Many Florida residents are understandably confused by their state’s tumultuous property insurance market.
One of them appears to be Gov. Ron DeSantis, who has incorrectly warned several times that the state-backed insurance program, with 1.2 million policies and $17.8 billion in reserves, is “not solvent.”
The Republican’s misstatements helped trigger a U.S. Senate investigation and have been repeated by news outlets as Florida residents struggle to maintain property coverage in a volatile market with the highest average premiums in the nation.
The governor has stated at least three times since late 2022 that Florida Citizens Property Insurance Corp. is “not solvent,” most recently in a Feb. 28 appearance on CNBC. Some political analysts speculate that DeSantis is trying to influence the Florida Legislature against expanding the program.
Florida Citizens’ financial reports, made public in December, show a $5 billion surplus at the end of 2023 and project a $6.3 billion surplus at the end of 2024. Additional financial backing from state funding, along with Citizens’ taxation authority and other sources, brings the insurer’s total reserves for paying claims to nearly $18 billion, the report shows.
DeSantis’ deputy press secretary Julia Friedland acknowledged to E&E News that Citizens has bottomless financial capacity, derived from its ability to impose fees on nearly every insurance policyholder in Florida, from motorists to homeowners, including millions of people who are not Citizens customers.
“Citizens is structured so that it will always have the ability to pay claims,” Friedland said in an email Wednesday.
But noting the enormous surge in Citizens’ policy count, which began months after DeSantis took office in 2019, Frieldland said, “Citizens was never meant to house as many policies as it currently does, therefore at its current growth rate, Governor DeSantis is correct.” Frieldland did not explain why DeSantis calls the program “not solvent.”
“Not solvent” means Citizens would be unable to pay all of its claims and other expenses.
Created by state law and run by political appointees, Citizens is Florida’s so-called insurer of last resort and is required to sell property coverage to any resident who cannot buy a policy from a private insurer. Most states have similar state-chartered insurers.
As traditional insurance companies in Florida have become insolvent or withdrawn from the state, Citizens has become the state’s largest property insurer and an essential component of Florida’s $1.4 trillion economy. Citizens has grown to provide nearly 20 percent of Florida’s property insurance.
DeSantis’ issued his most detailed warning about Citizens at a March 17, 2023, news conference while discussing Florida’s recovery from the devastation caused by Hurricane Ian.
“Citizens has not been solvent,” DeSantis told reporters in heavily damaged Fort Myers. “If you did have a major, major hurricane hit with a lot of Citizens property holders, it would not have enough to pay out.”
DeSantis’ comments about unpaid claims was a sharp reversal from remarks he made months earlier after Hurricane Ian caused billions of dollars of damage as one of Florida’s most destructive storms.
“Citizens, I think right now they’re between $6 [billion] and $7 billion of surplus,” DeSantis said during a hurricane update on Sept. 28, 2022. “Their modeling, based on paying out a lot of money in claims for this, was that they would still have between $4 [billion] and $5 billion in surplus.”
“For Citizens, they feel very strongly that they’re going to be able to handle this and still have pretty significant reserves,” DeSantis added.
DeSantis’ statements about insolvency have drawn little notice in Florida. But in Washington, Senate Budget Chair Sheldon Whitehouse (D-R.I.) referred to them when launching an investigation into Citizens and whether Florida would seek a federal bailout for the program.
In a Nov. 30 letter to Florida officials including DeSantis, Whitehouse quoted verbatim from the governor’s warning eight months earlier that Citizens would not be able to pay claims.
“In light of the state’s acknowledgment of Citizens’ potential insolvency,” Whitehouse wrote, the Budget Committee “is concerned that Citizens and the State of Florida would turn to the federal government to bail them out.”
Citizens CEO Timothy Cerio replied to Whitehouse on Dec. 15 in a letter that undercut DeSantis’ assertions about the insurer’s financial health.
Whitehouse’s concern about Citizens’ solvency, Cerio wrote, shows “a fundamental misunderstanding” of how Citizens operates and of its ability to pay insurance claims.
“As Florida’s insurer of last resort, Citizens is structured so that it will always be able to protect its policyholders and pay claims,” Cerio wrote, ignoring Whitehouse’s questions and document requests.
Cerio repeated that assertion in an email to E&E News on Wednesday. But he did not challenge DeSantis’ misstatements and said Citizens faces financial trouble because its premiums are too low.
“Citizens’ rates are currently actuarially unsound,” Cerio said, noting that state law restricted Citizens from raising average premiums by more than 13 percent. Citizens says its premiums are 55 percent below their proper level and, in some areas, 40 percent below rates charged by insurance companies.
A Whitehouse spokesperson didn’t respond to a request for comment.
Mark Friedlander, a spokesperson for the industry-backed Insurance Information Institute, said that DeSantis’ comments about solvency “may have been reacting to” an effort by some state legislators to vastly expand Citizens. The legislation has gone nowhere.
On Dec. 1, 2022, just before state lawmakers convened a special session initiated by DeSantis to address property insurance, the governor issued a warning about Citizens going “belly up” after noting that “some people say everyone should just go on [Citizens].”
Friedlander said Citizens is “very strong financially” and “can never go insolvent like a private insurer.”
DeSantis’ warnings have come as Citizens’ board, led by DeSantis appointee Carlos Beruff, has tried to improve its finances by shifting policyholders to private insurers and raising its premiums.
The number of Citizens’ policies dropped to 1.17 million in January from 1.41 million in September. The decline came after Citizens’ policy count shot up from 420,000 in early 2019, which raised concerns that private insurers would no longer cover property in parts of Florida that are vulnerable to climate change and intensifying hurricanes.
DeSantis and the Florida Legislature approved new laws aimed at encouraging insurance companies to operate in Florida.
“You’ve got to have a solvent private market,” DeSantis said in 2022. “You can’t dump everybody on Citizens Property Insurance. It’s not solvent.”
