Make us your home page
Instagram

Citizens' $6.1 billion surplus may draw private insurers

TALLAHASSEE — After six years without a hurricane, Citizens Property Insurance Corp. has built up a massive cash surplus of about $6.1 billion. And private insurance companies want to get their hands on it.

As Citizens desperately tries to move its policies into Florida's limited private market, insurers are pitching creative new ideas to help with the effort. The plans, discussed Thursday at a Citizens meeting in Miami, have two things in common: They require Citizens to pay private companies millions of dollars to take over policies, and they will result in higher premiums for newly acquired customers.

If any of the plans move forward, current Citizens customers could be shifted away from state-run insurance and into newer, smaller companies with a higher risk of going belly-up. The plans could begin as early as November. The full board would have to approve any such plan, but no date has been set for a vote.

"The goal of the proposal that we've given to you … is to create an incentive for the customer to leave Citizens at their own will," said Bill Martin, president of Bankers Insurance Group, which is pushing for a system of shares, like in the stock market, for people who leave Citizens. The system would use up to $578 million of Citizens' cash to get started.

The plans come at a time when Citizens is trying to make itself less attractive. The state-run insurer will vote today on how much to raise its own rates during a board meeting at the JW Marriott in Miami. The company is looking to raise rates by a statewide average of 7.5 percent, though increases will be higher in risk-prone areas like South Florida, and rates for sinkhole coverage (mostly in Tampa Bay) could more than double in some cases.

Gov. Rick Scott and Citizens executives say that the insurer of 1.4 million policies is too large and needs to give way to the private market, which has contracted in recent years. If a once-in-a-lifetime type of hurricane slams the state, Citizens might have to levy taxes on Floridians to cover a shortfall.

Some private companies now say they'll take on some of Citizens' risk — but only if Citizens pays them millions of dollars. Citizens, which has saved a record $6.1 billion during a six-year lull in hurricane activity, decided Thursday to look more closely at some of the plans.

One plan, by Tower Hill Insurance, would require Citizens to make a $150 million investment in order for the private insurer to take over 175,000 Citizens policies. The so-called "surplus note" loan, which amounts to about $850 per policy, might not be paid back for 10 years, if that. If there is a storm during that time, Citizens would have to forgive much of the loan.

Another plan, pitched by United Property and Casualty Insurance Co., requires Citizens to make up the difference between what a homeowner pays and what the rate would be without Citizens' price caps. In some cases, insurance industry models show that Citizens rates are underpriced by thousands of dollars.

Over the course of three years, Citizens would pay United an estimated $116 million in cash for removing 175,000 policies. Homeowners would see their rates continue to increase, but no more than 10 percent annually.

John Forney, CEO of United, said the multimillion-dollar payments would be a good use of Citizens' cash.

"I understand the notion of (Citizens) actually paying cash out is controversial and has some drawbacks, but you can get a great return on your investment," he said.

Reducing the size of Citizens could lower the amount of potential assessments, or "hurricane taxes," levied on consumers if Florida experienced a storm the size of 1992's Hurricane Andrew.

Company leaders want Citizens to shrink from 1.4 million policies to about 750,000.

Citizens' $6.1 billion surplus may draw private insurers 07/26/12 [Last modified: Thursday, July 26, 2012 10:05pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Tampa man pleads guilty to forging check for fake investment

    Personal Finance

    A Tampa resident was convicted Thursday for forging a check for a fake investment. The Florida Office of Financial Regulation said that Eric Franz Peer pleaded guilty. He served 11 months in jail and will have to pay $18,000.

  2. Minority business accelerator launch by Tampa chamber to aid black, Hispanic businesses

    Business

    A "minority business accelerator" program was launched Thursday by the Greater Tampa Chamber of Commerce geared toward helping black and Hispanic business owners identify and overcome barriers to grow their companies. The accelerator, known as MBA, will provide participants with business tools to cultivate opportunities …

    Bemetra Simmons is a senior private banker at Wells Fargo, The Private Bank. She is also chair of the new minority business accelerator program for the Greater Tampa Chamber of Commerce. [Photo, LinkedIn]
  3. Terrier Tri brings unique triathlon training to South Tampa

    Business

    Over a decade ago, Robert Pennino traded late nights in the music studio for early mornings in the Terrier Tri cycle studio.

    Terrier Tri, a cycling studio in South Tampa celebrates a grand opening on June 27. Photo courtesy of Tess Hipp.
  4. New bistro hopes to serve as 'adult Chuck E. Cheese'

    Business

    YBOR CITY — Inside Cheezy's Bistro and Speakeasy, a new restaurant opening in Ybor City, customers will find a mix of family recipes, games and secrecy.

    Cheezy's Bistro and Speakeasy readies to open in Ybor City. Photo courtesy of Cheezy's Bistro and Speakeasy.
  5. Ramadan having an economic impact on local charities, businesses

    Economic Development

    TAMPA — Dodging the rain, a few families and customers gathered inside Petra Restaurant on Busch Boulevard. Around 8:30 p.m., the adham (or call to prayer) music begins, signaling Iftar, the end of the daily fast. Customers grabbed a plate to dig into the feast.

    Baha Abdullah, 35, the owner of the Sultan Market makes kataif, a common dessert that is eaten during the month long celebration of Ramadan in Tampa. [OCTAVIO JONES   |   Times]