Is Florida’s State-Run Insurance Company in Trouble?

Citizens Property Insurance Corp. insures 1.3 million homes and businesses in Florida, making it Florida’s biggest home insurer. In an effort to protect itself during the 2011 storm and hurricane season, the insurance giant recently raised $900 million in one of this year’s largest municipal bond offerings. Florida hasn’t been hit by a major storm or hurricane since the litany of hurricanes in 2005 starting with Arlene and ending with Wilma. However, with scientists at Colorado State University predicting a 34 percent chance of Florida being hit by a major storm in 2011, Citizens isn’t taking any chances at being caught empty-handed with $406 billion in total exposure in the state of Florida.

As a state-run property insurer, Citizens offers homeowners insurance to those who cannot find adequate and affordable insurance elsewhere. While most private insurance companies have fled the state in the last decade complaining of laws and regulations that prohibit them from raising rates in high risk hurricane prone areas, state-run insurers like Citizens have swelled in size to meet the demand. Citizens has been Florida’s biggest insurer since 2006 and is one of the nation’s top 10 largest homeowners’ insurers.

The question is: Is $900 million enough if the worst-case scenario plays out? The $900 million bond offering brings the amount Citizens has readily available to pay claims to $16 billion. That would cover damage on a storm similar to Hurricane Andrew in 1992. However, a direct hit by a Category 5 storm to Miami, or back-to-back hurricanes in other densely populated areas could bleed Citizens dry. Citizens CFO Sharon Binnum recognizes that the state-run insurance company’s rates, “are not yet adequate for the type of risk we are covering.”

Florida homeowners are advised to review their homeowners policies to ensure they have adequate hurricane policy coverage. In the event of a dispute with an insurance company, an experienced attorney can assist with rejected or disputed insurance claims.