the third quarter, the adjusted surplus was over $48 million and growing, he said.

“Tower Hill’s acquisition, management and infusion of capital is returning the company to profitability and prevented the total bankruptcy of the insurer and the capital build-up loan from being permanently unpaid to the state,” Curran said.

Unlike the state loan program, the Citizens proposal is “designed to attract fiscally sound, proven carriers rather than attract unproven new carriers as the $250 million capital build-up program did,” Curran said.

For its part, American Integrity “consistently and timely repaid over 20 loan payments over the past five years except for one that was inadvertently paid a few days late over a year ago,” company spokeswoman Lisa Miller said. “We have paid the penalty for this oversight.”

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