Storm zeros in on Citizens' heart

The state insurer of last resort is concentrated in southeast Florida. Damage there from Ernesto may affect homeowners statewide.

Published August 29, 2006

Citizens Property Insurance is gaining unwanted insurance policies at an unprecedented rate of 17,000 a week. And that's not the bad news.

If the current forecast track holds true, Tropical Storm Ernesto could batter Florida's southeastern coast. If only one or two more storms take a similar path this year, as happened in 2004 and 2005, every homeowner in the state could take a battering in the form of higher insurance premiums.


All because of who insures vast sections of residential property along Florida's coast: Citizens Property.

The state-run insurer for homeowners who cannot find coverage in the private market, Citizens is by far the largest property insurer in the state.

It is also the largest insurer along the highly vulnerable southeast Florida coast. Of the more than 1.2-million Citizens policyholders statewide, roughly 375,000 - or nearly a third - are in coastal, or high-risk, areas.

About 240,000 of those 375,000 policies are concentrated in Miami-Dade, Broward, Monroe and Palm Beach counties.

And it's not just the number of policies that's important; it's what they're worth.

Citizens has about $92-billion in exposure, or insured risk, in the four-county area. By contrast, it has $61-billion in exposure in the state's remaining 63 counties.

That can be extraordinarily expensive, if recent history is any gauge. Because so many policies are concentrated in some of the most vulnerable parts of the state, and those areas were among the hardest hit the past two years, Citizens had to issue back-to-back assessments on all Florida homeowners to cover the deficits it incurred.

The 2004 deficit has been repaid, but homeowners are still on the hook for a 2.5 percent assessment to cover last year's deficit, in addition to a 1 percent assessment for each of the next 10 years.

State regulators have been trying for years to ease the burden on Citizens and entice private insurers to write new business or at least renew existing policies.

But just the opposite has happened. More homeowners policies are now coming into Citizens every month 68,000, than have been taken out during the entire year (59,600).

As it races toward becoming the insurer of half of Florida's households, Citizens has, by law, no choice but to take on the greater risk. But the risk of running another huge deficit, officials say, may be smaller.

"One huge storm can, of course, change everything," Citizens spokesman Rocky Scott said Monday. "But we have $5-billion in liquidity going into this season. That represents the total losses from the last two years.

"So we're by far in the best financial shape we've ever been in."

Even though, Scott acknowledged, most of Citizens' policies are in locations that private insurers have either abandoned or refused to enter.

There is, he said, a greater need.

"You're talking about areas that represent 70 to 80 percent of the state's economy," Scott said. "The state was built on tourism, rightly or wrongly. It's there, and we have a responsibility to our citizens.

"It would be criminal, in my view, to walk away from it."

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