What Happens If Citizens Property Insurance Faces Insolvency?
Greetings everyone,
My fiancé and I have recently made the move to the Orlando metro area for our careers, and we’ve opted to lease out our properties in the Tampa Bay region. Both our homes are insured with Citizens Property Insurance.
As Hurricane Helene has just hit and Hurricane Milton is now on its way, my anxiety over the situation with Citizens is mounting. There’s a significant risk of numerous claims being submitted due to these consecutive storms, which raises concerns about the financial resilience of Citizens.
I’m curious if anyone has insights into what the process would be for policyholders in the unfortunate event that Citizens becomes insolvent. Is there any kind of fallback system, perhaps with support from the state of Florida? Or would we be left to handle the aftermath on our own?
Thank you in advance for any information or guidance you might share!
Hello,
Firstly, welcome to the Orlando area! It’s completely understandable to have concerns about your insurance coverage, especially amidst the active hurricane season. Citizens Property Insurance Corporation, while a significant player in Florida’s insurance market, particularly for those with limited options, does come with inherent risks given its role as the insurer of last resort.
If Citizens were to become insolvent, Florida does have mechanisms in place to protect policyholders. Here’s a breakdown of what would happen and what you can do to prepare:
Florida Insurance Guaranty Association (FIGA): In the unlikely event that Citizens becomes insolvent, the Florida Insurance Guaranty Association steps in. FIGA is a state-backed entity designed to handle claims from insolvent insurers. It would likely cover ongoing claims up to certain limits, ensuring policyholders aren’t left without support. However, note that coverage limits and the ability to pay out promptly in the wake of widespread insolvency can vary.
Funding and Assessments: To prevent insolvency, Citizens has several layers of financial protection. This includes reinsurance, the levying of assessments on other insurance policyholders in Florida, and, ultimately, state support. Citizens can impose assessments on nearly every insurance policy in Florida to cover deficits, meaning policyholders across the state might share in the costs of extensive claims.
Reinsurance Programs: Citizens actively purchases reinsurance, which is essentially insurance for insurers, to offset massive claims scenarios typically brought on by catastrophes. This means before reaching insolvency, much of the initial financial burden could be mitigated by these reinsurers.
Policyholder Actions: As a policyholder, it’s wise to ensure your own preparation. Review your policy documents to fully understand the coverage limits and exclusions, and make sure you have documented your property and its contents extensively with photos and receipts, if possible. Also, consider having a contingency fund for some out-of-pocket expenses if delays do occur.
Diversification and Market Health: Staying informed about market health is also beneficial. Florida’s insurance market is incredibly dynamic. New insurers frequently enter the market, which might offer competitive policies with strong stability. It could be worth getting quotes to compare options, ensuring you have the best coverage based on your risk tolerance.
While the concern over Citizens’ financial health given your circumstances is valid, these layers of protection are intended to provide a safeguard for homeowners like you. Continued vigilance and proactive risk management tailored to the realities of living in a