Citizens Board of Governors Meeting Report: August 28

Citizens Property Insurance Corporation (“Citizens”) Board of Governors (“Board”) met on August 28, 2009.  To view the complete meeting agenda, click here.

 

President’s Report

Citizens’ President Scott Wallace reviewed key performance indicators for the second quarter of 2009 as part of his Report.

Customer contact centers continue to meet service level goals despite a slight increase in call times due to recent marketplace activity and pre-hurricane season questions.

As an anticipated result of Citizens’ Single Personal Lines (“SPL”) personal residential wind-only policy re-writes, there is a backlog of personal residential business to be underwritten. 

To view the second quarter 2009 key performance indicator chart summary, click here.

Citizens’ Vice President of Claims Paul Palumbo recently met with the Florida Office of Insurance Regulation (“OIR”) regarding Citizens’ recent rate filing.  During the meeting, it was determined that a single rate filing would not be adequate to cover both Citizens’ base rates and separate personal residential filings, which will include the multi-peril rating program.  Citizens will re-file its traditional base rates as approved by the Board, after which the OIR will hold a public rate hearing.  If the filing is approved by the OIR, the new rates will go into effect in January 2010 as mandated by law.  Citizens will then move forward with its personal residential rate filings.

President Wallace updated the Board on the recent Florida Commission on Hurricane Loss Projection Methodology (“FCHLPM”) hearing on wind mitigation. 

As result of House Bill 1495 becoming law on June 1, 2009, the FCHLPM  is required to review discounts, credits, other rate differentials and reductions in deductibles relating to windstorm mitigation.  These findings must then be presented in a report to Florida’s Executive Branch and Legislative leadership by February 1, 2010. 

To fulfill the HB 1495 requirement, FCHLPM held its first wind mitigation hearing on August 12.  Mr. Palumbo spoke on behalf of Citizens during that hearing and reported on the number of Citizens’ policyholders who qualify for mitigation credits.  He also discussed the financial value of these credits.  An additional breakdown of Citizens’ book of business will be provided to the FCHLPM during the next hearing, which is scheduled for September 17, 2009.  To view a summary report of the August 12 FCHLPM wind mitigation hearing, click here.

 

Chief Financial Officer Report

Citizens’ Chief Financial Officer (“CFO”) Sharon Binnun reported that, as of June 30, 2009, Citizens had a $3.7 billion surplus, with approximately $8 billion in cash and invested assets.  The surplus amount is expected to decrease as the balances at the Florida Hurricane Catastrophe Fund are paid and accounted for through the rest of the year.

Board Chairman Jim Malone stated that, by law, Citizens is required to identify its readily available assets as surplus.  He cautioned that this surplus is not tantamount to money in a checking account that may be easily withdrawn.  Chairman Malone stated that Citizens’ surplus is more like a reserve and emphasized that he wanted to clarify this issue publicly.

To view Citizens’ June 30, 2009 financial statement, click here.  To view the related management discussion and analysis, click here.

 

Executive Vice President Report

Citizens’ Executive Vice President of Corporate Operations Susanne Murphy updated the Board on Citizens’ vendor programs.  In March 2008, the Board amended Citizens’ purchasing policy to encourage the use of Minority Business Enterprise (“MBE”), Florida Business Enterprise (“FBE”) and Florida Small Business Enterprise (“FSBE”) vendors.  Since the amended purchasing policy went into effect, Citizens has awarded contracts to, or processed purchase orders for, 232 vendors who meet the definition of an MBE, FBE, or FSBE vendor. 

To view the Vendor Program Report, click here.

 

Finance and Investment Committee Report

Chairman Malone, who also serves as the Finance and Investment Committee Chairman, briefly reported on his Committee’s most recent meeting, during which no action was taken. 

At this meeting, John Forney from Citizens’ financial advisor, Raymond James and Associates, reviewed the improving financial markets and Citizens’ money management initiatives.  Given the market improvement, Citizens’ money management team is working to promote positive relations through personal meetings with potential and current investors and defining Citizens’ current money management needs.

To view a summary report of the August 27 Finance and Investment Committee meeting, click here.

 

Claims Committee Report

Yong Gilroy, Citizens’ Senior Vice President of Claims, updated the Board on the following Claims Department projects:

• Active recruiting continues for 16 open Claims Department positions, including a Commercial Manager.
• The year-to-date closing ratio for non-catastrophe property claims is 102 percent.
• As compared to 2008, the assignment volume for litigation, mediation, appraisal and liability claims has been increased 50.1 percent through July. This is believed to be due to perception that a five-year statute of limitations exists for 2004 hurricane season claims. It is also attributed to increases in contiguous flooring and sinkhole claims.
• The 19 Chinese drywall claims that have been received are still under investigation.
• Twenty-eight independent adjuster firms currently support Citizens’ non-catastrophe claims team; 24 firms provide catastrophe support.
• Citizens’ Claims Administration Information System, which will automate the credentialing and qualification process for independent adjusters, is scheduled to be implemented in September 2009.
• New training courses in claims orientation, an advanced claims school and skill-specific training classes have been developed for claims staff.

To view the Claims Committee report, click here.

 

Audit Committee Report

Citizens’ Chief of Internal Audit Joyce Bellows updated the Board on recent Office of Internal Audit (“OIA”) activities.  The OIA has continued its progress in developing a sustainable internal audit department for Citizens by drafting the OIA Procedure Handbook, Internal Audit Policy and Corporate Internal Control Policy.  All audit projects are on schedule to be completed for 2009, with the final audit report expected during the first quarter of 2010. 

Additionally, the OIA is working to address complaint activities from TellCitizens, an internal employee misconduct reporting program.  Administration of this program is being transitioned to the Corporate Compliance Division.

To view a summary report of the August 27 Audit Committee meeting, click here.

 

Consumer Services Committee Report

Consumer Services Committee Chairman Bill Corry reported on his Committee’s most recent meeting, during which it took no action.  During that meeting, a legislative briefing and updates on Citizens’ ongoing efforts to improve customer service were discussed.

To view a summary report of the August 27 Consumer Services Committee meeting, click here.

 

Market Accountability Availability Committee Report

Market Accountability Availability Committee Chairman Brian Squire reported on his Committee’s most recent meeting, during which members expressed concern about insurance agents using the Florida Market Assistance Plan to “churn” commercial residential insurance policies.  The Committee will investigate the issue and provide a recommendation for the Board at its next meeting.

The Committee also will continue to monitor the lack of availability of wind-only homeowners’ insurance policies for vacant properties in the private market.

To view a summary report of the August 27 Market Accountability Availability Committee meeting, click here.

 

Consent Agenda

The Board approved a $702,000 contract with AIR Worldwide Corporation to develop new Catastrophe Modeling Software (“CAT Software”) with no discussion.  The CAT Software will provide forecasting data for potential future catastrophic events that could affect Florida.  This data will be used by Citizens to develop actuarially-sound rates, improve internal risk management processes, enhance risk transfer decision-making and assist in catastrophe reserving estimations.

To view the consent agenda summary, click here.

The meeting was then adjourned.

 

Should you have any questions or comments, please contact Colodny Fass.

 

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