BRADENTON, Fla. - Moody's Investors Service said reform measures related to Florida Citizens Property Insurance Corp. passed by the Legislature earlier this year are positive factors for the state's largest property insurer.
The new laws will improve governance and decrease CPIC's exposure by aiding efforts to reduce the number of its policies, known as depopulation, according to analyst Lisa Heller in a July 30 commentary.
"The legislation augments depopulation efforts, including the establishment of a private insurance clearinghouse and new restrictions on eligibility for coverage and maximum policy size," Heller said. "Less risk exposure decreases the likelihood of additional bonding and potential corresponding assessments to pay debt service, a credit positive."
As of Dec. 31, Citizens had $5.7 billion of outstanding revenue bonds. The bonds are rated A2 with a stable outlook by Moody's.
The board of governors overseeing the state-run, nonprofit insurer has also approved rate increases. Those increases await approval by the Florida Office of Insurance Regulation.
"The increases are small, but will bring CPIC closer to actuarially sound rates, aid depopulation, and also reduce the likelihood of bonding," Heller said. "The new laws, along with recently approved rate increases, are positives for CPIC but the company's size and assessment capability continue to present unique credit challenges for the state."
Moody's said its rating is primarily derived from the strength of Citizens' assessment mechanism. To raise funds to pay claims, or debt service, the agency can place an assessment on all property and casualty premiums in the state except workers' compensation, medical malpractice, accident and health, and federal flood insurance.
In 2012, the assessment base was $34.6 billion.
Lawmakers have made numerous changes to the legislation governing Citizens over the years, some of which kept rates artificially low. That has also helped propel CPIC to the top slot as Florida's largest property insurer with more than 1.2 million policies.
"Continuing legislative changes highlight the uncertainty of CPIC's operating environment, including the potential for future actions that could affect rates and policy count, and is a risk incorporated in the rating level," Heller said.
Citizens bonds are also rated A-plus by Fitch Ratings and Standard & Poor's.