A controversial program to shrink the size of the Citizens
Property Insurance Corp. by spending $350 million to encourage private
companies to take over business came under fire from all sides on
Tuesday as the state-run insurer made its first appearance before a
The program, which would loan some of the
company’s surplus cash to private insurers who agree to take over
policies, is expected to be approved by the Citizen’s eight-member board
of governors in the coming weeks.
“It’s worthy to spend a little
bit of surplus in order to get risk off the books,’’ said Sharon
Binnun, Citizens chief financial officer.
But the concept was derided by two legislators as “corporate
welfare” and frivolous, and Chairman of the Insurance and Banking
Subcommittee, Rep. Bryan Nelson, R-Apopka, raised doubts about the
effectiveness of the idea after Citizens officials said the loan program
has attracted only three companies out of a possible 20 that might be
“We’ve got to have more carriers involved,’’ Nelson
said, who said he wants to see the plan revised to encourage smaller
companies to take the loan incentives.
Under the proposed loan
program, private insurers could borrow up to $50 million for 20 years at
an interest rate of two percent. Insurers would agree to hold the
policies for 10 years and, after three years, could raise rates on
customers more than 10 percent.
Rep. Frank Artiles, R-Miami, who
is not a member of the committee, blasted the proposal as a “corporate
bailout” scheme designed to help Florida-based Tower Hill insurance and
its three companies. He warned the program has no safeguards against a
private insurer that encounters financial difficulties can cannot pay
“The reality is citizens is going to dump 300,000
policies into the private market and give them to weaker insurance
companies,’’ he said. “So, at the end of the day, when those companies
fold and walk away, you’re going to end up with them again.”
Artiles on Tuesday asked the Florida Office of Insurance Regulation to conduct a top to bottom investigation, known as a “Market Conduct
Examination,” on Tower Hill Preferred, Tower Hill Prime, Tower Hill
Select and Tower Hill Signature in light of the proposed loan plan.
Artiles has been one of the most vocal critics of Citizens Insurance,
warning that the company’s policies threaten to increase the risk on
policyholders and will add to instead of reduce the risk to the state.
He won an unusual ally Tuesday when Rep. John Wood, a Haines City
Republican, who is also not a member of the committee, also raised
doubts about the concept. He represents a region of the state that has
long complained about being forced to subsidize Citizens Insurance rates
in the state’s coastal areas.
“This surplus notes thing is
frivolous in my opinion, totally frivolous,’’ said Wood. He suggested
Citizens freeze existing policies and charge the actuarially sound rates
on new business to drive away customers.
“My constituents are
at great risk,’’ he said. “I’m sympathtic to Rep. Artiles. but I’m not
going to have Dade County take down the whole state of Florida…We need
real relief fast.”
Rep. Doug Broxson, R-Milton, who is an
insurance agent, asked how the company can suppress growth when it fails
to charge rates that reflect the acturarial risk — a move that would
discourage people from signing up with Citizens.
“We’re re-arranging the deck chairs on the Titanic,’’ he said.
Sumner, Citizens general counsel, said the board hasn’t proposed
charging higher rates for new business, but “would benefit from
legislative clarification” on the controversial issue.