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Fla.'s largest insurer looks to shrink in size

TALLAHASSEE -- There could be many ways to kick off hurricane season in Florida. You could spend it drawing up your emergency plans, or even stocking up on batteries and flashlights.

But a large crowd gathered in a Tampa hotel on Friday to talk about another big issue associated with the storm season: Property insurance.

Citizens Property Insurance, the state's largest property insurer, billed the event as a "depopulation summit."

That's insurance jargon for saying that the state-created Citizens wants to reduce the number of policyholders it now must cover.

Citizens -- which was started as a backstop for those who can't get insurance coverage elsewhere -- now has 1.45 million policyholders and top officials including Gov. Rick Scott want that number to be a lot lower.

The fear is that a major storm would force Citizens to spend through the billions it now has in reserves and ultimately turn to all Floridians to help pick up the cost. Citizens covers many coastal homeowners as well as those in older homes. If it can't pay off its claims it can place an assessment on most insurance bills to make up the difference.

"Long-term, we've got to spread the risk," Scott said in Miami, where he attended events marking the start of the 2012 hurricane sea

son. "It doesn't make sense to have so much risk for one company."

But how Citizens achieves that goal could impact insurance bills and the fragile economic recovery. It's also a potentially big political issue depending on where you live -- and whether you think insurance is something that the government needs to closely regulate and control.

Those with a stake in what Citizens does next packed into Friday's summit. There were Citizens officials, insurance company executives, insurance lobbyists and lawmakers such as House Speaker Dean Cannon.

Many ideas were tossed out, including changing state law so that residents from other states cannot buy coverage from Citizens. Others suggested tweaks to encourage homeowners to switch policies to other companies.

But it was clear that the biggest debate continues to center on insurance rates and what Citizens should charge its customers.

Currently Citizens by law can't raise rates more than 10 percent a year. But the board that runs Citizens is considering a proposal to raise rates beyond the 10 percent for new customers. Some South Florida lawmakers say that goes against existing law and are prepared to fight the proposal.

Yet private insurers contend they can't provide a viable option to Citizens unless higher rates are charged in Florida.

Bob Ritchie, president and CEO of American Integrity Insurance, named three things that could make Citizens smaller.

"The three things are rates, rates, rates," Ritchie said.

Paresh Patel, CEO for Florida-based insurer Homeowners Choice, told the group that he estimates that 1 million Citizens customers are paying adequate rates, but he asserted that the nearly half-million other customers are paying too little.

"If you really want to depopulate citizens you have to have people come in and say I think I can make money writing those risks," Patel said.

But consumer advocates -- as well as some representatives of the real-estate market -- warn that raising insurance rates could harm real estate sales and the overall economy. Sen. Mike Fasano, R-New Port Richey, expressed skepticism that higher Citizens rates would create more competition. He said in some parts of Florida the state-created carrier "is the only game in town."

"Take into account the impact the decisions you will make on every homeowner who is within Citizens," cautioned Fasano. "...They cannot go anywhere else but Citizens."

Citizens has already taken steps in recent months to eliminate some types of coverage and to reduce credits it gives homeowners who fix their homes to withstand hurricanes. The board could vote on the rate proposal later this summer.

In the meanwhile Cannon had his own property insurance suggestion.

"Let's pray for no hurricanes," he said.

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