Citizens Board of Governors Meeting Report–April 28

On Monday, April 28, 2008, Citizens Property Insurance Corporation (“Citizens”) held a Board of Governors (“Board”) meeting to discuss reinsurance for the 2008 hurricane season.  To view the complete agenda, click here.

The meeting was called to order by Chairman Bruce Douglas, with Board members Andy Bennett, Richard DeChene, Carol Everhart, Earl Horton, Alan Katz and Jay Odom in attendance.  Citizens’ General Counsel was in attendance, along with Sharon Binnun, Citizens’ Chief Financial Officer (“CFO”), and representatives from Citizens’ reinsurance broker.

CFO Binnun gave a report detailing the amount of reinsurance Citizens should purchase from the Florida Hurricane Catastrophe Fund (“FHCF”) and private reinsurers in order to cover its projected 100-year probable maximum loss for the 2008 hurricane season.  To view the complete report, click here.

Ms. Binnun recommended Board approval to purchase the mandatory and optional Temporary Increase in Coverage Limits (“TICL”) layer coverage from the FHCF for the Personal Lines, Commercial Lines and High-Risk (“HRA”) accounts.  The mandatory coverage is approximately $6.9 billion at a cost of $402 million; the optional TICL layer coverage is approximately $4.9 billion at a cost of $106 million. 

The Board approved the FHCF purchases.

Ms. Binnun also recommended Board approval to purchase private reinsurance for the personal and commercial residential lines. 

A projection of Citizens’ claims paying resources for the 2008 hurricane season indicates that if this additional coverage is not purchased and a major storm were to hit Florida, additional assessments would need to be levied in order to cover losses. 

Depending on the extent of projected 2008 hurricane losses, purchase of this additional coverage could reduce current assessments by nearly $446 million.

Mr. Odom and Mr. Katz expressed concern regarding purchase of this additional coverage.  Mr. Katz was concerned about a large storm causing higher assessments. 

Chairman Douglas said that the potential $446 million in savings to the taxpayers of Florida far outweighed the risk. 

Mr. Odom’s concern was regarding the overall price of the reinsurance. 

Chairman Douglas amended Ms. Binnun’s initial proposal to include a reminder for the broker to purchase the lowest cost reinsurance available regardless of this coverage. 

The amended proposal to purchase private reinsurance was approved.  Mr. Katz voted against it.

The meeting was then adjourned.

Should you have any questions or comments, please do not hesitate to contact this office.

 

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