Florida’s Citizens Property Insurance Names Insurance Executive Barry Gilway as New President; Board Reviews Committee Reports

 

Citizens Property Insurance Corporation (“Citizens”) Board of Governors (“Board”) voted unanimously on June 13, 2012 to hire Mattei Insurance Services CEO Barry Gilway as its new president, citing his lengthy tenure in the insurance industry and past experience managing and downsizing large corporations as key attributes.

Mr. Gilway was one of two finalists interviewed during a public meeting before the Board made its selection.  The other finalist was Glenn A. Pomeroy, CEO of the California Earthquake Authority and a former North Dakota Insurance Commissioner.

During the earlier Search Committee meeting, Board member John Wortman sought to include Citizens’ Interim President Tom Grady as a finalist, but was voted down 2-to-1.  Mr. Grady was chosen to serve as interim president in early March to replace Scott Wallace, who resigned April 6, 2012.

Mr. Gilway’s career in the insurance industry spans more than 40 years, beginning with INA/CIGNA in 1970 where he held a variety of underwriting, marketing and field management positions, and later advancing to high-level executive positions with Crum & Forster, Berkley Corp, and Maryland Casualty.  He also served as CEO for Zurich’s Canadian companies for four years until returning to the U.S. to serve as the carrier’s U.S. Mergers and Acquisitions liaison and head its Operations Division.  Prior to joining Mattei several years ago, he spent time with Mystic Capital Advisors.

He is a graduate of Akron University and the Stanford Executive Development Program.

“One of the reasons you should consider me is because I have done this before,” Mr. Gilway told the Board, referring to Citizens’ challenge to downsize itself.  “I have met many, many challenges.”

If hired, he assured the Board members he would consult with each of them, as well as other key personnel throughout the company about what they consider to be key issues.  Mr. Gilway noted his experience with downsizing, explaining that, while in Canada, he was tasked with reducing a company with 2,500 employees to 1,500 employees in a 15-month period while operating in an atmosphere where success was based “virtually 100 percent on downsizing the organization.”  He said he accomplished the task by relying on integrity, openness, and honesty with employees.

Board members later agreed Mr. Gilway’s experience downsizing and managing large corporations tipped the scales in his favor.

“What struck me about Mr. Gilway was that Mr. Gilway has lived through many instances where he would probably face significant consequences if he were to mishandle risk,” one Board member noted.

Board Chairman Carlos Lacasa was impressed by Mr. Gilway’s extensive experience in the private insurance industry.

“To me Barry’s experience in the private sector brings something to the table,” he said.

Interim President Tom Grady thanked the Board, saying it has been a “great experience” and reminded the Board there are many important issues to be addressed in upcoming months, including rate filings and sinkholes.

He said during his recent travels around Florida to discuss insurance issues with residents, few understood that sinkhole endorsement income generated $50 million but sinkhole losses totaled more than $500 million.

“It is easy to understand why private insurance companies are unwilling to write that kind of insurance,” he stated.

Next, Citizens’ Chief Financial Officer Sharon Binnun gave a brief report on Citizens’ audited financials, explaining that first quarter statistics show that a significant amount of policies have gone to the private sector, she added.

“We are growing less than we projected and that is a good thing,” Ms. Binnun stated.  During the Fourth Quarter of 2011 and First Quarter of 2012, new business decreased three percent, while a comparison of First Quarter 2011 to First Quarter 2012 indicates a 19 percent decrease.

For sinkhole-related issues, about half of new claims are for the current incident year and about half are for prior years.

The depopulation of about 80,000 policies is directly attributable to Citizens’ recently revised policy on ceding commissions.

She said the 1-in-100 year probable maximum loss has decreased by about $4.5 billion due to numerous risk reduction measures.  When $1.5 billion in pre-liquidity bond transfers are added, the total of those numbers is $6 billion.

Ms. Binnun noted that Citizens’ Financial Advisor John Forney has made a decision to leave Raymond James.  She lauded his efforts on behalf of Citizens, as did others on the Board.

“John Forney to me is an institution as far as this organization is concerned and I came to consider him as a friend, a trusted advisor and friend, and he will be sorely missed,” Chairman Lacasa offered.

During his report, Citizens’ Chief Insurance Officer Yong Gilroy noted that the topic of new business rates was brought up before Citizens’ Actuarial and Underwriting Committee in mid-May.  The Committee had outlined three options, including taking no action, filing a phased-in approach to new business rates, and filing fully adequate new business rates.

It was noted that a “Rate Management Workshop” is scheduled for July 16, 2012, which is after the 2013 rate indications are available and before the July 27 Board meeting.

During a brief report on Citizens’ ongoing mitigation inspections, it was noted that Citizens has completed processing inspections on 180,503 buildings, resulting in an estimated net premium increase of $81.5 million.

Susanne Murphy, Citizens’ Executive Vice President for Corporate Operations, noted that Board members have received copies of the Perr & Knight outsourcing report that was submitted on May 31, 2012.   She explained that the Legislature had mandated the Board’s retention of a consultant to prepare an analysis of the relative costs and benefits of outsourcing.

“We do have a new business process outsourcing for underwriting processing and other capabilities and that is out in the market today,” Mr. Gilroy said. “We are going to be asking a Board member to be assigned to this project.”

He said they are trying to finish the solicitation for a consultant in time for the July Board meeting, but it might have to wait until September.

“We will be bringing in a new potential partner in terms of business process outsourcing on the underwriting processing side, as well as other capabilities shortly,” he said.

The Board must now develop a plan to implement the report and its recommendations, Ms. Murphy noted.  She said the plan must then be provided to the Financial Services Commission for approval.

Board member Chris Gardner gave a very brief update on Citizens’ June 1, 2012 Depopulation Summit, reporting that several key initiatives were identified during the event, that feedback was good, and that the findings will soon be made available.

In other business, the Board approved a $26.6 million contract with CSX Technology Incorporated (“CSX”) to handle the technical aspects of a long-term data center co-location and consolidation.

Citizens plans to consolidate its Data Center operations from three sites to two, with one for production in Jacksonville, Florida, and another dedicated to disaster recovery in Tampa, Florida.

Citizens’ contract with CSX includes an initial 10-year term at a cost of $12 million, an initial five-year renewal option for $6.7 million, a second five-year renewal option for $7.5 million, and a one-time build-out cost of $400,000.

The implementation involves the consolidation of equipment and services from multiple existing data centers to one site supporting production and test-development, and one disaster recovery site.

In other business, the Board approved the following:

• A $1.6 million, five-year contract for Custodian Banking Services with the Mellon Bank of New York. The contract includes an option to renew the contract for two (2) one-year terms.
• A $904,600 contract with Zabatt, Inc. for emergency generator services. The fee includes a $350,400 retainer to guarantee access to two generators for 12 months and $544,200 for an estimated potential spend to activate two generators for up to 30 days.
• An $864,300 12-month contract with Encompass Digital Media for voice and data satellite services. The contract includes a $720,000 retainer fee to guarantee delivery for two satellite units and $144,300 for one 12-day deployment during the contract period.
• A $201,000 expenditure for the purchase of BMC (Numara) software licenses and implementation services
• A $300,000 expenditure for back-up battery annual preventative maintenance
• A $1.2 million expenditure for hardware, software and related services for two years for two facilities

With no further business before the Board, the meeting was adjourned.

To view the meeting materials, click here.

 

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