Florida-Based Property Insurers CEO Group
Editorial
October 13, 2011
Citizens Property Insurance Corporation’s new board got mixed signals this week – reports of an incredible 42 percent increase in policies in 21 months but information from OIR that interest in Citizens takeouts by private carriers is surfacing once again.
“There will be takeouts in November and December,” reported Belinda Miller, Office of Insurance Regulation general counsel. “It is possible next year we will have additional takeouts.”
These are small proposals from insurers whom Ms. Miller did not identify, but it is encouraging news. OIR has not encouraged Citizens takeouts in recent months because several proposals fell apart when the majority of affected policyholders utilized the Citizens Choice statute and chose to remain in Citizens.
Depopulation programs, higher rates when possible under the Citizens’ glide path statute and other steps to stem the dramatic growth in Citizens and begin to shrink the program dominated the first meeting – Wednesday in Orlando – of the newly constituted Citizens board.
The board now includes two insurance community leaders with close ties to the Florida Insurance Council – Nancy Baily, Tampa, former chair of the FIC Executive Committee and Board and CEO of Travelers of Florida, and John Rollins, High Springs, president of Rollins Analytics, an actuarial consultant to several FIC members and former actuary for FIC member Florida Farm Bureau Insurance Company.
Former state Representative Carlos Lacasa of Miami, appointed Citizens chair by Chief Financial Officer Jeff Atwater, stated that Citizens must explore all possible options to stem its growth, eventually shed much of its business to the private market and work to promote the improved health of private carriers. Ms. Miller, who updated the board on the recent new depopulation interest among some private carriers, said Citizens will have to help make this work.
The discussions Wednesday were consistent with concerns about the critical need to reduce the size of Citizens expressed recently by Senate Banking & Insurance Chairman Garrett Richter, R-Naples, Senate President-Designate Don Gaetz, R-Destin, and Sen. Alan Hays, R-Umatilla, sponsor of unsuccessful legislation during the 2011 session dramatically increasing Citizens premiums and tightening its eligibility requirements.
“There are some folks who are coming to the Office…and they are suggesting they would be willing to do some takeouts if,’ General Counsel Miller said. “There are some if’s.” “Citizens will play a pivotal role in that. You have to be flexible and creative. There is absolutely no doubt this board can do that. You are creative…The board now has enough experience in insurance … from a variety of perspectives. I think you have the potential to really be successful.”
There are steps the Citizens board could consider which do not require legislation to make it less competitive and attractive in relation to private insurers, she said. “A lot of the commercial coverage is A-rated and not subject to prior approval. You might be able to make some adjustments there … You can certainly introduce things over time. That would be fine and we would work with you. Other things may take legislation.”
The big hurdle to successful takeouts by private insurers the last couple of years has been Consumer Choice, which allows consumers to opt out of a takeout proposal. The initial rejection rate in a proposed takeout was 5 percent. “After a few years, that really ballooned,” Ms. Miller said. Takeout companies would wind up with a fraction of what they selected and all of it in southeast Florida or in the sinkhole crisis areas of Tama Bay. “That doesn’t work out for a company. That is disastrous for a company.”
She rejected a comment by one Citizens board member that companies who did implement major Citizens takeouts in the 1990’s have gone out of business. Some takeout companies have, she said, but others have become major, significant insurers in the Florida property market.
Some companies can make a Citizens takeout work, she said. They have very conservative approaches, perhaps 10,000 policies a year. They know how to deal with agents.
OIR is no longer encouraging takeouts of 50,000 to 60,000 policies, especially as part of a start-up plan, she said. However, Commissioner Kevin McCarty will work to expand successful depopulation initiatives and partner with the Citizens board.
