Citizens Property to Consider $300
Million Loan Program
By: Michael Peltier
News Service of Florida
Citizens Property Insurance Corp. would offer $300
million in loans to encourage private companies to take
policies out of the state-backed insurer under a plan
unveiled Thursday that backers say could reduce
Citizens' noncoastal ranks by a third.
The Citizens board of governors is scheduled to meet
Friday to consider the plan aimed at reducing the ranks
of state's largest property insurer, which now covers
more than 1.4 million policies in some of the riskiest
areas of the state.
The proposed loan program could result in up to 350,000
policies being taken out of Citizens within two years,
Citizens President and CEO Barry Gilway said Thursday.
The number represents more than a third of the 982,314
policies in Citizens' personal residential account, or
PLA, the fastest growing segment of its business.
"The payback is substantial," Gilway told members of
Citizens Depopulation Committee, which unanimously
approved the proposal. "It has my wholesale support."
The plan would allow a qualified private insurer to
borrow up to $50 million in exchange for taking Citizens
policies for at least 10 years. The loans, referred to
as surplus notes, would carry a low interest rate and be
repaid to Citizens over 20 years. The loans are meant as
an incentive for the companies, which would be taking on
The program is an attempt to solve a fundamental problem
as state officials try to entice private insurers back
into the Florida market.
Because the state-run pool charges premiums that are
lower than a private company would offer, a gap exists
between what a private insurer would have to charge to
provide the policy and make a profit.
The loan program is also an attempt to close that
The amount of loan would be contingent on the number of
policies taken out and the relative risk, with riskier
policies qualifying for higher payments from the state.
The loan amount would be tied to Florida Hurricane
Catastrophe Fund premiums, which reflect a property's
The proposal calls for premiums on the privatized
policies to increase by no more than 10 percent a year.
"If the goal of this program is to get the most number
of policies out as quickly as possible, I would
recommend this program," said Citizens Chief Financial
Officer Sharon Binnun.
Companies would have to meet financial thresholds and
other considerations to qualify for the program and
would be required to take out at least $5.5 billion
worth of insured value, between 25,000 and 30,000
Citizens officials estimate that at least 20 companies
Robin Westcott, the Florida insurance consumer advocate,
said the board needs to move cautiously and not penalize
existing companies that have already stepped forward to
assist. She also called for consumer safeguards to
prevent private companies from taking advantage of the
tax savings and pushing customers back into the
The program would reduce the potential emergency
assessment charged to policyholders by $1.2 billion in
the event of a one-in-100-year storm.
"We're faced with an unprecedented opportunity," Gilway
said."Delaying it would be an absolute mistake."
The committee vote came hours after the Office of
Insurance Regulation announced that four companies have
agreed to take out 150,000 policies from Citizens
beginning in November without the need for financial
assistance. Binnun urged that those companies not be
excluded from the loan program.
Rep. Frank Artiles, R-Miami, criticized the proposal,
saying it has yet to be properly vetted. He urged
committee members to postpone any action for a couple of
months to provide more time to look into the proposal
and other options to depopulate Citizens.
In addition, Artiles said Citizens is overstepping its
bounds by becoming a financier, which is more
appropriately a legislative function.
"This rushed process … is designed to force a decision,"