The chairman of the United States Senate Budget Committee has escalated a request for financial information about Florida’s Citizens Property Insurance Corp. in response to a statement made by Governor Ron DeSantis.
Sen. Sheldon Whitehouse, D-R.I., wrote a letter to Citizens President and CEO Tim Cerio on Monday, citing a recent DeSantis statement that Citizens is “not solvent” and claiming Cerio had not adequately answered problems posed by Whitehouse in November.
“The bottom line is that, according to Florida’s governor, Citizens faces a major solvency crisis and would be unable to pay out all claims and expenses should a major storm hit Florida,” Whitehouse wrote in a letter to lawmakers on Monday. “This would, in turn, create the risk that Florida could seek a bailout from the U.S. government, further tapping into federal resources.”
According to a press release issued Tuesday by the Senate committee, its Citizens investigation “built on two previous, still ongoing investigations into the insurance industry’s response to climate change amid the committee’s growing concerns about the economy-wide harms from a spiraling insurance affordability and availability crisis.”
Citizens was established as a last resort insurer, but it has developed in recent years to become the state’s largest property insurer as a result of financial difficulties in the private sector. According to its website, there were 1.18 million insurance in place as of Friday.
State officials have long sought to minimize the number of policies in Citizens, citing financial difficulties if the state is hit by a severe disaster or many hurricanes. DeSantis sparked controversy when he stated during a CNBC interview last month that Citizens is “not solvent.”
Citizens can access billions of dollars in cash and reinsurance coverage to pay claims. It could also collect money from policyholders across the state, including non-citizens, through what are known as “assessments” to cover claims.
In November and Monday’s letter, Whitehouse broached the potential of Citizens seeking rescue from the federal government if they suffered catastrophic losses.
“The (November) letter specifically set out my concerns about Florida’s uniquely large and growing exposure to climate-related property losses, Citizens’ rapidly expanding market share, and state law allowing Citizens to levy special assessments on all policyholders if losses exceed its ability to pay,” the letter released on Monday stated.
“I mentioned that if Citizens were unable to cover its losses, state officials may approach the federal government for a bailout. As a result, I sought information and documentation in response to seven specific inquiries about Citizens’ storm exposure, risk modeling, the potential need for a government bailout, and contacts with important state leaders on those topics.”
Cerio reacted with a letter in December and publicly disputed Whitehouse’s claims. During a Citizens Board of Governors meeting in December, Cerio stated that Whitehouse’s November letter could provoke “unwarranted panic” among Citizens policyholders and Florida residents.
“I cannot over-emphasize that the assumptions in the Budget Committee’s letter suggest a fundamental misunderstanding of how Citizens Property Insurance operates, and it under-estimates our claims-paying ability,” Cerio said in a prepared statement.
“And I’m speaking now, and I need to speak to our policyholders so they hear this, Citizens is structured so it will always be able to protect its policyholders and pay claims.”
On Tuesday, citizens did not immediately respond to the new letter.
According to Whitehouse, Cerio did not “address my concerns that should a major storm hit Florida and require exorbitant levies, Florida residents might be unwilling or unable to pay them, leading to further financial risks both to Florida and, possibly, the federal government.”