Citizens could exceed 1 million insurance policies in Florida this year

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Highlighting “almost incomprehensible growth,” the president and CEO of Citizens Property Insurance Corp. said Wednesday that the state-backed insurer could have 1.2 million customers by the end of the year.

Citizens, which was set up as an insurer of last resort, has received a flood of policies over the past two years as private insurers have lost customers and sought steep rate increases due to financial problems.

Four insurers have been declared insolvent since February, but Citizens chairman and chief executive Barry Gilway said a bigger problem is that many other companies are not underwriting cover.

“The market is probably 75% closed,” Gilway said at a Wednesday meeting of the Citizens Board of Governors. “(There are) very, very few companies that are really open to the market.”

Citizens had 937,835 policies on Friday, down from 883,333 at the end of May. As longer-term illustrations of growth, Citizens had 638,263 policies as of June 30, 2021 and 474,630 policies as of June 30, 2020, according to data from its website.

In a recent week, Gilway said Citizens saw a net increase of 26,700 policies. He said a “reasonable” forecast is that citizens could reach 1.55 million policies in 2023.

State leaders have long sought to shift citizen policy to the private market, at least in part because of the financial exposure if Florida were hit by a major hurricane or multiple hurricanes. But the reverse has happened since 2020, with customers flocking to Citizens.

Gilway and other insurance industry officials say insurers pulled out due to financial losses in the state. Another factor has been a tight market for reinsurance, which plays a vital role as backup coverage for Florida insurers. Reinsurance, which is an unregulated global business, has become more expensive and harder for insurers to buy.

“This (Florida) market is reinsurance,” Gilway told the Citizens Council on Wednesday. “It’s not a well-capitalized market. It really works on reassurance.

The tight reinsurance market has also affected Citizens, which has set aside $400 million to buy more than $4.6 billion in relief coverage this year. But he ended up spending $215 million for about $2.5 billion in coverage.

Citizens’ council chairman Carlos Beruff said the decision to buy less coverage created greater financial exposure, but he said citizens’ officials had determined it was not possible to buy additional reinsurance at the price the state-backed insurer would have been forced to pay. Beruff said “essentially we couldn’t spend $185 million.”

Governor Ron DeSantis called a special legislative session in May to address issues in the broader insurance system. Lawmakers have made a series of changes, including trying to deal with roof damage claims that insurers accuse of driving up costs; try to reduce the legal costs associated with claims; and the creation of a $2 billion program to provide additional reinsurance to private insurers.

The Citizens’ Council also approved a proposal on Wednesday to try to reduce costly litigation. This proposal, if approved by the Florida Office of Insurance Regulation, would seek to channel at least some legal disputes through the state’s Administrative Hearing Division rather than the court system.

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