As private insurers flee, Florida's lead provides direction.
By Tom Zucco, Times Staff Writer
Published June 9, 2007
With the hurricane season under way, more than a dozen of America's coastal states are confronting a dramatic new chain of events that Floridians have known about for years.
As private insurance companies shed customers along the coast, state-backed insurers of last resort are filling the void, shifting the financial risk from the insurance companies to the broader public.
The risk is substantial. It has grown by more than half a trillion dollars nationwide in the last 17 years, according to a report Friday from the Insurance Information Institute, an industry trade group.
Private insurers fleeing the coast and being replaced by a state-backed company is a fact of life in Florida, where Citizens Property Insurance Corp. insures nearly a quarter of all the homes in the state. But smaller versions of Citizens have popped up from Texas to Massachusetts, the report says, and they are growing quickly.
North Carolina's state-backed windstorm plan saw its exposure and policy count more than double between 2003 and 2006, the report says. The exposure for all state-backed companies has risen to more than $600-billion today from $54.7-billion in 1990.
Unfortunately for Florida, $452.6-billion of that total risk belongs to Citizens.
Dr. Robert Hartwig, the Insurance Institute's president and chief economist, said shifting the risk to state-backed companies from private entities places "an enormous financial burden" on the state-run companies.
"In Florida, where the state-run insurer is no longer operated purely as a market of last resort, the result is reduced competition, and that will continue to be the case in the future," Hartwig said, "But in other states, where the state-run insurer is relatively small, it acts as a relief valve and enhances competition."
That Citizens has become Florida's largest property insurer and in most cases, the only insurer of coastal property, is intentional, Hartwig said. "... Private insurers have made a determination that given the current regulatory environment, including the inability to charge a risk-appropriate premium, they simply can't write there."
But Citizens officials insist competition is not a factor.
"People can't come to us unless their policies are at least 15 percent higher than ours," said Citizens spokesman Rocky Scott. "... The issue is that we have 1.3-million people who could not get insurance anywhere else."
Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.
Government insurers
Below are the five states with the greatest number of property insurance policies from state-backed insurers of last resort. Florida's numbers are current as of this week; the numbers for the remaining states are as of January 2006.
State | Policies | Exposure |
| 1. Florida | 1, 306, 000 | $452B |
| 2. Calif. | 215, 000 | $48B |
| 3. Mass. | 193, 000 | $54B |
| 4. La. | 134, 000 | $15B |
| 5. Texas | 121, 000 | $14B |