In a remarkable development for the state-owned Citizens Property Insurance Corp., the company is set to see a notable decrease in its policy count by the end of 2024. This marks the first time in several years that Citizens has managed to reduce its number of active policies, aiming to drop below the 1 million mark.
The concerted efforts to depopulate Citizens Property Insurance Corp. highlight an approach to reduce the company’s exposure and protect state residents from potential financial burdens in the event of severe weather. According to Jeremy Pope, the company’s chief administrative officer, a forecast made at a recent meeting indicated that the policy count is expected to decrease significantly from a reported count of 1.24 million in September to just over 900,000 by December 31, 2024.
The reduction strategy, termed ‘depopulation’, involves transferring policies from Citizens, often referred to as the ‘insurer of last resort’, to private insurance companies. This shift comes as a relief to many, as fewer policies with Citizens mean reduced risks of state-wide insurance assessments should a catastrophic hurricane season impact the region.
Historically, Citizens’ attempts to depopulate were hampered by regulations that allowed policyholders to refuse transfers to private insurers. A primary factor was that Citizens was previously unable to increase rates by more than 10% annually, making their offerings more affordable compared to private counterparts. However, subsequent changes in state law have tightened these conditions. Now, policyholders must accept a ‘takeout’ offer if the proposed cost does not exceed 20% more than Citizens’ renewal estimate.
In October, the Office of Insurance Regulation authorized over 410,000 takeout requests by private insurers, of which more than half have been executed. The adjustments in regulations have left policyholders with minimal options but to transition to private carriers, contributing to the declining number of Citizens policies.
Significantly, while new policies have continuously contributed to the company’s policy count, October recorded an average of 24,100 new policies, a decrease from the monthly average of 38,000 earlier in the year. This drop suggests that private markets are effectively absorbing new business, aligning with Citizens’ goals to minimize its own holdings.
The success of Citizens’ depopulation is further exemplified by the figures from this year, where 369,171 personal lines takeouts were approved, indicating robust participation from policyholders in transferring to the private sector. The percentage of policies originating from South Florida, once a major contributor, has also diminished, reflecting broader geographical shifts in the policyholder base.
Overall, the reduction in policy count and exposure is poised to significantly benefit the state, particularly considering the $225 billion in exposure anticipated to be removed by year-end. This strategic move is not only seen as a protective measure against financial assessments but also as a way to bolster the private insurance sector’s engagement.
The strategic reduction of policies by Citizens Property Insurance Corp. represents a focused effort to mitigate financial risks associated with natural disasters in Florida. Through successful depopulation efforts and regulatory adjustments encouraging policy transfers, the company is positioning itself and the state’s residents in a more secure insurance ecosystem.
Source: FloridaRealtors
