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Citizens' high-risk account short

The state-run insurer needs $515-million to replenish the deficit. But who will provide the money has yet to be decided.

By JEFF HARRINGTON
Published April 15, 2005

Citizens Property Insurance will need $515-million to replenish the deficit in its hurricane-ravaged high-risk account, according to an internal audit released Thursday.

Now it's just a matter of determining who's going to pay for it.

Citizens, the state-run insurer for those who cannot find property coverage in the open market, could compel all property insurers statewide to tack on an average 6.8 percent surcharge to homeowners' premiums. For a property owner with annual premiums of $750, that translates to about a $50 surcharge. For someone paying $1,300 in premiums, it means about a $90 surcharge.

But the state-run agency is holding off on any immediate assessment in hopes that legislators will find a pool of money elsewhere to bail it out.

"We've provided information to legislators. We've let them know that any general revenue applied to the deficit would be a valid way to eliminate the need for an assessment," Citizens spokesman Justin Glover said. "We'll give them time to make the decision. It's up to them as policymakers."

Florida Chief Financial Officer Tom Gallagher suggested in February that the state plug Citizens' deficit by using some of the estimated $760-million in excess sales tax money that was collected because of the increased commerce triggered by last year's four hurricanes.

No one has formally taken him up on the idea.

The Legislature is considering a broad range of fixes for Citizens, including altering its board makeup and how it sets rates. But there appears to be no agreement on using state money to replenish Citizens' high-risk account.

"We'll have a better idea early next week how (budget) priorities will be funded," said Tami Torres, a spokeswoman for Gallagher's office,

A statewide surcharge would be on top of hefty premium increases insurers such as State Farm, Citizens and Allstate have imposed or are planning.

Many Citizens' policyholders, for instance, are grappling with double-digit rate increases on their bills. This year, state regulators approved Citizens' filing to raise rates 23 percent on average statewide. Most of the rate increase went into effect April 1.

For many bay area policyholders of Citizens, rates are nearly doubling because the approved increase came in addition to a rate increase of 35 percent on average in sinkhole-prone areas.

There's no hurry to act, Glover said. Citizens has sufficient cash flow to payclaims.

The internal audit, conducted by Ernst & Young, wasn't a surprise. Last month, Citizens warned that its deficit could be about $525-million.

Ernst auditors projected that Citizens will pay out $2.4-billion toward hurricane damage claims and related expenses. About $1.8-billion of that is in its high-risk account, which faces the shortage. When Citizens' board meets next week, there will be a measure to approve the audited numbers but likely no action on the surcharge, Glover said.

- Jeff Harrington can be reached at harrington@sptimes.com or 813 226-3407.

[Last modified April 15, 2005, 00:48:13]