The chairman of the U.S. Senate Budget Committee has intensified his request for financial data regarding Florida’s Citizens Property Insurance Corp., capitalizing on a remark made by Governor Ron DeSantis.
Sen. Sheldon Whitehouse, D-RI, wrote a letter to Tim Cerio, the president and CEO of Citizens, on Monday. In it, Whitehouse noted a recent statement made by Rep. Ron DeSantis stating that Citizens is “not solvent” and complained that Cerio had not adequately responded to inquiries he had made in November.
In his letter on Monday, Whitehouse stated, “The bottom line is that, according to Florida’s own governor, Citizens faces a major solvency crisis and would be unable to pay out all claims and expenses should a major storm hit Florida.” “This would therefore increase the possibility that Florida would turn to the federal government for a bailout, further depleting federal funds.”
In light of the Senate committee’s growing concerns about the effects of a spiraling crisis in insurance availability and affordability on the economy as a whole, the committee said in a news release on Tuesday that its investigation into Citizens “built on two previous, still ongoing investigations into the insurance industry’s response to climate change.”
Although Citizens was initially intended to be an insurer of last resort, financial difficulties in the private market have caused it to expand in recent years, making it the state’s largest property insurer. Its website states that as of Friday, it has 1.18 million policies.
Long-standing efforts by state representatives to cut back on Citizens’ policies have been motivated, at least in part, by worries about the financial consequences of the state being struck by one or more powerful storms.
When DeSantis said that Citizens is “not solvent” in a CNBC interview last month, it created a commotion.
To settle claims, citizens have access to reinsurance coverage and billions of dollars in cash. In order to settle claims, it may also use “assessments” to obtain funds from policyholders throughout the state, including those who are not citizens.
Whitehouse hinted that Citizens would look to the federal government for a bailout if it suffered catastrophic losses in both its letter from Monday and its November statement.
“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 in the event that losses exceed its ability to pay,” Whitehouse’s Monday letter stated. “I noted that, if Citizens were unable to cover its losses, it is entirely possible that state leaders might ask the federal government for a bailout. Accordingly, I requested information and documents responsive to seven specific questions about Citizens’ storm exposure, risk modeling, possible need for a federal bailout, and discussions with relevant state leaders about those subjects.”
In addition to publicly refuting Whitehouse’s claims, Cerio also replied in a letter in December. Cerio warned that Whitehouse’s November letter might send Citizens policyholders and Floridians into “unwarranted panic” during a meeting of the Citizens Board of Governors in December.
Cerio failed to “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,” according to a letter written by Whitehouse on Monday.
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