Both sides of the Florida Legislature will spend time this fall reviewing a controversial deal approved by the state-backed Citizens Property Insurance Corp, reports Jim Turner of the News Service of Florida.
Senate President Don Gaetz on Thursday announced the Senate Banking and Insurance Committee will investigate a downsizing deal that could be worth up to $52 million for St. Petersburg-based Heritage Property & Casualty Insurance Co.
The amount the politically connected, nearly 10-month-old Heritage will be paid is based upon the number of policies it takes over from Citizens — a number that could be up to 60,000. Citizens had more than 1.27 million property insurance policies as of April 30.
“It is very important that Citizens take action to depopulate so as to reduce its exposure due to future hurricane loss,” Gaetz wrote to members of the Senate, “but at the same time it is important that this be done in a financially sound manner that is transparent and open to public scrutiny.”
Gaetz noted that he was responding to concerns that senators have expressed and received from Floridians about the May 22 Heritage deal.
“You have shared your belief that the facts and circumstances surrounding the above transaction need thorough investigation so that the people of Florida are assured that this, and transactions like it, are in the best interest of Floridians,” Gaetz wrote.
House Speaker Will Weatherford, R-Wesley Chapel, had previously directed House Regulatory Affairs Chairman Doug Holder, R-Venice, to have his committee review the laws governing Citizens in response to the Heritage deal.
When asked for comment Thursday, a Citizens spokesman referred to a letter that Citizens President and CEO Barry Gilway sent to the insurer’s Board of Governors on Tuesday that highlighted recent efforts by the agency to tighten travel expense rules, impose stricter disciplinary guidelines and reduce the overall number of policies.
“These are achievements of which you can be proud as they could not have been made without the strong support of the Citizens board,” Gilway wrote. “Unfortunately, however, our successes sometimes have been overshadowed by the fact that Citizens senior staff and I have not always communicated our plans to you in a sufficiently timely and effective manner.”
Gilway has called the Heritage deal “unique.” Meanwhile, Citizens Chairman Carlos Lacasa has said the policy takeout is “an appropriate use of our capital.”
Usually takeouts, approved by the Florida Office of Insurance Regulation, occur in November and December. But because the Heritage takeout was approved just prior to the start of the hurricane season, the financial package was included and Citizens board approval was required.
The money is intended to provide an immediate reserve for Heritage. That would help the company get through hurricane season, as it has not had months to collect premiums on the policies.
Meanwhile, Democrats have questioned $110,000 in contributions made by Heritage to the “Let’s Get to Work” political committee, which is backing Gov. Rick Scott’s 2014 re-election effort.
When asked Tuesday about the Heritage deal, Scott, who has been a critic of salary increases and travel expenses at Citizens, said the state-backed insurer needs to “constantly” find ways to downsize.
“My goal with Citizens is, you know, is to make them the insurance company of last resort,” Scott said.
He added that the eight-member board, of which he appoints two, needs to “make sure they do the right thing and they need to vet all these projects.”
Adam Hollingsworth, Scott’s chief of staff, has questioned the decision-making by Citizens as “tone deaf in earning public confidence.”
Under the terms of the deal, Heritage is limited in how much it can raise rates on the acquired policies for three years. It cannot exceed 10 percent annual increases that apply to existing Citizens policies. Heritage must also increase its own assets by $10 million, to $110 million.
The Florida Office of Insurance Regulation issued a consent order for the depopulation deal on May 17.
Last week, Scott signed into law changes at Citizens Property that include a series of steps aimed at reducing the number of homeowners getting coverage from Citizens, such as setting up what is described as a “clearinghouse” where private insurers could intercept policies that otherwise would wind up with Citizens.
The bill (SB 1770) would also require Scott and the Cabinet to appoint an inspector general for the beleaguered, state-backed insurer.