Nov. 26--As hurricane season ends Friday, Florida's last-resort insurer Citizens has paid $32 million in storm claims through Oct. 31, a report released Monday shows -- putting little dent in a pile of leftover money expected to grow well past $6 billion by year's end.
That expanding surplus, created by rising Citizens rates, reduced coverage and seven years of little storm damage, sets up a showdown in coming weeks about what to do with it.
Company executives have proposed spending what amounts to a majority of the year's projected surplus -- $350 million -- as low-cost, potentially forgivable 20-year loans to insurance companies that assume up to 300,000 of 1.5 million Citizens customers. They say the incentives can reduce the state-run company's risk exposure and the threat of assessments to all Florida insurance customers if a bad storm exhausts reserves.
But some lawmakers have criticized the plan as corporate welfare, unnecessarily giving away hard-earned ratepayer money. The surplus acts as a cushion to pay claims. The larger the surplus gets, the lower the risk of assessments to anyone and the lower the need, for example, to charge customers for expensive private reinsurance from unregulated offshore interests.
Incoming House speaker Will Weatherford has questioned why Citizens seems to be in a hurry to approve the plan without legislative input, possibly by a Dec. 14 board meeting.
Existing "depopulation" plans at the close of the year are already giving about 300,000 customers a choice to move to a new company without the loan incentives. The year is already on track to produce the biggest takeout totals for Citizens since 2008.
The Citizens board will meet Tuesday in a workshop expected to deal with the 2013 budget as well as fallout from the firing of internal watchdogs. The disbanded corporate integrity unit was investigating other uses of the surplus -- such as paying more than $750,000 in severance to officials leaving the firm amid allegations of sexual harassment, phony credentials, drunken bar dancing and the sale of adult novelties on company time.
Citizens continues to grapple with sinkhole claims, mostly on the state's west coast, but storms have not taken a substantial chunk of the surplus for a seventh straight year. Named storms including Beryl, Debby and Isaac produced 10,725 claims for $32.3 million this year, according to a report to the company's claims committee Monday. The report does not include about 260 claims for Superstorm Sandy after the third quarter. The storm mostly spared Florida on the way to the northeast.
The surplus was forecast to grow by more than half a billion dollars in the company's 2012 operating budget, from $5.6 billion to $6.2 billion, without a major storm. The surplus stood at a little over $6 billion as of June 30, according to financial records.
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