TALLAHASSEE, Fla. – In a move to transition policyholders into the private market, six private insurers have been granted approval by regulators to assume up to 153,000 policies from Florida’s Citizens Property Insurance Corp. Insurance Commissioner Michael Yaworsky signed six orders on Friday and Monday, authorizing the private insurers to extend offers to Citizens customers. The state Office of Insurance Regulation had previously issued similar orders on July 31 and September 1, potentially resulting in up to 386,000 policies being taken from Citizens.
While the actual number of policies that will ultimately leave Citizens is expected to be lower than the approved totals, the process, known as “depopulation,” remains a key strategy for reducing the size of Citizens. The state-run insurer currently holds over 1.4 million policies, primarily due to financial challenges faced by the private market.
Citizens President and CEO Tim Cerio emphasized the critical importance of depopulation for the overall health of the insurance market. He stated, “We’ve got to do it for the health of the market.”
The recent orders signed by Yaworsky grant the six insurers the ability to assume policies from Citizens on December 19. The approved numbers include Slide Insurance Co. with up to 75,000 policies, TypTap Insurance Co. with up to 25,000 policies, Safepoint Insurance Co. with up to 16,000 policies, Florida Peninsula Insurance Co. with up to 15,000 policies, American Traditions Insurance Co. with up to 12,000 policies, and Edison Insurance Co. with up to 10,000 policies.
For years, state leaders have been advocating for the shift of customers from Citizens to the private market, particularly due to concerns that policyholders across the state, including those without Citizens policies, could be burdened with contributing to claims payments following major hurricanes or multiple storms.
However, the lower premiums offered by Citizens often discourage customers from leaving the state-run insurer. To address this issue, a measure was passed in December, requiring Citizens customers to accept coverage offers from private insurers if the offers are within 20% of the cost of Citizens premiums. For instance, if a homeowner receives an offer that is only 19% higher than their Citizens premium, they would be obligated to accept it.
The new orders signed by Yaworsky also impose a cap on rate increases of no more than 40% for policyholders transitioning from Citizens to the private insurers. Such limitations were not included in the previous orders signed on July 31 and September 1.
The Edison Insurance order explicitly stated, “Because of the potential harmful impact to Florida policyholders, Edison shall not make takeout offers to Citizens policyholders that are more than 40% higher than the policyholder’s estimated renewal premium with Citizens.” Similar restrictions were incorporated into the other recently signed orders.
During a recent Citizens Board of Governors meeting, concerns were voiced about ensuring that customers targeted by the private companies are adequately informed when evaluating offers. Of particular concern was the potential for large numbers of customers to receive offers resulting in premium increases exceeding the 20% threshold.
If the offers exceed the 20% limit, policyholders must notify Citizens if they wish to retain their coverage. However, there is apprehension that some customers may overlook the notices and unintentionally find themselves shifted into the private market at significantly higher rates.
It is still too early to determine how many policies approved in the July 31 and September 1 orders will ultimately transition from Citizens to the private market. The July orders, for example, allow insurers to begin assuming policies on October 17.
Slide, Safepoint, Florida Peninsula, and Edison were also approved to take policies in either one or both of the previously mentioned sets of orders.
Established as an insurer of last resort, Citizens currently holds 1,406,189 policies. Its growth is evident in the numbers, as it had 511,055 policies on September 30, 2020, 708,919 policies on September 30, 2021, and 1,071,850 policies on September 30, 2022, according to its official website.