Citizens Property Insurance continued to receive sharp-tongued backlash this week over its plan to loan out $350 million from its surplus to private insurance companies.
Rep. Frank Artiles, R-Miami, wrote another scathing letter calling the plan a wasteful inside deal for insurance lobbyists, and Florida’s Insurance Consumer Advocate penned a lengthy list of unanswered questions about the high-risk program.
“Quite simply, it is reckless to rush the [surplus note] program through without taking the time to vet the program and make sure that it works,” wrote Artiles, who believes the plan is against the law and has spoken out forcefully against it.
The surplus note program is the latest in a series of ambitious moves by Citizens board in response to Gov. Rick Scott’s mandate to shrink the size of the government run insurance company.
The plan provides low-interest, forgivable loans to private companies who agree to take policies out of Citizens for 10 years. Last month, the board unveiled and approved the plan over the course of two days, with little public input and without legislative approval.
The lack of details and the speed of the approval set off red flags for Artiles, Insurance Consumer Advocate Robin Westcott and other critics who believe the unprecedented new program is being rushed through without adequate transparency.
In his letter, Artiles notes that several of the private insurers that are looking to participate in the program have troubled financial records and could go belly up after a major storm. That would leave Citizens on the hook for multimillion-dollar losses when the loans go into default. He also points out that several insurers have agreed to take over Citizens’ policies without any cash incentive, drawing into question the need for a new loan program.
“It appears that Citizens has been heavily influenced by lobbyists, as there is no rational explanation for such glaring violations of your fiduciary responsibilities to Floridians,” he said in a letter that followed a lengthy public records request seeking more details on the program. “Perhaps this is why Citizens is blindly rushing the SPN Program through with no public input or substantive changes.
Citizens has argued that the program is a revolutionary way to reduce its risk at a low price, and avoid the “hurricane taxes” that would be caused if the state-run insurer ran out of money.
“We have to reduce the overall size of Citizens,” said Barry Gilway, president of the state-run insurer, during a September meeting of its Depopulation Committee. “If we are to be successful in moving a large number of Citizens’ customers to financially secure markets, this program is compelling.”
Westcott has a number of questions about the program, and is asking Citizens to do a better job of proving that these loans make sense financially and won’t end up costing the company millions.