Ron DeSantis said Citizens Property Insurance ‘is not solvent.’ That’s misleading.

As Floridians continue to grapple with a state property insurance crisis, Republican Gov. Ron DeSantis has warned that the state-backed insurer of last resort for disaster damage is insolvent.

Over the past year, several major insurance carriers have left the state, citing Florida’s high risk of a costly weather calamity. Loose regulations and repeated hurricane damage have left residents paying the highest average property insurance premiums in the country — about $6,000 a year, or more than triple the national average.

This squeeze has pushed more homeowners to explore insuring with Citizens Property Insurance Corp., which holds about 1.2 million policies. The company is considered the "insurer of last resort" because it offers policies to customers who are seen as high risks because their properties are particularly vulnerable to damage, making them unattractive to conventional insurers.

Insurers of last resort do not have to agree to cover properties they consider too risky, and they may require potential policyholders to adhere to certain conditions for protecting a property before offering a policy.

During the legislative session, DeSantis touted efforts to improve Florida’s insurance market, saying new companies have entered the state. 

On Feb. 27 on CNBC’s "Last Call," DeSantis said the companies that recently entered the Florida market "have taken out hundreds of thousands of policies from this Citizens Property Insurance, which was created decades ago. 

"It is not solvent," DeSantis said of Citizens, "and we can’t have millions of people on that because if a storm hits, it’s going to cause problems for the state."

DeSantis has repeated the claim several times over the last year — catching Washington, D.C.’s attention. In a Nov. 30 letter to Florida officials and Citizens, U.S. Senate Budget Committee Chair Sheldon Whitehouse, D-R.I., said his committee began investigating Citizens’ finances "in light of the state’s acknowledgment of Citizens’ potential insolvency." Whitehouse outlined concerning implications for the Florida insurance market, state taxpayers and the potential of a federal bailout.

However, the company’s financial data undermines DeSantis’ use of "not solvent." Financial experts said that term is inaccurate for the situation.

Citizens’ latest financial report, from December 2023, shows that the insurer had a $5 billion surplus at the end of 2023. The company expects a $6.3 billion surplus by the end of 2024. (A surplus is the amount of money or resources an organization has that is not immediately being used to pay expenses.)

Additional state funding, and the company’s ability to draw funds from Floridians with insurance policies in a pinch, brings the insurer’s total reserves to about $17.8 billion, according to the report.

Jeremy Redfern, the governor’s press secretary, told PolitiFact that Citizens was never meant to accommodate as many policies as it currently does, and, therefore, "at its current growth rate, Governor DeSantis is correct." 

But this is not what "insolvency" means — it means that an entity can no longer meet its financial obligations today. Citizens could be considered insolvent if its debts exceeded the value of its assets, economics experts said.

If the company can now pay out claims and other expenses it isn’t insolvent. This remains true even if Citizens had to offload its expenses onto policyholders, which is allowed by Florida law, but would likely be unpopular.

"Citizens has the capacity to levy surcharges on property insurance policies," said Hakan Yilmazkuday, an economics professor at Florida International University. "In other words, Citizens can never be ‘insolvent’ in technical terms."

Redfern acknowledged that Citizens can’t run out of money to pay claims.

"Citizens is structured so that it will always be able to protect its policyholders and pay claims," Redfern said. "But this comes at the expense of all Florida insurance policy holders." These charges can be levied on nearly every type of property and casualty policy in Florida, including homeowner, renter, auto, boat and pet insurance policies.

Citizens CEO Timothy Cerio made a point similar to Redfern’s in a Dec. 15 reply to Whitehouse, writing the senator’s concern about insolvency showed "a fundamental misunderstanding" of how the company operates and its ability to pay claims. 

He told PolitiFact in an email that DeSantis has been "consistent and clear" in his concern that, if there were a major storm or series of storms and Citizens exhausted its surplus and reinsurance, Florida law would require the company to levy an emergency charges on state policyholders — "83% of whom are not even Citizens’ customers."

"Although Citizens' assessment authority means that it will always be able to pay claims. Citizens’ rates are currently actuarially unsound," Cerio wrote. "It is critical that Citizens be able to charge actuarially sound rates to help minimize the risk of such assessments on the people of Florida." (Citizens said "actuarially unsound" means charging rates that inadequately cover potential losses.)

Featured Fact-check

Facebook posts

stated on November 12, 2024 in a video

FEMA brought 300 semi trucks to Michigan’s Oscoda-Wurtsmith Airport

Cerio further explained to Politico’s E&E News that the company’s premiums are 55% below their actuarially sound level and, in some areas, 40% below rates charged by insurance companies. The Insurance Information Institute verified the data with PolitiFact.

With a major storm, Citizens may not have enough resources to pay its customers. It would then need to rely on financial assistance from the state, and that would mean a hit to Florida policyholders. 

"If certain property insurance policies are transferred to multiple private policy companies, the stress on each company would be easier to handle … without any impact on the Florida state budget," Yilmazkuday said.

Still, he said that DeSantis inaccurately defined Citizens’ fiscal position in the CNBC interview. DeSantis could have described Citizens as financially stressed, financially vulnerable, under financial strain, or a state budget risk, Yilmazkuday said. 

Efforts to shift policies from Citizens to other insurers have led to some small results. The number of Citizens’ policies declined from 1.4 million in September to about 1.2 million in January. That’s still about three times more Citizens policies than the company had in 2019.

DeSantis said that Citizens Property Insurance is "not solvent." 

Insolvency means a company cannot pay its bills today. That’s not so with Citizens, which has a $5 billion surplus and expects a surplus of more than $6 billion by the end of 2024.

Citizens faces significant financial challenges and must worry about one or more massive storms pressuring those surpluses. If that happens, the company can rely on backstopping from insurance policyholders under state law. That would be unpopular, but is different from insolvency.

We rate the statement Mostly False.

CLARIFICATION: We updated this story March 14 to clarify that Floridians with insurance policies would be affected by an emergency surcharge from Citizens.