Yet some in Congress worry
After another successful takeout period by state-backed Citizens Property Insurance and a resulting and welcoming drop in its policy count, some in Congress are now taking an interest in Citizens’ risk portfolio. They want to know how the nonprofit corporation is handling losses from the recent hurricanes, and whether it has enough money to pay future claims.
Senator Sheldon Whitehouse (D-Rhode Island), chairman of the U.S. Senate Budget Committee, sent a letter this past Thursday to the Governor, Insurance Commissioner Yaworsky, and Citizens President & CEO Tim Cerio. In it, he asked for information and documents on Citizens’ “plans to address increased underwriting losses from climate-related extreme weather events and other disasters such as tropical cyclones, intense precipitation events, droughts, heatwaves, sea level rise, and wildfires.”
Senator Sheldon Whitehouse
This is the second time in less than a month that the federal government is making inquiries about Florida’s property insurance market and the first time in my long history that I remember such action. We reported last month in these pages of Senator Whitehouse and the Budget Committee wanting climate data from the largest property insurance companies in the country, including Florida, and how the carriers use the data to gauge risk, the resulting cost and availability of coverage, and their solvency. Whitehouse has said he’s worried the federal government may not be able to bail out states or the industry should it be asked to do so in the future.
There are concerns – and we and current and past Citizens officials and others’ in state government have so voiced them. Citizens has $561.6 billion in exposure and its assets exceeded its liabilities by $3.4 billion at year-end 2022, according to its auditor’s report. Yet there is a long established procedure in place through graduated assessments for paying all Citizens claims, no matter the worst-case scenario.
The effort to reduce Citizens risk and exposure through depopulating its policies to the private market is working once again. Seven private carriers assumed just under 93,000 policies of the 202,000 authorized by regulators during the November takeout period. That’s a 46% success rate and follows the September takeout rate of 54% – more than double the usual rate. As a result, Citizens’ policy count is down to 1.25 million policyholders from the 1.4 million it had in April. More takeouts are schedule for this and each of the next three months and beyond.
Tim Cerio, President & CEO, Citizens Property Insurance
Shrinking Citizens is critical for all Florida property insurance ratepayers. That’s the point that Tim Cerio made in an exceptional opinion piece last week in the Orlando Sentinel and Sun Sentinel, following their stories on unfair private market rate hikes. “Citizens’ artificially low rates are fundamentally unfair to the 84% of Florida homeowners who are not insured by Citizens — individuals who for the most part are paying higher, actuarially sound rates and have absorbed more frequent rate increases over the last several years,“ Cerio wrote.
We are hoping that the Florida Legislature will provide continued solutions to return Citizens to the “insurer of last resort” as it was originally intended when the Legislature created Citizens in 2002, as Tim Cerio indicated in his piece. The timing of Senator Whitehouse’s letter seems to be related to the upcoming presidential election. Rather than focusing on Florida, perhaps the U.S. Senate should focus instead on the National Flood Insurance Program, which it is responsible for overseeing, and which has incurred tens of billions of dollars in debt over its 55 year history, with a current debt of $23 billion.
LMA Newsletter of 12-4-23
