Seizing on a comment by Gov. Ron DeSantis, the chairman of the U.S. Senate Budget Committee has ratcheted up a request for financial information about Florida’s Citizens Property Insurance Corp.
U.S. Sen. Sheldon Whitehouse, D-R.I., sent a letter Monday to Citizens President and CEO Tim Cerio that cited a recent DeSantis comment that Citizens is “not solvent” and said Cerio had not fully addressed questions that Whitehouse raised in a November request.
“The bottom line is that, according to Florida’s own governor, Citizens faces a major solvency crisis and would be unable to pay out all claims and expenses should a major storm hit Florida,” Whitehouse wrote in Monday’s letter. “This would, in turn, create the risk that Florida could seek a bailout from the U.S. government, further tapping into federal resources.”
A news release Tuesday from the Senate committee said its probe of Citizens “built on two previous, still ongoing investigations into the insurance industry’s response to climate change amid the committee’s growing concerns about the economy-wide harms from a spiraling insurance affordability and availability crisis.”
Citizens was created as an insurer of last resort, but it has grown in recent years to become the largest property insurer in the state because of financial troubles in the private market. As of Friday, it had 1.18 million policies, according to its website.
State officials have long tried to reduce the number of policies in Citizens, at least in part because of concerns about financial risks if the state gets hit by a major hurricane or multiple hurricanes. DeSantis caused a stir when he said during an interview last month on CNBC that Citizens is “not solvent.”
Citizens has access to billions of dollars in cash and reinsurance coverage to pay claims. It also could collect money from policyholders across the state — including from non-Citizens policyholders — through what are known as “assessments” to pay claims.
In November and in Monday’s letter, Whitehouse raised the possibility that Citizens could turn to the federal government for a bailout if it faced catastrophic losses.
“The (November) letter specifically set out my concerns about Florida’s uniquely large and growing exposure to climate-related property losses, Citizens’ rapidly expanding market share and state law allowing Citizens to levy special assessments on all policyholders in the event that losses exceed its ability to pay,” Whitehouse’s Monday letter said. “I noted that, if Citizens were unable to cover its losses, it is entirely possible that state leaders might ask the federal government for a bailout. Accordingly, I requested information and documents responsive to seven specific questions about Citizens’ storm exposure, risk modeling, possible need for a federal bailout, and discussions with relevant state leaders about those subjects.”
Cerio responded with a letter in December and also pushed back publicly against Whitehouse’s assertions. During a December meeting of the Citizens Board of Governors, Cerio said Whitehouse’s November letter could cause “unwarranted panic” among Citizens policyholders and Floridians.
“I cannot over-emphasize that the assumptions in the Budget Committee’s letter suggest a fundamental misunderstanding of how Citizens Property Insurance operates, and it under-estimates our claims-paying ability,” Cerio said. “And I’m speaking now, and I need to speak to our policyholders so they hear this, Citizens is structured so it will always be able to protect its policyholders and pay claims.”
Citizens did not immediately comment Tuesday about the new letter.
Whitehouse in Monday’s letter said Cerio did not “address my concerns that, should a major storm hit Florida and require exorbitant levies, Florida residents might be unwilling or unable to pay them, leading to further financial risks both to Florida and, possibly, the federal government.”
