TALLAHASSEE, Fla. — Concerns over what the next major storm, or storms could bring has a U.S. Senate panel probing Florida’s top home insurer.
Sen. Sheldon Whitehouse (D-Rhode Island), chairman of the U.S. Senate Budget Committee is questioning state-backed Citizens Property Insurance in a letter sent to company and Florida leaders.
“The Committee is … increasingly concerned about Florida’s uniquely large and growing exposure to climate-related property losses, Citizens’ rapidly expanding market share, and state law allowing Citizens to levy special assessments on all policyholders in the event that losses exceed its ability to pay," Chairman Sen. Sheldon Whitehouse (D-RI) wrote in the letter.
The letter highlights his concerns over the company’s solvency and requests documents as part of an investigation into whether the state-backed insurer could afford to cover massive storm-related claims in a city like Miami or Tampa.
“What we want to do is judge the scale of the risk and the likelihood that it can be contained within Florida and not spill over to other states or to a big ask to the federal government for a bailout or propagate that coastal property values melt-down,” Whitehouse said in an interview with 10 Tampa Bay.
Citizens is one of many insurers being questioned, amid a larger probe into the insurance industry's response to climate change and potential economy-wide harms from widespread uninsurability.
In a statement, Citizens spokesman Michael Peltier says they’re structured “so that it will always be able to protect its policyholders and pay claims.”
“If Citizens were to pay out all reserves and reinsurance following a major storm or series of disasters, it is required by Florida law to levy surcharges and assessments on its policyholders and all Florida insurance consumers until any deficit is eliminated. As such, Citizens will always have the ability to pay claims,” Peltier added.
“Whether you're a homeowner or a condo owner or renter, even a driver with auto insurance, you could see multi-year [up to 45%] surcharges to help replenish the funds of Citizens,” Mark Friedlander with the Insurance Information Institute explained.
Friedlander says it is likened to a “hurricane tax.”
“The state regulations clearly define how the process works, so the backstops are in place, and you as a Citizens policyholder will always get your claims paid, but there is a potential of this hurricane tax surcharge being applied," he added.
The so-called tax is among the main concerns for Sen. Whitehouse.
“The assessment of other Florida insurance is actually not feasible. It's thousands of dollars, even tens of thousands of dollars and people just can't and won't pay that. At that point. You really do have for a pretty catastrophic failure of insurance, of the ability to rebuild after a bad storm.” Whitehouse said.
Because of the potential for having to levy assessments, Citizens has been working to lower their number of policies — it's sitting at more than 1.2 million right now with an ongoing depopulation program.
“Thanks to the insurance reforms signed into law by Governor DeSantis, more policies have been removed through depopulation this year (223,307) than in 2016-2022 combined (169,227). In fact, Citizens recently revised its 2023 year-end policy count and exposure projections from 1.7 million policies and $675 billion in total exposure to 1.215 million policies and $551 billion, respectively,” Peltier wrote.
“They need to get back to the 400,000-500,000 policy total range to be at a manageable level of risk and until they get there we are in a position of a potential hurricane tax surcharge,” Friedlander added.
The insurer has until Dec. 21 to submit the requested documents to the Senate panel. Whitehouse said it appears they are complying with the request.