Florida’s insurer of last resort grows as
private market hits capacity
Citizens is back above
500,000 policies for the first time since 2015.
Article Courtesy of The Tampa Bay Times
By Jim Turner
October 18, 2020
TALLAHASSEE — Homeowners are again starting to flock
to the state-backed property insurer of last resort as the private
market becomes economically stressed, the president of Citizens Property
Insurance Corp. warned Wednesday.
Citizens President and CEO Barry Gilway
pointed to an “unhealthy” private market that is leading to
increased policies at Citizens, with the problems due
primarily to litigation and rises in costs of reinsurance,
which insurance companies buy to help cover losses.
“The growth is becoming extraordinary,” Gilway said during
an online meeting of the Citizens Board of Governors. “And
you can gloss over these numbers, but the impact they have
on the overall operations is significant.”
After peaking near 1.5 million policies in 2012, Citizens
has spent years trying to shed policies and move them into
the private market. A healthy number for Citizens is
considered around 420,000 policies — roughly the amount it
had in 2019.
But Gilway said Citizens likely will be above 540,000
policies by the end of this year, moving from 4 percent of
the market to 5 percent. In Southeast Florida, Citizens will
account for about 17 percent of the market.
A damaged business is seen in the aftermath of
Hurricane Sally on Sept.17 in Perdido Key.
With a number of major companies scaling back
coverage in South Florida or deciding they won’t cover homes older than
10 years, the forecast has Citizens growing to 625,000 policies next
year, or 6 percent of the market, Gilway said.
Citizens is back above 500,000 policies for the first time since 2015.
Citizens stood at 499,056 policies as of Aug. 31, and Gilway said the
company has been netting 2,500 to 3,000 new policies a week.
“This is exacerbated because nobody’s leaving (Citizens), because
there’s no capacity in the overall marketplace,” Gilway said.
Citizens' rate proposals for 2021 are expected before a December Board
of Governors meeting.
Citizens is also expected by the December meeting to receive a study
from Florida State University’s Florida Catastrophic Storm Risk
Management Center that is looking at steps to further reduce exposure
and actions the Legislature can take to slow the movement of policies
from private insurers to Citizens.
“We know that a healthy private market reduces Citizens' size, and in an
unhealthy private market we’re going to grow,” Gilway said. “Obviously,
this is the reason that we requested, and the board approved, the FSU
study. But we’ve also got to look around and consider recommendations
from board members, from legislators and others that might have some
ideas in terms of how we might reduce the overall size and scope of
Citizens over time.”
While Citizens has a 10 percent cap on annual rate increases, excluding
coverage changes and surcharges, private companies have been seeking
rate increases of 12 percent to 30 percent.
The Florida Office of Insurance Regulation held a public hearing Tuesday
on a proposal by First Community Insurance Co. to raise rates by an
average of 24.5 percent.
Last year, the Citizens board approved a statewide average increase of
8.2 percent for personal lines policyholders — homeowners, condominium
owners and renters.
Gilway didn’t target private-market rate increases as a primary driver
for policies moving into Citizens. However, he said Citizens is now the
most competitive company in rate comparisons 85 percent of the time in
Citizens had been optimistic that changes made during the 2019
legislative session, such as curbing the practice known as “assignment
of benefits,” were taking hold.
Insurers have long argued that abuses of assignment of benefits were
driving up rates, primarily because of litigation over residential
Gilway said the so-called “assignment of benefits” changes have helped
as the industry faces other pressures, but litigation trends continue to
And while South Florida had been heavily responsible for increased
claims, mostly involving water damage, Gilway said Central Florida has
become a recent hotspot for claims.