Hope for a lower policy count by year-end
In an effort to improve the health and competitiveness of Florida’s property insurance market, regulators last week approved another transfer of policies from state-backed Citizens Property Insurance Corporation to private market carriers. It comes as Citizens is further refining the “takeout” process to improve its effectiveness as it gains the dubious distinction of being the largest residual carrier in the nation.
The Florida Office of Insurance Regulation has approved proposals by six private insurance companies to take up to 153,000 policies from Citizens during the upcoming December takeout period. It joins the current October takeout approval of 184,000 policies and the 202,000 policies approved for next month’s November takeout. These takeouts or depopulation of Citizens, now the Florida market leader with 1.4 million policies, is an ongoing effort to return the taxpayer-backed carrier to its rightful role as the “insurer of last resort” in the marketplace.
A Citizens policyholder receiving a private company’s takeout offer that’s within 20% above the cost of the Citizens policy is no longer eligible to renew with Citizens. It’s part of the legislature’s recent market reforms to reduce Citizens’ policy count. But only 3 of 10 policies are actually leaving Citizens, based on recent takeouts, something Citizens President & CEO Tim Cerio alluded to during recent remarks to the Citizens Board of Governors.
“Our rates can adversely impact the success of depopulation efforts,” said Cerio. “If rates are actuarially unsound and priced below market, it is much harder for a private company to offer a comparable policy to an insured because the economics simply do not work. It’s bad for all Floridians.”
Cerio told the Board that Citizens is actuarially unsound with rates as much as 50% below the private market and called the legislature’s rating glide-path “an artificial impediment” to having sound rates and being non-competitive with the private market. In fact, Florida’s share of the entire national residual market is now 51% among the 40 or so state residual marketplaces.
Source: Citizens Property Insurance Corporation
Citizens Chief Actuary Brian Donovan, responding to a question from the Board on whether Citizens will ever be able to “catch-up” on its rates and attain “actuarially sound rates,” answered, “That’s a very good question. And I would say maybe, maybe not. That’s because there’s a lot of moving parts and those moving parts are Citizens’ size – growing, shrinking, and where are we in that process, and where are the reinsurance costs?”
Nevertheless, Tim Cerio is hopeful the takeout process will be successful. “We’re now forecasting our year-end figure will be around 1.3 million policies, down from the previous 1.5 million to 1.7 million, and a total insured value in the high $500 billions as opposed to approaching $700 billion,” he told the Board.
Citizens’ increased policy count caught the eye of the Wall Street Journal, which last week published Homeowners Flock to Last-Resort Insurance Policies. As I was quoted, “Policyholders are much better off being with a private insurance company than Citizens, not only for better coverage but to escape the potential ‘tax’ that can happen” from assessments should Citizens not have the resources to pay a future catastrophic claim or claims.
LMA Newsletter of 10-9-23
