We are finishing up our discussion of the Florida Legislature’s efforts to revamp Citizens Property Insurance Corp. It seems as if a week hasn’t gone by that the Legislature or a regulatory agency hasn’t put forward one proposal or another. It also seems as if the only thing anyone agrees on is that the state-run insurance company must change if it is to remain viable.
The bill we have been talking about addresses one of the stickiest aspects of Citizens: assessments. As the law is now — and as just about every Floridian knows — if the company cannot meet its claim obligations, it can levy assessments against policyholders as well as homeowners with private insurance.
The way the private insurance levy is constructed, though, puts the onus on the private insurers: They must pay the full 6 percent up front but can only collect it from their policyholders over time.
If the proposed bill goes through, the 6 percent assessment would go away for two of Citizens’ three insurance funds. The bill’s author emphasizes that the changes would not impede Citizens’ ability to pay claims on time.
The changes should, however, have a positive impact on the viability of private insurers. They will no longer have to make the large upfront payments to meet the assessment. Instead, they can hold on to their surpluses and face a much lower risk of bankruptcy.
The thinking seems to be that the lowered obligations for private insurers will not only keep them in business but will also attract new insurers to Florida. If there is one sure way to reduce the strain on Citizens’ resources, it is to reduce its exposure. For that to happen, policyholders would have to migrate to other carriers.
Officials say that Citizens is doing well right now. Between the company’s surplus and additional funds from the Florida Hurricane Catastrophe Fund, as well as money raised through pre-event bonds, Citizens should be able to meet the demands of a 1-in-50 year storm. Still, that shouldn’t slow down the Legislature’s reform efforts.
Source: Insurance Journal, “Florida May Change Citizens’ Policyholder Assessments,” Michael Adams, Feb. 28, 2012Share