Exposure doubled
A few hours before that Senate Banking and Insurance Committee meeting, one of the two recipients of private admitted market policies was having a meeting of its own. The Citizens Property Insurance Corporation Board of Governors was getting an equally dire update, but one with added perspective and some optimism.
Citizens President & CEO Barry Gilway, quoting S&P numbers, noted that Florida’s property insurance market suffered more than a half billion dollars in losses ($529.5 million) in the first half of this year and “is on target to hit close to another $980 million negative net income for 2021, as it did in 2020.” In fact, 36 of Florida’s 51 domestic insurance companies (which make up 79% of the market) reported net losses through June.
As a result, the private market contracts and Citizens grows, adding 5,000 to 6,000 net policies per week. Its current policy count of 700,000 is expected to reach 760,000 to 775,000 by year end. The taxpayer-backed company’s exposure is now more than $200 billion, up from $108 billion when it had 400,000 policies a few years ago. One bit of good news is that it picked up only about 20% of the almost 30,000 private policies cancelled this year. And it picked up even fewer of the cancelled policies from Florida’s two insolvencies earlier this year. “So there are signs that some market capacity remains,” Gilway said.
Barry Gilway. Courtesy, Citizens Property Insurance Corporation
On the commercial side, Citizens is writing fewer policies today than it was prior to the Champlain Tower collapse in June (708 today vs. a peak 13,000 in 2012, which was 43% of the commercial residential market at the time, said Gilway). The company doesn’t expect any significant depopulation of any of its policies until mid-year 2022.
Gilway also found some optimism in the very latest claim litigation numbers. CaseGlide, which follows 17 of the largest insurance companies in Florida, reports that litigation, including Citizens, dropped 35% from July (when SB 76 and its presuit settlement demand notice requirement took effect) to August. All 17 companies reported decreases. “One of the logical explanations, obviously, is the notice requirements under SB 76. We don’t know whether that’s a short term impact or long term impact,” Gilway said. Gilway’s caution with respect to the 10 day pre-suit notice is that the data mentioned does NOT take into account the pending 4,500 notices of intent to litigate (NITL) filed as of July 1, 2021. Most likely, many of these suits will convert to lawsuits at some point. It is our hope that is not the case and that plaintiff firms who have the best interests of their policyholder will use the NITL as a way to start claim settlement talks versus commencing those talks in a courtroom.
Fraud is also of concern to Citizens. It recently launched its quarterly newsletter to policyholders, educating on key issues and raising awareness on Assignment of Benefit scams and the like. It also includes timely brochures in its mailed policy packets. “Fraud is a key area where we try to make people understand that when you get a free roof, and you didn’t need one, that is insurance fraud, and everybody pays for it,” said Christine Ashburn, Citizens’ Chief of Communications, Legislative and External Affairs.
Board Chairman Carlos Beruff blocked an hour for discussion on the meeting agenda to discuss moving Citizens to a direct-to-consumer model, eliminating insurance agents. After much discussion, Citizens staff was asked to further research current direct-to-consumer companies and ways to reduce Citizens’ exposure, either through existing law or amendments to current law in the upcoming session.
LMA Newsletter of 10-4-21
