Florida’s insurance regulators are two years ahead of schedule in ending an assessment used to retire a bond issued by the state-backed property insurer Citizens following the eight-storm 2004-2005 hurricane season.
The move codifies a decision made by Citizens Property Insurance Corp. last September to no longer collect the assessment as of June 1, 2015. The bond had been scheduled to be paid off in June 2017.
Citizens issued the bond when eight major storms made landfall in the state including hurricanes Charley, Frances, Ivan and Jeanne in 2004 and hurricanes Wilma, Katrina, Dennis and Rita in 2005. Those storms left Citizens with a $1.7 billion shortfall and a need for additional funding to pay claims.
As a result, Citizens issued a 10-year post event bond that had a price tag of $1.38 billion. To pay off that bond, Citizens levied a 1.4 percent emergency assessment starting in 2007 that was paid by all state property insurance policyholders. In 2011, the assessment was lowered to one percent.
Florida Insurance Commissioner Kevin McCarty noted that ending the assessment was just one more sign that Citizens is now on sound financial footing and prepared for the 2015 hurricane season.
“Citizens reports it expects to enter the 2015 hurricane season with more than $4 billion in reinsurance coverage an about $7.5 billion in surplus available to pay future claims,” said McCarty in a statement. “That is important because Citizens can assess surcharges on all property insurance policies in Florida to cover any shortfalls that may occur in future hurricanes.”
Citizens Spokesperson Michael Peltier said that based on the insurer’s current size and financial condition, it will enter the 2015 hurricane season with enough resources to withstand a one-in-one-hundred year storm.
The insurer’s policies currently in force has dropped from a high of 1.5 million in 2012 to its current level of roughly 660,000. That has lowered Citizens exposure to some $200 billion. And the desire of private insurers to assume Citizens policies remains strong.
Regulators just announced they have signed-off on plans by three insurers to remove some 48,000 Citizens policies. Those insurers include Heritage Property & Casualty Insurance Co., Mount Beacon Insurance Co. and Southern Oak.
Some 95,400 policies have been removed from Citizens so far this year.
Peltier said that given Citizens position it hopes that assessments will become a thing of the past.
“Obviously, we are happy to end this assessment early and reduce the potential that we will need to go back to assessments in the future,” said Peltier.
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