Citizens Insurance chief details troubled industry

Pointing to a “sea of red ink,” the head of the state-backed Citizens Property Insurance Corp. described a private insurance industry Wednesday that is losing gobs of money while homeowners face soaring rates and trouble finding coverage.

“The consistency of loss across the entire marketplace is absolutely staggering,” Citizens President and CEO Barry Gilway told the House Insurance & Banking Subcommittee. “It’s not a decision that one or two companies are making. The reality is that what is occurring in the marketplace is impacting every single company in the market.”

Gilway went before the panel less than six months after lawmakers passed a measure (SB 76) to try to bolster the property-insurance system. But as evidence of continuing problems, the number of policies written by Citizens has soared to more than 700,000 and is expected to climb above 1 million next year, as homeowners turn to it for coverage.

While Gilway’s presentation focused heavily on financial problems in the insurance industry, Rep. Matt Willhite, D-Wellington, asked about the impact on homeowners, citing a disabled veteran who got hit with a large rate increase.

“Where is the breaking point for the disabled military veteran, who is on a fixed income, that can’t insure their home when they are at a breaking point themselves?” Willhite asked.

With lawmakers preparing to start the 2022 legislative session in January, the meeting Wednesday did not include detailed discussions of proposals to address the problems. As an example of one idea, Rep. Tom Fabricio, R-Miramar, floated the possibility of more broadly opening the market to what are known as surplus-lines carriers, which don’t face the same regulatory oversight as more-traditional insurers.

But House Minority Co-leader Evan Jenne, D-Dania Beach, pointed to numerous changes in the property-insurance system over the past two decades and questioned whether the state needs a new approach.

“Should we be moving in a completely different direction?” Jenne asked. “What we have been trying to do, a lot of it has been built on one another. Yet we continuously find the same results and find ourselves in these sticky situations. Should we be looking at something new?”

Citizens was originally created as an insurer of last resort, but it has seen huge growth since mid-2020 as private insurers have raised rates and reduced policies to try to stem financial losses.

Citizens added nearly 22,000 policies last month and had 708,919 policies as of Sept. 30, according to data posted on its website. It had gained almost 200,000 policies since Sept. 30, 2020, when it totaled 511,055 policies, and Gilway said recently that an initial forecast for 2022 includes 1 million to 1.3 million policies.

Many lawmakers and state leaders have long sought to move homeowners from Citizens into the private market, largely because of concerns about financial risks for taxpayers if Florida gets hit with a major hurricane.

But along with private insurers reducing the amount of coverage they will write because of financial problems, Gilway said Citizens often has cheaper rates than private companies. In addition, many homeowners in areas such as Southeast Florida rely on Citizens because they have few other options for coverage.

The legislation passed in April took a series of steps, including trying to help curb lawsuits against insurers and gradually raising a cap on rate increases for Citizens customers.

But one key part of the bill designed to prevent contractors from soliciting homeowners to file roof-damage claims has been blocked by a federal judge because of First Amendment concerns. Insurers contend they have faced soaring costs because of unnecessary, if not fraudulent, roof-damage claims.

Gilway’s comments Wednesday, in some ways, echoed state Insurance Commissioner David Altmaier, who last month told a Senate committee that the condition of the property-insurance market was “dire.”

Gilway, who said he has been in the insurance business for 51 years, used graphics to show lawmakers that dozens of private insurers have sustained net-income losses in recent years. Among the factors he cited were litigation costs and the costs of reinsurance, which is essentially insurance that insurers buy as a backup.

Also, Gilway said the Office of Insurance Regulation in 2020 received 105 rate filings from insurers that sought increases of 10 percent or more. Customers of some companies have seen rate increases of more than 25 percent in 2020 and 2021, according to information that Gilway presented.

Gilway said the situation is not “sustainable.”

“It is not acceptable to have Floridians faced with increasing rates that are staggering,” he said.