Editorial: Shoring up Citizens insurance a priority for state

The Florida Legislature and Citizens Property Insurance Corp. Board of Governors are getting serious about shoring up the insurance company's bottom line.

Citizens, of course, has always been the insurer of last resort for Floridians who could find no other coverage. That moniker really fit after Hurricane Ian struck in 2022 and sent other insurance companies scrambling to pay to cover the losses and some even leaving the state.

Citizens' policies exploded to a high of 1.412 million in fall 2023 and that was a problem. Lawmakers never intended for the state-backed insurer to get that big. Obviously the more policies it has the more the state has to pay out if a huge hurricane or two hits the state — and this is a year many are predicting that could happen.

Florida took a tough approach to culling policies from Citizens late last year when it invited private insurers to take over the company's policies and told policy holders they had to go with the new provider if the cost was within 20% of what their current Citizens policy cost.

That strategy allowed private insurers — some new to the state — to seek policies they felt were good risks.

In 2023, Slide Insurance Co. assumed the most Citizens policies, with 82,781, according to Citizens data and the News Service of Florida. Homeowners Choice Property & Casualty Insurance Co. took on 53,456 policies; SafePoint Insurance Co., managed to wrangle 41,895; and Florida Peninsula Insurance Co. got 37,586 new customers from Citizens.

In all, about 275,000 Citizens customers were forced to change providers last year and, so far, another 115,000 or so have been part of a "depopulation" of Citizens policies in 2024.

It was not a popular decision by the state to allow the new companies to take over Citizens policies. But the state is concerned about the financial hit it could take as the backer of so many claims.

Citizens still has more than 1 million policies.

And that led Citizens' Board of Governors approving a $750 million expenditure recently to buy reinsurance.

Reinsurance is the insurance an insurance company buys to guarantee it can cover all its losses. The money that was approved would give Citizens about $5.5 billion in backup coverage.

Citizens, however, is holding off on the purchase until it's sure the cost is at or below market rate.

We're not sure if projections of the market rate going down are realistic with the hurricane forecast for Florida. If it does, then Citizens will likely pounce on the price to make sure it's covered if another Hurricane Ian or two visit us this year.

But, Citizens has another card up its sleeve.

The state has a Hurricane Catastrophe Fund that all property insurers must pay into. And, Citizens has even more protection as it has the power to collect what could be called a surcharge from its customers, and those of other insurance companies, if it does not have enough money to pay for all the claims that result from a huge storm — or two.

Meanwhile, homeowners continue to struggle with high costs of insurance. Several have told us they plan to roll the dice in 2024 and not carry insurance on their home.

Lawmakers have work to do next year to help homeowners. The steps they've taken with Citizens should assure policy holders they will be made whole if they're victims of a storm this year.

Florida still needs more companies to take a risk here if the price of polices ever move closer to pre-Hurricane Ian days. The Legislature must seek ways to lure more competition and not just focus on making Citizens a better investment.