Jim Malone, CEO of the state-run Citizens Property Insurance, floated the idea of privatization at a regular board meeting on Wednesday. It would take political will and, if it happened, it could take nearly a year to do.
Malone, a Naples entrepreneur, has proposed the idea as a way to reduce the state’s financial risk, which continues to grow as the government-backed insurer adds more policy holders by the week.
“It just continues to worry me to death that here we sit with lower than market rates and with growth that just continues to increase our exposure,” he said in a phone interview after the board meeting.
He said Citizens is growing at “a rate of 4,000 to 5,000 people a week.” Statewide, Citizens has nearly 1.4 million policies.
“No other state has the number of policies or the exposure to loss like Florida. They don’t even come close,” said Lynne McChristian, a spokeswoman for the Insurance Information Institute.
Citizens Property Insurance has half of the total policies of all state-run insurers and it has 70 percent of the risk based on the value of insured real estate, she said.
As of June 30, there were 58,760 Citizens policies in Lee County – up from 50,821 a year ago. There were another 24,316 policies in Collier at the end of last month, up from 21,211 in June 2010.
“What has happened over the years through legislative action or inaction, depending on your point of view, Citizens has become the largest insurer in the state,” Malone said. “We are the third largest underwriter of property insurance in the country, but all of our risk is concentrated in the state of Florida.”
Gov. Rick Scott quickly embraced Malone’s idea. If privatization would help drive down the cost of insurance, he said, “I want to look at it very closely.”
The idea still needs legal and financial study. The state insurer could possibly become publicly traded, Malone said. “That way people from different parts of the country could own or invest in it,” he said.
Privatization would enable Citizens to have more competitive rates, Malone said.
“This is by no means an easy or sure solution, but it is one that I think needs to be explored,” he said. He expected opposition.
“People that have a vested interest in the status quo will naturally oppose anything that threatens their well being,” Malone said. “I think there will be some legislative opposition to it.”
At least one key legislator, Sen. Garrett Richter, R-Naples, is showing his initial support for the idea. He’s the chairman of the Senate Banking and Insurance Committee. “I have tremendous respect for Jim Malone’s intellect and his business acumen,” he said.