Amid reports about eye-popping insurance executive pay and undercapitalized new insurance companies, leaders of the state-run insurer are raising an alarm about the potential of a new cycle of insurers going under — again.
The Citizens Property Insurance Corp. met June 25, shortly after revelations that two executives of the 3-year-old, Tampa-based Slide Insurance — one of the companies now collecting premiums from former Citizens’ policyholders — were paid $50 million in their first two full years running the business.
Charles Lydecker, a Citizens’ board member from Ormond Beach who’s worked in insurance throughout his career, recalled other companies that have collected premiums, paid executives generously and then closed their doors after claims resulting from Mother Nature’s fury hit.
Slide Insurance has taken over 245,127 Citizens’ policies since it started taking them in 2023. Policyholders had to accept the offer if Slide’s premium was within 20% of expected Citizens renewal price.
“The insurance company business is a really neat business to be in if you can just go pluck out a bunch of policies and there’s no storms … but that’s not the environment we live in,” Lydecker said. “And the last 20 years have taught us that.”
A troubled insurance market
Despite Florida residents paying some of the highest property insurance premiums in the country, 11 Florida property insurance companies went under between 2019 and 2022. Shortly after those insolvencies, the number of policyholders on Citizens’ books hit an 11-year high in September 2023, with 1.4 million policies in force. That was viewed as a sign that the commercial market couldn’t take on so much property liability in this peninsular state vulnerable to hurricanes.
The high rate of lawsuits against insurers took much of the blame for that, and spurred 2022 tort changes that hobbled policyholders’ ability to sue their insurer.
Now, fewer lawsuits have been filed, the number of Citizens policyholders has dropped 36% and 12 new commercial insurers have started, the Citizens board heard, but that progress could be reversed, Lydecker warned. He called for better vetting of the commercial market from state regulators.
Cycle coming around again?
He recalled Southern Family Insurance Company, which went insolvent in 2006, shortly after the state’s battering from hurricanes Charley, Frances and Jean in 2004 and Hurricane Wilma in 2005. The backup for their reserves, called reinsurance, proved inadequate.
“They made the decision that we don’t need to have reinsurance there,” Lydecker said. “And they got that past (state regulators) … But prior to them going into receivership, they took $13 million out of the company. You could fight the rest of your life trying to claw back the $13 million that should have gone to mitigate the loss that was created, that the taxpayers ended up funding through the Florida Insurance Guarantee Association.”
Tim Cerio, Citizens’ CEO, said that recent legislation that changed the rules for suing insurers also gave state regulators more power to oversee insurers.
The legislation, he said, “has given the (Florida Office of Insurance Regulation) more regulatory teeth, holding insurers accountable. They are conducting more in-depth, thorough, robust financial review for financial wherewithal, for what it’s worth.”
Seven insurers, more than double the number from last year, did not come out of regulators’ catastrophe stress test with the required minimum required funds, according to the latest Property Insurance Stability Report published in January.
In that test, state regulators model the losses of historical storms that have hit Florida to see if insurers have the resources to pay off claims and still have the required minimum reserve. The test involves multiple landfalls that would have a probability of happening once every 75 to 100 years.
Exemptions to the state’s public information law keep the identities of those insurers secret.
Anne Geggis is the insurance reporter at The Palm Beach Post, part of the USA TODAY Florida Network. You can reach her at ageggis@gannett.com. Help support our journalism. Subscribe today