The CEO of Citizens Property Insurance Corp. has denied that corporation representatives have been unresponsive to Congressional requests for financial information, in the wake of unsettling comments from Gov. Ron DeSantis that Citizens is “not solvent.”
“We believe we fully addressed the concerns raised in Chairman Whitehouse’s prior letter by pointing out in great detail the mechanisms under Florida law that ensure Citizens will always be able to pay the claims of its insureds,” Citizens CEO and executive director Tim Cerio said in a statement Wednesday.
Cerio’s comments came in response to a statement and letter posted Tuesday by U.S. Sen. Sheldon Whitehouse, D-R.I., whose Budget Committee has been leading an inquiry into Citizens’ ability to withstand insured losses from a massive hurricane season.
“Citizens has failed to cooperate with our investigation,” Whitehouse said in bold-face type. “Governor DeSantis’s repeated statements that Citizens is not solvent and the company’s own public comments about their ability to shift their financial losses to Florida policyholders have done nothing to assuage the Committee’s concerns…”
The U.S. Senate Budget Committee initially raised concerns last November, and Citizens officials at that time explained that the state-created insurer could never be insolvent because it has the ability to place a surcharge on most Florida policyholders, if necessary, to help cover losses.
Whitehouse said Tuesday that his chief concern is that huge storms, fueled by climate change and warming oceans, would prove to be too much for an assessment on policies. “It would be politically and economically unfeasible for Citizens to attempt to recoup tens of billions of dollars in losses from Florida policyholders” and would force the insurer to seek a bailout from the federal government, the senator argued.
Citizens remains the largest property insurer in Florida, with more than 1.17 million policies in force, a number that has dropped slightly since last fall as primary market carriers have made takeout offers on Citizens’ policies. Whitehouse said his committee still needs more information from Citizens, including a full explanation on its assets; communication between the governor and the state insurance commissioner on the corporation’s future solvency; and whether Citizens has contemplated a federal bailout in case of a widespread disaster.
Whitehouse’s concerns were exacerbated last week after DeSantis said Feb. 27 on CNBC news channel that Citizens is not solvent, and “we can’t have millions of people on that because if a storm hits, it’s going to cause problems for the state.”
The governor made similar statements a year ago, raising eyebrows across the state.
DeSantis’ assertions may be a matter of semantics. Many in the Florida insurance industry have pointed out that Citizens’ rates, limited by law, are below market in many parts of the state, an arrangement that helps some property owners on premiums, but may discourage private insurers from entering or expanding in Florida.
Cerio reiterated in his statement Wednesday that Citizens’ rates are, in fact, actuarily unsound due to the statutory glidepath. He and others have pushed Florida lawmakers to allow the corporation to charge market rates in order to lower the risk of assessments on policyholders.
But actuarily unsound rates do not mean the insurer is insolvent or at risk, officials have said. At the end of last year, Citizens continued to hold a $5 billion surplus, which is expected to grow by $1 billion this year, according to corporation reports.
With access to a surcharge on Florida policyholders, reserves can top $17 billion, the firm’s projected risk report shows. Citizens also has several billion dollars available from the Florida Hurricane Catastrophe Fund and from other reinsurance providers.
The 22-year-old corporation also has new flexibility, after regulators and the Legislature recently approved a plan to combine its three accounts into one, allowing easier access to reserve funding.
Cerio said Citizens had fully explained to Whitehouse in December that the insurer, its predecessor organizations, and the state of Florida, have never sought a federal bailout to cover hurricane losses. “We can think of no scenario” that would require a rescue by the government, he added.
“We also expressed concern that the chairman’s letter could cause misplaced panic in a Florida insurance market well on its way to recovery,” Cerio said.
He added that, heading into the 2024 hurricane season, one that has been predicted to be busy, “Citizens will have the reserves and reinsurance coverage to handle a 1-in-100-year storm without having to levy assessments on non-Citizens policyholders.”
To put that into context, Hurricane Andrew in 1992, was a 1-in-43-year event, he noted.
The concern among some actuaries and climate scientists is that Florida could be hit with two or more massive hurricanes in one season as climate change increases, resulting in unprecedented losses to insurers. Cerio’s statement did not address that scenario.
Whitehouse explained that the latest back-and-forth grew out of two previous investigations into the U.S. insurance industry’s response to climate change and concerns about spiraling insurance costs for consumers.
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