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Recent developments have sparked a new debate about the role that Citizens Property Insurance Corp. is expected to play in Florida’s rapidly changing property insurance market, with potential changes that could affect agents, other carriers and homeowners for years to come.

At a Citizens’ Committee meeting last week, Florida Regulator Susanne Murphy revealed that the Office of Insurance Regulation is now considering waiving Citizens’ $700,000 coverage limit for high-end homes. range, at least in some counties. Agents said the change was badly needed: Their options are more limited than ever in parts of the state where home values ​​have skyrocketed and core market carriers have backed off or restricted coverage amid of hurricane season.

But others warn that such a move will not help depopulate the state’s largest insurer and could deepen citizens’ exposure in a time of stronger storms.

“It’s a decision that OIR will have to make,” said Barry Gilway, CEO and Executive Director of Citizens. But, he added, with Citizens topping 1 million policies this summer and continuing to grow, “that’s probably something that should be avoided.”


Over the past year or so, Citizens has had to terminate some 3,300 policies in the state because home values ​​and coverage exceeded $700,000, Gilway said. And another 14,000 policies are knocking on the door, covering properties between $600,000 and $700,000, reported Kelly Booten, chief operating officer of Citizens.

Also last week, Florida State University’s Risk Management and Insurance Program, in a soon-to-be-published academic paper, revisited the idea of ​​transferring all wind policies to citizens, allowing other insurers not to take out that cheaper water and other perils.

“Given the difficulty of providing hurricane wind cover profitably, it may be strategically and economically prudent to intentionally remove it from the primary market,” the FSU document reads. “With recent legislation (Senate Bill 76, 2021) allowing citizens to gradually increase rates over the next few years and the ability to assess policyholders for shortfalls, citizens may be in a better position to insure the wind than primary insurers. ”

And Florida regulators are also asking for $1.5 million for a consultant to explore new options for property insurers facing financial ratings downgrades – an indication that a plan to use Citizens as a type of reinsurer to troubled companies might not help stabilize the market.

Increase in the coverage ceiling

Murphy, the state’s deputy insurance commissioner, said state law allows the bureau to waive Limit A coverage of citizens in counties that don’t have sufficient competition from private carriers. The state passed that milestone in 2014, raising the cap to $1 million, but only in Miami-Dade and Monroe counties on the southern tip of Florida.

Proving that there are major carrier shortages in other Florida counties can be more difficult, and Murphy said the OIR is looking for any data it can find.

“Whether there is enough data to support this finding is what we are trying to determine. The last time we did it was pretty clear, but the data we’ve looked at so far this year isn’t quite as clear,” Murphy told the Citizens Market Accountability Advisory Committee on Aug. 31.

To help, the Florida Association of Insurance Agents plans to work with the OIR to develop data points that member agents can help provide.

It was not specified what data was missing. The OIR already receives a lot of information from carriers, including current policies and exposure by county, although not all of this data is made public in the quarterly reports. OIR’s Quarterly and Supplementary Reporting System, known as QUASR, displays a range of information on dozens of Florida carriers. But a number of carriers consider the data to be trade secrets and have chosen not to make it public.

Murphy said the OIR could complete the review within about six weeks.

Some insurance industry experts aren’t so sure about the idea.


“I don’t know why it’s necessary,” said Melissa Burt DeVriese, president of Ormond Beach-based Security First Insurance Co. “We’re open for business and underwriting up to $2.5 million in coverage.”

“Increasing the coverage cap would certainly send more policies to citizens, increasing their exposure” as well as the possibility of a surcharge for all policyholders in the state if citizens face heavy losses from the storm, explained John Rollins, actuary and former vice-insurer. President.

And though Citizens officials are quick to point out that an assessment to help cover losses would only be imposed on policyholders, not taxpayers, storm losses could ultimately affect Florida’s sparkling credit rating. , simply because Citizens is in some ways considered a state agency, says Professor Charles Nyce.

Nyce is the FSU Associate Professor of Risk Management and Insurance whose doctoral students researched and authored the paper examining the state of the insurance market in Florida.

Citizens for the wind?

By making Citizens the insurer of wind damage in Florida, as the FSU document suggests, DeVriese said that was also unnecessary.

“Wind cover isn’t what’s hurting the property insurance market in Florida – it’s abuse of assignment of benefits and frivolous litigation,” she said last week. .

Nyce agreed that making Citizens the sole writer of the wind, an idea similar to that considered by lawmakers after Hurricane Andrew, is a departure from a market-based system of capitalism.

“I’m generally more of a liberal person, but the big insurance companies have already decided they don’t want to be in Florida,” Nyce said. “So we end up with smaller companies that don’t have a lot of negotiating power with reinsurers and that aren’t very diversified.


The FSU document’s suggestion of wind coverage, along with the OIR’s exploration of increasing the coverage cap, helped put a new spotlight on citizen function in Florida’s struggling market.

“It’s up to our elected officials now to decide if Citizens is truly the insurer of last resort or if it’s a significant force in the home insurance market,” DeVriese said.

The Florida State paper examines other aspects of the Florida market, including the growth of claims litigation and fraud and the use of Florida-specific subsidiaries by some flag carriers after the Hurricane Andrew hit South Florida in 1992.

One example of such subsidiaries, which the newspaper calls a “pup” company, is part of Allstate Insurance. Castle Key Insurance is now one of the largest property insurers in Florida, with more than 293,000 policies in force this year, according to the QUASR report.

Evaluation question

On the issue of financial ratings, the Florida Department of Financial Services recently submitted a proposal to the Joint State Legislative Budget Committee, which is meeting this week, the WINK TV news channel said. reported.

The proposal calls for $1.5 million to fund a study of alternatives for Florida insurers, many of whom now rely solely on ratings firm Demotech. Demotech has downgraded several carriers this year, which could ultimately mean homeowners with mortgages may have to find new insurance or be pressured.


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