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From the staff of the Tampa Bay Times

Senate President Gaetz calls for hearings on special $52M deal for Scott donor

Senate President Don Gaetz is calling for special hearings on the $52 million special deal between Citizens Property Insurance and a politically connected upstart insurance company, the latest sign of legislative angst with the state-run insurer.

Last month, Citizens agreed to transfer $52 million to Heritage Property and Casualty, a nine-month old insurance company that has spent hundreds of thousands of dollars on lobbying and political donations to top Republicans, including Gov. Rick Scott.

“The Florida Senate believes the facts and circumstances surrounding the Heritage transaction need thorough investigation so the people of Florida are assured that it and transactions like it are in the best interest of Floridians,” Gaetz, R-Niceville, said in a statement. “As such, as soon as Committee meetings begin this fall, the Senate Banking and Insurance Committee will conduct hearings to investigate and propose ]solutions to the concerns raised by this transaction and any others that might result from Citizens’ attempts to reduce its liabilities.”

Gaetz joins a long list of top Republican lawmakers questioning the $52 million cash transfer from Citizens to a private insurer. House Speaker Will Weatherford, R-Wesley Chapel, said he was“highly concerned” about the deal and would call on a House committee to provide more oversight for Citizens. Gov. Rick Scott’s chief of staff called the board at Citizens “tone-deaf” when it comes to earning public confidence (Heritage donated $100,000 to Scott’s reelection in March, as the $52 million deal was being crafted, but Scott’s office denies pay-to-play). Chief Financial Officer Jeff Atwater also criticized the hastily approved 3-2 vote by the Citizens board to support the unique deal. Scott refused to answer questions this week about whether he supported the deal for his political contributor or not. 

Sen. Mike Fasano, R-New Port Richey, has called the deal “corporate welfare” and Rep. FrankArtiles, R-Miami, called it a “get rich” funding scheme. Critics say the deal allows Heritage to retroactively cherry pick policies that have made no claims, thus privatizing profits and socializing losses. They also pointed to a long list of insurance violations at companies run by Heritage's president, Richard Widdicombe

Citizens has defended the “quota share reinsurance” deal, with president Barry Gilway saying it would help reduce the company’s liabilities by more than $400 million should a 1-in-100-year hurricane hit Florida. That would reduce the risk of “hurricane taxes” on Florida consumers, who back Citizens. Heritage has also agreed not to raise rates by more than 10 percent for three years.

Gilway also penned a letter to the Citizens board, Scott, Atwater, Gaetz and Weatherford this week, promising to give more advance notice before making major policy decisions. The $52 million Heritage deal was unveiled and approved in less than a week, with some board members calling it "rushed" and complaining that they did not have enough time to review it. Gilway admitted that the lack of communication by his team was a "clear failure I intend to fix going forward."

The company will have several opportunities to defend itself before lawmakers later this year, as the House and Senate are both planning intensive reviews of the company over its practices.

Weatherford said the House Regulatory Affairs committee will be taking a close look at the state-run insurer of 1.3 million, which has become increasingly generous with its record $6.4 billion surplus. Two startup insurance companies have been approved to receive more than $100 million from Citizens in exchange for taking over policies. In recent years, several insurers have gone bankrupt after receiving millions of dollars from Citizens and state taxpayers. Those insolvencies also cost taxpayers more than $400 million on the back end, in “insolvency taxes.”

"We are going to look very closely at the take-outs,” Weatherford said. “We think there has to be some parameters for them. There's nothing wrong with being creative but, if you're going to do that, the process needs to be transparent and also allow for other companies to compete."

Gaetz has also promised an intensive review of Citizens in the Senate's Banking and Insurance committee, telling the Panama City News Herald editorial board that Citizens should implement new ethics and transparency measures. 

 "When we’re talking about $50 million transactions that take out risk, it’s important for the Senate and the House to understand what the business model is for depoputation," said Gaetz. The Senate president said several people brought up the Citizens deal during meetings with businesspeople in Panama City, wondering why the deal was approved so quickly.

With Mary Ellen Klas.

 See Gaetz’s full statement below:

 “The continuing problems and other issues at Citizens Property Insurance Corporation are cause for concern for all Floridians. With these concerns in mind, during this past Session, the Florida Legislature took a significant step forward in reducing the size of Citizens, a company that has grown to control 24 percent of Florida’s insurance market. By reducing the size of Citizens, we can materially reduce the risk to Floridians for assessments against their insurance policies if Citizens is unable to pay all its policyholders’ claims in the event significant hurricanes were to hit Florida.

 “The Legislature was also successful during this past Session in passing meaningful reform requiring the oversight of Citizens by an Inspector General, who will help assure Citizens’ operations are carried out with honesty and integrity.

 “Citizens’ recent attempt to reduce its size (depopulate) by transferring approximately 60,000 of its policies to Heritage Property & Casualty Insurance Company has understandably caused significant attention and concern. It is very important that Citizens take action to depopulate so as to reduce its exposure due to future hurricane loss, but at the same time it is important that this be done in a financially sound manner that is transparent and open to public scrutiny.

 “The Florida Senate believes the facts and circumstances surrounding the Heritage transaction need thorough investigation so the people of Florida are assured that it and transactions like it are in the best interest of Floridians. As such, as soon as Committee meetings begin this fall, the Senate Banking and Insurance Committee will conduct hearings to investigate and propose ]solutions to the concerns raised by this transaction and any others that might result from Citizens’ attempts to reduce its liabilities. As the Senate seeks to find additional ways to further assure the financial soundness of Citizens, it will investigate the need to set minimum standards to assure the integrity and openness of transactions such as Citizens’ dealings with Heritage.”

 

[Last modified: Thursday, June 6, 2013 3:20pm]

    

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