John Thrasher, Bryan Nelson, AIF
Back Citizens' Property Depopulation Loan Program
10/4/2012
By: Jim Turner
Sunshine State News
A group of state lawmakers, business advocates and representatives of the
insurance industry lined up Thursday behind a $350 million loan program proposed
to shift about 300,000 polices from the bloated Citizens Property Insurance
Corp. to private insurers.
The call comes despite concerns from the state’s chief financial officer and
consumer advocate about rushing to implement the loan program by December,
before numerous technical questions are answered. Others have expressed
criticism that the program is simply a shift of money from Citizens’ reserves
into private hands that only have to temporarily offer similar coverage.
Florida Sen. John Thrasher, R-St. Augustine, called for the proposal to be
urgently embraced when depopulation comes before the Citizens board of governors
on Tuesday. “We have dodged the hurricane bullet for a while, but we cannot
enter another hurricane season exposed to fiscal catastrophe,” Thrasher said
during a joint telephone media conference.
Associated Industries of Florida President Tom Feeney, who noted that some of
his members are from insurance industries, said AIF may not always be “thrilled”
by the actions of Citizens, but the loan program is “a good step in the right
direction” to reduce the state’s catastrophic hurricane risk.
State Rep. Bryan Nelson, R-Apopka, the chairman of the House Insurance and
Banking Committee, said he backs the loans not having to go before the
Legislature for approval because lawmakers already are aware -- a similar
proposal was discussed back in March, during the 2012 session. Citizens simply
shouldn't wait until hurricane season is close to subject affected policyholders
to a last-minute change, he said.
“I think we have a window of opportunity because of the lack of storms that
we’ve had the past few years to change the course of Citizens and reduce the
policyholder counts and put the policies back in the hands of the private sector
where they have their own reinsurance and can take care of the losses and not be
a burden on the folks in the state of Florida,” Nelson said.
Under the program, private insurers wouldn’t be allowed to increase rates on any
former Citizens policyholder by more than 10 percent a year for three years and
any rate adjustment after that would require prior approval from the state
Office of Insurance Regulation.
The former Citizens customers who couldn’t afford the hikes after three years
could jump back into the state program. However, for each policy that drops from
private hands during the 20-year loan period, the private insurer would have to
pick up a different Citizens policy.
With 1.4 million policyholders, Barry Gilway, Citizens president, said the loan
program is an alternative to $2.4 billion that would otherwise be needed over 10
years to eliminate the same 40 percent assessment.
“It would be foolish not to move forward with this program,” Gilway said.
The program has been estimated to reduce the emergency assessment tax by 38
percent if a one-in-100-year hurricane should hit Florida.
Florida Insurance Consumer Advocate Robin Smith Westcott fired off a
question-laced letter to Carlos Lacasa, Citizens Property chairman, on Monday
that seeks to know if the program will reduce costs to consumers.
“The Office of the Insurance Consumer Advocate shares the board’s goal of
depopulating Citizens and reducing the potential assessments on all property and
casualty policyholders in the state,” Westcott wrote.
“The surplus note take-out program tentatively approved at the last board
meeting appears to advance this goal. However, Citizens must assure consumers
and policymakers that a thorough cost-benefit analysis justifies the commitment
of up to $350 million of Citizens’ surplus, as this program would allow.”
