Last year marked a record-breaking decrease in policies for Citizens Property Insurance Corp., Florida’s insurer of last resort, according to a report presented to a Citizens Property Insurance Corp. committee on Wednesday, February 26. Executives described the trend as “great news.” However, some lawmakers question whether shrinking Citizens is the best measure of a healthy insurance market.
Created in 2002, Citizens was designed not to be a growing entity. The state’s goal has long been to reduce the number of policies the state-backed insurer carries to limit its exposure to significant losses during major disasters. Excessive claims could lead to surcharges on all insurance policyholders.
Citizens can levy a surcharge on every insurance policy in Florida if the catastrophic claims of Citizens’ policyholders deplete the nonprofit’s reserves. This occurred after the 2004-2005 hurricane season. The Market Accountability Advisory Committee heard that the likelihood of such an event is declining, as 2024 was a year of unprecedented movement of Citizens’ policyholders to the private market.
“Historically, we have never depopulated so many policies in such a short amount of time, which is further validating the many positive developments we are seeing take place in the Florida property insurance market,” said Jeremy Pope, chief administrative officer for Citizens.
Citizens insures the most property of any insurance company in the state. It was established as part of the reforms that followed the devastation of Hurricane Andrew in 1992.
An Improving Market?
The number of Citizens policyholders is a key indicator of the willingness of the state’s private insurers to take on liabilities, especially considering the state’s vulnerability to severe storms. The number of policies on Citizens’ books reached an 11-year high in September 2023, when several insurance companies stopped insuring properties in Florida or became insolvent.
The Florida Legislature passed new laws between 2019 and 2023 to stabilize the struggling insurance market. Citizens’ executives informed the committee that private insurers are responding to these measures.
After peaking at 1.4 million policies in 2023, Citizens ended the year with just over 936,000 policies underwritten. This represents a decrease of approximately 24% compared to the end of 2023.
“We had 16 carriers that participated in our depopulation program last year, including five new entrants to the Florida market, which is great news,” Pope said.
However, not everyone agrees that a reduction in Citizens’ business is positive overall.
State Rep. Hillary Cassel, R-Hollywood, proposed expanding Citizens to every homeowner who wants it, not just those unable to obtain property insurance elsewhere. This approach aims to spread the liability more evenly throughout the state. The bill has been assigned to committees, but has yet to be scheduled for a hearing.
State Rep. Kelly Skidmore, D-Boca Raton, who represents Palm Beach County, stated that fewer Citizens’ policies may be an outdated metric for assessing the insurance industry’s health in Florida. She cited a recent report in the Tampa Bay Times indicating that private insurance companies have been diverting profits to subsidiary companies while claiming losses related to catastrophic storms, including Hurricanes Irma and Michael.
“It may have been a laudable goal at one time to keep Citizens low in policyholders, but I don’t think that that is what the goal should be anymore,” Skidmore said. “I really think the goal should be that there is transparency and accountability on the part of everyone that is in this process.”
The number of Citizens’ policies rose slightly in January as the market continued to evaluate the impact of the previous year’s active hurricane season, which saw hurricanes Debby, Helene, and Milton affect the state, according to Citizens’ data.
