The head of Florida’s largest property insurer defended on Tuesday a controversial deal to pay millions to a startup insurance company that made campaign donations to Gov. Rick Scott.
But Barry Gilway, president and CEO of Citizens Property Insurance Corp., did not endure much tough questioning from the state Senate panel that asked him to speak about the transaction.
The state-created insurer paid Heritage Property Insurance and Casualty more than $33 million to absorb nearly 40,000 policies from the state-created insurer. The deal was only publicly announced days before the transaction was approved by Citizens’ board in a contentious May meeting.
Senate President Don Gaetz earlier this year pledged a “thorough investigation” into the deal since Citizens does not normally pay companies to absorb its policies. The arrangement also came under fire because Heritage began pushing for the deal during the same month it made $110,000 in donations to a political committee helping Scott’s re-election campaign.
Gilway told senators on the Senate Banking and Insurance Committee that it was a “great deal” because it removed policies from Citizens right before hurricane season.
He said his only mistake was not disclosing the pending transaction well in advance of the final meeting where the deal was approved.
Sen. David Simmons, chairman of the Senate Banking and Insurance Committee that reviewed the arrangement, said everything he had heard had convinced him the deal between Citizens and Heritage was a “pure transaction.”
But Simmons said he would likely ask Gilway to return to respond to questions about the timing and the way the deal was handled.
“Being a good deal doesn’t mean there may not be an appearance of impropriety,” Simmons said.
Sen. Jeff Clemens, D-Lake Worth, told Gilway that the connection between a political donation and the contract could lead to accusations of favoritism. He asked Gilway why Citizens doesn’t require companies to compete against each other when seeking to absorb Citizens customers.
Gilway told him he preferred having companies approach Citizens about possible transactions—which are then reviewed by state regulator before they are approved.
Campaign finance records show that Heritage and affiliated companies have donated $176,000 in contributions since last year. Those donations include the money to Scott and more than $40,000 to the Republican Party of Florida.
The Associated Press has previously reported that the contribution to the political committee connected to Scott came the same month that a lobbyist representing Heritage met with a Scott aide to discuss the transaction also known as a “take out.” Scott’s chief of staff Adam Hollingsworth has insisted no one in the Scott administration took a position before Citizens approved the transaction.
Hollingsworth previously called it “outrageous” that anyone would suggest the Scott administration influenced Citizens, whose board members are appointed by Scott and other elected officials.
Bruce Lucas, chairman and chief investment officer of Heritage, said Tuesday that his company gave the money to Scott because the two men have similar backgrounds and he supports the job Scott’s doing as governor.
He said there was no connection between the timing of the donation and Heritage’s business dealings with Citizens.
“I understand people connect dots that aren’t necessarily connected,” Lucas said. “It just shows my political naivete. I am not a political animal. I never even thought in a million years that anyone would connect those two.”
Gilway defends the arrangement with Heritage as part of an overall strategy to shrink the size of Citizens. Citizens currently has more than 1.2 million policyholders.
There has been a push to shrink the insurer because of fears that it would not be able to cover claims if a huge hurricane hits the state. Citizens has the power to place a surcharge, also called a “hurricane tax,” on its own policies and policies of most insurers if it can’t cover its losses.
When private companies seek Citizens customers, those policyholders can opt to remain with Citizens. But Sen. Tom Lee, R-Brandon, complained to Gilway that currently consumers can’t even find out how much their rates will eventually be if they switch companies.
Lee said he did not support “tricking consumers into believing the private market is going to offer similar coverage and affordable rates.”