Citizens Market Accountability and Advisory Committee Meeting Report: April 2

The Citizens Property Insurance Corporation (“Citizens”) Market Accountability and Advisory Committee (“Committee”) met on Thursday, April 2, 2009, during which a new Chairman, Brian Squire, was elected unanimously for the Committee’s new term.  To view the meeting agenda, click here.

In addition to Mr. Squire, Committee members Paul Palumbo, Belinda Miller, Greg Rokeh, Nancy Bonnell, Dave Newell, Christian Monnar, Skip Boylan and Steve Roddenberry were in attendance. 

Mr. Palumbo, Citizens’ Senior Vice President of Underwriting, provided a brief overview of Citizens and its role in Florida’s property insurance market, and explained the Committee’s purpose.

 

About the Market Accountability and Advisory Committee

The Committee assists Citizens’ Board of Governors (“Board”) in developing awareness of Citizens’ rates and its service levels in relationship to voluntary market insurers.  The Committee is required to report to the Board at each meeting on insurance market issues, which may include:  rates and rate competition with the voluntary market; customer and agent service; and depopulation efforts. 

The Committee is comprised of 11 members that serve three-year terms:  four members are appointed by Florida’s agent associations; three from the largest voluntary writers in Florida; one (each) from the Florida Office of Insurance Regulation (“OIR”), Florida Association of Realtors and the Florida Bankers Association; and one policyholder representative appointed by Citizens’ Board. 

To date, 10 Committee members have been appointed.  The policyholder representative position is vacant.

 

About Florida’s Property Insurance Market

Approximately 90 percent of Florida’s admitted market residential property insurance is written by:

• Citizens (approximately 30 percent);
• Major national companies’ “pups” or separate Florida-only units (approximately 30 percent); and
• Florida-only domestic companies (approximately 30 percent).

The remaining 10 percent is written by other smaller national and regional carriers.

As of March 31, 2008, Citizens held 23 percent of Florida’s personal residential market and 67 percent of the commercial residential market. 

Mr. Rokeh inquired about how the number of existing policies that are expected to be redistributed among “pup” insurers if State Farm Florida withdraws from the market.  Mr. Palumbo stated that State Farm Florida holds 16 percent of the personal residential and 17 percent of the commercial residential market. 

Ms. Miller indicated that the OIR is confident that the private insurance market can absorb those policies.  So far, 30 companies have expressed intent to absorb State Farm Florida policies, should the company’s Florida withdrawal be finalized. 

 

Citizens’ Operating Accounts

Citizens has three separate accounts:  the Personal Lines Account (“PLA”), which includes personal residential multi-peril homeowners, dwelling fire, mobile home, tenant and condominium unit owner policies; the Commercial Lines Account (“CLA”), which includes commercial residential multi-peril condominium association, apartment building and homeowners’ association polices; and the High-Risk Account (“HRA”), which includes personal residential wind-only policies, commercial residential wind-only policies and commercial non-residential wind-only policies in coastal high-risk coverage areas.

Coastal high-risk coverage areas are set by law at the recommendation of local county officials, and are determined by distance from the coast.

 

Citizens’ Rates

Citizens’ rates are frozen by law through December 31, 2009.  Beginning on July 15, 2009, Citizens must make an actuarially-sound rate filing for each of its personal and commercial lines that would be effective no earlier than January 1, 2010.  Citizens’ Staff is in the process of compiling filing information for all lines of business.

Mr. Boylan inquired whether Citizens’ Staff is taking material costs for repairs into account in the rate filings.  Mr. Palumbo stated that the rates are being developed at 100 percent of replacement cost using reasonable estimates of replacement cost guidelines.  Modifiers are applied annually by ZIP code to the guidelines based on inflation for materials and labor. 

 

Depopulation

Approximately 300,000 policies were taken out of Citizens during 2008.  Depopulation during 2009 has not been as active as was previously forecast due to the possibility of State Farm Florida’s withdrawal from the market, together with rising secondary insurance market prices.

Mr. Boylan inquired whether the increased number of inquiries to the Florida Market Assistance Program following State Farm Florida’s withdrawal announcement have translated to a significant number of successful take-outs.  Mr. Palumbo affirmed this and offered to provide documentation at the next Committee meeting.

To view Mr. Palumbo’s report, click here.

 

Other Business

It was suggested that each Member offer several issues that the Committee can monitor and provide Board recommendations.  Committee suggestions included:

• Commission a new mitigation study to determine the actual amount of money returned to policyholders compared to the formerly projected amount;
• Review Hurricane Wilma claims payments to see if the claims work has been completed, and if the actual claims costs are consistent with the current market environment;
• Examine the possibility of offering wind-only policies for vacant properties;
• Review the definition of “transient or short-term occupancy” in regard to commercial residential policy eligibility;
• Continue with consumer and customer service updates; and
• Obtain an update on outcomes from the 2009 Legislative Session.

Following discussion on Committee suggestions, the meeting was adjourned.

 

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

 

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