Florida’s state-run Citizens Property Insurance reported a loss of $27 million last year, its first since 2005.
“The loss comes despite minimal damage from Hurricane Matthew, the first major hurricane to impact Florida in 11 years,” the insurer said in a statement.
Local media outlet Palm Beach Post reported that the loss comes on the back of $974 million in premium collections. However, Citizens reported claim losses of $346 million and associated claim expenses of $167 million.
A confluence of factors has contributed to the loss, the Post reported. Among them is the continued downsizing of the Citizens client base, as it has actively shifted its policyholders to private insurers. The insurer reduced its policyholders to 450,000 from 1.5 million over the span of a few years.
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This situation is exacerbated by the significant sums it pays for reinsurance, despite the drop in risk exposure. The downsizing also resulted in fewer premium collections, which was no longer proportionate to the big dollars it spends for offshore reinsurance coverage, the report said.
The state insurer also said that the rampant abuse of the assignment of insurance benefits is hounding its operations. Non-catastrophe claims are ballooning because of litigation by third party providers, such as contractors repairing roofs and cleaning up water damage.
“The tragedy here is that the ultimate loser is the policyholder. Higher insurance costs simply make it more difficult for more Floridians to own a home,” Citizens board chairman Chris Gardner told the Post.
Furthermore, the insurer is unable to charge competitive rates because state law limits its rate increases to 10% per year, lower than the rate allowed to private insurance firms. Its relatively lower rates have also made it difficult for Citizens to continue shifting its policyholders to private providers, the report said.
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