From the October 20th Hearing on Citizens Insurance Company rate filings conducted by the Florida Office of Insurance Regulation (OIR)

Good afternoon.  My name is Barney Bishop and I’m the CEO for Associated Industries of Florida and for the last five years we have recommended the appropriate actions to revive Florida’s property and casualty insurance market. 

Fortunately, the Florida legislature finally listened this past session and passed a law that requires beginning after January 1st, 2010, that “the corporation SHALL implement a rate increase each year which does not exceed 10% for any single policy issued...”  Though Citizen’s chairman James Malone tried to get the Citizens Board to do just that – increase all policies by 10%, he was ultimately unsuccessful and instead the full board decided to let some insureds policies go up, but also allowed some insureds policies to go down even further.  This is absolutely astonishing to those of us that follow this closely because Citizens own actuaries have testified that it would take 50% increases to get Citizen policyholders to where they should be – that is, a place where the premiums produced would allow Citizens to pay for its losses.  If OIR accepts the filings as presented by Citizens, then the state is going to continue its reliance on “hurricane taxes” to fund Citizens losses because the state will not implement a reasonable glide path for Citizens insureds to pay appropriate rates.

Let’s go through the numbers.  The current exposure of Citizens is $413 billion.  The cost of a 1-in-100 year storm is projected to be $22.5 billion.  Citizens’ surplus is about $4 billion.  That leaves potential unfunded losses in the amount of $18.5 billion which the state borrow monies  to cover and impose “hurricane taxes” of which 40% will be borne by the state’s business community.  In short, we know the right thing to do – increase rates by 10% per year for the next 5 years.  Citizens’ rate filing makes no sense to me, to the rest of the business community or to any insurance experts – we are all dumbfounded by it.

So, the message Citizens is  sending to Citizens insureds is like the song: “Don’t Worry, Be Happy” – you don’t have to pay your fair share of the cost of insuring your home because we are going to make everyone else in the state pay “hurricane taxes” to subsidize you so you can pay less! 

The choices are crystal clear.  You can decide to allow all Citizens insureds to pay 10% more, which will generate $211.5 million more in revenue for a cash-starved, bond-challenged Citizens, or you can tell the rest of the state that they will have to pick up the cost.

Thank you.