Citizens Actuarial and Underwriting Committee Meeting Recap

A meeting of the Citizens Property Insurance Corporation (“Citizens”) Actuarial and Underwriting Committee (“Committee”) took place on July 19, 2007.

To view the Agenda, please click here.

The Committee’s first order of business was to discuss the newly developed product acronyms, as a result of Citizens’ introduction of multi-peril policies in wind-only eligible areas.  The acronyms PLA, HRA and CLA (i.e., personal lines account, high risk account and commercial lines account) will continue to be used to represent Citizens’ three accounts, except that the following changes have been made to specifically identify the product line and indicate whether the product is multi-peril or wind-only:

To view a table outlining the acronym changes, click here.

On June 1, 2007, Citizens began offering commercial nonresidential wind-only policies in areas outside of the wind-only eligible areas.  The first month of production generated 278 policies with a total premium of $3.55 million.  Further, Citizens, ICAT and consultants from ISO are collaborating to develop a new commercial nonresidential multi-peril product to be launched this fall (see table above).  To date, feedback from agents and the Office of Insurance Regulation (“OIR”) has been positive. 

Although Citizens received approval from the OIR to increase its high-risk Commercial Residential Program rates by a statewide average of 125.8% in 2006, a similar rate filing was not submitted that year for the Commercial Non-Residential Program.  As such, the latest ISO analysis indicates that the rates currently being charged in the high risk Commercial Non-Residential Program are inadequate and a statewide average rate change of 105.3% (excluding loss amplification) and 151.1% (including loss amplification) should be implemented.  However, the Committee did not adopt these recommendations and instead tabled this item for further analysis.

The Committee next discussed the wind-only binding authority of agents.  In particular, the issue is that risks located in wind-only eligible territories are currently permitted to be bound only when a new multi-peril policy option is selected.  As such, the Committee voted to amend Citizens’ rules and systems to accommodate agent binding of wind-only policies.

A discussion on Personal Residential Rules and Processing Changes ensued.  The following four areas were discussed and voted on:

• Agent Submission and Inspection Procedures for PR-M (Personal Residential-Multi-Peril) Policies

o Agents presently have five (5) business days from the date coverage is bound to submit the application, premium and all necessary documentation to Citizens, in addition to visually inspecting the property.

o The Committee voted to modify the time limit for these procedures to five (5) business days from the effective date of coverage, rather than five (5) business days from the date coverage is bound.

• Photographs Requirement for PR-M Policies

o Unbound Risks:  the current rule requires reverse angle photographs showing the front and one (1) side view, with a second photograph showing the back and remaining side.

The Committee voted to keep this requirement but to also require additional photographs for any other structures.

o Bound Risks:  the current rule requires a single photograph showing the front and one (1) side.

The Committee voted to amend this rule by requiring two (2) photographs—one (1) showing the front and a side view and another showing the back and the remaining side.

• No Prior Declarations Page Surcharge for PR-M Policies

o Although the current manual states that applicants are subject to a surcharge if they are unable to provide a copy of their prior declarations page, Citizens staff no longer enforces or applies this surcharge.  The Committee voted to update the manual accordingly.

• Market Availability Document (MAD Form) for PR-W (Personal Residential-Wind) Policies > $1 million

o Until now, this document, containing an applicant’s affirmation that he/she is unable to obtain insurance coverage from another carrier, was required for homes valued over $1 million.  The Committee voted to withdraw this requirement.

Following this discussion, the Committee voted to clarify the CLA and HRA manual rules to follow the ISO construction definitions, charts and mixed occupancy rules, given that they currently differ slightly from each other and from standard ISO Commercial Property Rules.  In addition, the Committee voted to amend the underwriting guidelines in both the CLA and HRA accounts to prohibit midterm changes to coinsurance percentages and deductibles.

Additional meeting documents included:

01A: 01 FINAL Actuarial Minutes 06_14_07.pdf

02A: 02 Product Acronyms Exe Summary.pdf

03A: 03 Wind Only Binding Authority Exe Summary.pdf

04A: 04 Personal Residential Rules Processing Changes Exe Summary.pdf

05A: 05 Draft HRA Commercial NonResidential Rates.pdf

06A: 06 CLA Construction Defintions Exe Summary.pdf

07A: 07 CLA Coinsurance and Deductible Rules Exe Summary.pdf

08A: 08 Commercial Product Update Exe Summary.pdf

Should you have any comments or questions regarding this newsletter, please feel free to contact this office.