Citizens to Further Review Incentive Plan While Legislators Weigh In
It was another interesting week in Citizens Property Insurance Corporation’s development of a proposed depopulation incentive program. Citizens has been working on a plan that would allow certain insurers to qualify for up to $350 million in surplus notes in exchange for agreeing to remove policies for a 10-year period. In the meantime, other insurers have requested to assume more than 200,000 policies from Citizens at the end of this year without surplus notes under Citizens’ existing depopulation program.
Citizens’ depopulation committee met earlier this week and was scheduled to meet again next week before a board of governors meeting where the surplus note program potentially could have been approved. However, anticipated incoming House Speaker Will Weatherford questioned why Citizens is moving forward with the surplus note program without legislative input. He also raised concern that the surplus note program might not be permissible under Citizens’ statutes. The next Senate President, Don Gaetz, supported Weatherford’s assessment. The depopulation committee then decided to have an outside firm review the merits of the surplus note program. Citizens’ is now expected to retain Goldman Sachs to analyze the program. However, it is not clear this will be enough for Weatherford, whose staff indicated later this week that he still believes the legislature must be part of any decision about how to use Citizens’ surplus.
Meanwhile, some Citizens officials remain interested in moving forward with the plan and hope to do so not later than early 2013. Their concern is adopting a plan in sufficient time that insurers will be able to remove significant numbers of policies before the 2013 hurricane season.
One aspect of the depopulation initiatives that will be interesting to watch is the impact of companies’ assuming policies in November and December of this year. Insurers have shown increased interest in assuming policies from Citizens, even under the existing depopulation program. This likely will mean that many policies currently in Citizens that are not true “residual market” policies will find their way back into the private sector. Citizens then can evaluate the feasibility of further incentives to encourage insurers not to remove policies the private market wants anyway, but to assume policies whether barriers to assumption continue to exist.