Florida House Insurance and Banking Subcommittee Hears a Presentation on Citizens Property Insurance Corporation

On January 13, 2021, the Florida House of Representatives Insurance and Banking Subcommittee held its first interim meeting before the 2021 session. The subcommittee heard a presentation from Citizens Property Insurance Corporation President and CEO Barry Gilway. The purpose of Gilway’s presentation was to give House members an introduction to Citizens and its role in the Florida insurance market.

Gilway provided the subcommittee with a high-level summary of Citizens. Gilway discussed:

• The history of the creation of Citizens
• The governance of Citizens by a board of governors appointed by elected officials
• The Citizens’ Plan of Operation
• The three types of Citizens accounts (personal lines account, coastal account, and the commercial lines account)
• The Property Insurance Clearinghouse
• The Depopulation Program
• The unique financial situation at Citizens
• The ability of Citizens to impose assessments
• The policy assumption process

Gilway said Citizens had over 1 million policies in 2013. The policy count dropped to 420,000 in 2018 but has been rising in recent years. He projects Citizens will have 630,000 policies by the end of 2021. He attributes Citizens growth in part to Florida’s unfavorable litigation environment. Even though he believes AOB reform has been “tremendously successful,” the benefit has been offset by an increase in first-party litigation. He told the subcommittee that there were 85,000 suits in 2020 compared to 27,000 in 2013.

Another cause of the recent growth in Citizens is that Citizens’ rates are competitive with the private market 91% of the time. Before 2007, rates were required to be non-competitive with the private market. Now, Citizens’ rates are required to be actuarily sound but Gilway noted that rates cannot increase more than 10% per policy each year. Gilway said that Citizens is not required to purchase reinsurance at the same level as the private market. Accordingly, Citizens’ provision for reinsurance is much lower than in the private market. This leads to a lower rate need for Citizens. If Citizens was required to purchase the same level of reinsurance as a typical private insurer, its homeowners multiperil and wind-only indication would nearly triple.

Gilway said that Senator Brandes has suggested that Citizens charge the full actuarily indicated rates to new policyholders. Citizens has requested OIR review the relevant statutes and provide feedback on charging actuarially sound rates for new business.

Gilway noted that a recent study conducted by Florida State University suggested possible legislative reforms including:

• Reform of the attorney fee multiplier
• Changes to the one-way attorney fee statute
• Application of provisions of the AOB law to first-party litigation
• Changes to the Citizens glidepath on rates.

The slides Gilway used in his presentation can be found here.