Citizens will get experts to review loan program
Published: Tuesday, October 9, 2012 at 7:51 p.m.
Last Modified: Tuesday, October 9, 2012 at 7:51 p.m.
Under pressure from some top state leaders, Citizens Property Insurance officials voted Tuesday to have outside financial experts review their controversial plan to lend $350 million to private insurers that take Citizens policies.
The state-run insurer agreed to hire a financial firm - likely the investment bank Goldman Sachs - to scrutinize the loan program before it receives final approval.
Removing the policies would reduce Citizens' overall liability after a major disaster, but depleting reserves would also hurt the ability of Florida's largest property insurance company to pay claims.
State officials including the incoming Florida House speaker and the chief financial officer had urged Citizens' board in recent days to proceed cautiously with the loan program.
Citizens' officials made it clear Tuesday that they still hope to implement the plan before the next hurricane season, with a final vote likely in December.
Tuesday's action was taken by a subcommittee of the full Citizens board.
Company board member Chris Gardner said he wants to address concerns raised in recent days by elected leaders - among them Rep. Will Weatherford, who will become House speaker later this year, and Florida Chief Financial Officer Jeff Atwater - without missing "the window of opportunity" to move policies out of Citizens before next summer.
With the loan program predicted to shift upward of 350,000 policies out of Citizens, Gardner said it could be a powerful way to limit potential taxes on insurance policies throughout Florida if Citizens cannot cover claims after a major disaster.
"If we delay making a final decision in the next 30 to 60 days, we will miss the chance to protect Florida's policyholders from over $1 billion in assessments," he said.
But Gardner added that going ahead without addressing the concerns of Atwater and Weatherford - they both urged Citizens' board to act with caution - would "risk losing the public's confidence."
Critics have derided the loan program as a giveaway of money that should be available for Citizens' customers after a storm. The loans are to be repaid over 20 years, but Citizens could lose the sum entirely if the private companies fail, as a number of Florida insurers have done in recent years.
Additionally, taxes are levied on insurance policies statewide to pay the claims of private insurers that fail. So shifting customers out of the state-run insurer does not reduce the assessment risk if the policies are moved to weak private companies.