Lawmakers, Consumer Advocate
Concerned about Citizens' Speedy $350 Million Loan
Program
10/1/2012
Tampa Bay Times
Citizens Property Insurance continued to receive sharp-tongued backlash this
week over its plan to loan out $350 million from its surplus to private
insurance companies.
Rep. Frank Artiles, R-Miami, wrote another
scathing letter calling the plan a wasteful inside deal for insurance lobbyists,
and Florida’s Insurance Consumer Advocate penned a lengthy list of unanswered
questions about the high-risk program.
“Quite simply, it is reckless to rush the [surplus note] program through without
taking the time to vet the program and make sure that it works,” wrote Artiles,
who believes the plan is against the law and has spoken out forcefully against
it.
The surplus note program is the latest in a series of ambitious moves by
Citizens board in response to Gov. Rick Scott’s
mandate to shrink the size of the government run insurance company.
The plan provides low-interest, forgivable loans to private companies who agree
to take policies out of Citizens for 10 years. Last month, the board unveiled
and approved the plan over the course of two days, with little public input and
without legislative approval.
The lack of details and the speed of the approval set off red flags for Artiles,
Insurance Consumer Advocate Robin Westcott and
other critics who believe the unprecedented new program is being rushed through
without adequate transparency.
In his letter, Artiles notes that several of the private insurers that are
looking to participate in the program have troubled financial records and could
go belly up after a major storm. That would leave Citizens on the hook for
multimillion-dollar losses when the loans go into default. He also points out
that several insurers have agreed to take over Citizens’ policies without any
cash incentive, drawing into question the need for a new loan program.
“It appears that Citizens has been heavily influenced by lobbyists, as there is
no rational explanation for such glaring violations of your fiduciary
responsibilities to Floridians,” he said in a letter that followed a lengthy
public records request seeking more details on the program. “Perhaps this is why
Citizens is blindly rushing the SPN Program through with no public input or
substantive changes.
Citizens has argued that the program is a revolutionary way to reduce its risk
at a low price, and avoid the “hurricane taxes” that would be caused if the
state-run insurer ran out of money.
“We have to reduce the overall size of Citizens,” said
Barry
Gilway, president of the state-run insurer, during a September
meeting of its Depopulation Committee. “If we are to be successful in moving a
large number of Citizens’ customers to financially secure markets, this program
is compelling.”
Westcott has a number of questions about the program, and is asking Citizens to
do a better job of proving that these loans make sense financially and won’t end
up costing the company millions.
“The Board materials that have been provided to date neither provide enough
detailed information for consumers and policymakers to have a complete
understanding of the program’s operation and benefits nor enough transparency of
the process employed to choose this program over others presented,” she wrote in
a letter to Citizens board chairman Carlos Lacasa.
Last month, Westcott said the program appeared to have been advanced “in a
hurry.”
Citizens has defended its rollout of the new program, stating that it had a
public hearing back in July to discuss proposals and that all company board
meetings since hen have been broadcast on statewide television.
“Before this or other depopulation programs are finalized there will be time
provided for public testimony before the depopulation committee and the board,”
said company spokesperson Christine Ashburn.
Florida’s Chief Financial Officer, Jeff Atwater,
also said last month that Citizens should consider slowing down the program,
which is scheduled to begin in a few weeks.
“How about slowing this thing down, make sure you can demonstrate to the public,
the real mathematical value of all of this.”
