TAMPA - It wasn't supposed to be like this.
Citizens Property Insurance Corp., established by the state for homeowners who could not get insurance in the private market, has evolved into an industry titan. With more than 1.3 million policyholders, it is now the state's largest property insurer, eclipsing State Farm.
Its recent rapid-fire growth has lead to another distinction: Citizens says it's now one of the largest property insurers in the nation.
The state-backed insurer didn't want to grow and increase its exposure in Florida's high-risk market, but Citizens is required by law to take on policies that no other company will cover. And that's happening with continued frequency as private companies reduce their risk in Florida, which was raked by storms in 2004 and 2005.
"That's a sign of how weak the private market is," said Citizens spokesman Rocky Scott. "No one is writing commercial insurance. Nobody is writing wind, and very few companies will cover condominiums. This is statewide."
As a result, the so-called insurer of last resort is expected to continue to grow at a blistering pace. The company expects to have 2 million policyholders by year's end.
Robert Hartwig, president of the Insurance Information Institute in New York, says Citizens' growth is concerning. He believes the company has taken on too much risk and is overexposed. That could have serious financial consequences should a major hurricane or a series of hurricanes hit the state and cause massive losses. Citizens could end up paying billions in claims, draining its assets and resulting in assessments on insurance policies statewide to build a new pool of money for the company.
Citizens' Reluctant Customers
Property owners who are covered by Citizens have their own worries.
Geri Biewer of Palm Harbor was one of about 100 who attended a public forum hosted by the insurer Monday in Clearwater.
She said that next month she will unwillingly become a Citizens policyholder. The reason: Nationwide insurance is dropping coverage on her home, she said, and she was unable to find any company other than Citizens to cover it despite the fact she has never filed a homeowner's claim.
"No other insurance company will cover me," Biewer said. "… It really is very scary because I have no options."
Biewer said she is distressed because her annual property insurance premium will be even higher than the $2,800 she was paying Nationwide. Citizens, she said, has informed her that her annual premium will be $3,500.
Others attending the forum also complained about rising premiums after they were placed with the company. In some cases, people told Citizens officials, their premiums jumped fivefold after they were placed with Citizens.
Scott, the Citizens spokesman, said the company is sorry about policy costs but must charge rates set by law.
Poe Collapse Also Fueled Growth
Since June 2006, Citizens has added 450,000 policyholders, the result of private companies dropping thousands of customers and the financial collapse of Tampa-based Poe Financial Group, which resulted in the sudden transfer of 320,000 policies to Citizens.
Since December 2005, Citizens' exposure has doubled, rising from $220 billion to $452 billion today. The number of Citizens policies outside the high-risk coastal areas also has doubled, Scott said.
During the past 18 months, private insurers in Florida have dropped about 250,000 policies. People who have been dropped often have turned to Citizens for coverage.
Citizens has $9.4 billion available to cover claims if a devastating hurricane hits Florida. Beyond that, money from the state's Hurricane Catastrophe Fund would be used to cover losses.
Is that enough to cover the claims triggered by a major hurricane? Is Citizens overexposed?
"Yes and no," Scott said. "It depends on where the hurricane hits."
Citizens has enough capital to cover claims outside the high-risk coastal areas, Scott said. But it could fall short on cash if a major hurricane hits a highly populated area along the coastline, he acknowledged. About 420,000, or a third, of Citizens policyholders are in coastal areas.
"There is a chance that we might have to go to assessments to recoup damages to get into the CAT fund," Scott said.