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Citizens stands strong as storm season looms

By Tom Zucco, Times Staff Writer
Published April 6, 2007

Bruce Douglas said the number slowly and let it hang in the air: $8.8-billion.

That, Douglas explained Thursday, is how much money state-backed Citizens Property Insurance will have in claims-paying ability this year. Contrast that, the chairman of Citizens' board of governors said, with the $5.1-billion Citizens paid in claims in all of 2004 and 2005, two of the most destructive hurricane seasons on record.

Speaking during a conference call with Citizens' board of governors, Douglas said the insurer is "in a very strong financial position. But you can always raise the spectre of the perfect storm that no one is prepared for and would take national intervention."

When the 2007 hurricane season starts June 1, Citizens will have about $3-billion in cash, another $3-billion that would be reimbursed from the Florida Hurricane Catastrophe, or CAT, Fund, a $1-billion line of credit and other short-term investments.

The state's largest property insurer with about 1.3-million policyholders, Citizens also is taking in about $200-million a month in premiums. But if forecasters are even close to being right for an active 2007 hurricane season, that money could go quickly.

Citizens rang up a $516-million deficit in 2004 and a $1.7-billion deficit in 2005, resulting in assessments to all Florida policyholders, regardless of carrier. To help pay down the 2005 deficit, premiums were assessed 2.7-percent, plus an additional 1.4-percent for the next 10 years. The Florida Legislature chipped in $715-million of taxpayer money.

The additional resources do not apply evenly. Citizens will have access to only about $1.2-billion to pay claims in its coastal, or high-risk, account before resorting to assessments to pay any deficit. And if the CAT Fund runs a deficit, as it did in 2005, all policyholders must help pay it off.

Citizens did not purchase private reinsurance in 2006, buying it instead from the state-backed CAT Fund. But because lawmakers allowed Citizens to expand its commercial book of business, which is not covered by the CAT Fund, the company may have to venture this year into the private market for reinsurance - insurance for insurance companies.

"We need to take a look at what's available," Douglas said, "to see if we can find a reasonable piece of reinsurance."

And although the private insurance market remains weak, Citizens is still trying to lighten its policy load. Insurers took 293,000 policies out of Citizens in 2005. But in 2006, that number dropped to 67,000.

While 57,000 policies have been taken out of Citizens and moved to private companies in the first quarter of this year, none came from the coastal areas that account for most of Citizens' risk.

Douglas said the pace of moving policies to the private market could pick up. He cited two companies, Plantation-based PURE Privilege Underwriters Reciprocal Exchange and Tampa-based American Integrity, that together plan to assume another 70,000 Citizens policies.

"So there is some movement," Douglas said, "albeit small."

Citizens also announced a new Web site (www.citizensfla.com) that includes expanded information for policyholders, agents and the public.

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

[Last modified April 5, 2007, 23:07:00]