Citizens Board of Governors Meeting Recap

The Board of Governors (“Board”) of Citizens Property Insurance Corporation (“Citizens”) met on June 27, 2007. The agenda is attached for your review.

The highlights of the meeting are as follows:

President’s Report

• 25,000 new applications are received weekly.
• $162 million is being refunded to policyholders because of (i) rate rollbacks (already completed) and (ii) presumed factor adjustments (to be completed by mid July 2007).
• Citizens is equipped to run up to six (6) full-service emergency operation centers; 105 Citizens employees have been trained to manage same.

Web site

• Governor Crist and the Florida Office of Insurance Regulation (“OIR”) met on June 26, 2007 in order to discuss the creation of a Web site, to be used by insureds to compare coverage rates.
• Effective June 22, 2007, Citizens has a similar functionality on its Web site–the “Agent Locator” link, which lists licensed Citizens agents according to zip codes or counties.

Legislative Report – Senate Bill 2498 (“SB 2498”)

• SB 2498 was passed by the Florida Legislature during the 2007 Regular Session and was signed into law by Governor Crist on June 11, 2007, with the exception of a line item veto specific to a $600,000 appropriation included in the bill. 
• The bill clarifies Citizens’ public purpose and intent, recognizing that Citizens is a government entity and not a private insurance company.
• For new applicants for residential coverage, the bill changes the 25% eligibility threshold to 15%.
• The bill provides a detailed method for determining whether premiums of the admitted insurer and of Citizens are for “comparable coverage” for purposes of the 15% threshold.
• It extends Citizens’ current rate freeze through December 31, 2008.
• The bill repeals the mandatory 10-day waiting period before Citizens coverage can be bound.
• SB 2498 allows Citizens to offer monthly payment plans.
• It allows the Office of Insurance Regulation (“OIR”) to establish a pilot program to enable Citizens to offer optional sinkhole coverage in one or more counties or other territories for purposes of implementing HB 1A.
• Under the pilot program, Citizens is not required to issue a notice of non-renewal to exclude sinkhole coverage upon the renewal of existing policies, but may exclude such coverage using a notice of coverage change.
• The definition of “sinkhole” did not make it in during Special Session.

Agent Education and Training Initiative

• There are over 8,600 insurance agents in Florida and accordingly, the Board agrees that these agents must be trained in order to be able to represent Citizens properly.
• Citizens staff made three (3) recommendations to the Board:

o Agent Certification Program – to ensure that Citizens agents are committed to understanding Citizens’ rules and underwriting requirements.
o Online and Field Training – designed to educate and prepare Citizens’ agents to provide excellent policyholder service. 
o Agent Review – given that agent review activity has increased significantly this past year, it is recommended that when such reviews reveal minor problems at an agency, that the agency principal perform a self audit of the policies the Agent Review unit had already examined—if the problem is severe, the Agent Review team may recommend suspension or termination of an agent appointment.

• A motion to approve these recommendations did not pass.

o The Board suggested that a committee be appointed to address these recommendations – it is concerned that such mandatory training may put some agents entirely out of business.

Actuarial and Underwriting Committee Report

• The Board passed a motion, approving the submission of filings to the OIR that amend Citizens’ underwriting guidelines by increasing agents’ binding authority limit from $500,000 to $1 million for multi-peril and homeowners’ policies.

Audit Committee Report

• The Audit Committee hired consultants to analyze Citizens’ audit department and make recommendations–the Board approved the report generated by the consultants and decided that the report would be implemented as a guide.
• The Board passed a motion to hire outside auditors while Citizens builds its internal audit department.
• It is estimated that Citizens will need about three (3) months to get its internal audit department running.
• A motion to approve the Audit Committee’s retention of independent counsel, as a means of maintaining the Committee’s independence, passed.

Finance and Investment Committee Report

The Board approved the following:

• The diversification of the operating asset portfolio by funding two additional investment portfolios benchmarked to the 30-day LIBOR, with an initial balance for each manager of $250 million.
• That Citizens staff take all necessary action to amend the current Investment Management Agreements with the recommended external investment managers to allow for a reduced investment management fee of five basis points.
• That Mellon Bank be appointed to serve as Custodian for all operating assets and authorize the appropriate staff members to take all necessary action to negotiate and execute a contract with Mellon Bank to perform these services.
• A technical amendment to add, “all residual bond proceeds and other assets that fall under direction of the HRA 1997 Trust Indenture or the PLA/CLA Master Trust Indenture,” also be managed by the SBA passed.

New Business

• The Chairman recommended that the Board consider retaining a national management consulting firm to evaluate Citizens and make recommendations.

 

Should you have any questions or comments regarding the above, please feel free to contact our office.