The new president of the state-backed Citizens Property Insurance Corp. meets with the insurer’s governing board for the first time, looking for consensus on finalizing the insurer’s rate request for next year.
Citizens’ governing board holds a rate workshop Monday in Miami, just 11 day before voting on what rate increase it will request from the Office of Insurance Regulation. The board is moving toward shedding thousands of policies.
And the board hired Barry Gilway, a veteran of 42 years in the insurance marketplace, last month to lead the way. Gilway said Citizens’ rates and the impact of sinkholes will be among items discussed Monday.
Gov. Rick Scott has made downsizing Citizens one of his chief goals. He contends the company’s rates are artificially low, which could leave policyholders on the hook to make up the difference if the insurer can’t pay all claims if a major storm hits the state.
“At some point in time we have to address rates,” Gilway said, adding that they are required by law to file actuarial adequate rates.
Agreeing on rates, however, has not only been a challenge for Citizens and those in charge of the insurer, but Florida’s lawmakers as well. About the only thing that everyone has agreed on is that the company must be dramatically downsized. At one point earlier this year, there was talk that Citizens’ might ignore the 10 percent legislative cap on rate increases to reach actuarially sound rates.
Gilway said he wants to give independent insurance agents a larger role in placing tens of thousands of Citizens’ contracts in the hands of private commercial carriers. He also doesn’t foresee boosting insurance rates by more than 10 percent for existing policyholders without legislative change, with the possible exception of sinkhole policies and new business.
“It does no good moving business out of Citizens if our policyholders do not have quality insurers take over that risk,” Gilway said.
Citizens was created a decade ago ostensibly as the insurer of last resort and is now Florida’s largest property insurer with more than 1.4 million customers.
Citizens’ was designed 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.
However, a series of storms in 2004 and 2005 led to several private insurers either pulling out of the state or cutting back on the number homes or businesses it would provide coverage on and Citizens’ book of business exploded.
About 450,000 Citizens’ policyholders own homes or businesses in the high-risk coastal areas of Florida.