Gov. Rick Scott inflating Citizens' hurricane liability

The statement

Citizens Property Insurance has "over $500 billion worth of risk, with less than $10 billion worth of surplus."

Gov. Rick Scott, in comments to the media

The ruling

After six years without a hurricane hitting Florida, could Citizens' finances be that frightful?

We found that Scott's statement, while technically true, omits major components of the financial structure of Citizens.

First, on the side of Citizens' "surplus." The state-run insurer does, indeed, have nearly $6 billion in cash reserves, money it has been able to build up during the last six hurricane-free years. But that cash — the most Citizens has ever had — is only part of the pot the insurer uses to pay hurricane claims.

Few, if any, property insurers rely solely on cash surplus to pay claims in the wake of catastrophe. Citizens, like every other licensed property insurer in Florida, has backup insurance from the Florida Hurricane Catastrophe Fund. It also has private reinsurance worth hundreds of millions of dollars.

Finally, Citizens has the ability to sell bonds to cover claims that exceed its surplus and reinsurance coverage.

Altogether, Citizens has about $19.5 billion in claims-paying ability, far more than the amount cited by the governor. Most of that could be paid out before any assessments, or "hurricane taxes" would be required from non-Citizens policyholders.

The other half of Scott's statement mentions Citizens has $500 billion in total exposure to risk. This is also true, but it has little to do with whether Citizens "is going to be able to pay the bill" after a storm.

What would it take for Florida to have to pay $500 billion in claims? A superstorm 25 times as ferocious as Hurricane Andrew would have to hit South Florida, and zigzag its way through Florida's peninsula, hitting all 67 counties and damaging or destroying every home and business with a Citizens policy. A series of back-to-back, Andrew-sized storms up and down the state could also do the trick.

In the absence of such an occurrence, a more realistic estimate of maximum losses would be the 1-in-100-year storm, the so-called "Big One," that would cause more damage than Hurricane Andrew in 1992.

Estimates indicate that kind of storm — which only has a 1 percent chance of occurring in a given year — would cost Citizens a maximum of $21 billion. This number, while large and financially troublesome for Citizens, is nowhere near the $500 billion often repeated by Scott.

Scott spokesman Lane Wright said regardless of which numbers are presented, the fact that Citizens remains in a precarious financial position is central.

"No matter how you slice it, in the worst case storm, the 1-in-100-year storm, Citizens still falls short of being able to pay its claims," Wright said.

That's true — but those aren't the words Scott has been using. He's opted for the gasp-inducing $6-billion-versus-$500-billion language.

We rate his claim Mostly False.

Toluse Olorunnipa, Times/Herald Tallahassee Bureau

This ruling has been edited for print. Read the full version at PolitiFact.com/Florida.