Citizens Property Insurance customers would bear more of the cost for excessive damage claims after a major hurricane under legislation that passed the Florida House on Thursday.
The bill, which also is moving quickly through the Senate, shifts more of the burden for post-disaster taxes for excess claims coverage from private property policies to customers of the state-run company. It also gives private companies and their policyholders more time to pay any assessments that are levied.
Limiting assessments on non-Citizens policies could help grow the troubled private insurance market in Florida, supporters of the bill say.
But critics contend that Citizens’ 1.5 million customers — including 10,603 policies in Polk County — are unfairly targeted in the legislation.
Some lawmakers also expressed concerns that largely removing one of Citizens’ post-disaster revenue streams could hurt the company’s finances. Florida’s state-run insurance company could find it more difficult to borrow money if it cannot force private insurance companies to pay their assessments immediately.
“I worry about what happens after a big storm and how this would affect that,” said Rep. Jeff Clemens, D-Lake Worth.
Bill sponsor Rep. Ben Albritton, R-Wauchula, has been quick to point out that Citizens has $6 billion in reserves and $3.5 billion of borrowed cash sitting in the bank. The company also has a large backstop of cash from the Florida Hurricane Catastrophe Fund and private reinsurance.
“This bill does not in any way limit Citizens Property Insurance’s ability to pay claims,” Albritton said in explaining the bill on the House floor this week.
The praise for Citizens’ financial position has not gone unnoticed. Such statements run counter to state leaders’ long-running arguments supporting moves to dismantle the government insurance giant. Gov. Rick Scott and top lawmakers in the House and Senate have asserted that Citizens is a ticking time bomb of liability for state residents and that it will struggle to pay claims after a catastrophic hurricane.
Private insurance companies are eager to eliminate one of the three assessments Citizens is allowed to impose on other companies’ policyholders in the event of a major storm. Their lobbyists and supportive lawmakers have lauded Citizens’ financial health in arguing the post-disaster levy is no longer needed. They note that Citizens has the resources to withstand a repeat of the record-setting 2004-05 hurricane seasons.
Clemens said such optimistic reviews of Citizens’ finances are proof that previous warnings have been overblown. “I think in private moments some of my colleagues will admit that Citizens is in better shape than many of our private insurers,” Clemens said. “Unfortunately, their ideology won’t let them admit that in public so it was refreshing to hear Rep. Albritton come out and say it.”
Albritton said he only mentioned Citizens’ surplus to note that “it takes quite a while to spend $9.5 billion dollars on claims,” so spreading the assessments over a longer time period will not leave the company short on cash.
Citizens has a three-tiered assessment system that kicks in if the insurer runs short of cash. The company’s own policyholders are taxed first, then private policies, then a mixture of both.
The legislation that passed 89-25 in the House would eliminate the second stage of assessments for most homeowners and businesses, and reduce it from 6 percent of a policyholder’s premium to 2 percent for property owners near the coast.
Private insurers do not like the so-called “regular” assessments because they must front the cash to Citizens in a lump sum and recoup the money from policyholders over time.
Insurance companies want all of their assessment to be levied in the third, or “emergency” phase. Private insurers can take longer to collect the assessments from their customers because the companies will not have to pay Citizens up front, and a greater share of the cost will be borne by Citizens’ own policyholders.
Albritton emphasized Thursday that insurance customers “won’t have to pay that assessment year one.”
“They’re going to have an opportunity to spread that out over a longer period of time,” he said. “That is good consumer business.”
