Task force aims to lessen Citizens’ risk exposure

Jan 7, 2009

A state task force Tuesday will consider ways to shrink Citizens Property Insurance and reduce its exposure to windstorm risk.

Miami Herald–January 6, 2009

Rate hikes for Citizens Property Insurance policyholders could be capped, and Citizens customers could be forced to accept insurance coverage from a private company — regardless of price — as part of a proposal to shrink the state-run insurer.

A state task force meets Tuesday in Tampa to consider several recommendations to return Citizens to its original role: insurer of last resort for Florida homeowners unable to buy coverage from a private company. Since the busy 2004 and 2005 storm seasons, Citizens has ballooned into the state’s largest insurer as many private companies walked away from the state.

The company has nearly 1.1 million policies on the books, down from 1.3 million a year ago. Citizens has been trying to shrink by transferring its policies to other private insurers, known as ”take-out” companies.

The meeting is expected to be contentious, as task force members say there is no consensus on the various recommendations among the group’s 11 members.

”We all have different views. I anticipate there will be some rigorous debate,” said William ”Chip” Merlin, a plaintiff’s attorney based in Tampa. One of the most debated issues relates to rate hikes Citizens can charge customers.

Since 2007, Citizens’ rates have been frozen. The freeze remains through this year.

But state officials, lawmakers and Citizens’ officials believe the company will have to raise rates a hefty amount next year to ensure rates are ”actuarially sound,” meaning they are bringing in enough to cover expected future claims.

A recommendation before the task force, created by a state law last spring, includes allowing Citizens to raise rates to an ”actuarially sound” level over a number of years.

Merlin believes any Citizens rate hike should be capped at 10 percent a year.

Other recommendations from the task force, led by former Citizens chairman Bruce Douglas, include:

• Eliminate a provision that allows homeowners to stay with Citizens if a private carrier charges rates 15 percent or more than Citizens’ premiums.

• Require homeowners to accept take-out offers from private insurers regardless of rates charged.

• Eliminate a provision that allows independent insurance agents to block clients’ policies from being removed from Citizens.

Merlin believes the task force would likely require Citizens to continue encouraging homeowners to mitigate their homes against hurricanes. He would like to see the insurer continue to cover coastal construction, but building codes should continue to be strengthened so new structures are better able to withstand major storms.

”The best loss is one that does not happen because the structure withstood the catastrophe with no damage,” he said.

The task force must provide its final report to the state Legislature by Jan. 31.