Florida’s home insurer of last resort is in serious trouble. Will Milton put it over the edge?

An exodus of national insurance companies from Florida, combined with local private insurers canceling plans, has left many homeowners there with only one option: Citizens Property Insurance Corp.

The state-backed nonprofit home insurance company was set up to be an insurer of last resort for those who can’t find coverage in the private market. With 1.3 million policies in force as of last month, three times as many compared to five years ago, Citizens is by far the largest provider in the state.

But now, with Hurricane Helene and Hurricane Milton both making landfall and devastating homes in Florida within just days of each other, the insurer will almost certainly have to pay out billions of dollars in claims.

Can Citizens stay afloat?

The answer lies in the insurer’s structure — which might be reassuring to policyholders, even if it ultimately leads to higher premiums.

Florida Gov. Ron DeSantis warned earlier this year that Citizens was “not solvent” and that it can’t function with “millions of people on that because if a storm hits, it’s going to cause problems for the state.”

“Thankfully, Florida avoided the worst-case scenario forecasted with Milton, but that doesn’t change the fact that Citizens is potentially one catastrophic storm or storm season away from insolvency,” Sen. Sheldon Whitehouse, a Democrat from Rhode Island, told CNN in an emailed statement.

“Should claims exceed the insurer’s ability to pay, Citizens has a mechanism to pass its losses on to Florida families, who are already paying sky-high premiums,” said Whitehouse, who chairs the Senate’s Budget Committee and is leading an investigation into Citizens’ viability. “Recouping billions of dollars in losses from Floridians is unlikely to be feasible economically or politically, let alone in time to pay massive claims — hence the Budget Committee concern about possible requests for a federal bailout.”

The only way someone qualifies for insurance from Citizens is if the lowest quote they get from a private insurer is more than 20% greater than the Citizens’ quote. Their property also has to be valued at $700,000 or less unless they are located in Miami-Dade or Monroe counties, where the cap is $1 million.

But while Milton and Helene will undoubtedly squeeze Floridians and the state-backed home insurance provider, the storms won’t cause it to go under.

“Citizens cannot go insolvent like a private insurer,” Mark Friedlander, a spokesperson for the Insurance Information Institute, an industry trade group, told CNN in a statement. Because of the way it is structured, “in a worst-case scenario where its reserves would dwindle due to a high volume of storms claims, Citizens is allowed by state regulations to implement a premium surcharge to its policyholders and other Florida consumers to ensure all claims are paid,” he said.

Those “other” customers include people who have other kinds of policies — including auto, boat, pet and renters— living in Florida who could see their premiums go up to cover Citizens’ claims even if they don’t have a Citizens policy.

Representatives for DeSantis did not respond to CNN’s request for comment. The Republican governor said Thursday in a CNBC interview that since Hurricane Ian two years ago, more private home insurance companies “are coming into Florida.” The state has sought to offload some of Citizens’ policies to them. And at the end of last year, it was able to transfer 300,000 policies to private insurers.

Michael Peltier, a spokesperson for Citizens, said the insurer is expecting to see its policy count drop even further by the end of the year as more private companies assume Citizens’ policies.

As for any claims it may have to pay due to Milton, Citizens has about $15 billion it can tap into, according to financial filings. Because of that and the insurance it takes out on the policies it is responsible for, what’s known as reinsurance, it’s unlikely it will have to make serious immediate changes to pay out Floridians’ claims, said Denise Rappmund, a senior analyst at Moody’s Investors Service.

Peltier also told CNN that Citizens has “the financial resources to handle claims from Hurricanes Milton and Helene without needing to levy any surcharges or assessments.”

But it is possible that more private insurers in Florida, who have to adhere to state guidelines for how much they can raise premiums, will cancel policies after this year’s hurricanes, leading more people to turn to Citizens, Rappmund said. “When you don’t allow the price to be matched to the risk, then the private companies can’t make a business there and they retreat.”

Still, if fewer private insurers want to do business in Florida, Citizens would likely need to push for higher rates on its customers more and potentially even reworking what its policies cover, Rappmund told CNN.

Bobby Atwood, a 29-year-old product manager who recently moved to Orlando but rents out a home he owns in the Tampa Bay area, was kicked off a private home insurance policy three years ago as his property value jumped due to the influx of new residents moving there. Like many other Floridians, he was forced to turn to Citizens for coverage.

Despite knowing his insurance costs are likely going to go up, Atwood said he found it “reassuring” to know that his policy won’t get canceled.

“It’s nice to know that Citizens isn’t just going to file bankruptcy,” he said.