Friday, November 24, 2017

Column: Florida insurance picture brightens


As another Atlantic storm season fires up right on schedule, with our great state in the crosshairs as usual, there is some good news for Floridians from an unexpected place — Citizens Property Insurance Corp. Recent news coverage of Citizens has rightly focused on issues of transparency and public trust, but behind the scenes the big picture and the numbers for taxpayers look better than they have for several years.

In 2011, Gov. Rick Scott and the Cabinet demanded of Citizens leaders that we make the state-run insurance company smaller, without making it less affordable for the longtime Florida homeowners who depend on it. Why? Citizens can tax, or "assess," nearly every insurance policy in the state to cover its deficits, which after a bad hurricane season could run to several billion dollars and extend for up to 30 years.

Floridians can't afford to pay a massive extra bill just as they struggle to rebuild and simultaneously watch our recovering economy suffer under the extra burden. Fortunately, with assistance from the Legislature, the future has brightened and the numbers prove it.

The size of potential assessments has been slashed by nearly half since 2011 because Citizens has reduced its policy count through promoting private insurance alternatives and aggressively transferred its storm risk burden to global investors in reinsurance and the bond markets. The unfunded expected deficit in the proverbial 100-year storm — an unlucky but scientifically plausible scenario — has declined from $11.6 billion then to $6.4 billion this season. That means a typical policyholder could save hundreds of dollars each year for many years, and an assessment could be paid off much sooner.

The governor asked Citizens to shed policies by offering only essential coverage and marketing the attractive customers to willing private insurers. More than 430,000 properties were moved out of Citizens in the past two years, as home-grown insurers stepped up, raised capital, provided excellent coverage — and created jobs in Florida while doing it.

More insurers are lining up to offer quality policies, at Citizens rates or less, in places like Tampa Bay and South Florida where so many deserving consumers have felt "stuck" with Citizens. The instant-shopping "clearinghouse" authorized by SB 1770, signed by the governor in May, will make it even easier to find coverage that may be better, and cheaper, than Citizens.

Meanwhile, Citizens has sparked a revolution in the capital markets by sponsoring the largest ever "catastrophe bond," as well as a substantial traditional reinsurance program, in 2012 and 2013. Global investors, who ultimately pay our hurricane claims, watch the signals from Tallahassee and have gained comfort with Citizens as a reliable risk transfer partner.

As a result, reinsurance costs have declined by more than 30 percent, allowing the "glide path" of annual, measured rate increases to make us a more actuarially sound insurer. In addition, SB 408, passed in 2011, has cut by over half the sinkhole claims costs that were causing Citizens to lose money even in storm-free years.

The payoff? For the first time, the annual rate adjustments for statewide multi-peril policies will require less than the up to 10 percent increase authorized by the Legislature to achieve actuarially sound rates. That's progress.

Finally, results are important but how we get them matters. The governor insisted on a new Citizens inspector general reporting directly to him and the Cabinet, a new consumer advocacy seat on Citizens' board, and reforms to travel and purchasing policies, all in SB 1770.

Taxpayers can be confident that Citizens will play by the rules as it pursues the all-important goals of minimizing assessment risk, speeding the return of a vibrant private insurance market, and offering stable yet actuarially sound rates for the essential property insurance coverage Floridians need.

John W. Rollins is an actuary and a member of the Board of Governors for Citizens Property Insurance Corp. He wrote this exclusively for the Tampa Bay Times.


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