TALLAHASSEE -- Two months after contributing $110,000 to Gov. Rick Scott’s reelection campaign, an upstart property insurance company is likely to reap a $52 million windfall, paid from the coffers of Citizens Property Insurance Corp.
Sitting on a record cash surplus of $6.4 billion, Citizens is hoping to ink a special deal Wednesday with Heritage Property and Casualty Insurance Company, a St. Petersburg firm that opened for business nine months ago and made significant political contributions.
Heritage has donated more than $140,000 to Scott and the Republican Party of Florida in recent months, and spent tens of thousands more lobbying the Legislature. Now it’s in line to get special treatment from Florida’s state-run insurance firm in the form of an unusual and lucrative “reinsurance quota share” agreement.
If the Citizens board of governors approves on Wednesday, the state-run insurer will pay Heritage up to $52 million to take over 60,000 policies, about $866 a piece.
“It’s an opportunity to get this deal done prior to the next hurricane season,” said Citizens CFO Sharon Binnun, defending the multimillion-dollar payment. “It’s an opportunity for Citizens to get another 50,000 policies off the books before another hurricane season.”
The proposal is the latest effort in Citizens’ controversial and aggressive campaign to reduce risk and revive the private insurance market.
Proponents say the push to shrink Citizens will pay off when the next hurricane hits, saving consumers from having to bail out the state-run insurer. Critics see the campaign cash and lobbying by Heritage as evidence that Citizens and Scott are tapping the insurer’s $6.4 billion surplus for special giveaways to politically-connected companies.
“Citizens’ board continues to fall prey to Tallahassee lobbyists who cook up these get rich funding schemes,” said Rep. Frank Artiles, R-Miami.
Scott’s office said the governor played no role in the $52 million deal at Citizens, and that campaign contributions were not a factor. “We expect [the board] to approve or disapprove of this risk transfer based solely on its merits,” said Melissa Sellers, a spokeswoman for Scott. “Anything short of that would harm Citizens policyholders and Florida residents who back Citizens policies.”
Heritage’s president, Richard Widdicombe, declined comment through a spokesperson.
It’s the second time this year Citizens is looking to subsidize an upstart private insurer using its massive surplus, which has been built up over seven years as the state has dodged hurricanes. The next hurricane season starts June 1.
In February, Citizens’ board approved a deal with Weston Insurance, agreeing to pay the young company $63 million to take out 30,000 policies. Weston has spent more than $250,000 on lobbying this year, and two of Citizens’ seven board members abstained from voting due to conflicts of interest.
In both deals, the payments are structured as backdated “reinsurance” agreements, where Citizens essentially pays the company to cover Citizens’ losses on certain policies over a specified period of time. Since the period of time is in the past, the company can actively select policies that had no losses, in effect making the deal virtually risk-free.