Fla. ‘Insurer of Last Resort’ Wants to Cut Costs

Citizens Property Ins.’s board met Tues. and urged the firm to cut costs. It has $6.5B in reserves but is growing quickly and has more than 800K policies.

LAKE MARY, Fla. – Citizens Property Insurance Corporation’s Board of Governors on Wednesday urged staff to strengthen the company’s financial position as the state’s “insurer of last resort” faces challenges brought on by increased policy count, litigation and a continued weak private insurance market.

The state-backed Citizens Property Insurance Corp. will likely have more than 1 million policies by the end of the year, Citizens President and CEO Barry Gilway said. He says the company is adding about 5,500 policies per week in part due to a “continuing deterioration” in the private insurance market. In March 2022, Citizens had 801,341 policies Wednesday compared to about 570,000 policies one year earlier.

Gilway said Florida’s property insurers are losing money and “terrified” about potential costs of reinsurance, which is essentially insurance for insurers – a fund that kicks in if losses rise to high following a major disaster.

Despite Citizens’ overall financial health – the company has $6.5 billion in reserves – Citizens Chairman Carlos Beruff said Citizens must look for ways to cut costs and/or raise revenues to stem underwriting losses as the Florida market continues to experience challenges.

Citizens, like other carriers, has posted underwriting losses since 2015. Citizens’ investment portfolio has offset those losses and allowed the company to post positive net income since 2019, but that also makes investment market changes a concern. In 2021, Citizens posted net income of $81.1 million despite an underwriting loss of $166.5 million.

“We just want to be solvent so when a CAT event comes, we are not sticking Floridians with Citizens’ assessments across the state,” Beruff said. “That is my mission.”

While Citizens can make changes to administrative costs, revenue increases may not keep pace with the increased exposure that accompanies policy growth. Nine out of 10 times, Citizens’ rates are lower than comparable private policies.

Citizens is restricted by law to annual rates increases of 11% or less. Meanwhile, private companies have been raising premiums at higher rates.

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