In run-up to hurricane season, Citizens gains policies despite positive market trends

Citizens makes a substantial purchase in reinsurance coverage, ahead of the upcoming hurricane season.

After three years of skyrocketing property insurance rate increases, bankruptcies and moves by companies out of Florida, legislative leaders and state regulators have been touting the positive signs in the market in recent months.

Some companies have asked for level rates, others have even asked for small decreases and more companies are entering the market. But one factor isn’t going in the right direction: the policy count for state-run Citizens Property Insurance Corp.

As of Jan. 31, Citizens had 1.16 million policies in force. As of May 17, that’s risen to 1.2 million policies. But Citizens officials aren’t overly concerned, noting that it tends to add policies leading into the start of hurricane season, which begins Saturday and runs until Nov. 30.

“It is not unusual for Citizens’ policy count to increase as the hurricane season approaches,” Citizens spokesman Michael Peltier wrote in an email.

“Most private carriers have purchased their reinsurance coverage for the season and are more limited in their ability to take on new policies. We expect our policy count to fall again later in the hurricane season as companies assume policies through the Citizens Depopulation program.”

Citizens was set up by lawmakers in 2002 to act as an insurer of last resort for risky policies the private market wouldn’t cover. It can impose assessments on policyholders across the state if a hurricane or series of storms wipes out its ability to pay claims, so many policy makers want to keep its risk profile low.

But in the recent turbulent market, which saw 12 companies fail between 2021 and 2023 and many others hike rates and pull back with nonrenewals, Citizens saw its policies skyrocket. From the start of 2020 until June 30, 2022, it more than doubled in size, from 442,203 policies to 931,357. It increased to 1.4 million by Sept. 30, 2023, before dropping again.

Regulators and legislative leaders have pointed to the changes in the law passed by the Legislature in the last two years aimed at reducing lawsuit costs, especially SB 2A in December 2022, which eliminated assignment of benefits and one-way attorneys fees.

In a recent memo, the Office of Insurance Regulation (OIR) noted that “rate filings for 2024 show a slight trend downward for the first time in years, indicating stabilization of the property insurance market. Ten companies have filed a zero percent increase and at least eight companies have filed a rate decrease to take effect in 2024.”

Citizens is also bullish on its efforts to remove policies and place them in the private market, which it calls “depopulation.” A private company can assume policies from Citizens after they submit a plan to OIR. Citizen customers must opt out of the new company if they don’t want to switch.

“So far in 2024, 115,000 policies have been assumed by private insurers that have been approved by the Office of Insurance Regulation to participate in the depopulation program,” Peltier wrote. “We have assumptions scheduled for September, October, and November but do not have any information yet on which companies may wish to participate in each of those assumption periods.”