Citizens’ CEO: Florida Insurers Swimming in a Sea of Red Ink; Capital Drying Up

Article Courtesy of The Insurance Journal 

Published October 31, 2021


It’s not just a few Florida property insurance companies that are running into financial trouble. Almost every carrier is losing money in 2021 and the future does not look any better, the CEO of Citizens Property Insurance Co. told lawmakers Tuesday.

“It is an absolute sea of red ink across the industry,” Barry Gilway said at a Florida Senate Banking and Insurance Committee meeting. He showed sobering net income data for carriers, and few bright spots could be found.

“This is not one or two companies that are having problems in the marketplace,” he said. “This is virtually every single company experiencing negative net income – and a direct hit to surplus.”

Gilway said that 52 Florida-domiciled companies write about 79% of the market. They write $13.8 billion in premium but are backed by only $4 billion in surplus. With Florida’s market now on “life support,” and red ink rising, many insurance companies are now finding it almost impossible to obtain new capital.

That forces carriers to go out of business or drop policies and raise premiums, a growing trend that has prompted thousands of homeowners to move to Citizens in the last two years. Citizens’ policies, expected to top 1 million by the end of next year, are reaching unsustainable levels, officials have said.

Tuesday’s committee hearing was held to explore some solutions to the Florida insurance conundrum. Gilway echoed the sentiments of insurance agents, lawmakers and others who have spoken about the problem in recent months. Citizens, he said, was set up to be an insurer of last resort, yet it is limited by law and by regulators on rate increases that now set most Citizen premiums at about half of what private market insurers charge.

“We are in an insane position,” he said. “Here we are, supposed to be the insurer of last resort, but we’re not supposed to be there at 50 cents on the dollar of what private carriers charge.”

More than 90% of Citizen’s single-family homeowner policies are offered at less than what private market insurers charge. In answer to a question from Sen. Doug Broxson, R-Pensacola, Gilway said he is aware of no other state’s residual insurer that has rates so low and competes with the private market.

Sen. Jeff Brandes, R-Bradenton, pointed out the absurdity of Florida’s market. A billionaire from out of state can buy a second home in Florida, with a lower-priced policy from Citizens that is subsidized by taxpayers.

“You’re right on,” Gilway said. “Yes. The system is subsidizing those individuals.”

Sen. Darryl Rouson, D-St. Petersburg, asked if Citizens had a way of tracking insurers who appear to be losing money and have complained about litigation.

“Do you have any data on the performance of insurance companies on denying and delaying claims payments and how that has had an impact on litigation,” Rouson asked.

Gilway said Citizens does not have that data, but that the Florida Office of Insurance Regulation may collect that information.