Florida’s Citizens Property Insurance Readies Depopulation Program Changes, Enhancements for 2017

 

Private insurers’ takeout offers could be more readily accepted after implementation of Florida’s Citizens Property Insurance Corporation’s (“Citizens”) “Depopulation Enhancements for Policyholder Choice” Program (“Program”), which will be reviewed at Citizens’ Market Accountability Advisory Committee meeting tomorrow, September 27, 2016.  

In order for the Program to be put into effect, modifications to Citizens’ existing Depopulation Plan must be made.  These changes will be presented at Citizens’ Depopulation Committee meeting–also tomorrow. 

The Depopulation Enhancements Program would allow Citizens policyholders to choose from among multiple insurers’ takeout offers (when applicable), rather than having the selection made by an algorithm.  A policyholder would receive a single letter from Citizens that explains the assumption process and provides them with information about all insurers interested in assuming their policy.  The policyholder would then document their selection directly with Citizens, rather than via insurers, with the goal of reducing the opportunity for error or delay in selection processing.

To view a slide presentation on the Program, click here.

The corresponding proposed revisions to Citizens’ Depopulation Plan are described as adding more detail to the existing Plan, and would require changes to existing law.  The new Plan would also serve as a foundation document for upcoming revisions to the Assumption Agreement between Citizens and private insurers.  It must be approved by Citizens’ Board of Governors (which meets on September 28) and the Florida Office of Insurance Regulation. 

The new Plan provides a single document from which the details of Citizens’ depopulation program can be understood. 

Among the proposed changes are:

• Definitions:  A series of definitions have been drafted to be used throughout the Plan. 
• Depopulation Cycles:  Section 627.351(6)(ii), Florida Statutes, provides that Citizens shall periodically publish a schedule of cycles during which an insurer may identify and notify Citizens of policies that such insurer is interested in taking out.  The new section of the Plan sets how and when such cycles will be published and what will be included with such publication. 
• Assumption Agreements:  Consistent with the previous plans, the new Plan requires insurers who wish to take out policies to enter into an assumption agreement with Citizens.  However, the following changes have been made: 
  • Rather than entering into an agreement every 18 months, an insurer must enter into an agreement for each calendar year that the insurer wishes to assume a policy.  The agreement will cover only the assumptions that occur during that calendar year.  This will ensure that if there are changes to any facet of the depopulation process at the beginning of a calendar year, those changes will be captured in the annual agreements and applied uniformly to all such assumptions that take place during that year. 
  • The Plan clarifies that the insurer’s obligations regarding assumed policies last for the “Assumption Term” which is generally three years. 
  • Rather than incorporating a minimum exposure or minimum number of policy selections into the Plan directly, such minimums may be incorporated into the assumption agreements.  This will allow Citizens to adjust the minimums over time to reflect a changing book of business.
• Policyholder Notices and Policyholder Choice for Personal Lines Residential Policies:  This section incorporates the changes required per Section 627.351(6)(ii), Florida Statutes. 
• Commercial Lines Selection Process:  This section allows Citizens to utilize a selection process for commercial lines that is the same as that set forth for personal lines, or to maintain the same selection process that has been utilized in the past. 
• Producing Agents and Assuming Insurers:  This section reflects the legal obligations that assuming insurers have toward agents of record for assumed policies. This does not change the current obligations that are found in law, in the consent orders, and in the assumption agreements. 
• Liabilities on Assumed Policies:  This sets forth the insurer’s obligations on assumed policies, consistent with the relevant statutes.  This does not change the current obligations that are found in law, in the consent orders, and the assumption agreements. 
• Returned Policies:  This section sets forth the conditions under which policies may be returned to Citizens, and sets forth the responsibility for claims on such policies.  The responsibilities regarding claims do not change.  However, the Plan codifies Citizens position on when policies may be returned (sometimes colloquially referred to as “untagged”). 
• Forms, Rates and Renewals:  This section sets forth the obligations to offer renewal on assumed policies.  It does set forth situations when the insurer may cancel or non-renew a policy, but makes clear that the insurer may not cancel or nonrenew for any exposure management or underwriting reason known of the insurer at the Assumption Date.  This does not change the current obligations that are found in law, in the consent orders, and in the assumption agreements. 
• Assumed Premiums:  This section details the obligations regarding assumed premiums and trueups.  This does not change the current obligations that are found in law, in the consent orders, and in the assumption agreements, but does provide a greater degree of detail regarding what will be reviewed during a “true-up” of such premium. 
• No Take-Out Bonuses are Approved:  This section makes clear that no take-out bonuses are approved as part of this Plan.

While Citizens expects its policy count to hold steady in 2017 at just under 500,000 policies, it projects another 65,000 policies to be assumed during the remainder of 2016–22,500 of which are wind-only policies.

To view the depopulation update to be presented at tomorrow’s meeting, click here.

For complete meeting information on these and all of tomorrow’s Citizens committee meetings, click on the hyperlinks below:

• Market Accountability Advisory Committee
• Finance and Investment Committee
• Depopulation Committee
• Audit Committee
• Actuarial and Underwriting Committee

All meetings will be live-streamed at www.TheFloridaChannel.org beginning at 10:30 a.m. (ET).

 

 

Should you have any questions or comments, please contact Colodny Fass.

 

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