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House committee gives Citizens insurance a hard look

Don Brown felt he had to say it.

"Millions of Floridians are unaware that they are just one hurricane away from the equivalent of a massive tax increase," Brown told the Florida House Committee on Insurance on Friday. "I think people deserve to know that.''

A DeFuniak Springs Republican, the committee chairman and an insurance agent, Brown and his colleagues spent five hours asking executives from state-backed Citizens Property Insurance Corp. what would happen if the state was hit by a major hurricane, and who would pay for it.

The response from Citizens was that Florida policyholders would be liable for more than $10-billion in assessments if a one-in-100-year storm struck the state.

The amount would be paid by policyholders over 30 years and would be in addition to assessments charged by the state's catastrophe fund.

Under current law, all Florida home and auto owners can be assessed if Citizens runs a deficit, as it did after the storms of 2004-05. Floridians are paying more than $800-million over 10 years to cover those losses.

The likelihood of more assessments has grown, Brown argued, because as Citizens' exposure to risk continues to grow, its rates haven't increased since late 2005 and will remain frozen until January 2009. A bill in the Senate would tack on another year of the rate freeze.

Citizens actuary Paul Erikson estimated the company will lose about $120-million a year in uncollected premiums in its high-risk account because of the freeze.

Asked if Citizens has had inadequate rates since 2007, when the freeze went into effect, Erikson replied, "Yes."

Unlike last month's Senate hearings with Allstate, Nationwide and the Hartford, the tone this time was non-combative.

Committee members had nothing but praise for Citizens and its 1,000-member staff, which is about a fourth the size of a comparable private company.

But the company has had to be nimble. The Florida Legislature last year changed insurance law in three critical areas. The state's catastrophe fund was increased so that private insurers would have more access to cheaper back-up coverage, with the savings to be passed on to policyholders.

And in addition to freezing its rates, Citizens was allowed to have rates competitive with private carriers.

Brown would like to see those last two parts undone, if not the entire package.

"There's an old saying that when you find yourself in a hole, the first thing you need to do is stop digging,'' he said. "(Citizens) financial picture is better today than ever before, but not in the event of a one-in-100-year storm. Shouldn't we stop digging?"

Citizens chief financial officer Sharon Binnun smiled. "We look to the Legislature for direction,'' she said, "and do the best we can.''

Brown is not without his critics. State Sen. Mike Fasano, R-New Port Richey, a member of the Task Force on Citizens Claims Handling and the Senate's select committee on insurance, said that if Florida was hit by a Katrina-like storm, "Yes, there will be assessments. But every other insurance company in Florida will be hurting, too.''

"I'm disappointed that (House) Speaker (Marco) Rubio allowed this type of exhibition to go on in the Florida House. Rep. Brown can talk about Citizens premiums not being high enough, but a lot of Floridians can't afford it now.''

One of two lawmakers to vote against the 2007 legislative changes, Brown said he will schedule another meeting in the coming weeks to revisit the issue.

Tom Zucco can be reached at or (727) 893-8247.

House committee gives Citizens insurance a hard look 03/14/08 [Last modified: Monday, March 17, 2008 2:08pm]
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