Insurers today are in a highly competitive market. To receive greater market share, expansion to new locations and new business strategies may be required. Insurance takeouts are one such strategy in the state of Florida that can give insurers a new customer base.
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Learn More About Insurance TakeoutsWhat are Florida Insurance Takeouts?
In many states, including Florida, state-run programs can step in to support high-risk insurance policies. These are called FAIR Plans, and these programs often take over insurance policies due to natural disasters. In Florida, the FAIR Program is managed by Citizens Property Insurance Corporation, known as Citizens.
A takeout, or depopulation, is when a private insurance company takes over policies from a FAIR Program. In Florida, Citizens selects policyholders to be taken out of the state-based program as they have become eligible for private insurance coverage. The private insurer is referred to as the Take-Out Company.
The purpose of Citizens, founded in 2002, is to offer windstorm and general property insurance to Floridians who are not able to receive coverage by private insurance companies. Over time, it is the obligation of Citizens to transition policyholders back into private insurance.
The Florida Office of Insurance Regulation routinely shares deadlines for assumption of both residential and commercial policies. These deadlines include the dates of when an insurer must submit a request to their office in order to assume policies.
Private insurers may participate in a Citizens takeout for strategic purposes, as it can help to increase their market share, diversify their portfolio, and access new customers.
Not all FAIR Programs offer takeouts as regularly as Florida. Other states with highly active FAIR Programs include Texas, Louisiana, and California.
5 Steps to Citizens’ Takeouts in Florida
The process for insurers completing a Citizen’s takeout involves several steps, which include:
1. Notifications from Citizens
Citizens will notify private insurance companies when policies are eligible for takeout. This notification will include details about the policies that are available for takeout, such as the policy type, coverage limits, and policyholder information.
2. Submissions of Bids
Private insurance companies that are interested in participating in the takeout process will submit bids to Citizens, outlining the rates and coverage terms they are willing to offer for the policies. Bids are typically evaluated based on a number of factors, including the company’s financial stability, claims handling practices, and ability to provide quality customer service.
3. Policyholder Notification
Once the bids have been evaluated and the takeout companies have been selected, Citizens will notify the policyholders whose policies are being taken out. Policyholders will have the option to accept or decline the new coverage offered by the takeout company.
4. Transfer of Policies
If the policyholders choose to accept the new coverage, their policies will be transferred from Citizens to the takeout company. The takeout company will be responsible for managing the policies, handling claims, and providing customer service to the policyholders.
5. Ongoing Monitoring
After the policies have been transferred, Citizens will continue to monitor the takeout companies to ensure that they are meeting the state’s insurance regulations as well as providing quality coverage and customer service to policyholders.
Benefits of Florida Takeouts for Private Insurers
Takeouts allow private insurers to take advantage of several strategic benefits.
Acquire Policyholders – Acquiring policies from Citizens allow insurers to rapidly expand their customer base without incurring marketing costs.
Premium Revenue Stability – Policies obtained through takeouts provide a consistent stream of premium revenue, which can help stabilize an insurer’s financial outlook.
Regulatory Favorability – Participating in takeouts can demonstrate an insurer’s commitment to serving high-risk areas, potentially fostering goodwill with state regulators.
Challenges of Florida Takeouts
While takeouts provide a fast revenue stream, the policies acquired are notably high-risk.
High Risk Policies – Florida is vulnerable to hurricanes, severe storms, and flooding, increasing potential losses for insurers acquiring high-risk policies.
Reinsurance Costs – The rising cost of reinsurance can impact profitability, particularly for insurers with significant exposure to high-risk properties.
Florida Takeout Market Shifts
In recent years, Florida has been hit with significant losses due to hurricanes.
These hurricanes, including the back-to-back disasters of Hurricane Helene and Hurricane Milton in 2024, have caused many homeowners to lose their eligibility for private insurance. As parts of Florida become too risky to cover, Citizens steps in to be the insurer of last resort.
Takeouts by Citizens are vital in order to continually bring policyholders back into the private market. When disaster strikes, the program must be ready to accommodate new policyholders affected. In 2023, 300,000 policies were transferred back into private insurance through Citizens takeouts. Private insurers who participate in Citizens takeouts are part of an important cycle to balance risk within the state, depopulating the program so that others can be supported.
WaterStreet & Florida Insurance Takeouts
Whether you’re just getting started in Florida or preparing for a takeout, WaterStreet has you covered with nearly 20 years of experience working with Florida insurers. We have successfully supported our clients in over 15 Citizens takeouts since 2005.
Reach out to WaterStreet Company today to request a consultation and demo.
