FL: And Now Citizens Reinsurer of Last Resort?

Citizens is the GSE (government sanctioned entity) which was originally set up in 2002 to be the “Insurer of Last Resort” in Florida for homeowners. Originally way back when, Citizens started in the Keys and South Florida after a series of bad hurricanes bankrupted many local Insurers and homes damaged in those hurricanes were no longer insurable the following year(s). It was originally thought that there would never be more than 200,000 home policies insured by Citizens, but, here we are in 2022 and since Irma in 2017, the insured base will more than triple in five years to 1.2 Million covered with “The Insurer of Last Resort.” (And this could escalate if more than 20 Insurance companies soon lose their “A” ratings if/when Demotech (an Insurance ratings agency) downgrades their business.

That said, Citizens might now be entering the “Reinsurance” business, whereby this GSE Reinsures these Insurance Companies which might see their rates downgraded and forcing default with Fannie Mae, Freddie Mac, and other numerous lenders who require an “A” rating for Insurers with whom they will work.

Here’s the latest from yesterday. If you’re trying to get a handle on Florida Insurance woes, read this whole piece. And it is a big piece of the puzzle which shows Florida Housing blowing up while the Governor is crowing about people moving into this supposed business friendly state.

WFLA headline: Gov. DeSantis announces temporary fix for Florida property insurance crisis

by: Mahsa Saeidi

Posted: Jul 27, 2022 / 07:00 PM EDT

Updated: Jul 27, 2022 / 08:16 PM EDT


Okay, Demotech caved to political pressure and did not downgrade 17+ insurers from an “A” rating which many mortgage lenders require homeowners have as Insurance to get a loan. This is temporary. The downgrades will eventually happen:

Under pressure, Demotech’s president Joe Petrelli delayed downgrades “until further notice”, but the question from homeowners is, are insurance companies in financial trouble? A state report released this month seemed to say “maybe”.


If the downgrades happen, people with a mortgage would have to find new coverage. Gov. DeSantis announced a solution that would allow homeowners to keep their policy, for now.

“We can use Citizens Insurance as kind of the reinsurer of last resort,” DeSantis said, referring to a program state regulators created with Citizens Property Insurance, providing reinsurance to troubled companies.

Note: Citizens would have been wiped out after Irma. The state (which means all taxpayers not living dangerously on the water) bailed out Citizens so that claims could be paid. And now it looks like there will be further bailouts of privately owned insurance businesses which might lose their “A” rating, with the State being the Reinsurer of Last Resort."

Crony Capitalism in the Sunshine State. Have tax revenues, will bail out the businessmen behind Insurance.

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from the link: “What happens next? Industry experts believe the state is working to get mortgage companies to accept downgraded companies.”

The companies are downgraded for a reason, but the genius Desantis will pressure the mortgage
companies to accept proof of insurance by insurance companies that have financial issues, in a
weather climate that is almost certainly going to lead to more and more claims being filed
against these insurance policies.

Lol, yeah, that sounds like a plan.

Appreciate you sharing this, PeregrineTrader. I live in Michigan, and people that I know are
always talking about how bad they want to buy a winter home in Florida. I tell them to rent,
it’s financially much safer.

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Joe, just to be safe, if anyone you know is buying real estate in Florida, tell them to take it inland a few miles where the storm surge won’t get them.

Home insurance companies will receive downgrades

Yesterday, while traveling to and from Key West twice, I listened to some excellent pieces from WLRN:

In the first segment, a noted climatologist whose name escaped me as I had to enter a doctor’s office without hearing the entire segment, was quoted as saying (but I’ll parphrase) that if Hurricane Irma had hit Miami/Cutler Ridge etc., the storm surge would have been 9 feet high and gone inland much farther than in the Keys where it washed over us and back out into the Bay.

He estimated 150,000 homeowners would have lost their homes, made unlivable by the surge and Cat 4-Cat 5 wind shear.

He was retelling how just a simple heavy rain flooded downtown Miami and roads in Miami Beach just this past June. He said, “Imagine, hurricane winds in the Cat 4 to Cat 5 range with tornadoes tucked inside, and then add the rains from the hurricane coming at you not for a few hours, but possibly for a day or more. It would have wiped out all travel on US 1 and parts of I-95. Turkey Point Nuclear Reactors would have shut down before the Hurricane would hit. Lucky for us, the sparsely inhabited (HA!) Keys took the brunt of the storm.”


The next segment was one in which I had to exit the car again before I could hear any of it. So, I’ve gone to the WLRN website, and this seems to be the gist of what they were covering concerning Citizens the “Insurer of Last Resort” and now, possibly, the “Reinsurer of Last Resort” should DeSantis see his “solution” enacted:

Home insurance companies will receive downgrades

"Over two dozen Florida-based home insurance companies received notifications that they were at risk of being downgraded, according to the Florida Office of Insurance Regulation. These downgrades were supposed to happen on Tuesday, but the ratings agency, Demotech, announced that the downgrades would be delayed.

Neither Demotech nor the state disclosed the companies that could be downgraded, so several homeowners are unaware of their home insurance’s current status. These lower grades come during the middle of a seemingly quiet hurricane season, but August to October has historically seen higher volumes of storms.

Mark Friedlander is the Florida representative for the Insurance Information Institute. He said if people have a federally-backed mortgage and their home insurance company gets downgraded, they’ll have to find a new insurer.

The money shot paragraphs:

“Your mortgage loan agreement clearly states you must have insurance with an A-rated company. However, the Florida regulator stepped in this week and announced a temporary reinsurance arrangement where Citizens [Property Insurance Corporation] – the state-run insurer of last resort – will be acting in a reinsurance capacity to satisfy the conditions of federally-backed mortgages,” Friedlander said.

The caveat of this adjustment is that it could cost every consumer in Florida a surcharge on future insurance bills. Friedlander mentioned that Citizens has the largest volume of home insurance policies in the state, which is an unhealthy position for an insurer of last resort.

I’ll close that I did hear one more politican’s “cure” for this “uninsured problem” and it comes from another Democratic nominee hopeful, Nikki Fried, who was the only Democratic cabinet member under DeSantis (she was Agriculture Commissioner and also head of weights and services which checks up on every gas pump in the state and certifies they are not cheating customers.)

Anyway, Fried made note that only homes in the Keys & South Florida are able to get insurance for homes up to $1,000,000 in value from Citizens, the Insurer of Last Resort. Fried wants to make that same “deal” available to people throughout the entire state. At the moment, homeowners without a Keys or South Florida zip code can only be insured for up to $700,000 on their homes by Citizens. Left unsaid is Citizens would still be “subsidized” by all tax payers, including the majority of Florida homeowners who did not build their homes right on the water, or a block or two from the Ocean, and who did not have to rely on Citizens to be insured.


DeSantis - Make Citizens the Last Resort ReInsurer of private Insurance companies which might lose their “A” ratings.

Crist - Make Citizens the Insurer of Last Resort for 12-months after any homeowner loses insurance from one of the 17-20 for-profit insurance companies should they lose their “A” rating.

Fried - Raise the insurable property values for ALL Floridians to $1,000,000 if they are forced to turn to Citizens.