Separating Myths from Facts on Florida’s Citizens

Currently, Florida’s legislature is considering a proposal that will help restore health to Florida’s insurance market. As the proposal moves forward, it is worth separating the myths from the facts on the issue.

It is true that the state-backed Citizens Property Insurance is building reserves, however, this is mostly due to the fact that Florida hasn’t had a storm in five years and such accumulation is, therefore, due to luck, not profitable operations. It’s also true Citizens has $5.1 billion in surplus, however, it is also true Citizens’ probable maximum loss is four times that amount at just over $22 billion.

Some have argued that Citizens is currently more profitable than private carriers by pointing out that during the same storm-free seasons, private companies lost money. In reality, five have already failed since 2009. Unlike Citizens, private companies can’t assess those who don’t buy their policies and must cover almost all their wind exposure with expensive reinsurance; back-up coverage that Citizens opts to forego in favor of the assessments it is privileged to levy on everyone else. This is partially why the Florida Office of Insurance Regulation has had to approve more than 150 rate increases after five storm free seasons.

It is worth pointing out the irony of private companies competing with rates of Citizens that are 55 percent subsidized by assessments levied on the very carriers it is stealing the business from. Calling Citizens’ surplus “profit” is simply disingenuous. Remember, Citizens was building reserves before the 2004 and 2005 storms seasons, too, but that huge shortfall is still being paid by the rest of Florida’s policyholders and will be for years.

Those paying are often some of Florida’s most vulnerable citizens, including mobile home renters, single mom’s living in apartments, students and others in subsidized housing. A complete picture would have shown that Citizens’ assessments “always” flow from a majority of households, many that can’t afford to own property, to a minority of homeowners, mostly wealthier people living on or near the coast.

Supporters of the current non-competitive, government monopoly of the state’s insurance market are entitled to their own opinions, but not their own facts. The goal of the reforms, known as SB-1714 and HB-1243, is to allow market forces to dictate Florida’s insurance market, not government bureaucrats.