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News Herald: Citizens Seeks Fiscally Sound Solutions

Monday, June 10, 2013


Some welcome winds of change are finally blowing into the state-run Citizens Property Insurance Corp. Fed by artificially low, actuarially unsound rates, Citizens has grown into Florida’s largest property insurer and put the 77 percent of non-Citizens homeowners, plus all businesses, charities, religious institutions, local governments and school boards at risk. Should a large storm or series of storms hit Florida, hurricane tax assessments will be imposed on all Florida policyholders, whether they are insured by Citizens or not. These taxes would extend to other types of policies, too, including automobile and renters. Recent moves by the Citizens Property Insurance Corp.’s Board of Governors to transfer policies to the private market will significantly diminish the risk of these assessments.

The Citizens Board has made the responsible decision to “depopulate” Citizens by putting plans in place to transfer policies to the private sector. Many of these are among the highest risk policies in some of the most hurricane-exposed areas of the state. These are positive steps forward that Associated Industries of Florida (AIF) hopes will signal the beginning of a broader movement toward returning Citizens to an insurer of last resort — what it was originally intended to be.

Every policy we move from Citizens back into the private property insurance market means a reduced threat of hurricane taxes levied on Florida businesses. Our employers already face a high cost of doing business. As the “Voice of Florida Business,” AIF supports any effort to alleviate the tax burden on businesses and enable them to dedicate more resources to job creation and economic growth.

Depopulating Citizens through fair and transparent mechanisms makes perfect sense for Florida. But this is not the only fiscally sound possibility to reduce the state’s risks. Citizens should continue to expand its investment in risk transfer, shifting its risk away from the state and our taxpayers and into the global private markets. Citizens buys less reinsurance, on a proportional basis, of any state residual market entity, and its unfunded sister entity, the Florida Hurricane Catastrophe Fund, is unique in buying none. These purchases benefit Floridians in general by reducing the risk of hurricane taxes, and benefit Citizens beneficiaries by increasing the certainty that their claims will actually be paid.

Florida needs to explore every viable option for the inevitable day when disaster strikes again. Florida has been fortunate these past seven hurricane seasons and we have dodged the proverbial bullet. But luck is not a plan — and will inevitably run out. In contrast, well planned risk reduction initiatives will pay dividends when a catastrophic event does occur.

Yet another hurricane season is upon us. As we prepare our families, homes and businesses, so must the state. Continued depopulation of Citizens, rapid implementation of the Citizens policy clearinghouse established by the Legislature this session and just approved by Gov. Rick Scott, and continued investment on risk transfer is the best hurricane preparedness strategy for Florida.

Thomas C. Feeney III is president and CEO of Associated Industries of Florida.

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