No Champagne

Officials at Florida’s Citizens Property Insurance have dropped a plan to loan money to private insurers in exchange for these insurers taking some of the state-backed insurer’s policies. It turns out that insurers did not think it was a good deal. They would have had to assume the policies for 10 years with rates that would be level for the first three.

But even without that surplus loan program, Citizens actually made some progress last year in its depopulation effort. After two years during which private insurers removed only 100,000 policies, last year private insurers took steps to absorb more than double that.

But Citizens officials are not breaking out the champagne over the numbers. As Chief Financial Officer Sharon Binnun said, it remains to be seen how many of those polices will actually be retained by takeout insurers. “We can celebrate that the needle has moved,” Binnun said. “But we can’t declare victory until next summer and the hurricane season to see how many policies stay out.”

Binnun said depopulation was given a boost by paying the takeout insurers a 16 percent ceding commission worth $300 million that used to be retained by Citizens. But if those policies taken out end up back in Citizens, that payment will amount to another costly experiment.

Florida Association of Insurance Agents President Jeff Grady believes many of the policies will indeed flow back into Citizens when they are renewed by the insurers at higher rates or non-renewed by insurers prior to hurricane season.

According to Citizens President Barry Gilway, while current depopulation efforts have been more successful than in previous years, the overall framework is bound to fail in the end.

“In reality, the current depopulation effort is not working,” Gilway said. “We have depopulated 277,000 policies, but we have added 361,000 more policies this year.”

So it’s back to the drawing board for Citizens to figure out how to encourage more of its policyholders to migrate to the private market.

Gilway proposed creating a Rube Goldberg-like clearinghouse in which Citizens would essentially act as a broker, shopping Citizens applicants to private insurers. He promised more details later this month.

Some wonder why Citizens’ leaders feel they must invent a new scheme every few months. The answer is because elected officials have not given them much leeway or choice. They may not get it right every time, but you can’t say Citizens leaders aren’t trying.