Citizens Mission Review Task Force Meeting Report

On Friday, October 10, 2008, the Citizens Property Insurance Corporation Mission Review Task Force (“Task Force”) held its first meeting in Tampa, Florida. 

To view the meeting materials and Task Force member roster, click here.

Scott Wallace, President and Executive Director for Citizens Property Insurance Corporation (“Citizens”) opened the meeting and reviewed Citizens’ vision and mission.  Representative Alan Hays (R-Umatilla), the author of the Task Force language that passed as part of Senate Bill 2860 during the 2008 Florida Regular Legislative Session, stated that he voted in support of House Bill 1A in 2007, but added that the bill had some very bad unintended consequences. 

Representative Hays called on the Task Force to provide recommendations without regard to politics.  He also called on the Task Force to review the Florida Hurricane Catastrophe Fund (“FHCF”) and activities of Florida’s Chief Financial Officer.  Representative Hayes expressed that, in his view, Florida currently has a socialized property insurance system.  He added his concerns about Florida’s probable inability to secure adequate bonding capacity in the event of a catastrophic event, given the current financial market. 

Suzanne Murphy, Citizens Executive Vice President, opened the floor for the election of Bruce Douglas as Task Force Chairman.  With Task Force consent, Mr. Douglas then appointed Terry Johnson as Vice-Chair, noting his consumer advocacy experience.  It was noted that Citizens is statutorily required to provide staff for the Task Force. Christine Turner was selected as the principle contact.

Citizens Counsel provided a brief presentation on Florida’s Sunshine Laws.  He noted that these meetings are open to the public, and therefore, Task Force members cannot discuss its activities without public notice.

Ms. Murphy provided a history and review of Citizens and its former companies.  There was some discussion about claims and transactions stemming from the Poe Financial Group insolvency, as well as the sentiment that the State of Florida should have the flexibility to deal with insolvent insurance companies’ unique situations. 

Task Force member Locke Burt suggested that a statutory change be made to allow private companies assuming policies from an insolvent company during a hurricane season to be provided with the same FHCF coverage available to the insolvent company.  Current law allows Citizens to secure the FHCF coverage in such a case, but not private companies.

The Task Force discussed the Florida residential market:

• William Merlin suggested acquiring data and testimony from several admitted insurers. 
• Mr. Burt provided a review of the insurance market from Hurricane Andrew to the present. 
• Chairman Douglas noted that rates and reinsurance must be addressed.
• Belinda Miller, Florida Office of Insurance Regulation (“OIR”) Deputy Commissioner of Property and Casualty Insurance, stated that even if larger insurance companies could charge double or triple their existing rates, they would not necessarily write additional policies.  She further noted that Florida should nurture its domestic companies and facilitate Citizens’ takeout process.

Discussion continued regarding a plan submitted by Citizens to the Florida Financial Services Commission (“FSC”) regarding implementation of a system for insurance companies to notify Citizens via the Internet that a policy had been offered to an insured (thereby making the insured ineligible for Citizens).  This is based on concerns about a lack of enforcement regarding ineligible policyholders who are insured by Citizens.  The Task Force staff was directed to provide members a copy of their report to the FSC, and to get input on the plan’s viability.

Citizens’ reinsurance broker provided a report on the reinsurance market, noting that reinsurance pricing has decreased and capacity has increased since 2006. 

Explaining that reinsurers use near-term models in their pricing, he discussed Citizens’ modeling exposure and depopulation of the personal lines account. 

The Task Force generally discussed methods of assuming additional risks through a “Fair Plan,” which would require insurance companies to all share in high-risk exposures.  It also discussed that high-risk account takeouts have been problematic for the OIR, as well as for the Florida Legislature.  Ms. Miller indicated that a company would have to be extremely well-funded for the OIR to consider approval of a high-risk takeout program.

FHCF Senior Officer Jack Nicholson noted that the FHCF will be sending out new guidelines for Capital Incentive Build-Up Program participant companies.  He also commented on the nature of FHCF-related risk and loss, explaining that the FHCF charges $2 per $100 based on five different loss models, including the Florida Public Model.  Mr. Nicholson advocated lowering the FHCF’s risk.

Sharon Binnun, Citizens Chief Financial Officer, provided an update on Citizens’ finances, including surplus, reinsurance reimbursements and assessments.  Ms. Binnun stated that Citizens has a claims-paying ability of up to $18 billion, with $4 billion in cash.  She also discussed the assessment and surcharge processes.

As the meeting reached its conclusion, Brian Donovan, Citizens’ Director of Actuarial Services, provided a brief report on Citizens’ rates.  Rates were retrenched to their 2006 level, and are legislatively frozen until 2010.  Mr. Donovan reviewed the elements of Citizens’ policy pricing, which are similar to those of private companies.   In general, however, private companies have a more detailed pricing plan. 

Bill Ballard from the St. Petersburg-based Florida Reinsurance Corporation (“FRC”) gave public testimony.  FRC proposes to allow the FHCF to reinsure Florida’s entire wind risk, in which private reinsurance would not play a roll.  Mr. Ballard’s proposal had mixed reaction from the Task Force.     

The Task Force is expected to produce a report by January 31, 2009.  While future meeting dates have not yet been set, three additional meetings are likely prior to the above date.  Colodny Fass will continue to monitor Task Force activities and provide reports accordingly.

 

Should you have any questions or comments, please feel free to contact this office. 

 

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