Citizens Property Insurance Corp. has the money to weather almost any major hurricane to strike the state, the chief financial officer of Floridas state-run insurance company told the governor and his cabinet.
In a presentation Tuesday, Citizens CFO Sharon Binnun revealed the company is in a better financial position than it has ever been.
Citizens has $14 billion to pay claims in 2010, $11 billion in cash and assets, and $3.9 billion in surplus to stay afloat if a catastrophe occurs.
All of these things are very positive for us as we enter the 21st century, Binnun said.
With its current funds, Citizens, the state-run insurer-of-last-resort that covers more than one million Floridians, would be able to pay its clients for damage sustained in major once-in-five-year storms and once-in-25-year storms without conducting emergency assessments to compensate for a budget shortfall.
But regular assessments would rise in both cases.
If the state were to be struck by once-in-50-year-storms and once-in-a century storms, the company would need to hold emergency assessments and regular assessments.
Citizens has been able to keep assessments low because Florida has avoided the paths of major hurricanes over the past few years, Binnun said. In addition, John Forney, a financial consultant, said the bonds market is thawing, and Citizens is well-placed to take advantage of it when the need arises.
The information comes as state lawmakers are pushing to allow private, unregulated insurers to raise their rates. Crist has said repeatedly that he will veto any legislation allowing for a rate increase.
State Commissioner of Agriculture Charles Bronson said Citizens is important to the state, but it is absorbing a tremendous amount of risk and spreading it to taxpayers. He told Binnun not to forget the Legislature contributed millions to the fund after the busy 2005 hurricane season, when the state-run company was still in its early stages.
There is $714 million of public money that actually helped found this deal, he told Binnun.
State Attorney General Bill McCollum emphasized that Citizens would still raise rates with every storm that strikes the state, so the rates would not always stay low. In addition, the cost is spread to payers throughout the state, whereas private insurers spread their rate hikes among a small group of clients.
There is a big difference, I think. And we ought to consider that," he said.
McCollum said Citizens has become bloated. He said the company is primarily intended to insure against wind damage, and by expanding its programs to other sectors it has become more costly. He recommend looking at how to cut some of the additional programs in the future.
Contact Alex Tiegen at atiegen@sunshinestatenews.com, or at (561) 329-5389.
