Insurers Granted Approval to Assume Citizens Policies in Florida

Regulators in Florida have approved proposals by seven private insurers to withdraw up to 202,000 policies from the state’s Citizens Property Insurance Corp. The move comes as efforts to assess the damage caused by Hurricane Idalia continue. Insurance Commissioner Michael Yaworksy signed orders approving the proposals, which were filed in late July. The companies will be able to start assuming policies from Citizens from November 21.

These approvals align with the state’s long-standing goal of transferring policies from Citizens to the private market. One of the primary concerns is the financial risk associated with major hurricanes or multiple hurricanes. Over the past three years, private insurers in Florida have dropped customers and increased rates due to financial troubles, resulting in a surge of policies flooding into Citizens. As of Friday, Citizens had nearly 1.38 million policies, making it the largest property insurer in Florida. Originally established as the insurer of last resort, Citizens has become the go-to option for many homeowners.

However, the approvals for the seven insurers do not indicate that they will accept all the approved policies from Citizens. Each insurer has been approved to assume a specific number of policies, with Homeowners Choice authorized to take up to 75,000 policies, Slide up to 50,000 policies, Florida Peninsula up to 30,000 policies, Monarch National up to 20,399 policies, Safepoint up to 16,000 policies, Loggerhead up to 6,000 policies, and Edison up to 5,000 policies. These insurers have the freedom to cherry-pick the policies they wish to assume, as highlighted by Citizens Board of Governors Chairman Carlos Beruff.

While the transfer of policies to private insurers may lead to more expensive coverage for some homeowners, recent legislative changes in Florida’s insurance market aim to bolster the industry. A modification implemented in December requires Citizens customers to accept coverage offers from private insurers if the premiums are within 20 percent of the cost of Citizens’ policies. The willingness of insurers to assume policies from Citizens might indicate that the package, which also includes measures to limit lawsuits against carriers, has made the market more attractive to the industry.

In July, Yaworsky approved proposals that could result in up to 184,000 policies being transferred from Citizens to private insurers starting in October. This list included Slide, Safepoint, Southern Oak Insurance Co., Florida Peninsula, and Monarch. Monarch had previously assumed 17,239 policies in June, while Slide and Loggerhead received approval in August to take up to 26,000 policies.

Although Hurricane Idalia caused substantial property damage as it lashed Florida’s Gulf Coast, the insurance industry appears to have avoided a catastrophic blow. According to the AM Best financial rating agency, the Big Bend area where the hurricane made landfall has low population density and negligible insured values, reducing the likelihood of losses matching those of Hurricane Ian, which struck last year. However, the storm did cause significant damage in Florida, Georgia, and South Carolina, leading to sizable losses for the insurance industry. BMS, a reinsurance firm, estimated insured losses from Idalia to be between $3 billion and $5 billion.

The BMS analysis attributed the relatively low losses to Idalia traversing rural areas, sparing densely populated regions. However, specific data on insured losses in Florida and other states is yet to be released. As of Sunday, insurers reported estimated insured losses of $85 million from 10,561 claims, including 7,515 residential property claims and damages to vehicles.

In summary, Florida regulators have granted approval to seven private insurers to assume up to 202,000 policies from Citizens Property Insurance Corp. As Florida seeks to reduce the burden on Citizens, insurers have been offered the opportunity to “cherry-pick” policies. Legislative changes, including encouraging private acceptance and limiting lawsuits against insurers, may have contributed to insurers’ willingness to assume policies. While Hurricane Idalia caused significant property damage along the Gulf Coast, losses were contained due to the storm’s path through rural areas. Insured losses are estimated to be between $3 billion and $5 billion, but precise data is yet to be released.