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Insurance - Fix Citizens

After peaking at 1.5 million policies, state-subsidized Citizens Property Insurance is expected to have 900,000 policies by early next year. Progress is being made.

That said, Citizens, Florida's largest insurer, private or public, remains a stumbling block Florida can trip over. Even with a $6.8-billion surplus, our putative insurer of last resort still is too risky should the state get hit by the Big One, or even a few Small Ones in a single season. For too many, rates continue below what actuarial science says they should be. Increases have been capped at 10% a year. Raise the cap to 15%. The 80% of Florida homeowners who have private insurance pay actuarially sound rates — the actual cost of their insurance — and the sooner that all Citizens policyholders pay the full tab for their coverage, the better.

Additionally, it's unfair to ask the 80% of all Florida homeowners who aren't insured by Citizens to pay assessments to make Citizens customers whole if Citizens can't pay. Under current policy, once Citizens exhausts its surplus and reinsurance, it will borrow from the bond markets to pay claims. Its own customers will get tagged first with onerous assessments to make up shortfalls. But if Citizens still is short, it sells bonds that are paid back with a de facto tax on everyone's home, business and auto insurance even though they haven't benefited from Citizens' subsidized rates. At last report, in the case of a 1-in-100-year storm Citizens would hit all Florida policy owners with a $4-billion bill. Ideally, that burden should rest entirely on Citizens policyholders.

The sticking point — aside from the politics of angry Citizens policyholders — is that bond investors may shy from buying Citizens bonds backed only by Citizen customers. The state should get bond market evaluations on the maximum burden that investors would allow Citizens' customers to be responsible for — and then move the responsibility for making up Citizens' shortfalls to that level.

Citizens also needs to determine just how much of its customer base resides out of state. Those customers are least likely to have other Florida policies to tax to make up a Citizens shortfall; the state should get out of the business of serving them.

While the state is right-sizing Citizens and the responsibilities for it, it should open up its property insurance regulatory scheme to bring more companies here.