Citizens Committee Meeting Reports: December 11

Citizens Property Insurance Corporation (“Citizens”) held three committee meetings in Jacksonville, Florida on December 11, 2008.  Below is a brief summary of the activities and discussions that took place during the meetings.

 

Market Accountability Advisory Committee

Christine Turner, Citizens’ Director of External and Legislative Affairs, provided an update on public outreach and education efforts.   To view a copy of the public outreach and education update, click here.

Over the past few months, Citizens has held public information forums throughout the state.  The largest turnout was for the forum held in Pensacola, which was attributed to an increased communications outreach effort.  Staff members expected, but did not get, a high turnout in South Florida.   Citizens will increase its communications efforts to elicit greater participation for future forums. 

Ms. Turner noted that consumers had many questions and concerns regarding take-out polices.  She stated that a few forum attendees expressed concerns with pending claims. 

Ms. Turner also gave a brief update on the Citizens Mission Review Task Force (“Task Force”).  The Task Force has released a working draft of its preliminary report for comment or changes.  The final report is due to the Legislature on January 31, 2009.  To view a copy of the draft report, click here.  To view a copy of the Task Force update, click here. 

Steve Bitar, Citizens’ Director of Consumer Service, provided an update on the Consumer Services Department.  To view a copy of the update, click here.

The primary function of the Consumer Services Department is to handle customer complaints.  There have been no recent trends in complaints to report.  Citizens has continued to address complaints in a timely manner and continues performing customer service practices above the industry standard. 

Committee members expressed satisfaction with the Consumer Services Department’s functionality.  Committee member Nester Rivero asked whether agents are notified when complaints come to Citizens.  Mr. Bitar stated that, while it is not current practice, the Consumer Services Department would be willing to put that policy in place.  

Paul Palumbo, Citizens’ Senior Vice President of Underwriting, discussed proposed changes to the Actual Cash Value Loss Settlement for Ineligible Risks policy.  To view a copy of the proposed changes, click here.

Citizens is considering issuing a notice to wind-only policyholders that would clarify the coverage amount offered for roofs in this type of policy.  Roof coverage for a wind-only policy is for the actual cash value of the roof only. 

To view a copy of the proposed actual cash value loss settlement for roofs letter, click here.  To view a copy of the proposed windstorm or hail losses to roof surfacing letter, click here.  Another version for use with form DW-2 for new declarations on a wind-only policy may be viewed by clicking here.

Committee members expressed concern that the policy language in the draft letters may mislead and frustrate policyholders because an insured with an old roof may have little to no insurance on their roof.  Committee members suggested that incentives for consumers to harden their homes should be increased.

The meeting was then adjourned.

 

Consumer Services Committee Meeting

Ms. Turner provided a policyholder forum update similar to her report to the Market Accountability Advisory Committee discussed above.  Board Member Carlos Lacasa expressed concern that turnout for the forums held in South Florida were low.

Mr. Bitar provided an overview of the Consumer Services Department similar to his report to the Market Accountability Advisory Committee discussed above.  Committee members suggested that information technology (“IT”) enhancements be part of future consumer service plans because the IT budget is being increased. 

In response to questions by Committee members, Mr. Bitar expressed the opinion that his department is prepared to adequately function during a catastrophic event through in-house staff and outsourcing resources.

Mr. Palumbo discussed the proposed Actual Cash Value Loss Settlement for Ineligible Risks Policy similar to his report to the Market Accountability Advisory Committee discussed above. 

Mr. Lacasa stated that adequate disclosure measures are being put in place.  He asked about the effect on premiums.  Mr. Palumbo noted that the premium rate for wind-only policies will not change due to the increased risks on other structures. 

A representative from the Consumer Advocate’s Office expressed concern that the policy may lead insureds to believe they have coverage when they do not.  Concern was expressed about insureds being able to determine what the actual cash value on their roof will be. 

Committee members discussed alternative policy wording that would exclude coverage for roofs entirely.  Mr. Palumbo stated he would recommend changing the policy to clearly state that the roof has no value and will not be covered in the event of a wind loss.

Following this discussion, the meeting adjourned.

 

Finance and Investment Committee

Sharon Binnun, Citizens’ Chief Operating Officer, reviewed the 2009 Budget.  To view a copy of the 2009 Budget Report, click here.

The 2009 budget was prepared assuming no catastrophic events for the year, and a contingency budget was prepared to account for a catastrophic event (see page 39 of the 2009 Budget Report). 

Generally, the budget assumes:

• That fewer policies will enter Citizens in 2009
• Depopulation will continue
• Staff levels will decrease
• Average premiums are declining in each policy category
• Non-catastrophe loss rates are increasing
• Investment income is down

Ms. Binnun noted that pre-event liquidity is very important.  The budget estimates that Citizens will service 803,000 policies in 2009.  The budget was approved by the Committee and will be submitted to the Board of Governors (“Board”) for adoption.

Kerry McGovern, Citizens’ Investment Manager, provided an update on Citizens’ Portfolio and reported on Investment Returns. 

To view the Assets Amortized Cost Chart, click here.  To view the Total Assets Chart, click here.  For the Invested Assets Charts, click here.  To view the Maturity Schedule Chart, click here.  For the Credit Quality Chart, click here. 

70 percent of Citizens’ portfolio is AAA rated.  Ms. McGovern noted that Fund A in the Local Government Investment Pool will be fully liquid on December 23, 2008.  As a result, $650 million will be immediately available to Citizens. 

It was noted that the state of the financial market does not pose a significant risk to Citizens’ investments.  To view the Downgraded Securities Chart, click here.  To view Citizens’ Investment Returns, click here.

Ms. Binnun reported on the Finance and Investment Committee Charter (“Charter”), Reinsurance Broker Consent Agenda, and Allocation of Additional Assets Executive Summary. 

With little discussion, the Committee approved the Charter, which will be provided to the Board for adoption.  To view the Charter, click here.

Ms. Binnun stated that a Committee meeting related to outlining investment philosophy parameters and hiring financial advisors will be scheduled to be held during January, 2009.

Regarding the Reinsurance Broker Consent Agenda, Ms. Binnun stated that Citizens is in the process of looking at six reinsurance brokers to secure private reinsurance for Citizens.  She noted that, if determined necessary and approved by the Board, a contract amount will be negotiated.  The contract will provide that there will be no fee if reinsurance is not purchased and that any broker fees will be based on a percent of the reinsurance secured.  The contract would be for 2009-2010, including a one-year term with two optional contract extensions.  

The Committee authorized Staff to negotiate with the eligible brokers.  Additional Board approval is required to purchase any reinsurance.  To view the Reinsurance Broker Consent Agenda, click here.

The Committee also approved hiring six financial advisors to oversee Citizens’ assets.  To view the Allocation of Additional Assets Summary, click here.

There being no further business before the Committee, it adjourned.

 

Should you have any questions or comments, please do not hesitate to contact Colodny Fass.

 

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