New companies look to get in on Citizens Property Insurance loan incentives
Oct 12, 2012
The following article was published in The Florida Current on October 11, 2012:
New Companies Look to get in on Citizens Loan Incentives
By Gray Rohrer
As Citizens Property Insurance Corp. officials and lawmakers wrangle over whether to provide low-cost loans to companies that take over their policies, new companies are battling behind the scenes to be included in the program.
Right now, only companies that have been writing business in Florida for at least two years would be eligible for a loan under the surplus notes program.
Citizens officials and lawmakers backing the program say the state-run company has gotten too big, and want to shift about half of its 1.4 million policies into the private market and attract new capital to the state.
New companies are wondering why they should be shut out of the program, if its intent is to entice new players to the market. Michael Lyons, president of the Weston Insurance Co., which received a permit to write policies this year and plans to take out some wind-only policies from Citizens in December without loan incentives, sent an email to Gov. Rick Scott last week asking for new companies to be included in the surplus notes program.
”Time is of the essence and Weston is cognizant of the need to participate in the ‘super takeout’ planned for December and not to be disadvantaged by falling behind the companies who will be utilizing capital provided entirely by the state under the new program,” Lyons wrote.
But Citizens board members and staffers, already under pressure from critics for pursuing the program in the first place, say they must make sure companies receiving the loans are financially sound and won’t fold after a large hurricane brings an influx of claims.
On a recent conference call with reporters, Citizens CEO Barry Gilway left the door open for new companies to be included in the loan program.
“There may be a potential opportunity for new companies to be part of the program,” but there must still be stringent requirements to ensure newer companies are properly capitalized, he said.
The program hopes to provide $350 million in loans to qualifying companies to take out 300,000 policies, reducing its risk in a given year by $2 billion and lowering the risk of assessments on customers by $1.17 billion. The loans would be over 20 years, but companies would only have to keep the policies for 10 years and 20 percent of the principle of the loan could be forgiven in the first five years if a hurricane were to hit the state.
Gilway is a staunch supporter of the program, but after severe criticism of the program and calls from Chief Financial Officer Jeff Atwater and incoming House Speaker Will Weatherford to take a cautious approach, he recommended the board contract with a third party to review the loan program before moving forward with it.
Tower Hill Insurance Group, which floated the initial plan for the incentive program in April, and others looking to take advantage of the program want it to be in place by February at the latest so they can select which Citizens policies to take over before buying reinsurance ahead of the 2013 hurricane season.
View the original article here: http://www.thefloridacurrent.com/article.cfm?id=29748148