Florida-Based Property Insurers CEO Group
Editorial
October 5, 2011
Leaders of the Senate Banking and Insurance Committee Tuesday said they want to take another look at unsuccessful legislation from the 2011 session to shrink Citizens Property Insurance Corporation, now growing by 1,000 policies a day. Banking & Insurance Chair Garrett Richter, R-Naples, Senate President-Designate Don Gaetz, R-Destin, and Sen. Alan Hays, R-Umatilla, expressed their intent to work on a proposal.
Hays offered a bill last session, which didn’t pass, dramatically increasing Citizen’s rates and tightening eligibility requirements. It was opposed by southeast Florida legislators whose constituents would have faced major rate increases.
Rep. Jim Boyd, R-Bradenton, filed a Citizens bill (HB 245) earlier this week, allowing surplus lines carriers to submit Citizens depopulation proposals to the Office of Insurance Regulation, in addition to admitted insurers. What other depopulation proposals might come up in the House is not yet clear.
Sharon Binnun, Citizens Chief Financial Officer, told the Banking & Insurance Committee Citizens is growing by 1,000 policies a day, mainly in the Personal Lines Account, and should reach 1.6 million policies by the end of this year. Following that, Richter, Gaetz, and Hays agreed reducing citizens should be tackled again during the 2012 session.
Citizens’ policy count has increased 67 percent since December, 2009, “and we are not advertising,” Ms. Binnun said. The significant growth is limited to the statewide, all perils, Personal Lines Account. The Coastal Account has remained steady at about 400,000 policies, many dating from the 1970’s and the old Florida Windstorm Underwriting Association.
The Citizens’ policy count was 1.46 million as of September 30. It is projected to be 1.6 million at the end of the year.
Why do so many policies continue to come to Citizens’ Personal Lines Account? One huge factor is “rate, rate and rate,” she said. The Citizens’ premium is likely lower than private market. Another factor is that some agents have no market which is accepting new risks other than citizens.
Still other factors she cited in her PowerPoint included:
• Citizens cannot become insolvent
• Less stringent underwriting requirements
• Geographic concentration in SE Florida and Sinkhole territories
• Wind Mitigation Credit factor
• Few private companies want to write Commercial Residential policies and/or Coastal properties
Citizens’ areas of the most significant concentration in the PLA include Dade, Broward and Palm Beach (42 percent) and Hillsborough, Pinellas, Pasco and Hernando (29 percent).
“This gives me a gross headache,” Hays said. “You are good people. You don’t wear black hats, but we have told you these are the parameters you will operate under.”
Hays raised one possible new legislative edict: requiring that all new policies in Citizens be charged actuarially sound rates and be exempt from the Citizens glide path. That probably would reduce the 1,000-policy-a-day growth rate, Ms. Binnun said.
Senate President-Designate Gaetz asked what the Legislature could do to return Citizens to the insurer of last resort. When his time in the Senate is up and he is packing up his papers “I would love to have a closed sign on a lot of Citizens business,” he said.
Richter said taking another look at making an offer of full sinkhole coverage optional instead of mandatory is probably the primary issue from the SB 408 deliberations which could be considered again during the 2012 session. He did express interest in looking at portions of the Citizens bill sponsored by Sen. Hays.
Ms. Binnun said keeping the rules of the game consistent is most important to attract private carriers. If the Legislature did make full sinkhole coverage optional, some carriers would wonder how long it would be before it was mandatory again.
An adequate rate which does not compete with the private market is very important, she said. Some time to allow the significant reforms from SB 408, passed during the 2011 session, to take effect also is important. Non-catastrophe losses in southeast Florida are growing at a dramatic rate and SB 408 provisions will attack this. Some private carriers will sit on the sidelines for a while, watching Citizens’ implementation of the reforms. Their attitude is, she said, “I want to see if this works for someone else.”
‘We don’t have to re-invent the wheel. A lot of good work has been done,’ she said. She specifically mentioned the Hays Citizens bill from 2011 (SB 1714) and recommendations from the Citizens Property Mission Review Task Force of a few years ago.
“I’m not going to beat my head against the wall again” for a strong Citizens depopulation package unless there is significant support in the Legislature, Hays said. He got quick responses from Chairman Richter and Gaetz that they would work with him in developing Citizens legislation for 2012.
Richter noted that Citizens is now the fourth largest property writer in the country, and it operates in a single state, while other giant writers operate in many states. “We have to do what we can to shrink this.”
“I would be happy to be a junior partner or take it on myself,” Gaetz said of development of a focused Citizens package. He was especially interested in the high error rate through the reinspection program uncovered in the $1 billion in annual mitigation discounts being granted by Citizens.
