Citizens Status Report to House Insurance Committee Focuses on SBA Investments

 

The House Committee on Insurance convened today, Thursday, December 13, 2007, for the sole purpose of hearing testimony related to Citizens Property Insurance Corporation (“Citizens”). 

Citizens’ Chief Financial Officer Sharon Binnun reported to the Committee on issues ranging from policy counts to financial statements, with a particular focus on investments managed by the State Board of Administration (“SBA”).

For a copy of Ms. Binnun’s presentation click here.

According to Ms. Binnun, Citizens currently has 944,719 active policies in the Personal Lines Account (PLA), 13,954 in the Commercial Lines Account (CLA) and 442,494 policies in the High-Risk Account (HRA).  The number of policies has grown, but at a rate lower than 2006 growth, primarily because of the calm 2007 storm season.  The only account that has seen significant growth is the CLA , the result of which is directly related to the Legislature’s decision to merge the Florida Commercial Joint Underwriting Association into Citizens.

Ms. Binnun also reported that Citizens currently has $10.1 billion in cash and invested assets and $2.3 billion in surplus available to pay claims.  Including its Florida Hurricane Catastrophe Fund (“FHCF”) coverage and pre-event funding, Citizens estimates that it has a total of $22.8 billion available to pay claims in the event of a catastrophic storm.

Because of Legislative action taken early in 2007, Citizens also has an assessment base that has increased to $34 billion for regular assessments and $37.4 billion for emergency assessments.  Citizens’ assessment base essentially mirrors that of the FHCF and includes most lines (excluding worker’s compensation and medical malpractice coverage).

At the Citizens Board of Governor’s meeting scheduled for Spring 2008, Board members may vote to purchase private reinsurance for Citizens in order to offset the likelihood of a potential catastrophic storm assessment in the event of a catastrophic storm.

Binnun reported on Citizens’ depopulation initiatives, projecting that 270,000 policies will be purchased by the private sector in 2007, and more than 310,000 will be taken out in 2008.  Most of the companies purchasing Citizens policies are Florida-only mono-line companies that have taken advantage of the Capital Build-Up Incentive Plan implanted by the Legislature in 2006.

The final portion of the meeting related to SBA-managed Citizens assets.  The SBA has recently come under public scrutiny for making poor investment decisions. 

Ms Binnun reported to the Committee that the SBA has invested approximately $586 million of Citizens’ money in funds that have been identified as faulty.  The Committee expressed grave concern about this wasteful use of taxpayer money.

 

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