Citizens Property Insurance Board Chairman Carlos Lacasa Urges Newly-Appointed Board Member John Wortman to find ways to depopulate Citizens
Nov 4, 2011
During a public teleconference yesterday, November 3, 2011, Citizens Property Insurance Corporation (“Citizens”) Board of Governors (“Board”) Chairman Carlos Lacasa urged newly-appointed Board Member John Wortman to draw on his insurance expertise and help devise a plan to downsize the Florida’s “insurer of last resort,” along with specifics to implement it.
Mr. Wortman is chief executive officer of Wortman Capital Associates and previously served as chief executive officer of Louisiana Citizens Property Insurance Corporation from 2007 to 2010. He was recently named chairman of Citizens’ Actuarial and Underwriting Committee.
“The Governor and our appointing officers in general are looking to us to help them achieve a policy goal, which is to make Citizens smaller, and to help the privately-capitalized companies improve their market share in the state,” Chairman Lacasa explained at the beginning of the meeting. “The details are where I need you.”
The two chatted for about 25 minutes during the teleconference to discuss the issue of depopulation, which Florida Governor Rick Scott announced as a priority during this week’s November 1 Cabinet meeting. During that meeting, Governor Scott told Citizens President Scott Wallace he wanted the state-backed insurer to recommend ways to make the company solvent by December 6, 2011. Chairman Lacasa and Mr. Wortman agreed to have ideas ready for discussion for the November 14, 2011 Citizens Board meeting.
Mr. Wortman also suggested the Actuarial and Underwriting Committee discuss the matter when it convenes on November 9.
Mr. Lacasa said the Board is faced with a difficult balancing act.
“We don’t want to assess but you have to be profitable to assess, but you don’t want to be profitable because then you are crowding out privately-capitalized companies,” Mr. Lacasa stated.
Mr. Wortman said Louisiana law is substantially different than Florida when it comes to rate assessments. He explained that Louisiana requires that Louisiana Citizens conduct an annual rate assessment that is very specific in relation to product and rating territory, with 10 percent being added to the highest rates in the voluntary market. The result was Louisiana Citizens having the highest policy rates “on the streets,” which provided substantial motivation for agents to move Citizens’ business into the private sector, he added.
Chairman Lacasa then gave a brief summary of how, during a Special Session, the 2007 Florida Legislature devised Citizens’ current rate structure and “glide path” of a 10 percent annual rate increase as a way to address affordability issues.
“The plan worked, insurance rates came down, we were able to keep it slightly affordable,” Chairman Lacasa stated. “But now we are at the point where we need to contract. I wanted to expand Citizens to make insurance affordable when everything was going through the roof. But now things have changed and we need to contract again.”
He suggested depopulating risk as opposed to policies, possibly through reinsurance, the Florida Hurricane Catastrophe Fund and quota-sharing. Chairman Lacasa also suggested examining coverages that address the needs of Freddie Mac and Fannie Mae as far as lending standards, but added that prices shouldn’t be lowered so much that they crowd out capital.
Mr. Wortman agreed the suggestions made sense and said he would look at the various coverages offered by Citizens and evaluate them. He said they must identify the major issues relating to depopulation, study them and come up with a list of pros and cons.
Mr. Lacasa suggested a 10- to 15-question survey be sent to all insurance carriers in the state on the matter. Mr. Wortman agreed such a survey might be helpful.
“We have limited time,” said Citizens President Scott Wallace. “It’s a tight timeline.”
With nothing further to discuss, the teleconference ended.
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