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Citizens offers 31 proposals to reduce exposure, coverage (p4)

We have been talking about the proposals that officials of Citizens Property Insurance Corp. presented to a panel of lawmakers at the specific request of Florida Gov. Rick Scott. The insurance company has been under fire for some time, with the governor and others sounding the alarm about the company's financial stability and its rate of growth. Citizens was designed to be the insurer of last resort in the state, but it now boasts 1.5 million policyholders and $500 billion or more in exposure.

Between its own reserve and other funding sources, Citizens currently carries a surplus of $16.7 billion. Lawmakers are more concerned than ever that a major storm will decimate that surplus and Florida residents will have to pick up the remainder.

While almost $17 billion sounds like a lot of money, it looks different when you consider the preliminary cost estimates for the first few months of 2011. Experts estimated that storms in the Midwest and Southeast would run to about $4.25 billion. Blizzards in the Midwest and Northeast would run to about $1 billion each. Droughts, floods, storms -- as we discussed in August, the first part of 2011 saw nine disasters estimated to cost $1 billion each.

That doesn't leave much of a cushion for Citizens, and that's what worries lawmakers.

The original challenge from the governor, though, was for Citizens itself to shrink. The cuts to coverage will lower the company's exposure; reports don't include information on the effect the cuts may have on operating costs. Commentators are wondering how much money will be saved by limiting the coverage for damage to floors that account for more than 5 percent of a home's square footage.

Citizens insists that real change cannot occur without legislative action. The company's to-do list for the Florida Legislature was included no surprises. Legislators will reconvene in just a few weeks.

Source: Insurance Journal, "Florida's Citizens Insurance Says Legislation Needed for Real Change," Michael Adams, Dec. 6, 2011

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