The Citizens Decertification Statute
Policyholder groups and other interested parties in recent weeks have been debating various aspects of the coverage provided by Citizens Property Insurance Corporation. These discussions show the challenge of dealing with issues affecting a residual market as large as Citizens in a market as challenging as Florida. In some areas of the state policyholders generally cannot obtain coverage from the admitted market. In other areas, however, admitted market capacity exists but has a difficult time competing with the lower rates charged by Citizens pursuant to the legislatively-mandated glide path.
One issue to consider in this discussion is that the Citizens statute does not require a one-size-fits-all approach to its availability across Florida’s diverse territories. The statute requires Citizens to have a plan of operation that:
12. May establish, subject to approval by the office, different eligibility requirements and operational procedures for any line or type of coverage for any specified county or area if the board determines that such changes are justified due to the voluntary market being sufficiently stable and competitive in such area or for such line or type of coverage and that consumers who, in good faith, are unable to obtain insurance through the voluntary market through ordinary methods continue to have access to coverage from the corporation. If coverage is sought in connection with a real property transfer, the requirements and procedures may not provide an effective date of coverage later than the date of the closing of the transfer as established by the transferor, the transferee, and, if applicable, the lender.
Citizens therefore is able to work with the Florida Office of Insurance Regulation to create different eligibility requirements based on the state of the market in various territories. This might lead to a logical conclusion that eligibility for Citizens should remain unchanged for areas like Monroe County or Pasco and Hernando Counties but should be tightened for other areas where the admitted market is open and competitive.
The Citizens statute also discusses deactivation, with a process for revisiting deactivation:
(o) If coverage in an account is deactivated pursuant to paragraph (p), coverage through the corporation shall be reactivated by order of the office only under one of the following circumstances:
1. If the market assistance plan receives a minimum of 100 applications for coverage within a 3-month period, or 200 applications for coverage within a 1-year period or less for residential coverage, unless the market assistance plan provides a quotation from admitted carriers at their filed rates for at least 90 percent of such applicants. Any market assistance plan application that is rejected because an individual risk is so hazardous as to be uninsurable using the criteria specified in subparagraph (c)8. shall not be included in the minimum percentage calculation provided herein. In the event that there is a legal or administrative challenge to a determination by the office that the conditions of this subparagraph have been met for eligibility for coverage in the corporation, any eligible risk may obtain coverage during the pendency of such challenge.
2. In response to a state of emergency declared by the Governor under s. 252.36, the office may activate coverage by order for the period of the emergency upon a finding by the office that the emergency significantly affects the availability of residential property insurance.
This provision creates two opportunities to revisit changes in Citizens’ eligibility. One situation would be that the private market, while initially believed to be competitive enough to justify a reduction in Citizens eligibility, turns out not to be competitive enough. The second gives the OIR discretion to respond to emergency situations.
Having Citizens writing policies throughout Florida at subsidized rates creates potential problems for Citizens, its policyholders and all Floridians. The potential for massive assessments grows, and the private market has problems deploying its capacity due to subsidized competition. Looking at the market’s status by territory instead of as a whole might create opportunities to limit Citizens growth where the market is strong while preserving opportunities for coverage in areas where a private market solution doesn’t yet exist.