Depopulation Activity Reduces Citizens Policy Count
Citizens Property Insurance Corporation recently announced that it had 727,122 policies as of November 30, 2014. This is about half of Citizens’ policy count a few years ago when it reached a high of about 1.4 million policies.
The Citizens portfolio consists predominantly of personal residential policies, although it continues to have significant commercial exposure as well. Citizens reported about 393,000 personal residential policies in its Personal Lines Account as of November 30. It had another 101,000 multi peril policies in its Coastal Account, which consists of policies located in areas in close proximity to the coast around the perimeter of the state. Citizens also continues to have a significant number of wind-only policies (about 199,000) in the Coastal Account.
Several factors have combined to produced the reduction in Citizens’ portfolio. Several years ago, Citizens’ rates significantly lagged the market as the legislature froze its rate level and subsequently capped the amount its rates could go up each year. This made Citizens comparatively more attractive than private market insurers. However, after several years of capped rate increases, Citizens’ rates have reached or approached private market rates in many areas, allowing insurers to compete for the business and incentivizing consumers to shop for coverage. In addition, competitive pricing in the reinsurance market has allowed private market rates to remain competitive and in many cases to go down. This has encouraged existing insurers to write additional business and new insurers to enter the market. Some of these companies have looked to the Citizens depopulation process as a way of accelerating their entry into the market.
With no hurricane activity affecting Florida again this year, the private market has continued to be competitive in many areas and state-created entities such as Citizens and the Florida Hurricane Catastrophe Fund have been able to accumulate funds to mitigate the possibility of future assessments. The overall result is a healthier market that sees reduced reliance on potential hidden taxes on consumers in the form of assessments.