Citizens Property Insurance, the state-run insurer, may face losses of more than $223 million from investments - mainly in asset-backed securities that have declined sharply in value as the mortgage and credit markets have fallen apart in the past year.
Sharon Binnun, Citizens’ chief financial officer, told the company’s board of governors meeting in Tampa last month that there is about $500 million in troubled securities on its books right now. Market value is about half of that amount, she added.
The insurer has $8 billion available to pay claims, including money it has borrowed and invested until needed.
Binnun said the insurer “has tightened our investment policies over time” and “we have mitigated” the negative impact of the market’s decline by limiting the amount of any one type of security Citizens can invest in. It invests only in short- and long-term U.S. Treasury, agency and corporate securities as well as money market funds.
Still, Citizens hasn’t been able to avoid the market’s slide. It has unrealized losses of more than $36 million in the Treasury, agency and corporate securities it holds.
But the biggest losses - $186 million - are in asset-backed commercial paper, supported by mortgages including some sub-prime loans, that were purchased by the State Board of Administration, a state agency that manages a number of funds that include private and public money.