Florida Gov. Ron DeSantis has said that state-backed Citizens Property Insurance is “not solvent” and could be in trouble if a storm hits the state.
DeSantis’s comments come as the federal government conducts an investigation into whether the insurer has enough money on hand for a natural disaster.
Citizens Property Insurance, Florida’s ‘insurer of last resort’, was formed in 2002 to provide windstorm and property coverage to state residents who could not obtain insurance elsewhere.
In an interview on CNBC this week, DeSantis said Citizens was “not solvent, and we can’t have millions of people on that – because if a storm hits, it’s going to cause problems for the state.”
Florida insurance agent Robert Norberg agreed with DeSantis, saying that Citizens’ financial woes could hit taxpayers if a storm caused widespread damage in the state.
“He’s on track,” Norberg told West Palm Beach, Fla., news affiliate WPTV. “If we have a major hit in Florida, for example, and it takes out a lot of the Citizens policyholders, there would be an assessment. That’s the way Citizens works.”
It’s for that very reason that Citizens can’t really become insolvent, Mark Friedlander of the Insurance Information Institute told NBC-2, a Fort Myers, Fla., news affiliate.
“If Citizens would ever run into a depletion of its reserves due to storm losses, it would trigger a policy surcharge or hurricane tax that would be applied initially to its own customers and then to other consumers throughout Florida,” Friedlander said.
For the past year, Citizens has been dropping policies and forcing those customers to get their insurance from private companies, WPTV reported.
Norberg thinks that’s the right move for the insurer.
“Citizens is right now still at a net gain, which means they’re taking in more than they’re being able to put out by the assumption process,” he told WPTV. “But the assumption process seems to be going very well with the latest round of assumptions.”
Citizens CEO Tim Cerio told WPTV last month that the company had $4.5 billion cash on hand and would be able to pay claims. However, Cerio said the goal was for Citizens to “shrink back to that true insurer of last resort.”
Norberg agreed.
“Consumers should not be asking for Citizens,” he told WPTV. “They should be taking Citizens only when they have to.”
Florida is no stranger to insurance woes, with frequent extreme weather events, the nation’s highest premiums (averaging $6,000 per year) and a highly litigious environment, all of which contribute to a highly unstable insurance market in the state. Recent legislation trying to curb third-party financing of lawsuits stalled in the state senate.
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