As hurricane season begins, asking tough questions of Citizens Insurance

Recent headlines heralded the fact that Citizens Insurance, the state-run company for those who can’t get coverage anywhere else, has a lot of cash. With the official opening of hurricane season at hand, company officials say Citizens has enough money in reserve to pay claims if even a catastrophic Category 5 storm hits a major metro area.

That’s good, right?

Maybe.

Or, just maybe, in the ever-popular game of “let the free market decide” many former Citizens clients have been shifted by what the state called “depopulation” to private insurers whose ability to handle a catastrophe is unproven.

That hasn’t stopped many of them from filing double-digit rate increase requests, by the way.

Citizens reached a peak of about 1.5 million policies in 2012 but has shrunk now to less than 500,000.

Sure, the books look good for Citizens and shrinking the government always plays well, but at what cost? The aftermath of a major hurricane would be a bad time for a new company to go “oops.”

We know, of course, that it could happen, even though Florida hasn’t had a major hurricane since Wilma came ashore in October 2005 and caused an estimated $20 billion in damage. The time to ask tough questions is now, rather than play the blame game in the aftermath.

While Citizens has a reported surplus of more than $7 billion and the ability issue bonds for more than double that amount, the big question lingers about what would happen to policyholders in new, smaller companies.

“My great concern is that many of these companies won’t be able to back up claims if we have a storm that goes up the middle of the state and affects almost everybody,” said Pasco County Tax Collector Mike Fasano, a Republican and former state legislator.

“The state would have to step in and pay the claims, and it would be a mess.”

It probably wouldn’t be quick, either. While major companies have disaster-response teams that quickly settle claims and get repairs underway, smaller companies may lack those resources.

“These companies think only of today,” Fasano said. “They don’t think of tomorrow, or next week or next year. They think only of maximizing profits today.”

That looks good for a governor and other politicians who want to brag that they helped dismantle a state-run insurance program. If something goes wrong, though, just remember what Fasano said.