Citizens Property Insurance Corp Meeting 8/11/06

Citizens Property Insurance Corporation (“Citizens”) held meetings on August 9-10, 2006, in Jacksonville, Florida. Citizens’ Market Accountability Advisory Committee, Florida Market Assistance Plan Committee, Finance and Investment Committee and Board of Governors met during this time.

The Market Accountability Advisory Committee discussed Senate Bill 1980, which requires Citizens to implement systemic changes to Florida’s insurance market. The Committee discussed changes of coverage to the excess and surplus lines market and indicated that a determination has not yet been made as to what constitutes a legitimate offer for purposes of surplus lines eligibility. The private nature of offers is one issue that the Committee will address in future discussions.

The Committee discussed a hypothetical scenario in which a lower deductible from Citizens may not prevent consumers from seeking surplus lines coverage. Also the Committee discussed surplus lines policies that exclude wind, which may or may not be a full coverage under Florida law.

In addition, the Committee will further study private companies performing servicing functions for Citizens. Citizens will request input from carriers and other interested parties, and staff will prepare a report for review by the Board of Governors.

The Committee reported that Citizens’ next rate filing and decision to purchase reinsurance must be implemented by March 1, 2007, at which time the rates are expected to increase substantially.

The Florida Market Assistance Plan Committee approved Citizens’ 2005 Annual Report and 2006 Proposed Budget, and the Report of Independent Auditors was ratified. The 2005 Annual Report subsequently will be filed with the Florida Office of Insurance Regulation. The proposed budget for 2006 is less than the 2005 budget, specifically proposing a decrease in administrative and underwriting costs.

The Finance and Investment Committee reported that Citizens is steadily building surplus and on target to continue to do so. The Committee stated that recent media reports suggesting that Citizens is financially troubled are inaccurate and that, even after the costly transfer of 320,000 Poe policies, under current conditions, Citizens is accumulating surplus at the rate of $2 million a month. Citizens has approximately 1.2 million policies in Florida, including the recent Poe policy transfers, and is the largest property insurer in Florida. Information regarding the Poe companies can be found on Citizens’ website, under “What’s New at Citizens” at http://www.citizensfla.com.

The Committee reported that Citizens undertook a review of its investment managers and found that they are in compliance, except for two technical non-compliance issues that will be resolved. The Committee also reported that Citizens’ rating has been upgraded by two rating agencies. Citizens’ bond issue, which invested $2.85 billion in bond funds with Citizens’ money managers, was reported to be an unqualified success.

In addition, the Committee unanimously approved the release of a Request for Proposal (“RFP”) for a financial advisor company and an RFP for an investment banking company. Citizens’ last financial advisor contract with Raymond James expired June, 2006, and an emergency extension contact was required. The RFP for a financial advisor will be advertised from August 14-27, 2006 and proposals will be accepted from August 28-September 11, 2006. A selection will be made in time for a special Board meeting scheduled for September 31, 2006.

The Committee also reported that Citizens has received the full $715 million in state appropriations allocated by the Florida Legislature in 2006, and that a letter of credit in the amount of $750 million will be finalized shortly.

The Board of Governors reported that Governor Jeb Bush is considering a plan to address the commercial property insurance market in Florida. At the next Cabinet meeting, scheduled for August 15, 2006, the Financial Services Commission will propose an emergency rule that would require the Property and Casualty Joint Underwriting Association to provide commercial property insurance to persons unable to secure an adequate level of coverage in the voluntary or surplus lines market. Citizens’ Board of Governors suggested that Citizens would be heavily involved in this proposal and will provide whatever support and systems possible to implement and run the plan.

Finally, the Board of Governors called on members of the Citizens’ Legislative and Consumer Affairs Committee to prepare an educational program on Citizens’ financial viability to disseminate to policyholders and the public in order to create more awareness.

The materials distributed at the Committee meetings and Board of Governors meeting are attached. These Committees and the Board of Governors will meet next on September 13-14, 2006, in Fort Lauderdale.

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

Regards,

Fred E. Karlinsky