Video above: Citizens CEO on US Senate probe, ‘Never heard of anyone suggesting’ fed bailout
TAMPA, Fla. (WFLA) — Despite some optimism from Florida lawmakers about the state’s property insurance crisis, Citizens Property Insurance — the “insurer of last resort” for Florida property owners dumped by their previous companies — is still plagued by uncertainty.
In an interview with CNBC on Tuesday, Gov. Ron DeSantis warned ahead of hurricane season that a major storm could wreak havoc on a state-backed insurer that is already stretched to its limits.
“It is not solvent,” DeSantis said. “We can’t have millions of people on that because if a storm hits, it’s going to cause problems for the state.”
Though the market is in a precarious position, there may be some signs of hope. DeSantis said seven new insurance companies that recently entered Florida are projected to inject $1.5 billion into the market. He claimed those companies have taken over 30% of the 1.2 million Citizens policies and “will actually be able to offer lower rates to those people.”
DeSantis has recently taken a more optimistic approach when asked about the state’s property insurance crisis. In an interview during last year’s hurricane season, he implied residents should “knock on wood” and hope an incoming storm doesn’t collapse the market.
The Florida legislature has its own plans to take pressure off Citizens. Two companion bills, SB 1716 and HB 1503, would allow surplus lines insurers — unregulated companies approved by the state to write custom policies — to take over tens of thousands of Citizens policies. Only those for second homes would be permitted to move to these insurers, according to the bill.
Both bills faced little resistance in committee, but some lawmakers warned use of unregulated insurers will circumvent some consumer protections written into Florida insurance law. Companies regulated by the state must undergo financial reviews and face state approval for customer payouts and rate hikes.
When an insurance company fails, it’s more than just their customers on the hook. The Florida Insurance Guaranty Association (FIGA) takes over the remaining claims, and if it can’t pay, the remaining cost gets passed on to homeowners in the form of an assessment.
As 8 On Your Side reported last year, FIGA is an important indicator of the market’s health. Regulated insurers are required to pay into the pot, but this wouldn’t be the case for surplus lines insurers.
If passed, the bill would require the unregulated companies to seek state approval for takeout offers — which homeowners are required to accept, if the new premium is within 20% of their existing Citizens policy.
The Senate version of the bill, sponsored by Sen. Jim Boyd (R-Sarasota), breezed through the Fiscal Policy committee by a unanimous vote on Tuesday. The House version was reported favorably out of committee and had its first reading on Monday.
A U.S. Senate budget committee launched a probe into Citizens last year to investigate its underwriting policies and to prepare for the possibility that Florida lawmakers may ask for a federal bailout.
“Given the potential magnitude of Citizens’ losses, such a request would put the federal government (and by extension, all American taxpayers) at substantial risk,” committee Chairman Sen. Sheldon Whitehouse (D-Rhode Island) wrote in a news release.
Citizens CEO Tim Cerio told 8 On Your Side that he hadn’t heard of anyone at the company suggesting a bailout. According to Cerio, the Senate probe “demonstrates again a misunderstanding of our structure.”
