Legislators eye Citizens’ surplus
Mar 31, 2008
Miami Herald--Mar. 29, 2008
BY BEATRICE E. GARCIA
Money earmarked to pay future insurance claims could end up funding a program to provide additional capital for start-up and newer insurance firms.
A bill passed Thursday by the House Jobs and Entrepreneurship Council would take $100 million from the surplus that Citizens Property Insurance, the state-run insurer, has set aside to pay claims.
A similar proposal was included in an extensive bill introduced in the Senate Tuesday, but it contained no provision for funding.
The Senate bill would look to find nonrecurring revenue to provide the money for the program.
Established in 2006, the $250 million capital build-up program has good support in Tallahassee because so far it has provided additional reserves to 13 new or recently established companies.
One big supporter is House Speaker Marco Rubio, who is eager to bring new companies operating in Florida.
”This program encourages the growth of private insurance companies instead of the continued growth of Citizens,” said Rubio in his speech when the legislative session opened early this month.
The capital build-up program’s goal was to match money being pumped into local insurers. Thirteen companies borrowed $247.5 million from the state. The firms added $296 million of their own capital.
Four of the companies that tapped the program — American Integrity Insurance, First Home Insurance and Florida Peninsula — have taken just over half of the policies to come out of Citizens in the past 15 months.
The logic for using Citizens’ surplus to continue this program is that the takeouts have reduced the state insurer’s overall exposure.
But Citizens has a different take on the proposal.
Lawmakers ‘ought to be careful when they’re invading Citizens’ surplus,” said Bruce Douglas, chairman of Citizens’ board of governors.
He noted that $100 million would cover about 7,000 claims for Citizens. If there is less cash in Citizens’ hands when a big storm hits Florida, the greater the chance the insurer will run out of money to pay all the claims that it receives.
If that happens, the company would add surcharges to all its policyholders in the state.
But if the law is passed, Citizens ”would live within the intent of the statute,” added Douglas.
Both bills likely have one or more committee stops in their respective chambers and could be substantially revised if they make it to the floor for a full vote.