A $52 million deal between state-run Citizens and a start-up insurer that gave to $110,000 to Gov. Rick Scott’s political committee may be causing “serious concerns” for Florida’s House Speaker, but state records show another fledgling carrier from South Florida spent more than $650,000 lobbying state legislators and executives to get more — up to $63 million.
Officials with Weston Insurance Co. of Coral Gables say most of that spending went for legal work setting up the company and not actual lobbying, regardless of how it may have been reported to the state. About 31,000 customers, including 1,334 in Palm Beach County, have to decide whether to go with Weston or stay with Citizens, many in coming weeks.
Top Weston executives came from prominent reinsurers and “force-placed” insurer QBE, which has come under fire from regulators and recently reached a settlement with 24,000 Florida homeowners over claims by plaintiff attorneys it arranged with lenders to charge consumers excessive premiums. Company officials say they left past employers before those those events played out, and it’s not relevant to what Weston is doing now: offering Citizens customers a strong choice with protection from rate increases of more than 10 percent for three years.
But one legislator blasted what he sees as more “corporate welfare” that isn’t justified or necessary.
“The same people who are crying Citizens won’t have enough money to pay claims are giving the surplus away,” said Rep. Mike Fasano, R-New Port Richey. Other companies are taking hundreds of thousands of Citizens customers without special payments, he said: “Why should ratepayers or taxpayers have to pay a company to do it?”
On Wednesday, Scott signed into law SB 1770, a bill barring Citizens coverage for new construction in environmentally sensitive coastal areas, reducing the value of properties covered to $700,000 over time and creating a clearinghouse designed to steer more customers out of the state-created carrier. Scott urged Citizens officials to “reform their existing policies” and give at least seven days notice for public meetings — instead of the four days, for example, before a divided board approved a deal last week with Heritage Property & Casualty Insurance Co. of St. Petersburg.
Heritage gave $110,000 to Scott’s Let’s Get to Work committee in March.
“We agree with the governor that we must do a better job communicating with our stakeholders in advance of major initiatives,” Citizens president Barry Gilway said.
The agreement with Weston got far less attention than the Heritage plan, but both transactions add up to giveaways, according to skeptics like Fasano. They pay start-up insurers money under provisions backdated to the start of the year even though the companies aren’t taking customers until months later. It’s been described as money companies can use to pay for reinsurance and other expenses including 2013 claims on policies they eventually choose. But because they can choose to avoid customers with claims, it amounts to a gift, detractors say.
Gilway, who defended both deals as creative ways to reduce the company’s exposure and risk of potential assessments in the event of extremely severe storms, said Wednesday that he is sometimes asked if letting companies select customers is “cherry-picking.”
“My answer to that is absolutely —- the companies should be cherry-picking,” Gilway said.
Weston, certified as an admitted Florida carrier in late December, agreed in February to take up to 31,000 customers in what Citizens officials called a historic deal — the first “depopulation” of wind-only coastal customers in Citizens’ history. A Riviera Beach condo, for example, says it has a June 16 deadline to go with Weston or remain with Citizens.
Weston gets an A rating from Demotech and a B (Fair) rating from AM Best.
Prior to forming Weston, president Michael Lyons worked for reinsurance companies including as assistant vice president for U.S. underwriting for RenaissanceRe Ltd., according to his company biography. RenassianceRe was one of the sponsors of an industry conference in November where Scott got a standing ovation for warning about the dangers of a bloated Citizens and supporting moves to drive more business to private insurers.
Two other Weston executives — chief claims officer and general counsel Bryan McCully and chief underwriting officer Ian Davey — held similar titles for insurer QBE or the affiliated Praetorian Financial Group, according to their company bios. Without admitting wrongdoing, QBE and Wells Fargo Bank this month reached a $19 million agreement with 24,000 Florida homeowners to settle claims by plaintiff attorneys they overcharged customers with kickback-laden premiums over many years.
McCully said he and Davey left Praetorian/QBE in 2007 and 2008 respectively and Lyons left Renaissance in 2011, saying they had no involvement with subsequent events.
As for the deal with Citizens, MCully noted Weston would likely get less than $63 million because it won’t get payments for Citizens customers who choose to stay, and Weston would be responsible for paying 2013 claims for those policies it does take.
“Weston assumed the risk for claims on these policies, and therefore Weston assumed the unearned premium associated with these policies,” McCully said.
Less than $100,000 of Weston’s spending with Foley & Lardner LLC went to lobbying, as in dealing with regulators or talking with legislators about ways to downsize Citizens, estimated Austin Neal, an attorney with Foley in Tallahassee.
Palm Beach Post Staff Researcher Niels Heimeriks contributed to this story.
Charles Elmore has been reporting for more than a year on questionable plans to spend ratepayer or taxpayer money on plans to shrink state-run insurer Citizens. Four days after a Post investigative report last year, Citizens said it was dropping a plan to spend up to $350 million.