Not a month seems to pass without their being some discussion of the potential for accelerated portfolio and exposure growth for Florida’s residual market insurer, Citizens Property Insurance Corporation.
This time it’s the Florida Citizens policy cap, a ceiling limit that prevents Citizens from assuming higher-value property insurance policies at the moment.
But given all the challenges that Florida’s property insurance market is facing, lawmakers and regulators are now debating lifting the cap, which could open up Citizens portfolio to additional policies and risk.
Florida Citizens is not allowed to provide a replacement cost coverage higher than $700,000 at the moment, aside from Miami-Dade county where the cap is $1 million.
With insurer failures continuing in Florida and other carriers halting new cover, or elevating pricing significantly, there are now homeowners needing higher policy limits that are turning to Citizens as the insurer of last resort.
Regulators are now exploring whether the higher $1 million policy cap limit should be set more broadly, with competition available a key factor.
If competition is limited in counties, then perhaps Citizens should be there as an alternative, even for higher-value properties and owners requiring higher policy limits, is the thinking.
Florida Citizens used to have a cap of $2 million, but that was lowered and has been a driver of shrinking its portfolio over the last decade.
However, as we’ve explained recently, Florida Citizens is already destined for growth, due to the dysfunctional Florida insurance market and other factors like higher reinsurance pricing.
The upshot of any move to raise the policy limit cap for Florida Citizens will be to attract even more policies to it and increase the exposure it holds.
As a result, Florida Citizens would need more financing to support this increased risk, with reinsurance a key lever, although at current prices the insurer is perhaps more likely to turn to other financing sources.
The problem Citizens may face next year is that, absent meaningful legislative reform, the next reinsurance renewals may be just as challenging as the recent one, making it hard for the insurer to secure the coverage it needs, especially if it is out in the market looking for more.
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