Florida Gov. Rick Scott quickly embraced a suggestion this week by the board chairman of the state-backed Citizens Property Insurance Corp. to consider privatizing Florida’s largest insurer of business and homes.
Citizens has roughly 1.4 million policies in force and is growing by more than 5,000 new policies each week. But their rates have remained below what many feel are realistically sound levels. Florida citizens would be liable to make up losses if the company became insolvent after a major hurricane or a series of destructive storms.
If privatizing Citizens would help drive down the cost of insurance, Scott said Wednesday, “I want to look at it very closely.”
Naples entrepreneur Jim Malone, who was chosen three years ago to chair the board overseeing Citizens’ operations, told the insurers’ board of directors on a conference call that selling all or part of Citizens might be the best option for all parties.
“My experience would say that any organization that has 1,400,000 customers, that has a premium revenue stream of close to $3 billion a year and a nice chunk of liquidity sitting on its balance sheet potentially has some value to the private world,” Malone said. “We owe it to the state to see if it’s a viable option.”
Malone’s suggestion also drew initial support from a key legislator, Senate Banking and Insurance Committee chairman Garrett Richter of Naples, who said Wednesday he agrees that Citizens would be a good target for a private entity because of its existing book of business. It would also relieve the state of a giant liability.
“One would think a company that is growing and has that many policyholders, would be attractive to somebody to come in and take it over, but you’d have to be able to charge an actuarially sound premium,” Richter said. “It’s been my objective and desire to return Citizens to the insurer of last resort, but as long as we have artificial premiums that continues to be a huge challenge. I would be absolutely open to the discussion.”
Malone does expect some challenges.
“There will be 100 reasons people will come up with not to do it, I’m sure,” Malone told The Associated Press. “We’re going to ratchet up the due diligence on this to see if it can work or if it’s politically palatable.”
Citizens was created by the Legislature in 2002 to provide insurance to homeowners in high-risk areas and those who cannot find coverage in the private market. It was largely an offshoot of an underwriting association formed by the state in the aftermath of Hurricane Andrew in August 1992.
Topics Florida
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