Hundreds of thousands of Floridians who rely on Citizens Property Insurance could soon find themselves with a new insurance company.
State regulators last week quietly signed off on a plan to let 10 different insurance companies absorb nearly 400,000 Citizens policyholders this November.
If the shift goes through as planned, it will be a dramatic downsizing of the company — nearly a third of all existing Citizens customers. The state-created Citizens is the largest residential property insurer in the state with 1.2 million policyholders.
Customers are automatically shifted to a new insurer unless they object.
As many as a third of Citizens customers traditionally balk at moving, especially since some of the companies that have absorbed Citizens policies are smaller. Several companies that previously absorbed Citizens policies went insolvent, although Citizens officials point out that hasn’t happened in the past three years.
Richard Koon, deputy insurance commissioner, said the decision by the 10 companies to pursue Citizens customers is “indicative of a stronger homeowner’s insurance marketplace in our state.”
Gov. Rick Scott and other politicians have been pressuring Citizens to scale back its size due to fears a major storm could wipe out its reserves. Citizens has the ability to place a surcharge, or what some call a “hurricane tax,” on most insurance bills, including auto insurance policies, if it can’t cover its claims. But Citizens has been able to build a sizable surplus in the past few years due to an absence of hurricanes.
Citizens did not have a geographic breakout of the policyholders who have been chosen by the 10 companies although some of the customers chosen live close to the coast.
The nearly 400,000 policyholders that have been selected will receive notices at least 30 days in advance that provide instructions on how they can elect to remain with Citizens.
While 10 companies are seeking Citizens customers, one company —United Property and Casualty— wants 100,000 policies.
Another company slated to get 50,000 policies under this latest downsizing is Heritage Property Insurance and Casualty. The start-up insurer struck a controversial deal with Citizens earlier in the year to absorb as many as 60,000 policies for $52 million. The deal was unique because usually Citizens does not pay companies to absorb policies.
Michael Peltier, a spokesman for Citizens, said that so far only 39,000 Citizens customers had shifted to Heritage under the previous agreement. That has limited Heritage’s payment so far to $33 million.