Citizens Committee Reports: October 2009

Citizens Property Insurance Corporation (“Citizens”) held a series of Committee meetings in Jacksonville, Florida on October 22, 2009. The following is a report on the discussions that took place during the meetings:

 

Market Accountability Advisory Committee (“MAAC”)

Citizens’ Director of Legislative and External Affairs Christine Ashburn provided a month-end report, in which she noted that, as of September 30, 2009, Citizens had 1,064,287 policies with a total exposure of $413,998,196,336 for all of its accounts.

Director of Claims Operations Lance Malcolm reported on Citizens’ 2009 year-to-date claims activity, which totals 22,306 new claims and 23,459 closed claims. The primary cause of 2009 Citizens claims is related to water and plumbing issues.

To view the agenda and presentation materials for this meeting, click here.

The next MAAC meeting will be held in Tampa on December 10, 2009.

 

Claims Committee

Claims Consultant Bill Steelman reported that Citizens obtained Florida Office of Insurance Regulation (“OIR”) approval for the use of new disputed/claims appraisal language to be included in all new and renewal residential and commercial policies effective with OIR approval of the 2010 rates after January 1, 2010.  The rate review process is currently ongoing.  To view a summary of the form changes applicable to the new language, click here.

Catastrophe Claims Operations

Thirty claims were filed as a direct result of damage from Tropical Storm Claudette, which made landfall on August 16, 2009.  Despite this minimal amount of claims, Citizens’ catastrophic plan was implemented, primarily as an exercise.  A total of $125,000 in Claudette-related claims payments were made, along with $10,300 in loss adjustment expenses.  To view the Catastrophe Claims Operations and Commercial Claims Update, click here.

Non-Catastrophe Claims Operations

Litigation and disputed claims assignment trends were among the non-catastrophe and key performance indicators reported by Mr. Malcom.  Re-opened claims continue to increase.  Each claim is evaluated on a case-by-case basis.  Along with the re-opened claims, increases continue in mediation, appraisal, litigation of claims and expenses.  Additional statistics include:

• New assignments have increased 47 percent from 2008
• 90-95 percent of re-opened claims are precipitated by public adjuster involvement
• Closing ratios in mediation and appraisals have improved, but litigation closing ratios have decreased from 2008 to 2009. 
• Twenty-five Chinese drywall claims were filed in 2009 and five of these are still open. 

Discussion took place regarding Citizens’ interactions with policyholders and mortgageholders in total loss scenarios.

To view the Non-Catastrophe and Key Performance Indicators Update, click here.

Vendor Relations

Citizens’ Director of Vendor Relations Eric Ordway discussed staffing inventory.  He reported that Citizens has contracted with 29 firms for current and potential staffing needs.  From these, 589 adjusters have been approved and deployed; 1,537 have been pre-approved, but are inactive; and 1,936 have not been approved, but are open.  The number of commercial policies has substantially increased and is causing the need for general adjusters (“GA”) and executive general adjusters (“EGA”) with specialty claims handling experiences.   Citizens has contracted with GA/EGA firms for emergency responses as well. 

The Claims Committee approved a commercial adjuster services claims contract with Engle Martin and Associates and BrightClaim, Inc.  Worth over $8 million, the contract does not include commercial catastrophe adjusting services.  Designated as an emergency purchase, it is intended to support the increased demand, volume and size of Citizens’ commercial exposures.  The contract term begins in October 2009 and expires on December 31, 2010, with a single, one-year renewal term.

To view the Vendor Relations Update, click here.

Staffing

Citizens’ Senior Vice President of Claims Yong Gilroy reported that, with Citizens’ staffing levels now at 231 in-house claims employees and 125 in-house claims adjusters, the goal is to handle 50 percent of non-catastrophe claims in-house.  Other priorities include catastrophe planning, quality assurance and claims handling improvements.  To view the Staffing Update, click here.

It was also reported that all Citizens independent adjuster training is being performed by state-certified continuing education instructors.  To view the consent agenda for commercial adjuster services, click here.

The Committee approved a consent agenda item regarding multi-lingual translation services estimated to cost $110,688 over five years.  To view the consent agenda for translation services, click here.

Following these discussions, the meeting concluded.

 

Audit Committee

Citizens’ Audit Committee met on October 22, during which Citizens Chief of Internal Audit Joyce Bellows reported that two audits and resulting reports from the 2008 Audit Plan have been completed and that several other audits are expected to be completed by December, with reports to be issued during the first quarter of 2010.  Ms. Bellows noted that 75 percent of audit time is spent on direct audit practices, which do not include administrative time, staff meetings or training.

Ms. Bellows noted that Citizens uses two vendors and one independent contractor in addition to the internal audit staff.  The Committee approved the use of the outside audit firms recommended by staff.  

Citizens’ Chief Financial Officer Sharon Binnun briefly reported that Citizens currently has a policyholder surplus of $3.7 billion.  Citizens’ collected premiums have decreased, primarily due to wind mitigation credits.

The Committee adjourned following Ms. Binnun’s presentation.

To view the agenda and presentation materials for this meeting, click here.

 

Finance and Investment Committee

Citizens’ Finance and Investment Committee met on October 22, during which CFO Binnun reported on Citizens’ investment portfolio and returns.  To view the Investment Report, click here.  To view the meeting agenda, click here.

The Committee approved a consent agenda item required to retain a team of senior and co-managing bond underwriters for future Citizens liquidity financing.  The senior bond underwriters include Citigroup, Goldman Sachs, J.P. Morgan, Merrill Lynch and Morgan Stanley.  To view the bond underwriter consent agenda, click here.

The Committee also approved the hiring of UBS Global Asset Management to assist in the management of Citizens’ investments, for which it will be paid $1.25 million.  To view the investment management consent agenda, click here.

Discussion took place regarding the need for multiple managers due to the conservative nature of Citizens’ investment strategy.  Ultimately, the Committee agreed that multiple firms provide value, but too many could become unnecessarily costly. 

Ms. Binnun advised the Committee that she would be presenting a liquidity plan for 2010 at the December Committee meeting.

Following Ms. Binnun’s report, the Committee adjourned.

To view the October Citizens Board of Governors meeting agenda and related materials, click here.  A representative of Colodny Fass will attend this meeting and provide a report on the proceedings.

 

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