{"id":57590,"date":"2023-03-20T23:08:57","date_gmt":"2023-03-21T03:08:57","guid":{"rendered":"https:\/\/thelehighacresgazette.com\/news\/?p=57590"},"modified":"2023-03-20T23:09:03","modified_gmt":"2023-03-21T03:09:03","slug":"desantis-turns-heads-with-comment-that-citizens-insurance-is-not-solvent-board-approves-emergency-cat-bond","status":"publish","type":"post","link":"https:\/\/thelehighacresgazette.com\/news\/2023\/03\/desantis-turns-heads-with-comment-that-citizens-insurance-is-not-solvent-board-approves-emergency-cat-bond\/","title":{"rendered":"DeSantis Turns Heads with Comment that Citizens Insurance is \u2018Not Solvent;\u2019 Board Approves Emergency Cat Bond<\/strong>"},"content":{"rendered":"\n

Florida Gov. Ron DeSantis raised some questions Friday when he suggested that Citizens Property Insurance Corp., the state-created insurer, has \u201cnot been solvent\u201d and may be unable to pay all claims from a major hurricane.<\/strong><\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The head-scratching comments came just hours before the Citizens board of governors voted to spend more than $170 million over the next three years on $500 million in reinsurance bonds \u2013 over the objections of the board\u2019s chairman.<\/p>\n\n\n\n

DeSantis made his statement at a news conference in Fort Myers, a city that took the brunt of Hurricane Ian last September, and where many homeowners are now complaining that they\u2019ve received little or no payouts on their insurance claims.<\/p>\n\n\n\n

A news reporter asked DeSantis if he would consider changing Citizens\u2019 eligibility requirements for homeowners. Some residents have said they can\u2019t be fully covered by Citizens because the corporation limits coverage to $700,000 per home in most parts of the state. Others said they can\u2019t be accepted by Citizens until their Hurricane Ian damage is repaired, but repairs have been delayed while claims with their existing carrier have been delayed or unpaid.<\/p>\n\n\n\n

\u201cMaybe, yeah, I\u2019d be willing to look at that for sure,\u201d DeSantis said, according to<\/a> The Florida Channel and WZVN TV 7 news in Naples. \u201cI think most people know Citizens has not been solvent. If you did have a major hurricane hit with a lot of Citizens property holders, it would not have a lot to pay out.\u201d<\/p>\n\n\n\n

Bryan Griffin, the governor\u2019s press secretary, did not explain what DeSantis may have meant. He referred the Insurance Journal to a December news conference held when DeSantis signed Senate Bill 2A.<\/p>\n\n\n\n

Citizens\u2019 board members also could not be reached for comment.<\/p>\n\n\n\n

Citizens, by statute, cannot become insolvent. State law allows the company to levy a surcharge on Citizens\u2019 policyholders and then on all carriers\u2019 policyholders if its reserves and reinsurance layers fall short of losses in a catastrophic hurricane season. DeSantis acknowledged that assessment mechanism at the news conference.<\/p>\n\n\n\n

\u201cThe governor is correct in that if Citizens exhausts its surplus and has a deficit, we are required to levy assessments on our policyholders and most other Florida insurance consumers,\u201d said Citizens\u2019 Media Relations Manager Michael Peltier.<\/strong><\/p>\n\n\n\n

It\u2019s no secret that Citizens\u2019 rates are not considered actuarially sound and are below market levels in many parts of the state, thanks to the insurer\u2019s statutory glidepath that limits annual increases. But Citizens is far from becoming insolvent, insurance industry leaders and Citizens\u2019 financial documents indicate.<\/p>\n\n\n\n

Citizens\u2019 2023 budget indicates it will have some $407 million in net income this year. Its latest quarterly statement<\/a> shows assets for the third quarter of 2022 were no less than its liabilities.<\/p>\n\n\n\n

Board members, industry executives and lawmakers have expressed concern that Citizens\u2019 explosive growth in recent years will lead to an assessment on policyholders if the state is hit with two or more major hurricanes, and the insurer has launched a depopulation program designed to reduce its exposure.<\/p>\n\n\n\n

But no one has suggested that the corporation, created by the Legislature in 2002 as an insurer of last resort, is nearing insolvency.<\/p>\n\n\n\n

At the Citizens\u2019 board of governors\u2019 meeting Friday afternoon, no one mentioned DeSantis\u2019 comments. But the board voted to approve a staff recommendation that the corporation secure an extra $500 million in reinsurance protection. That would help the insurer avoid an assessment on policyholders, staff members said.<\/p>\n\n\n\n

Chairman Carlos Beruff argued strongly against the catastrophe bond package from Lightning Re Ltd., an entity created by Citizens to secure investors and provide the coverage. Although Citizens\u2019 staff and advisors had developed the plan and negotiated with investors in a tough market<\/a> for months, Beruff said it would cost too much: $61 million for the first year and $55 million per year for the next two years in fees and interest payments.<\/p>\n\n\n\n

The bond would attach at $51.5 billion in aggregate industry losses and would be exhausted at $66 billion in losses.<\/p>\n\n\n\n

\u201cThe decision for me is quite simple,\u201d said Beruff, a Bradenton real estate developer and homebuilder. \u201cFor us to recoup 100 cents on the dollar, the state would have be whacked to the tune of $66 billion across the industry, which puts us in a whole different world.\u201d<\/p>\n\n\n\n

Citizens would have a better chance of recouping its expenses by buying $61 million worth of lottery tickets, he quipped.<\/p>\n\n\n\n

Beruff argued that if storms create such heavy losses in one year, Florida\u2019s economy would be wrecked. Property owners would not be able to rebuild anytime soon, thanks in part to what would become an overwhelmed supply chain. A layer of reinsurance would be the least of Floridians\u2019 problems at that point, he said. He urged the board to consider alternatives to the bond, including more traditional reinsurance purchases.<\/p>\n\n\n\n

To help put the loss amount in perspective, $66 billion is not off the charts. Hurricane Ian\u2019s insured losses, including flood damage, have been clocked at more than $60 billion by some estimates.<\/p>\n\n\n\n

Citizens\u2019 chief financial officer, Jennifer Montero, and Citizens\u2019 Raymond James advisor said the cat bond program would not be available again at the negotiated rates, at a time of soaring reinsurance prices and Florida-skiddish investors. Without it, Montero said, Citizens would move a step closer to needing an assessment charge on policyholders if massive losses do occur.<\/p>\n\n\n\n

At the end of the emergency board meeting<\/a> Friday, Citizens governors voted 5-2 to endorse the Lightning Re bond plan.<\/p>\n","protected":false},"excerpt":{"rendered":"

Florida Gov. Ron DeSantis raised some questions Friday when he suggested that Citizens Property Insurance Corp., the state-created insurer, has \u201cnot been solvent\u201d and may be unable to pay all… <\/p>\n","protected":false},"author":8,"featured_media":47471,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[32],"tags":[2239],"_links":{"self":[{"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/posts\/57590"}],"collection":[{"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/comments?post=57590"}],"version-history":[{"count":1,"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/posts\/57590\/revisions"}],"predecessor-version":[{"id":57591,"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/posts\/57590\/revisions\/57591"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/media\/47471"}],"wp:attachment":[{"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/media?parent=57590"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/categories?post=57590"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thelehighacresgazette.com\/news\/wp-json\/wp\/v2\/tags?post=57590"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}