Citizens, Florida's property insurance of 'last resort,' doesn't need any federal bailout, CEO says

Saying the state's Citizens Property Insurance Corp. has "never sought a federal bailout, period," Citizens President and CEO Tim Cerio on Wednesday took issue with a U.S. Senate Budget Committee request for information about the insurer's finances.

Cerio, speaking to the Citizens Board of Governors, tried to tamp down concerns that the Senate committee's request could cause about Citizens' ability to pay claims. Among other things, a letter from committee Chairman Sheldon Whitehouse, D-R.I., raised questions about whether Citizens could have to seek a federal bailout if Florida gets hit with a major hurricane.

Cerio said the letter could cause "unwarranted panic" among Citizens policyholders and Floridians.

"I cannot over-emphasize that the assumptions in the Budget Committee's letter suggest a fundamental misunderstanding of how Citizens Property Insurance operates, and it under-estimates our claims-paying ability," Cerio said. "And I'm speaking now, and I need to speak to our policyholders so they hear this, Citizens is structured so it will always be able to protect its policyholders and pay claims."

Cerio said Citizens has reserves and purchases reinsurance to help pay claims. Reinsurance is essentially backup coverage. If reserves and reinsurance become depleted, Citizens has authority to collect surcharges from its policyholders and what are known as "assessments" on policyholders across the state — including policyholders who are not Citizens customers — to pay claims.

"At no time in Citizens' history has it sought a federal bailout to pay its hurricane-loss claims, including after the catastrophic 2004 and 2005 hurricane seasons," Cerio said.

Citizens was created as an insurer of last resort but has grown during the past three years to become, by far, the largest property insurer in the state. That growth has occurred as private carriers have dropped customers and raised rates because of financial problems in the industry.

Whitehouse's letter, sent Thursday to Cerio, Gov. Ron DeSantis and state Insurance Commissioner Michael Yaworsky, requested information about issues such as models showing Citizens' potential financial exposure to "worst case hurricane scenarios" and models about Citizens' ability to pay claims.

The letter, in part, cited Citizens' massive growth in recent years and said the committee was seeking information about "plans to address increased underwriting losses from climate-related extreme weather events and other disasters such as tropical cyclones, intense precipitation events, droughts, heatwaves, sea level rise, and wildfires."

"If Citizens were unable to cover its losses, it is entirely possible that state leaders might ask the federal government for a bailout," Whitehouse's letter said. "Given the potential magnitude of Citizens' losses, such a request would put the federal government (and by extension, all American taxpayers) at substantial risk."

As an example of Citizens' exposure to hurricane risks, it has had $3.6 billion in losses and what are known as "loss adjustment expenses" from Hurricane Ian, which hit Southwest Florida in September 2022 and crossed the state, according to information presented Tuesday to the Board of Governors' Audit Committee. Reinsurance covered nearly $1.04 billion of those costs. Citizens did not have to use surcharges or assessments to pay claims.

Citizens had 1.26 million policies as of Friday. By comparison, it had 532,788 policies on Nov. 30, 2020; 741,420 policies on Nov. 30, 2021; and 1.126 million policies on Nov. 30, 2022, according to data posted on the Citizens website.

Through what is known as a "depopulation" program, Citizens has been trying to shift policies into the private market. Friday's policy total represented a reduction from as many as 1.412 million policies this fall.

At least part of the reason that Citizens officials and state leaders have sought to move policies to private insurers is because of the risks of assessments if a major storm or multiple storms hit.

Whitehouse's letter requested that Citizens provide information to the Senate committee by Dec. 21. Cerio said Citizens is preparing a response to the letter.