Citizens Property Insurance Board Approves Clearinghouse Concept, Monroe County Windstorm Study; Delays Surplus Notes Depopulation Program Pending Further Study

 

At its December 14, 2012 meeting, Citizens Property Insurance Corporation (“Citizens”) Board of Governors (“Board”) approved a “Clearinghouse” concept designed to provide a means to compare Citizens’ policies with those of private insurers, along with detailed explanations of the differences between them.

Citizens CEO and President Barry Gilway explained that the idea is to ensure policies are “shopped effectively,” instead of simply being absorbed by Citizens.

“It could have a huge impact,” he said.  “If a private insurer is willing to provide insurance to those coming through the Clearinghouse, this is something the consumer needs to know and something Citizens needs to know.”

“(The Clearinghouse) is a shopping facility . . . that allows Citizens to have a relationship with multiple numbers of policyholders and allows them to shop that business to multiple numbers of carriers,” Mr. Gilway said.  He said 52 percent – possibly more – of Citizens’ policies do not get effectively shopped in the private marketplace.

The Board instructed Citizens’ Staff to move forward with the concept, acknowledging there is much additional work to be done.

Other key topics of discussion during the lengthy meeting included the delay of Citizens’ Surplus Notes Depopulation Program (“Program”) due to uncertainty of the success of recent policy takeouts from Citizens, and the possibility of withdrawing Citizens’ rate filing for a statutory basic personal residential product (pursuant to HB 1101) because of concerns about its pricing. 

Board members agreed to take no further action on the Program until the results of a policy retention study are available early next year.  The study is expected to provide a clearer picture of why insurance policies that were absorbed by private companies are returning to Citizens.

Earlier this year, Citizens proposed using $350 million in surplus funds to provide 20-year loans to companies that would take Citizens policies and keep them for 10 years.  The plan drew much criticism.

Mr. Gilway said he does not believe the Program will not have any takers, given its stringent financial and retention requirements.

“The Surplus Notes Program, with all its merit, is not ready for prime time,” said Carlos Lacasa, Board Chairman.

Board members also voiced concern about a pending rate filing with the Florida Office of Insurance Regulation (“OIR”) for a statutory basic personal residential product similar in nature to an HO-8 policy–one that is lower in price, but that but removes considerable amounts of coverage.  Pursuant to HB 1101 enacted this year, Citizens must offer this limited coverage option by January 1, 2013.

Several Board members voiced concern over the product, saying it will ultimately serve to defeat Citizens’ depopulation effort, since consumers might not realize how significantly reduced their coverage would be.

Although some discussion touched on withdrawing the rate filing, it was ultimately agreed the Board would allow Citizens’ Staff additional time to work and negotiate with OIR, and only consider withdrawal of the filing if no amenable compromises could be reached.

In other business, the Board:

• Reviewed the current percentage of the Emergency Assessment related to the 2005 Plan Year Deficit and the recommendation that there be no change in it for 2013. 
• Voted to spend $485,000 on an independent study to analyze catastrophic loss exposures in Monroe County under a proposal submitted by the non-profit group Fair Insurance Rates in Monroe (FAIR).  Of concern is the difference in rates and premiums paid in Monroe County that are significantly higher when compared with other coastal communities.  The goal of this project is to resolve the windstorm insurance crisis in Monroe County by developing an accurate wind risk profile for the Florida Keys.  This would include distinguishing between predicted hurricane damage attributable to wind versus storm surge, and incorporating accurate, validated data regarding the quality of wind-resistant construction throughout Monroe County.  The resulting risk profile is expected to enable the Keys to depopulate at least 25,000 High-Risk policies from Citizens in a market-driven, scientifically supported manner.  
• Agreed to formulate coverage for screened enclosures for mobile home dwellers with a buy-back that is adequate for the degree of risk.  Earlier this year, Citizens filed to remove coverage of such structures from all personal lines policies because of the risk, but some mobile home dwellers insisted the coverage is required by their mortgages and, in some cases, the mobile home community prospectus.  After some discussion, the Board directed Citizens’ Staff to develop a product and report back with details in late January 2013.  Of note, last month, Citizens’ Actuarial and Underwriting Committee refused to recommend the re-instatement of such coverage, citing a possible $1 billion in exposure.
• Voted to hire Charles D. Johnson as Citizens new Vice President of Human Capital Management.  Mr. Johnson comes to Citizens from American Express Inc. where he led Human Resources support for 15,500 employees in North America and in 15 countries. 
• Approved Citizens’ 2013 Budget

The Florida Market Assistance Plan Board of Governors meeting scheduled after the Board meeting was deferred.

 

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