Lawmakers and policyholder advocates have panned a proposal by Citizens Property Insurance to allow private insurers to borrow up to $50 million in exchange for taking over Citizens policies. Citizens officials defended the plan to set aside $350 million of the company’s surplus cash to dole out to private insurers but agreed to hire an outside financial consulting firm to assist with the roll out.
What Citizens Property Insurance learned form the firm it hired, Goldman Sachs, apprently wasn't good.
Citizens President Barry Gilway told members of the company's Board of Governors that for now he won't be asking for them to sign off on the surplus note proposal after all because he doesn't think any insurance companies will want to participate.
“I seriously doubt even if the surplus note program was approved by this committee and the board that we’d have any real takers," Gilway said today, "takers that meet the financial requirements that we believe would be appropriate to make a $50 million or $25 million loan to.”
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Goldman Sachs will still complete its study, and the results are expected next month, Gilway. But that information will be used to inform Citizens as it moves forward with other ideas to reduce the number of policyholders, currently at 1.4 million.
He presented a brand new proposal today. Gilway wants to create a "clearinghouse" to help ensure that people purchasing property insurance have access to all the policies they are eligible for, in hopes that other companies rank higher than Citizens. Right now, because many agents only have access to a handful of companies, homeowners are chosing Citizens despite having other options they don't know about.
If the clearinghouse is approved, it should decrease the number of people purchasing or renewing policies for Citizens, Gilway said. That is because they would have new access to policies with rates comparable to Citizens and will be required or encouraged to send their business there.
“Technology did not exist a year ago, two yeas ago to do this," Gilway said.
The board's Depopulation Committee authorized Gilway to move forward on this proposal, and he will make a presentation to the full board next month. There are still legal hurdles that must be navigated, and insurance agents will likely question how the clearinghouse will affect them. Plus, Citizens will have to come up with a program that makes private insurers want to sign on.
“We’re going to encourage as many carriers as possible," Gilway said. "The more carriers that participate...the more effective that this is going to be.”
Sean Shaw, founder of the Policyholders of Florida who works for a company that represents policyholders, applauded both of these new developments.
"The surplus lines program seems to be off the table, and that's great news," Shaw said via email. "This looked like a bad deal for policyholders, and we shouldn't be handing out cash without full vetting by the Legislature. I'm proud that a handful of advocates and lawmakers made sure this proposal was actually studied."
He said the new clearinghouse idea "makes sense."
"It gives policyholders and the private insurance companies a better platform for connecting, and at the same time keeps more policyholders from being forced into Citizens based solely on agent authority," Shaw said.