By Marianela Toledo | Florida Watchdog
MIAMI— The state-subsided property insurer Citizens Property Insurance Corp. is not only unaccountable, it is also actively seeking to “defraud” the state of Florida, one House member told Florida Watchdog in an interview.
State Rep. Frank Artiles, R-Miami, in reacting to the news that Citizens will begin shedding hundreds of thousands of policies and handing out millions in low interest loans to selected companies, is livid and wants an audit of the entire organization.
Citizens was created as an “insurer of last resort” in order to provide protection to homeowners who live in an area of high risk to storm and property damage.
“There are $6.2 billion dollars in the reserve. They invented this program to get the money,” Artiles told Florida Watchdog. “Citizens does not answer to anyone. It doesn’t answer to the Legislature, it doesn’t answer to the Senate.”
The Surplus Note Depopulation Program seeks to shed some 300,000 policies to other insurers throughout the state, providing $350 million in loans to private insurers for the transition. In the first three years, Citizens would only ask the insurer to pay the interest on the loan, based on the rate of 10-year bonds.
The objective of the program is to “reduce claim liability for the future,” according to the statement released by Citizens.
“If we remove 300,000 policies, pay $350 million, and also fail to collect $400 million of those premiums, then we’ll end up paying $750 million to companies that can go broke tomorrow,” Artiles said.
Supporters, however, applaud the plan because they claim it will avoid the need for future taxation if disasters hit Florida’s shores.
“This proposal could not only remove 300,000 policies from Citizens but also reduce the potential of an Emergency Assessment tax by 38 percent if a 1-in-100 hurricane were to hit,” said state Rep. Bryan Nelson, R-Apopka, in a statement. “That’s what I call a win-win.”.
Artiles said that the process of selecting participating insurance companies that will assume Citizens’ policies is far from transparent.
He points to examples such as Tower Hill Insurance Group, with a negative credit rating as recently as 2009, according to credit agency A.M. Best Co.
Tower Hill’s three subsidiaries — Tower Hill Preferred Insurance Co., Tower Hill Select Insurance Co. and Tower Hill Signature Insurance Co. — are all set to receive upwards of $150 million each in the loan deal, despite their most recent “poor” credit ratings that would normally disqualify them.
Artiles said special interest lobbying is behind the effort to depopulate Citizens, risking millions of dollars of abuse and a complete loss of accountability.
“How do you remove the policy from a company that is solvent to one that is not solvent? In the end, the state of Florida will end up paying those policies,” Artiles said.
Robin Wescott, Florida’s insurance consumer advocate, said the program should be implemented and would be beneficial for Floridians.
“I think it will ultimately succeed because there are many people supporting it,” Wescott told Florida Watchdog. “There is a value that can be found with a fair price.”
Florida Watchdog reached out to Citizens Insurance by telephone and email, but a representative declined requests for an interview.
“The board has expanded its powers. They’re not accountable to anybody,” said Artiles.
“Nobody controls the board of Citizens. There is no accounting for$ 6.2 billion, and we’re talking 10 percent of the budget of the state of Florida,” said Artiles. “That’s why I’m calling for an audit.
“For me, the ideal solution is to remove all who are taking advantage of Citizens,” said Artiles, proposing unifying a statewide price for property insurance to defray costs.
“The only people who should be in Citizens are living on the coast, Miami-Dade, Monroe, Broward, West Palm Beach, Tampa and parts of Orlando,” said Artiles.
“It’s very easy to raise premiums in southern Florida, which already pays the highest premiums and highest taxes. I’m tired of the abuse.”
On Thursday, officers of the state-subsidized insurance provider will have a meeting in Miami to discuss details of the depopulation program.
Interview with state Rep. Frank Artiles:
Contact Marianela Toledo at Marianela.Toledo@FloridaWatchdog.org.
Florida Bureau Chief Yaël Ossowski translated this article.