Significant depopulation of Citizens possible later in 2023: CEO Gilway

January 5, 2023, Artemis – Speaking as a guest on a recent episode of The Florida Insurance Roundup podcast from Lisa Miller & Associates, Florida Citizens soon to be outgoing President, CEO and Executive Director Barry Gilway gave some insights into his hopes for the state’s property insurance marketplace.  (Original story location:

Florida: Barry Gilway, the CEO of Florida’s property insurer of last resort Citizens Property Insurance Corporation, believes that after the enactment of new property insurance legislative reforms the Florida market will be more attractive to investor capital and that a “significant depopulation” of Citizens could happen as soon as after the next hurricane season.

The Florida Citizens CEO says that investors are calling up the residual market insurer and asking whether now is the time to deploy more capital into the insurance market there, while at the same time he believes reinsurance market confidence in the state should now return, once the new legislation has some time to take hold.

Speaking as a guest on a recent episode of The Florida Insurance Roundup podcast from Lisa Miller & Associates, Florida Citizens soon to be outgoing President, CEO and Executive Director Barry Gilway gave some insights into his hopes for the state’s property insurance marketplace.

He highlighted two key issues that the legislation, which was passed in the recent Special Session of the Florida legislature, goes a long way to solving, in his view, the elimination of one-way attorney fees and abolishing of assignment of benefits (AOB).

“That alone for the industry, I think it will have a profound impact,” Gilway said. But went on to explain that, “The issue, of course, is that it doesn’t impact Ian, it doesn’t impact Nicole, it doesn’t impact Michael doesn’t impact Irma, and we’re still getting litigation from Irma, but it does impact the marketplace going forward.”

Adding, “This will draw capital into the marketplace.”

He went on to discuss the interest in the Florida property insurance market he is currently seeing from investors.

“Bottom line is, more and more calls every single day from investors saying how do I get in?” Gilway said. “Because on a going forward basis, if I can leave the development of losses behind and I can charge rates that are based upon historic litigation rates, when the litigation rate is going to drop like a rock, then it’s time for me to enter this marketplace.

“Now, there’s still impediments along the way, but I will tell you this is historic legislation, it’s going to have a huge impact on this marketplace going forward.”

Gilway highlighted the poor track-record of Florida’s insurers, with the sector having lost a billion dollars per-year of late and its surplus dented, while there have also been company failures.

He said the failures may not be over, as the legislation does not affect the way losses from past catastrophe loss events will develop.

But, on a forward-looking basis, Gilway is much more positive on the outlook for carriers in Florida and believes they can now operate profitably.

However it will take time, on which Gilway explained, “The first thing that has to happen, in order to generate competition, is for these private companies to be in a position where they can make a reasonable return on investment.

“They’re not doing that today, ergo it’s going to take some time, it’s going to take 12, in my opinion, 18 months before the impact of what we’re seeing here from a legislative standpoint, really hits the bottom line.”

On the reinsurance market appetite for Florida and to support companies underwriting property risk there, Gilway believes it will return.

“The reinsurers are saying, show me the proof that the impact of this legislation is really going to put the private companies in a much better financial position,” he said.

However, the podcast went on to discuss the fact that reinsurance pricing is unlikely to change rapidly, for this very reason of reinsurance capital providers wanting to see the proof of the reforms improving the situation in that market.

But Gilway is positive that the legislation will have the right effect.

“Why I say this will add more capacity is because, new companies are not stuck with the historic development on losses and they’re coming in and they’re able to charge rates that are actuarially sound,” he said.

Adding that, “We’re getting calls from investors saying, hey is now the time to come in and provide capacity in this overall marketplace? And of course, our attitude is, yes.

“I would expect a significant depopulation of citizens, attempted depopulation, in the November, December ’23 timeframe.

“I think that’s probably when we’re going to see the biggest impact of more capacity entering the market, but it’s unlikely they would do it before that simply because they’re not going to come in before the storm season.”

This depopulation is likely to see significant interest from the insurance-linked securities (ILS) market, as long as the evidence of the legislation being effective is apparent by that time.

If that is the case, then ILS capital can support depopulation efforts, by providing the funding and reinsurance to support underwriting vehicles that can take-out risk from Citizens and reduce its position in the market back towards something more manageable and the residual market it should really be.

Gilway noted that in his tenure at Florida Citizens the policy count was reduced to just 414,000 around two years ago, but that by the end of 2022 this could have tripled to almost 1.2 million policyholders.

“We’ll be three times the size we were just two years ago and we fully expect this to continue to grow somewhat in 2023,” Gilway said.

Going on to say that Citizens is now a “market of first resort” and in some areas of Florida state, its rates are 50% below the private market, so Citizens is competing openly against the private insurers.

This needs to change, Gilway believes, and he said the legislative changes around Citizens and how it competes, or how policyholders will need to move out if they get private market quotes at a low-enough price to transition out, are a good step.

Gilway explained that, “I think the legislation really does a good job, an interim job, of getting us on a step-by-step basis back to the point where we are really operating in the appropriate role that we were meant to operate in and that’s basically, be there for policyholders when the markets not there them, but you don’t have to do it at a rate that’s significantly below the market. That’s not the intent.

“You’ve got to have people in a position, a financial position, to quote so no matter where the Citizens rate is, you’ve got to have competition.

“I think the one-way statute and the AOB, etc. ultimately will put those private companies in a position where they’re profitable enough to want to commit more capacity to the market.

“I think that is really going to be an advantage to the individuals… that want to commit capital to the depopulation programme.”

If the reforms have the desired effect, of reducing litigation related loss amplification for Florida’s property insurance market, while allowing the industry to price risk appropriately and bring back reinsurance market appetite, it’s natural to assume investor appetite will return in a relatively significant way.

Florida hurricane risk is likely to remain the peak-zone for ILS capital deployment either way, but if the issues can be resolved and confidence can be rebuilt, then a significant opportunity to help shoulder risk in the state could emerge, as Gilway suggests.

That could make for an attractive opportunity for the ILS market and its investor-base, to provide capacity to support risk as it is depopulated and to provide reinsurance to support a resurgent private Florida property insurance marketplace as well.

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