Citizens Depopulation Committee Meeting

The Citizens Property Insurance Corporation (“Citizens”) Depopulation Committee (“Committee”) held a meeting on Tuesday, January 15, 2008 to discuss the proposed Commercial Residential Non-Bonus Depopulation Plan and give a depopulation update for 2007. To view a copy of the meeting agenda, click here.

Committee Chairman Jay Odom called the meeting to order with members Andy Bennett, Gaby Fernandez and Fred Strauss in attendance. Also in attendance were Citizens’ Board of Governors Chairman Bruce Douglas, Board of Governors member Carol Everhart and Actuarial and Underwriting Committee member Paul Palumbo.

Lee Stuart from Citizens gave an update on 2007 depopulation activity. In 2007, seven take-out carriers removed 247,923 personal residential multi-peril policies from the Personal Lines Account (PLA), with an exposure total of $68,259,426,361. To view a complete list of take-out carriers and policies removed, click here.

The Depopulation Plan filed with the Florida Office of Insurance Regulation (“OIR”) in March, 2007 had been revised to include requirements for non-bonus assumptions and two new statutory requirements for assumptions providing an incentive or bonus for removing policies. These provisions condition receipt of a bonus by assuming carriers to their retention of those policies for at least five years, and limit the take-out bonus to a maximum of $100 per policy assumed.

2007 also brought about changes to Florida law modifying Citizens’ statutory eligibility rules. These changes allow policyholders to reject an offer from an assuming carrier and instead choose to remain insured by Citizens. To comply with these law changes, Citizens implemented notification requirements assuming carriers must implement in order to remove policies from Citizens. All assuming carriers must give notification to each policyholder by mail, giving them the option to remain insured through Citizens at least 30 days in advance of the planned assumption. Approximately 39,000 policyholders have chosen to remain with Citizens to date.

After formal assumption, the follow-up notice sent to the policyholder, agent and lienholder must clearly indicate that the policyholder can instead choose to remain insured by Citizens until the current policy expires. Citizens has processed approximately 7,800 policyholder requests to remain insured by Citizens after receiving the notice. To view samples of these letters, click here.

A list of Committee answers to frequently asked questions about the depopulation process was also given. To view those questions and answers, click here.

Ms. Fernandez mentioned recently receiving many calls from consumers who did not have the information needed to feel comfortable switching coverage from Citizens to an assuming carrier. The Committee resolved to improve communications on this issue.

Mr. Stuart also detailed the proposed Commercial Residential Non-Bonus Program.

Citizens is currently developing system requirements and processes to facilitate commercial residential depopulation. Commercial residential properties are considered to be commercial properties containing residences such as condominium and apartment buildings. These multi-peril policies each may cover hundreds of units. To date, approximately 11,500 of these policies have been reviewed by carriers for assumption.

The proposed Non-Bonus Program includes the following minimums: Single assumption must be at least 100 policies or a total insured value of $700 million. The take-out contract duration minimum is 18 months, during which the assuming carrier must remove either a total of at least 500 policies with wind-only coverage or policies with wind coverage that have a total insured value of at least $3.5 billion. These policies must be retained by the assuming carrier for a minimum of three years. Personal Lines Accounts and Commercial Residential non-bonus take-outs are exclusive and may not be assumed simultaneously under a single 18-month contract.

Additional incentive for assuming carriers that remove larger numbers of eligible policies include a ceding commission reduction for all policies in a take-out if either the minimum number or total insured value are assumed. To view the Ceding Commission Chart, click here.

It was added by Chairman Odom that when a policy is taken out, it is still covered by Citizens until the expiration date regardless of assumption status. If an insured customer wants to return coverage to Citizens, they may do so during the assumption period. Any loss that occurs after assumption is handled by the assuming carrier with a reimbursement from Citizens.

The Program was approved by the Committee and will be sent to the full Citizens Board for approval. The meeting was then adjourned.

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

 

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