The Florida Hurricane Catastrophe Fund isn’t the only state-run insurance program under heightened scrutiny in the Sunshine State. The Miami Herald is reporting that Gov. Rick Scott is demanding the board of Citizens Property Insurance Corp. provide him a plan to shore up the state-run property insurer in time for the Florida Cabinet’s next meeting on Dec. 6
The Herald story quotes Scott –who is on record as favoring privatization of Citizens, now the largest property insurer in the state— saying he believes the Florida Legislature would be willing to tackle property insurance reform in 2012. But he also wants proposals from Citizens’ board, which next meets Nov. 16, on ways to place the company on more secure footing even without legislative action.
“I expect them to come back with ideas of things they can do without the Legislature, things that we have to go to the Legislature with,” Scott said Tuesday. “We shouldn’t be sitting here just hoping every hurricane season that we’re not going to have a hurricane. Someday we’re going to have a hurricane.”
The governor’s comments come just as a new report from Florida TaxWatch concludes that reform of Florida’s property insurance system must go beyond proposals to fix to shore up the cat fund’s projected $3.2 billion funding shortfall, and also include changes to Citizens, the Florida Insurance Guaranty Association and to the private market.
In its report, Florida TaxWatch weighs the impact of a variety of proposals to address the cat fund’s shortfall, including increasing industry retention to $8 billion, increasing the cat fund copay to 25% and shrinking the fund itself to $12 billion, from its current $17 billion. The group notes the different plans would raise median policyholders’ costs by at least $19.25 and potentially as much as $173.04 annually.
However, moving to shore up the cat fund in isolation would risk leaving other parts of the system more exposed to major hurricanes, TaxWatch concludes. The report argues that “any reduction in exposure for the FHCF increases the net exposure to CPIC, private insurers and reinsurers, FIGA, and the State of Florida.”
Citizens had 1.46 million policies with $508 billion of total coverage as of October 2011, according to the report. The insurer accounts for more 25% of the state’s residential exposure, but 58% of its own policies are concentrated in the five high-risk counties of Miami-Dade, Broward, Pinellas, Palm Beach and Hillsborough.
Under current law, should Citizens be unable to cover its obligations, it can assess policyholders surcharges for up to 15% of their premiums in each of three different types of accounts. Should the surcharges not produce sufficient amounts to cover repayment of Citizens’ bonds, assessments of up 6% can be imposed on all P&C policies in the state except workers’ compensation and medical malpractice.
