insurance corporation type non profit industry insurance founded 2002 headquarters tallahassee florida key people barry gilway president & ceo products homeowners insurance revenue 2 766 249 317 parent state of florida website citizensfla.com citizens property insurance corporation citizens was created in 2002 from the merger of two other entities to provide both windstorm coverage and general property insurance for home owners who could not obtain insurance elsewhere . it was established by the florida legislature in section 627.351 6 of florida statutes as a not for profit insurer of last resort headquartered in tallahassee florida and quickly became the largest insurer in the state . 1 the company has no connection to louisiana citizens property insurance corporation the equivalent entity in louisiana or several similarly named for profit subsidiaries in the hanover insurance group . contents 1 history 1.1 catastrophe 1.2 post andrew 1.3 high activity 1.4 legislation 2 current situation 2.1 takeout policies 2.2 model change 3 see also 4 references 5 external links history edit catastrophe edit hurricane andrew in 1992 was the costliest storm the united states had experienced with 26.5 billion in damage . it took a huge bite out of the reserves for claims held by 30 insurance companies doing business in florida . eleven insurance companies were bankrupted while others stopped writing or renewing property insurance policies in the state . 2 those that remained raised premiums and deductibles across the board and limited the number of high risk policies they wrote . almost 1 million coastal homeowners were unable to find any company willing to insure their homes so the florida legislature authorized the formation of the florida residential property and casualty joint underwriting association frpcjua and the florida windstorm underwriting association fwua as the insurers of last resort . 3 the florida hurricane catastrophe fund was also created and managed by the state as a resource for florida consumers and insurers . it is funded by assessments to every property insurance policy in the state . 4 post andrew edit hurricane damage between 1992 and 2003 was relatively manageable with none or one major hurricane each year except 1998 which had two . during that time new insurance companies were started and existing carriers began writing policies again . by 1999 florida insurance commissioner bill nelson stated that frpcjua and fwua were close to shifting most of their 711 000 policies to private insurers . 2 in 2002 the florida legislature passed legislation to merge the florida residential property and casualty joint underwriting association frpcjua and the florida windstorm underwriting association fwua . this resulted in the creation of citizens property insurance corporation citizens whose goal is to more efficiently and effectively provide insurance to and serve the needs of home owners in high risk areas and others who can not find coverage in the open private insurance market . high activity edit there were four major storms in 2004 that made landfall in florida with total damages exceeding 57 billion . the following year brought five major storms including katrina the most expensive atlantic hurricane of all time . 5 once again several companies pulled out of the florida market due to an extraordinary number of hurricane and new sinkhole related claims . citizens became not just the insurer of last resort but the insurer of only resort for many floridians . as of 2005 florida owed almost 5 billion which would be recovered through insurance policy assessments . 6 the cost of insurance and its availability became an important hot button issue in florida especially in the 2006 elections . 3 7 8 through 2006 citizens insurance charged its customers the highest rate approved by the florida office of insurance regulation to avoid competing with private carriers . insurance agents were prohibited from writing policies through citizens if there was a private not surplus lines carrier that would write the risk . if a qualified insurance company was willing to take a group of policies citizens insurance would transfer them to that company and cancel coverage . customers had no recourse . legislation edit florida senate bill 2498 known as the glitch bill was signed into law by governor crist on june 11 2007 . this legislation permitted agents to write a citizens policy for customers if the premium for a comparable policy offered by a private carrier was 15 % instead of 25 % more expensive . customers were also allowed to stay with citizens insurance if they were notified that their policy was being assigned to a private carrier . 9 after 2010 eight global insurance carriers including state farm entered or re entered the florida market . while the cost of reinsurance fell by 10 % in 2010 and was expected to decrease more in 2011 the cost of insurance to consumers remained the same . 10 current situation edit in 2001 state farm and renaissance jointly formed davinci reinsurance ltd. in bermuda which covered more than 3.5 million florida homes in 2010 . that same year japan based tokio millennium re ltd. became an approved florida reinsurance vendor . 10 as of 2011 citizens had cash and investment totaling 11.3 billion and 1.3 million policyholders . 11 the florida council of 100 published a position paper in 2010 entitled into the storm framing florida s looming property insurance crisis . chief among problems identified was that citizens insurance was undercapitalized and charges rates that are not actuarially sound . 6 the study also found that low risk property owners were subsidizing high risk policies . they concluded that rates must be based on risk factors including geographical location age of structure and construction type . florida house bill 1495 passed in 2009 allows citizens to raise rates gradually over five years to become actuarially sound . this was intended to shift the risk from taxpayers to the private sector . 6 in the spring of 2012 florida governor rick scott stated in a survey with the florida council of 100 that citizens insurance had 504.8 billion in risk and just 6.1 billion in cash reserves . politifact florida a fact checker of the tampa bay times and miami herald researched scott s claims . they concluded that while the company did have 500 billion in exposure storms would have to damage or destroy every citizens insured home in all 67 florida counties . a century storm with a 1 % chance of occurring in any year would generate no more than 21 billion in claims . 12 regarding the resources available to pay claims the citizen s own website states that their claims paying ability is 19.5 billion . 13 there is a 1.5 billion disparity prompting the governor to order citizens to reduce its risk . barry gilway was hired on june 18 2012 as president and chief executive officer of citizens property insurance corporation 14 replacing tom grady . 15 with 42 years of experience in the insurance industry he has a reputation as a turnaround specialist . 16 he was keenly aware that his first priority was to shrink the number of citizens policies . throughout 2012 citizens asked 174 000 of its nearly 1.4 million policyholders to move their policies to five private insurers . approximately 25 000 of that group chose to remain with citizens 17 18 but florida s consumer insurance advocate robin smith westcott warned that for the consumer there really isn t enough information . 19 the state determined that those five private insurers were financially sound and able to absorb more customers but issues such as higher premiums customer responsiveness and number of consumer complaints must be determined by the policyholder . florida law gives the consumer 30 days from notification to decline their policy transfer before it is assumed by a private firm . 19 on february 8 2013 senator jeff brandes filed florida senate bill 724 a comprehensive bill to overhaul florida property insurance law 20 to avoid new hurricane taxes which would be necessary if another catastrophic hurricane ravaged the state . the proposal is unpopular among many citizens customers because it would mandate more rate increases to what they consider to be already high premiums . a similar bill was defeated in 2012 . however businessman and former us representative tom feeney commented it is unfair to continue to require 77 percent of florida homeowners to subsidize citizens policies in addition to 100 percent of businesses charities religious institutions renters automobile policyholders local governments and school boards . 21 the bill did not make it out of the senate banking and insurance committee before the legislature adjourned in may 2013 . 22 takeout policies edit in an effort to encourage more private companies to acquire homeowners policies serviced by citizens known as takeout policies florida s office of insurance regulation oir was authorized to provide monetary incentives based on the number of citizens policies acquired . in may 2013 just three of the eight members of the citizens board of governors approved a deal 23 in which heritage property and casualty insurance formed in 2012 was offered 52 million to take over 60 000 accounts 867 per policy . florida cfo jeff atwater admitted that heritage did not have the financial strength to take over the policies without the incentive but citizen s president barry gilway insisted that heritage was one of the most well capitalized in florida . 24 in march 2013 while negotiations were in progress heritage made a 110 000 donation to the re election campaign of governor scott . a spokesman for the governor stated that the citizens deal was not influenced by the governor . 24 state leaders criticized the deal as corporate welfare for a politically connected startup . 24 former chief financial officer of florida alex sink criticized the transaction noting that florida law limited the incentive to 100 per policy . she was also concerned that heritage s reinsurance may not contain full risk transfer . 23 new insurance companies in florida must be approved by the office of insurance regulation oir which reviews the firm s business plan projections and financial condition . the judgment of the oir has been questioned because six of the 18 companies licensed to write takeout policies between 2007 and 2011 failed even though florida had no major hurricanes during that time frame . florida taxpayers were forced to cover 400 million in losses . 25 despite concerns about the oir state regulators have approved six property insurers to remove up to 151 000 policies from state run citizens property insurance corp. in february 2014 . ... florida s office of insurance regulation last month approved first community insurance co. to take out as many as 51 249 citizens policies while safepoint insurance co. may remove up to 40 000 policies . elements property insurance co. and heritage property casualty insurance co. each have been approved for up to 20 000 policies . southern fidelity insurance co. and southern fidelity property & casualty can remove 10 000 each . private insurers have taken out more than 312 000 citizens policies this year . citizens president barry gilway has said the goal is to trim citizens down to about 800 000 policies . 26 as of april 2014 citizen policies fell below one million to 940 000 . cash reserves totaled 7.6 billion a record . 27 model change edit since the 2005 pull back by insurance giants allstate state farm etc. small in state companies have been taking a larger share of policies . these start ups have not followed the traditional insurance model by accumulating cash reserves to cover expenses in high claim years . instead they pay as much as half of the policy premium for reinsurance to offshore companies to cover claims . in the seven years since the last major florida hurricane profits have risen but many small companies shifted that money into affiliated businesses