Citizens Insurance hits over 1M policies as Florida homeowners turn to last resort

TALLAHASSEE, Fla. – Barry Gilway, president and CEO of Citizens Property Insurance Corp., said Wednesday the state-backed insurer has been a “roller coaster ride” for the past two decades.

Right now, it is continuing to pick up speed.

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Citizens last week reached 1,055 million policies — more than double the number two years ago — as private insurers drop customers to try to curb financial losses. Meanwhile, the industry continues to grapple with underlying problems, including costs of critical reinsurance and large amounts of claims-related litigation.

Gilway briefed the Citizens Board of Governors during a meeting Wednesday and said private property insurers are projected to have $1 billion in losses this year. Five insurers have been declared insolvent and placed into receivership since February, with tens of thousands of customers of those companies turning to Citizens for coverage.

“If the (financial) numbers remain in the red, and companies aren’t put in a position where they are making a reasonable rate of return, you’re not going to have a stable market,” Gilway said.

As the peak of hurricane season approaches, Florida is still dealing with a property insurance crisis.

A key issue for the market is reinsurance, which provides backup coverage for carriers. It is particularly important in Florida, which depends heavily on Florida-based insurers rather than larger national companies.

Gilway said 40 percent to 50 percent of policyholders’ premiums typically go to reinsurance costs, and Florida carriers are expected to continue facing a tight reinsurance market.

“This is an industry in collapse. Citizens is growing exponentially,” said soon to be former Senator Jeff Brandes.

Florida State Senator Jeff Brandes reacted Wednesday after a Board of Governor’s meeting where the President and CEO of the State-backed Citizens Property Insurance Barry Gilway said his company has reached more than one million policies this week. That’s more than double he said from two years ago. He said this comes as private insurers continue to drop customers to curb their losses.

“Until we fix the overall private market, people will continue to flood into Citizens, but two Citizens can no longer be a direct competitor with the private market, which means Citizens rates have to go up,” said Senator Brandes.

Citizens was created 20 years ago as an insurer of last resort for Floridians.

In Gilway’s September President’s report , he said Citizens has been a rollercoaster ride since forming in 2002. He said it’s based on companies becoming insolvent and the business moving into Citizens to stabilize the market.

“For the 3rd year in a row, the private industry really is going to show a billion-dollar loss, with no storms to speak of. This is driven by litigation,” said Citizens Property Insurance President and CEO Barry Gilway.

This coming as News 6 has done a series of investigations detailing the state’s property insurance crisis. Experts have told us there have been excessive lawsuits from roof repairs.

“This is a legislative problem, Citizens is doing everything it can,” said Senator Brandes.

The last time citizen’s policy count topped one million was when Florida was hammered by a barrage of hurricanes in 2004 and 2005. It remained above that mark until early 2014 according to data on the insurer’s website.

A commentary released last week by the AM Best ratings agency pointed to reinsurers seeing losses in Florida, “despite moderate hurricane seasons, further suggesting that current prices are not adequate to cover the claims inflation and fraud in the market. Consequently, reinsurers have been pulling back from the Florida property market or significantly raising prices.”

“Pricing will continue to impact business plans and companies’ ability to use reinsurance structures with adequate limits to protect against severe storms,” the ratings agency said. “AM Best expects reinsurers to remain selective in the risks they reinsure, placing further burdens on the Florida homeowners market, which has seen four property insurers, along with a Louisiana-based insurer that wrote policies in Florida, declared insolvent since late February.”

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Florida lawmakers during a May special session approved spending $2 billion in tax dollars to provide another “layer” of reinsurance to insurers that otherwise might not be able to buy it in the private market. But that was a stopgap move to help insurers, many of which needed to have reinsurance contracts in place in June.

Lawmakers also took steps to try to curb litigation costs, but Gilway and many other industry officials argue that more needs to be done to address lawsuits and attorney fees. The issue, however, is always controversial, as groups such as plaintiffs’ attorneys contend that lawsuits help hold insurers accountable for properly paying claims.

“For the third year in a row, the private industry really is going to show a $1 billion loss, with no storms to speak of,” Gilway said. “This is driven by litigation.”

Citizens was created as an insurer of last resort and has seen wild swings in its numbers of policies during the past two decades.

Millions of Floridians have mortgages that require insurance companies to be financially rated. Right now, only one organization will rate a company less than 5 years old. It’s why the state is now looking at possible alternatives.

After Florida was hammered by a barrage of hurricanes in 2004 and 2005, Citizens’ policy count topped 1 million and remained above that mark until early 2014, according to data on the insurer’s website. But the policy count dropped below 500,000 in 2016 and remains under that level for more than four years.

In September 2020, Citizens hit 511,055 policies and steadily increased to 1,055,366 policies as of Friday, with thousands of customers a week flowing in. Gilway said Citizens insures about 13 percent of the market and is expected to be at 15 percent by the end of the year.

In certain areas of the state, however, it is a far-bigger player. For example, it has 39 percent of the residential market share in Miami-Dade County and 30 percent in Broward County, Gilway said.

State leaders have long sought to hold down the number of policies in Citizens, in part because policyholders throughout the state could face additional costs — known as “assessments” — if Citizens runs deficits after a major hurricane or multiple hurricanes. Citizens policyholders would be hit hardest by assessments, but other insurance policyholders could also face additional costs if deficits are large enough.

“The entire state’s on the hook,” Citizens board member M. Scott Thomas said during Wednesday’s meeting.

News Service Assignment Manager Tom Urban contributed to this report.

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