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Letter to the editor

New territory, familiar fears for Citizens

Details of Citizens' commercial plans leave private insurers uneasy.

By JENNIFER LIBERTO, Times staff writer
Published July 19, 2007

TALLAHASSEE - Help is on the way for some small businesses as Citizens Property Insurance Corp. offered a peek Wednesday at its plan to offer commercial insurance policies beyond basic windstorm coverage.

Thanks to the Legislature's efforts earlier this year, the state-run insurer will start offering $5-million worth of commercial coverage for fire and theft. The coverage includes $2.5-million for a structure and $2.5-million for contents. It will also offer another $500,000 worth of business interruption coverage.

All Citizens has to figure out now is the price.

The new details came as quite a shock to some insurance industry leaders attending a roundtable discussion at the Florida Chamber of Commerce on Wednesday organized by Chief Financial Officer Alex Sink. They were meeting to brainstorm ways to provide more affordable commercial insurance coverage.

"That's the most dangerous account to grow," said Jason Schupp of Zurich North America, one of the largest commercial insurers in the nation. Schupp and others pointed out that as the state-run insurer assumes pricier commercial policies, Citizens makes it more likely that all policies, including those insured by Zurich, will get assessed if hurricanes hit the state.

However, Bruce Douglas, chairman of the Citizens Property Insurance Corp. board, asked his colleagues around the table: "What is the alternative?"

Douglas pointed out the Legislature directed Citizens to expand into the commercial insurance market earlier this year, in response to the cry for more affordable commercial insurance for small business owners.

"The commercial market doesn't exist for the small businessman in Florida," Douglas said.

Currently, if Citizens gets hit by a hurricane and it can't pay claims, then all insurers - except workers' compensation and medical malpractice - pay for the losses. That assessment gets passed on to policyholders.

Several insurers said the uncertainty of assessments contributes to keeping commercial insurance rates high.

David Daniel of the Florida Chamber of Commerce suggested "de-coupling Citizens assessments" so that commercial insurers would only be assessed for Citizens' losses in the commercial market and residential insurers would be taxed for Citizens' losses in the residential market.

They also had advice for Citizens as it figures out its new commercial product: Don't charge rates that are so low that no private insurer can ever compete.

"If we charge rates that are too low, then these policies will never be picked up by the private market," Sink agreed.

Jennifer Liberto can be reached at liberto@sptimes.com

[Last modified July 18, 2007, 22:53:15]