As Hurricane Season Opens, Florida’s Citizens Touts Depopulation Deals

Officials at Florida’s property insurer of last resort say that it is entering the 2013 hurricane season in improved financial condition thanks in part to various private insurer policy takeouts. Those takeouts have also nearly cut in half the potential emergency assessments on all state policyholders.

Sharon Binnum, chief financial officer for Citizens Property Insurance, recently told the insurer’s depopulation committee that between the 2012 and 2013 hurricane seasons, Citizens’ probable maximum loss for a one-in-100-year storm has fallen from $23.5 billion to $19.9 billion.

As a result of that decease, the potential emergency assessment burden on Florida policyholders has likewise been reduced, nearly been cut in half from $7.3 billion to $3.8 billion, a reduction of 47.2 percent.

“If we ask ourselves if depopulation efforts have made a difference, I think those numbers speak for themselves,” said Binnun in a statement.

Binnun said most of that decrease is due to private insurers potentially removing as many as 445,000 policies when all the planned takeouts are concluded later this summer.

In 2012, seven insurers assumed a total of 277,002 policies while collecting $304 million in premiums. Among those insurers is Southern Fidelity Property & Casualty Insurance Co., which removed 80,000 policies, Homeowners Choice Insurance Co. (60,000 policies) and Heritage Property & Casualty Insurance Co. (42,700 policies).

Along with those traditional takeouts, Citizens has approved two other controversial takeout plans whereby Citizens is setting aside the policyholder premiums and using the funds to assist private insurers seeking to remove policies.

Earlier this year, Citizens signed-off on a plan with Weston Insurance Co. whereby the insurer would remove 31,000 wind-only policies. In exchange for covering 100 percent of the risk on the policies dating back to December and through May, Citizens agreed to grant the insurer up to $63 million in policyholder premiums.

A similar deal was just inked with Heritage whereby the insurer agreed to remove up to 60,000 policies in exchange for $52 million in premiums.

Citizens President Barry Gilway said the insurer takeouts along with the creation of the new clearinghouse that is slated to be up and running in January 2014, should result in even more policies being shifted to the private sector before next year’s hurricane season.