State

State-run Citizens Property Insurance Corp. could face billions of dollars’ worth of property damage claims along Florida’s Gulf Coast, where Hurricane Idalia is expected to make landfall on Wednesday.

Citizens’ total exposure trumps other carriers’ by a long shot at $72 billion for the policies in force that it holds in the eight coastal counties anticipated to reach winds greater than 110 mph, according to data reported by the Florida Office of Insurance Regulation.

Citizens has approximately 190,700 policies that include wind coverage in Pinellas, Pasco, Hernando, Citrus, Levy, Dixie, Taylor and Jefferson counties, followed by Castle Key Indemnity Co. with 28,000 policies, which amounts to roughly $9.95 billion in exposure, according to FLOIR data. However, the total exposure of every carrier that holds policies in the area is unknown since many of the state’s largest companies do not report certain information to regulators due to trade secrets exemptions.

The ballooning size of Citizens, meanwhile, has become a widespread concern among industry analysts who say Idalia could have dire financial consequences for the so-called “insurer of last resort” after it was significantly depleted by Hurricane Ian.

Citizens’ surplus — excess funds that are used to pay claims — declined by $1.9 billion to $4.9 billion after the 2022 hurricane season, according to the insurer’s annual report published in February that estimates net probable losses, financing options and potential assessments.

Citizens has around $6 billion in reimbursement through the Florida Hurricane Catastrophe Fund and $5.8 billion of private risk transfer available. Still, it will need to rely on assessments and possibly post-event financing to meet policyholder obligations in the event of a hurricane in 2023, according to the report.

“People would look at those multiple billions and say, ‘Hey, that’s plenty of money, how bad could it be?’ Well, Hurricane Ian came through Southwest Florida last year, and it didn’t hit a populated area, an area where Citizens does not have a huge market concentration, and that cost them $4 billion,” Tampa-based Slide Insurance CEO Bruce Lucas said during a previous interview with the Tampa Bay Business Journal.

Citizens is “one Category 1 hurricane away from being wiped out,” according to Lucas.

Citizens’ vulnerable position is primarily due to the fact it charges rates far lower than the private market, particularly in more risky coastal areas, according to Insurance Information Institute Senior Director Mark Friedlander.

“It’s a very precarious situation for all Florida consumers because the bottom line is they will be on the hook for Citizens claims,” Friedlander said.

State regulators recently denied the insurer’s request to raise rates by around 13% during a hearing on August 22. Even if the Florida Office of Insurance Regulation approved the hike, Citizen’s policies would still be, on average, about 44% below private market rates.

Citizens CEO Tom Cerio outlined how Citizens rates are not actuarily sound for the risk present in Florida during the hearing last week, saying, “The risk of assessments to private market policyholders is exacerbating because of our incredible policy growth.”

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2022 S. Fla. premium volume