TALLAHASSEE (CBSMiami/NSF) — The new head of Citizens Property Insurance Corp. made his debut before the governor and Cabinet on Tuesday, saying the state-backed insurer needs to raise rates but conceded that the issue is a political hornet’s nest.
After telling the governor and Cabinet that inadequate premiums were the “1,000 pound alligator in the room,” Citizens President and CEO Barry Gilway met with reporters and said the state’s 10 percent cap on Citizens’ premium increases would not result in more private company participation in Florida property insurance market.
Citizens’ is providing “$50 worth of insurance for $30,” thanks in large part to legislation that has capped premium increases to 10 percent a year, Gilway said after the meeting, the first since he was chosen by the Citizens Board of Governors last week to run the agency that now insures about one in four policyholders in the state.
Despite the need for higher rates, Gilway said he is becoming quickly attuned to the political considerations that have made it difficult for his predecessors to raise rates to actuarially sound levels.
A majority of Florida residents live within miles of the coast, a fact that led in part to lawmakers freezing, and then capping rates on Citizens policies following the 2004 and 2005 hurricane seasons.
Recent attempts to raise rates have met with stiff resistance, with critics saying the state’s economic recovery will suffer if rates go up too rapidly.
Over the past few days, Gilway has met with Gov. Rick Scott, Florida Agriculture Commissioner Adam Putnam and others who have briefed him on the level of emotions surrounding rates.
“It’s going to have to be a very fine balancing act, in my opinion, related to how we address them, but ultimately, my position is that we have to address them,” Gilway said.
On the job for a week, the former private insurance-industry executive said the number of Citizens policies could be dramatically reduced from the nearly 1.5 million now under its umbrella, but it would take time for him to work up detailed proposals.
What is clear is that Florida must tap into the global market to draw private companies willing to insure some of the state’s most hurricane prone homes and businesses. To do that, however, they have to be able to make money.
“The only way you are going to attract private insurers is if they believe they have a reasonable chance of generating a return on capital,” Gilway said “It’s not rocket science.”
Gilway said he spent the week meeting with top state officials and stakeholders from all sides of the multi-billion dollar issue, including at a town hall meeting in Miami where he heard the frustrations of policyholders from Citizens and private companies.
Speaking after the Cabinet meeting Tuesday, Scott and Chief Financial Officer Jeff Atwater offered their support but expressed concerns that cash strapped consumers can’t afford too much of a hit.
“You can’t make the big, bold moves that some people in the private markets may wish to make,” Atwater said. “You need to let time take you there on an appropriate glide path.”
Meeting with reporters, the governor said Citizens customers will be socked by huge assessments in the event of a major storm, a message he believes is not being sent.
“The first thing we ought to be doing is that we need to let people know what they are buying,” Scott said. “It’s just a down payment in case there is a hurricane. They need to know that.”
“The News Service of Florida contributed to this report.”