Flood waters inundated a neighborhood after Hurricane Milton came ashore on October 10 in Punta Gorda, Florida. The storm made landfall as a Category 3 hurricane in the Siesta Key area of Florida, causing damage and flooding throughout Central Florida. - Joe Raedle/Getty Images
An exodus of national insurance companies from Florida, combined with local private insurers canceling plans, has left many homeowners there with only one option: Citizens Property Insurance Corp.
The state-backed nonprofit home insurance company was set up to be an insurer of last resort for those who can’t find coverage in the private market. With 1.3 million policies in force as of last month, three times as many compared to five years ago, Citizens is by far the largest provider in the state.
But now, with Hurricane Helene and Hurricane Milton both making landfall and devastating homes in Florida within just days of each other, the insurer will almost certainly have to pay out billions of dollars in claims.
Can Citizens stay afloat?
The answer lies in the insurer’s structure — which might be reassuring to policyholders, even if it ultimately leads to higher premiums.
Staying solvent
Florida Gov. Ron DeSantis warned earlier this year that Citizens was “not solvent” and that it can’t function with “millions of people on that because if a storm hits, it’s going to cause problems for the state.”
“Thankfully, Florida avoided the worst-case scenario forecasted with Milton, but that doesn’t change the fact that Citizens is potentially one catastrophic storm or storm season away from insolvency,” Sen. Sheldon Whitehouse, a Democrat from Rhode Island, told CNN in an emailed statement.
“Should claims exceed the insurer’s ability to pay, Citizens has a mechanism to pass its losses on to Florida families, who are already paying sky-high premiums,” said Whitehouse, who chairs the Senate’s Budget Committee and is leading an investigation into Citizens’ viability. “Recouping billions of dollars in losses from Floridians is unlikely to be feasible economically or politically, let alone in time to pay massive claims — hence the Budget Committee concern about possible requests for a federal bailout.”
The only way someone qualifies for insurance from Citizens is if the lowest quote they get from a private insurer is more than 20% greater than the Citizens’ quote. Their property also has to be valued at $700,000 or less unless they are located in Miami-Dade or Monroe counties, where the cap is $1 million.
But while Milton and Helene will undoubtedly squeeze Floridians and the state-backed home insurance provider, the storms won’t cause it to go under.
“Citizens cannot go insolvent like a private insurer,” Mark Friedlander, a spokesperson for the Insurance Information Institute, an industry trade group, told CNN in a statement. Because of the way it is structured, “in a worst-case scenario where its reserves would dwindle due to a high volume of storms claims, Citizens is allowed by state regulations to implement a premium surcharge to its policyholders and other Florida consumers to ensure all claims are paid,” he said.
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