Citizens Market Accountability Advisory Committee Meeting Summary

The Citizens Property Insurance Corporation (“Citizens”) Market Accountability Advisory Committee (“Committee”) held a meeting on Wednesday, January 23, 2008 to discuss Citizens’ month-end and Key Performance Indicator (“KPI”) reports, and updates on the Actuarial and Underwriting Committee.

Committee members Skip Boylan, Nestor Rivero, Scott Johnson, Greg Rokeh, Brian Squire were in attendance. Committee Chairperman George Grawe was not there. Also in attendance were Bill Zellman, Christine Turner, Paul Palumbo and Suzanne Murphy.

A report was given by Ms. Murphy encompassing both month-end and KPI summaries. At the end of 2007, Citizens held approximately 1.3 million policies, representing a net growth from 2006-2007 of 6,726 policies. The growth in policies was small overall for 2007 because almost 250,000 policies were taken out.

The concern was raised by the Committee regarding Citizens’ total exposure increasing even though the number of policies in the PLA account is down. CLA business grew in 2007, and as those policies are renewed, replacement costs increase and Citizens needs to ensure policyholders have enough coverage.

Citizens is seeing lower premiums due to the Florida Catastrophe Hurricane Fund’s refined definitions of risk and a reduction in sinkhole policies.

The KPI report compared monthly averages of 2006 and 2007 to demonstrate improvement in the amount of business Citizens has been processing.

Mr. Palumbo then gave an update on the Actuarial and Underwriting Committee. He reviewed changes implemented in regard to eligibility guidelines for short-term (six month) hurricane coverage policies. These changes provide that policyholders must now replace their expired short-term hurricane policy with an annual-term policy that also covers wind or they will be ineligible to enroll for Citizens coverage for six months after their policy expiration date.

This change is to mitigate against the scenario where an insured purchases a wind policy exclusively for hurricane season as a means of exploiting a flaw in the current system. The changes will go into effect on February 1, 2008.

The Actuarial and Underwriting Committee has also made changes to Citizens’ rating algorithm. These changes are designed to allow Citizens to rate policies more appropriately by more effectively taking actual risk into account. Changes from this restructure will begin to be seen within the next year, which is expected to result in rate fluctuation.

Clarification was requested on the definition of commercial lines wind-only policies. Many agents are unclear on the definition and, from the current wording, it appears that many condominiums that are currently covered would be excluded based on their proximity to water.

Concern was also raised about the inflation guard factors for renewal of wind-only policies. Under the current system, extra work is created for both Citizens and its underwriters. Currently, when a policy is up for renewal, the property has to undergo a new appraisal and the underwriters then have to endorse policies back down to the appraised value. Automatic renewal for wind-only policies starts in July 2008 and under the new system, a new inflation guard appraisal will not be needed, inasmuch as it will be built-in.

Concerns were raised about policies being written and accepted at one price and then re-assessed mid-term and having the rates increased. It was stated that this is bad for the agents. The Committee decided to create a presentation for the March 2008 meeting to review this issue.

The meeting was then adjourned.

 

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

 

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