The US Senate Appropriations Committee is launching an investigation into whether Florida’s state-backed home and property insurer has enough money in the bank to withstand future disasters, as scientists warn that warming oceans and rising sea levels are making storms more destructive.
The Citizens Property Insurance Corporation exists as a so-called insurer of last resort – if owners cannot persuade a private insurance company to cover their property, Citizens will step in. It insures about 1.3 million policyholders in the state, who typically pay more money for a policy that covers less.
But as coastlines disappear and storms get wetter and more dangerous, the risk to many of the properties Citizens insures is going through the roof, putting intense financial pressure on the state-backed company. During a press conference in March, Florida’s Republican governor Ron DeSantis said: “I think most people know that Citizens is not solvent.
After Florida was hit by major hurricanes in 2022 and 2023 that together cost more than $100 billion in damages, committee chairman Senator Sheldon Whitehouse, a Democrat from Rhode Island, is writing to top Florida officials asking for documents showing how Citizens plans to manage rising costs and exposure if a massive storm hits a major metropolitan area like Miami or Tampa.
“Florida is on the front lines of the climate crisis, and it could take just one major hurricane to render Citizens insolvent – a fact the current governor himself has admitted,” Whitehouse said in a statement.
Citizens spokesman Michael Peltier said the insurer would “certainly cooperate” with the committee’s investigation.
The committee’s main concern is that if a major city is hit, millions of Florida policyholders who aren’t with Citizens could see massive spikes in their insurance costs. That’s because state law says Citizens can impose special assessments on millions of Floridians with car and home insurance, even if they are insured through private companies, not Citizens.
In its letter to Florida officials, the budget committee expressed concern about “the potential economic consequences of a potential widespread decline in property values”.
Two years ago, Citizens wrote that if the state had been hit by a 100-year storm, Florida policyholders “would have been on the hook for $24 billion in assessments that would have been added to monthly premiums for years”. As the number of Citizens policies has grown, reports from reinsurance companies Munich Re and Swiss Re have found that the figure could be much higher, anywhere from $36 billion to $162 billion, depending on the severity of a future hurricane.
If that happens, the Senate Budget Committee is concerned that Florida could turn to the federal government for a bailout, Whitehouse said.
“The Committee has significant concerns about how such an insolvency would affect not only Florida’s real estate market, but also the broader economy and the federal budget,” he said. “If Florida were to seek emergency assistance from the federal government, all American taxpayers could be on the hook.”
Fears of a possible federal bailout are not unfounded, Benjamin Keys, a real estate professor at the University of Pennsylvania’s Wharton School, told CNN.
“They absolutely have reason to be concerned; the exposure is enormous,” Keys said. “1.3 million of the riskiest policies in the riskiest state, period. It’s a correlated exposure – if a hurricane hits your house, it hits my house.”
‘An extreme amount of risk’
Of the states with state-backed insurers of last resort, Florida’s is by far the largest. It has steadily increased the number of consumers who can’t get insurance anywhere else, as private insurers have pulled out of the state and smaller insurers have gone bankrupt after back-to-back major hurricanes.
State insurers of last resort were originally intended to be a stopgap for consumers to ensure their coverage wouldn’t be interrupted. But in Florida, in particular, many more people have been forced onto Citizens as other insurers flee the state or go bankrupt, in part because the state is particularly vulnerable to climate-related losses like hurricanes and rising sea levels, according to the Senate Budget Committee letter.
This is compounded by the fact that Citizens’ policyholders have some of the riskiest properties in the state, Keys added, such as coastal properties or those that have flooded multiple times.
Florida isn’t alone; some major private insurers have either pulled out or stopped writing new policies in wildfire-prone California. And consumers in California’s insurer of last resort – known as the FAIR plan – have also seen their premiums skyrocket.
But Keys says there are two important things that distinguish California’s FAIR plan from Florida’s. First, California has far fewer consumers on its state-backed insurance – just over 268,000 compared to Florida’s 1.3 million. And second, if a major wildfire or storm were to hit California, state law there puts the onus for the high cost of special assessments on insurance companies, not individual policyholders.
“The scale is just enormous,” says Keys. “At that scale, that means there’s an extreme amount of risk.”
Keys said the Senate Budget Committee inquiry signals the federal government is trying to get ahead of a potential future disaster – and the billions of dollars in damages it could bring.
“We know it’s very difficult for the federal government to withhold aid and assistance in the event of a crisis,” Keys said. “It doesn’t look good.”
