After years of cutting its policy numbers, Florida’s home insurer of last resort may be about to shrink again.
At the request of a state lawmaker, the Citizens’ Property Insurance board is again bringing in an outside evaluator to help the insurer decide if and how to cull its policyholder base further.
“We were asked to take a look at things and see if we can do any better, and we’re happy to do so,” said Citizens spokesman Michael Peltier.
Created by the state Legislature in 2002, the insurer was meant to provide property insurance to homeowners who were eligible for coverage but couldn’t secure a policy on the private market. Often, that included homes that were older and seen as more risk-prone, as well as mobile homes.
The insurer currently has about 444,000 policies.
In June, Citizens’ policies (then at 417,000) accounted for about 11 percent of the state’s residential property insurance market, according to the Florida Office of Insurance Regulation. But at its height in 2011, the insurer held just shy of a quarter of the market — or about 1.5 million policies.
The numbers swelled as Citizens picked up policyholders shed by insurers that either went out of business after significant storms in the late 1990s and early 2000s or left the state after determining that Florida was too risky.
“That’s when the Florida Legislature kicked in and determined that they needed to have an insurer of last resort to cover these policies,” said Mark Friedlander, the Florida representative for industry group the Insurance Information Institute.
According to Citizens, such a high number of policies put state taxpayers at risk for paying $11.6 billion if there was an especially catastrophic “1-in-100-year” storm.
A series of studies between 2011 and 2015 from the National Association of Insurance Commissioners, Florida State University and the James Madison Institute pushed Citizens to lower its policy count to reduce financial risk, which the insurer has been doing at a steady pace since then. The only major uptick in policies since then was in November when it absorbed about 23,000 policies from Florida Specialty Insurance Co., which the state liquidated after it failed to maintain adequate assets but continued writing policies.
“We think we’ve gotten pretty close to being a residual carrier now,” Citizens’ Peltier said.
But Sen. Jeff Brandes (R-St. Petersburg) said that still isn’t low enough.
In August, the St. Petersburg senator sent a letter to Citizens president Barry Gilway asking for a study to help Citizens figure out how to either become a reinsurance company — insurance for insurance companies — a “service organization," or both.
“It is the logical next step to determine the feasibility of transitioning Citizens” to one of these options, Brandes said, “so that its current policyholders, more than 400,000, may be better served in the private insurance market.”
What that study will look like, and which institution will perform it, hasn’t been determined yet. Peltier said the insurer does not yet know who will conduct the study, though it may tap Florida State University again.
According to Friedlander, now may be a particularly good time for Citizens to reduce its policies if possible.
“The private market has become financially stronger than it was seven years ago and is ready to take on more coverage of homeowners,” he said.
If Citizens does reduce its policy count, policyholders currently with the program won’t have to worry about being dropped with no option, Friedlander said.
“Citizens cannot decide to no longer write policies if there is not a private market available in a specific area of the state,” he said.
The Office of Insurance Regulation requires that Citizens can only offload policies in areas where those policyholders have other options for insurance.