Citizens Property Insurance Corp. is a taxpayer-backed insurance company that was created as an insurer of last resort for properties that could not get coverage in the private sector. There are currently 1.4 million Citizens policies and around 900,000 of them are uninsurable in the private market because they are on the coast, are older homes or are mobile homes (so I guess if you've got an older mobile home in a coastal town you've got some big insurance problems!). Currently it adds 1,000 policies every day. Citizens is the largest insurer in the state and the insurance rates are held artificially low (meaning lower than those of private companies) by state law.
It sounds great to have a state agency protecting property owners from predatory rates from private companies. But the Citizens Chairman, James Malone, says the insurer needs to decrease the number of policies it currently holds because the exposure for the state is just too great. Translation: if we get a big hurricane, Florida taxpayers are picking up the tab for insurance payouts to all Citizens policy holders who suffered property damage during that hurricane. The questions is whether the state has to resources to cover such a major loss. Mr. Malone would like to sell off a significant portion of its business to the private sector, thus reducing its exposure and returning the company to its roots as an insurer of last resort for otherwise uninsurable properties. However, there is no need right now to fear that Citizens will not be able to meet its obligations. Through the issuance of bonds it just completed a $900 million financing deal that keeps it liquid.
Currently the state is using financial incentives to get private companies to assume some of the policies from Citizens. But privitization of a large number of policies is sure to come with big increases in insurance rates for policy holders.
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