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Citizens poised to be top insurer

The state-run insurer of last resort is projected to become the state's biggest as private companies continue to drop policies.

By TOM ZUCCO
Published May 20, 2006


Citizens Property Insurance Corp. is on pace to balloon to a staggering 1.5-million policyholders or more by this fall, leapfrogging State Farm as Florida's biggest property insurer.

In fact, based on projections Friday from Citizens board chairman Bruce Douglas, the state-run insurer of last resort could become 50 percent larger than State Farm in Florida.

Because Citizens is required by law to charge the highest rates in the state, and because its policyholders have faced three rate increases within the past year, the strain on homeowners could only worsen.

Speaking at a Citizens reinsurance committee meeting Friday, Douglas said that as a result of private insurers shedding policies, Citizens has no choice but to do something even it doesn't want to do: grow.

Douglas said Citizens currently has about 850,000 policies, ''and we could be looking at 1.2-million by the end of the summer.''

But more policies are coming.

"There is going to be another large number of policies coming into Citizens,'' Douglas said. "It could mean that over a 12-month period, another 120,000 polices come into Citizens.''

That, he added, does not include nearly 300,000 policies from the Poe Financial Group, which is being liquidated, or about a third of the 174,000 Allstate policyholders who will be dropped in November.

Allstate plans to transfer 120,000 policies to Royal Palm Insurance in November, a new insurance company based in Ormond Beach.

With the addition of the Poe and Allstate policies, plus thousands of others dropped by other, smaller carriers, Citizens could swell to a record number, more than 1.5-million customers, by the fall.

The previous high for homeowners insured by the state was 1.4-million policies in 1996, largely as a result of Hurricane Andrew in 1992.

If any insurance company is taking a risk, it's Citizens.

About half of Citizens' policies are in so-called high-risk areas - property deemed either coastal or prone to sinkholes.

And about 60 percent of all Citizens policies are concentrated in areas that were among the hardest hit by recent hurricanes, including Miami-Dade, Broward, Palm Beach, Pinellas and Monroe counties.

Citizens tries to keep private insurers from leaving the market by charging the highest rates and pushing for loan programs for private insurers and grants for hurricane mitigation.

Those two initiatives were part of statewide legislation passed last week.

Still, the state-run insurer takes in about 40,000 new policies a month. For every six policies Citizens takes on, only one is given back to the private market.

Even as Citizens continues to expand, the two major players in the private insurance market insist they aren't giving up on Florida.

Allstate Floridian, the state's third-biggest insurer with about 600,000 homeowner policies, said last week it may be forced to drop nearly as many policies next year as this year.

But before that happens, it is trying to find other private carriers to step in.

Allstate spokeswoman Deb Clouser said the number of policies dropped next year may well be fewer than this year.

"We don't know how many policies will be affected next year,'' she said. "But we're putting together a portfolio to see if anyone in the private market is interested.

"And Allstate Floridian is committed to staying in this marketplace. We'll continue to cover as many customers as we can financially, and continue to seek out other companies and help them enter the market.''

Allstate announced last week it would transfer 120,000 policyholders to a new homeowners insurer, Royal Palm, when policies expire in November.

The 95,000 policies that Allstate shed in 2005 went to Universal Insurance Co. of North America.

Also last week, State Farm, which insures about 943,000 homeowners statewide, asked the state for rate increases averaging 71.5 percent.

Subject to state approval, the increases would take effect Aug. 15.

But State Farm also says it wants to remain in Florida.

"We made a series of filings last week that were large and very painful,'' said State Farm spokesman Chris Neal. "But it shows our commitment to Florida, and hopefully, it enables us to grow in some areas.''

But any future growth, Neal said, would be minimal - about 1 or 2 percent.

"There's no way we have the capacity to fulfill all the homeowner needs in Florida,'' Neal said. "It's an incredibly difficult market. That's why companies are going broke.

"It's a lot easier to leave the business than stay in it.''

Citizens, however, has no choice.

"The good news is that Citizens exists and we don't have hundreds of thousands of people without insurance going into the hurricane season,'' said Citizens spokesman Justin Glover. "If Citizens had all the Poe policies during the 2004-05 season, our deficit would've been even larger.''

Citizens recently placed a staff in Tampa to handle the transfer of tens of thousands of Poe policies, Glover said, and is considering hiring former Poe employees.

But Glover was unsure when the office would open for business.

In the meantime, Citizens has scheduled another meeting Monday of its board of governors to discuss Florida Preferred, one of three Poe subsidiaries the Tampa-based insurer has not agreed to liquidate. Florida Preferred has 138,691 policies statewide.

"It's basically a comprehensive update,'' Glover said. "Any action would have to come from the Department of Financial Services or the courts.

"But I can say Citizens does not plan to enter into any business agreements with any Poe entities.''

Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.