TALLAHASSEE, Fla. (AP) _ The governing board of the state-backed Citizens Property Insurance Corp. on Friday approved $350 million in low-interest loans for private insurers to relieve Citizens of thousands of policies.
Citizens has sought unsuccessfully for years to reduce its customer base and corresponding risk by unloading hundreds of thousands of policies and shifting them into the private sector. As Florida's largest property insurer by far with more than 1.4 million customers, Citizens would likely face solvency issues if a catastrophic hurricane or series of storms ripped across the state.
If Citizens were able to quickly shed an estimated 300,000 policies, the company's exposure would be reduced by an estimated $1.2 billion. Citizens is offering a low-interest, 20-year loan to attract private insurers.
And while new Citizens President and CEO Barry Gilway said he'd trade the funds for offering the low-interest loans and reducing Citizens' liability “in a heartbeat,'' state Sen. Mike Fasano phoned in with some strong admonitions.
“Here we go again,'' Fasano told the board. “These private companies that you want to give $350 million to, they have no risk whatsoever.''
The New Port Richey Republican said that if insurers can get their hands on good policies, they shouldn't need an incentive.
“Why should the taxpayers and the rate payers have to put out the money?'' asked Fasano, who predicted that Citizens would spend the $350 million and within 10 years have all of the policies back in their portfolio.
However, board member John Rollins of High Springs saw it differently.
“It has the potential to start a renaissance for the Florida property insurance market,'' Rollins said.
Private companies must complete a detailed application outlining financial eligibility, including reinsurance and business plan information, and must receive written approval of proposals from the Florida Office of Insurance Regulation before being eligible to assume Citizens' policies. Many private insurers fled the Florida market after eight destructive hurricanes slammed parts of the state in 2004 and 2005, leaving Citizens as an insurer of last resort _ particularly in coastal areas.
And during Friday's half-day meeting, the disagreements weren't limited to differences between Citizens' executives and the board.
Board Chairman Carlos LaCasa had two proposals shot down by his colleagues.
On Thursday, in a related matter, the state's insurance regulator approved four private companies to take over 150,000 policies, although policyholders are given 30 days to decide whether to accept a new carrier or remain with Citizens. The policies will be assumed by Florida Peninsula Insurance Co., Homeowners Choice P&C Insurance Co., Southern Fidelity P&C, Inc. and Southern Oak Insurance Co. The transfer of these 150,000 policies are not part of the incentive program approved Friday. More hope to be approved for consideration in the near future.
The insurer also agreed Friday to review its internal policies on expenses and corporate credit cards after several newspaper stories criticized some of the company's executives for a few lavish expenditures on hotel rooms, meals and even a bottle of wine.
The Legislature created Citizens Property Insurance Corp. a decade ago with the intent of providing an affordable, last-resort option for consumers left in the lurch when private carriers began pulling back from Florida's hurricane-threatened marketplace. It was largely an offshoot of an underwriting association formed by the state in the aftermath of Hurricane Andrew in August 1992.