TALLAHASSEE, Fla. (AP) – Florida's largest property insurer is shedding 60,000 policies, many of them in South Florida, under a deal that is being questioned.
The board of Citizens Property Insurance Corp. voted 3-2 on Wednesday to transfer policies to a start-up St. Petersburg company called Heritage Property and Casualty Insurance.
Heritage is less than a year old but it has already made large donations to the re-election campaign of Gov. Rick Scott. One lobbyist for Heritage is former Insurance Commissioner Tom Gallagher.
It was Gallagher who led the push to create Citizens more than a decade ago.
The deal calls for Citizens to pay roughly $52 million to Heritage, or about half the premium dollars that would be collected from those policyholders in a year. Other companies that have agreed to absorb Citizens policies recently have not been paid anything.
Citizens officials defended the deal as a way to shrink the size of the state-created insurer. Citizens currently has nearly 1.28 million policyholders and has a built up a sizable surplus in recent years because the state has dodged hurricanes since 2005.
Barry Gilway, president and CEO of Citizens, called the deal "good for the state, good for Floridians.''
There has been a push since 2012 for Citizens to shrink in size because of fears that it would not be able to cover claims in the event of a huge hurricane hitting the state.
Citizens has the power to place a surcharge, also called a "hurricane tax,'' on its own policies and policies of most insurance policies if it can't cover its losses.
But some Citizens board members publicly questioned how fast the Heritage deal was put together and why other companies weren't offered a similar arrangement. Details of the deal were not released until just a few days ago.
Those opposed to the deal also noted that recent efforts to shrink Citizens had been successful without spending millions.
"We are giving up a lot of surplus that could be used in the event of a storm,'' said Citizens board member Carol Everhart.
Citizens officials defended the timing, saying they want to finish the deal before the end of June in order to avoid paying $10 million to purchase reinsurance for the policies the company is giving up.
They also noted that state regulators have looked at Heritage's financial situation and have signed off on the policy transfers.
About 40 percent of those policyholders who will be handed over to Heritage live in Broward, Miami-Dade and Palm Beach counties. Policyholders will be given 30 days to say whether or not they will accept the transfer.
The vote by the Citizens board, however, comes about two months after Heritage donated $110,000 to a political committee created by Scott. That donation, and connections between Citizens and Heritage, were first reported by the Tampa Bay Times/Miami Herald capital bureau.
Citizens board chairman Carlos Lacasa publicly stated during the board meeting that no one in Scott's office or the Legislature had reached out to him about the deal with Heritage.
Adam Hollingsworth, Scott's chief of staff, put out a statement that said that any assertion the governor influenced the decision was "outrageous.'' But Hollingsworth still criticized the speed that the deal was put together.
He said Citizens needs to review its own process to "ensure that all decisions are fully, publicly vetted with enough time for board members to review the material and make the best decision possible for the taxpayers of Florida who support Citizens.''