TALLAHASSEE — Newly formed property insurance companies in Florida looking for a long-term, low-interest loan from the state will have to try somewhere else this year. And officials from state-backed Citizens Property Insurance have no problem with that.
Gov. Charlie Crist signed into law on Wednesday legislation adopted earlier this month that, among other things, gives regulators tighter control over insurance companies and freezes Citizens' rates for a year.
But as he had hinted he would do, Crist vetoed a portion of the bill that would have taken $250-million out of Citizens' surplus to fund loans of up to $25-million to small, private insurance companies in the state.
Two years ago, when Florida first enacted the Insurance Capital Buildup Incentive Program, the state loaned $250-million to 13 insurers, including Florida Peninsula, Royal Palm and American Capital Assurance. But the money came from the state's General Revenue Fund. This year, with the state experiencing a severe revenue shortfall, lawmakers decided instead to pull the $250-million from Citizens.
"While I believe the program is well intended . . . the funding source is inappropriate,'' Crist wrote in a letter Wednesday to Florida Secretary of State Kurt Browning. "The additional funding for the program provided in this legislation comes from policyholders' premiums paid to Citizens, which is used to pay claims in the event of a catastrophic hurricane.''
Lawmakers had argued the program would help reinvigorate the private market. But with the highest policy count (1.25-million) and the greatest total risk exposure (nearly $450-billion) Citizens could not afford to jeopardize its reserves.
Citizens has in excess of $10-billion to pay claims. But once it goes past $3.6-billion of that, the company has to begin using assessments.
"To take $250-million out of the $3.6-billion is totally imprudent,'' Citizens board chair Bruce Douglas said Wednesday, "and I think the governor acted very wisely.''
Tom Zucco can be reached at email@example.com or (727) 893-8247.