Citizens High-Risk Account Public Rate Hearing Report: November 10

On Tuesday, November 10, 2009, the Florida Office of Insurance Regulation (“OIR”) held a public hearing on Citizens Property Insurance Corporation’s (“Citizens”) proposed rate filing for its High-Risk Account (“HRA”). 

Citizens, which has been operating under a mandated rate freeze since 2006, is required by the recently passed House Bill 1495 to make annual rate filings with the OIR.  For certain policies, Florida law also mandates that Citizens’ rates cannot increase more than 10 percent per policy per year.

OIR officials present at the hearing included Deputy Commissioner Belinda Miller; General Counsel Steve Parton; Actuaries Bob Lee and Ken Ritzenthaler; and the Director of Property and Casualty Product Review, Richard Koon.

Citizens representatives who testified included Director of Actuarial Services Brian Donovan; Paul Palumbo, Senior Vice President of Underwriting; ISO Consulting Actuary Paul Erickson and Executive Vice President of Corporate Operations Susanne Murphy.

The following HRA statewide average rate increases were proposed by Citizens:

• 7.5 percent for Homeowners
• 5.9 percent for Dwelling Fire
• 11.8 percent for Mobile Homes
• 9.8 percent for Commercial Property Residential Condominium
• 9.8 percent for Commercial Property Residential Ex-Condominium
• 9.9 percent for Commercial Property Non-residential

Following brief introductory remarks by Mr. Palumbo, OIR actuaries questioned Citizens officials regarding the rate filing.  Much of the discussion related to a 15 percent reinsurance surcharge that Citizens has been applying in its rates, but did not include in its rate filing.  This surcharge would generate approximately $100 million in revenue. 

According to the OIR officials, there is no statutory authority for the surcharge.  Citizens’ officials said that they are considering the purchase of private reinsurance if it can be obtained at an appropriate cost.  Ms. Miller noted that Citizens has considered purchasing reinsurance for several years, although it has not been fiscally responsible to do so.

Citizens and OIR officials also discussed rate indications, costs related to non-hurricane catastrophe losses, pre-event financing and other rate filing factors.  OIR officials expressed some concern with the completeness of the filing. 

Following the question and answer period, the OIR panel heard testimony from the public.  A representative from Associated Industries of Florida (“AIF”) expressed concerns with the potential negative impact to the business community created by suppressed rates and reliance on post-event assessments.  Mr. Parton stated that commercial properties–specifically those owned by AIF members–have benefitted substantially from the existing Citizens’ rate structure.

Members of Fair Insurance Rates in Monroe (“FAIR”) provided testimony related to “unjustly high” property rates in Monroe County.  FAIR representatives contended that the rates do not reflect Monroe County’s already-stringent building code and suggested that data from the Florida Public Hurricane Loss Model, upon which Citizens is required to rely, is inaccurate.  FAIR representatives also noted that, because a large portion of damage from a major storm would be attributable to flooding, rather than wind, Citizens’ rate increases should be completely denied.

Ms. Miller indicated that the record will remain open for additional written comments until November 17, 2009.  Shortly thereafter, the OIR is expected to issue its order on Citizens’ filing.

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

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