Florida's insurance consumer advocate on Monday called on the state-backed property insurer to provide much more data surrounding a decision to loan $350 million in surplus to private insurers willing to take policies out of Citizens Property Insurance Corp.
In a letter to Citizens chairman Carlos Lacasa, consumer advocate Robin Westcott put forth a lengthy list of questions surrounding a deal approved in September by Citizens' board of governors to provide 20-year, low interest loans to private established carriers to partially offset the risk associated with Citizens policies.
"The Office of the Insurance Consumer Advocate shares the Board?s goal of depopulating Citizens and reducing the potential assessments on all property and casualty policyholders in the state,? Westcott said in a letter to the board. But, she wrote, "Citizens must assure consumers and policymakers that a thorough cost-benefit analysis justifies the commitment of up to $350 million of Citizens? surplus, as this program would allow."
The loan program, to be funded with Citizens' surplus, is an attempt to move up to 350,000 customers from the state-backed insurance pool, which now handles more than 1.4 million policies.
The Citizens plan would allow a qualified private insurer to borrow up to $50 million in exchange for taking Citizens policies for at least 10 years. The loans, referred to as surplus notes, would carry a low interest rate and be repaid to Citizens over 20 years. The loans are meant as an incentive for the companies, which would be taking on more risk.
Because the state-run pool charges premiums that are lower than a private company would offer, a gap exists between what a private insurer would have to charge to provide the policy and make a profit and what customers are paying now.
Barry Gilway, Citizens new president and CEO, said the plan is a cost-effective means of reducing Citizens exposure while helping to re-establish a more vibrant private market.
"The addition of the program approved today has the potential of removing more than $1.2 billion in assessment risk shouldered by all Florida policyholders," Gilway said Sept. 7 when the idea was approved.
Among the questions Westcott raised were how the firms would be selected, what enforcement mechanism Citizens would have to make sure the money was repaid and what models were used to come up with the $350 million figure.
In response to Westcott's letter, Associated Industries of Florida urged Citizens leaders to go ahead with the loan program, saying Citizens is "a ticking time bomb that must be defused now,"
"Time is of the essence and this plan should not be delayed," AIF President and CEO Tom Feeney said in a statement.