Citizens Actuarial & Underwriting Committee Meeting Recap

On August 30, 2007, the Citizens Property Insurance Corporation (“Citizens”) Actuarial and Underwriting Committee (“Committee”) met and discussed the following:

Sinkhole Underwriting Rules

The Committee discussed amending Citizens’ underwriting guidelines so that agents would have the capability of binding risks that have had partial and/or total sinkhole losses, only when sinkhole coverage is not elected.  If and when a policyholder chooses to elect sinkhole coverage, he/she would then be required to submit the documentation proving eligibility for such coverage.  At no time would sinkhole coverage be added to any policy without the requisite underwriting questions and review.

The Committee voted and agreed that Citizens’ underwriting guidelines should be amended so that sinkhole underwriting would only be necessary when sinkhole coverage is elected.  This recommendation will be presented to the Board of Directors at its next scheduled meeting.

Commercial Nonresidential Wind Rate Equalization

The Committee also discussed the rates for Citizens High Risk Account (“HRA”) commercial nonresidential wind-only policies located in the coastal areas of Florida.  These rates are inconsistent with the rates being charged in other Citizens programs, and have not been adjusted in more than ten (10) years.  Accordingly, ISO Actuarial Consulting Services (“ISO”) recently completed an actuarial analysis for the HRA commercial nonresidential wind-only rate equalization filing.  Included with this e-mail are the Reinsurance Structure Options for your review.

The Committee reviewed the information provided by ISO and voted to:

1.     Build a ten percent (10%) residual market contingency provision into the final rates;
2.     Prepare the rate filings for approval by the Board of Governors; and
3.     Utilize the average indicated rate change among Reinsurance Structure Options 1, 2 and 3 as Citizens’ reinsurance model.

This recommendation will also be presented to the Board of Directors at its next scheduled meeting.

This information is intended to be a general summary of the discussion that took place during the Committee meeting.  It is not intended to provide specific analysis and should not be relied upon in making business decisions that are specific in nature.