October 17, 2007

Developed by Florida Insurance Council staff

Additional informaton on Citizens is available from these links:

Citizens Property Insurance Corporation
Frequently Asked Questions About the New Legislation Impacting Citizens

Citizens Purchased Almost 40 Percent of Expanded Cat Fund Coverage;
Citizens Officials See Resurging Private Market to Offset Their Growth

Citizens Property Insurance Corporation purchased almost 40 percent of the $12 billion in additional Florida Hurricane Catastrophe Fund coverage and now has about 40 percent of the program’s $28 billion total coverage. Citizens probably can  avoid bonding in any event short of a 1-in-100-year storm largely because of the Cat Fund expansion. Citizens has no private
reinsurance.

These important statistics were reported October 16 by John Forney, Raymond James & Associates, who is financial advisor for Citizens and the Cat Fund. Forney made a presentation to the Cat Fund Advisory Council.

Citizens President Scott Wallace also appeared before the Advisory Council and noted that Citizens has hovered at about 1.4 million policies in recent months and almost certainly won’t see the significant expansion which had been expected. He credited the leveling off of Citizens growth to a resurging private market, primarily smaller insurers, and credited this in part, to two years without hurricanes ((hopefully) and the state’s $250 million Capital Incentive Loan Program.

Citizens “is the largest customer of the Cat Fund and the largest beneficiary of the TICKL layer,” Forney said. Citizens purchased $4.5 billion of the additional $12 billion optional, upper layer, or 37.5 percent. It has $10 billion of the $28 billion in total Cat Fund capacity, or almost 40 percent.

Because of the Cat Fund expansion, Citizens is unlikely to be competing with the Cat Fund for tax-exempt bonds following a major hurricane, he said. This is a significant factor increasing the likelihood the Cat Fund could sell the bonds it needs o meet its  $28 billion obligation through the 2009 hurricane season, under the expansion package passed during the January special session.

Citizens has the surplus to cover its retention, its along-the-side co-pay and even part of its liabilities above the Cat und, he reported. “For most storm events that would exhaust the Cat Fund, Citizens would not have to bond,” he said, adding, bonding would probably be necessary for a 1-in-100-year hurricane event.

Citizens President Wallace noted that Citizens’ risk count as of September 30, 2007, was 1,379,847. This includes 428,515 wind-only policies in the High Risk Account, 7,903 multi-peril policies in the HRA, 930,149 residential policies in the Personal Lines Account, 916 wind-only commercial policies from the old commercial JUA, and an additional 919 commercial
policies from the Citizens new commercial program.

Citizens had $506 billion in total exposure as of October 3. This includes all accounts - homeowners, mobile homeowners and commercial.Its 100-year probable maximum loss was $10.1 billion in the PLA/CLA and  $14.4 billion in the HRA; its 50-year PML, $6.5 billion and $9.1 billion; and its 25-year PML, $3.4 billion and $4.6 billion.

Citizens policy count had been projected at about 2 million by the end of this year. It now should be about 1.6 million, Wallace reported.. The projected number for the end of 2008 is now about 2 million, compared to the earlier projection of 2.5 million to 3 million.

Several companies, primarily small and new, have taken out policies from Citizens this year and as many as 100,000 additional  policies may be removed in November and December. In addition. The smaller companies are picking up risks dropped by larger private carriers and new homes coming onto the market, keeping these risks out of Citizens.

Citizens and the private marker have benefitted from “almost two years of good weather and the capital build-up program, he said. “The smaller companies starting up, they need to put their capital to work.”

Citizens has $10 billion in cash and investments available to pay  claims - $5 billion in bond proceeds, a $2.5 billion surplus projected by year’s end, and a line of credit.

Citizens Can Now Compete With Private Insurance Market 

The largest insurer in Florida for the hurricane risk is not a private company. It is Citizens  Property, created in 2002 with the merger of two high risk pools, the Florida Windstorm Underwriting Association and the Florida Residential Property & Casualty Joint Underwriting Association.

Citizens is a state-operated association providing property insurance where it is not available from the regular market or, as a result of the January special session legislation, when the private market offer has a premium at least 15 percent higher than the comparable Citizens premium.

Also as a result of HB 1A, passed during the January special session, Citizens will now offer an all-perils policy to consumers purchasing wind coverage from it in the so-called High Risk Account, areas on barrier islands, near the mainland coasts and, in Dade, Broward and Palm Beach counties, from I-95/U.S. 1 to the Atlantic Ocean. Many of these homeowners had been getting their “underlying perils” insurance from private insurers.

Also as a result of the January legislation, Citizens will be offering full coverage (hurricane plus the other perils) to business owners unable to get it from the private market or with private market offers substantially higher than the Citizens premium. This will be available statewide.

Governor Charlie Crist is leading the charge to allow and direct Citizens to complete with the private market when its rates are lower and Floridians can save money. The down side is that Citizens premiums have never covered its losses following a major hurricane. The deficit will be financed  through an  assessment on all homeowners – not just the one in four insured by Citizens; all business owners; and all automobile insurance policies.

Citizens State's Largest Hurricane Insurer

Citizens is the largest insurer in Florida according to policy count, followed by State Farm, Allstate, Nationwide and USAA.Concentration in Dade, Broward, Palm Beach and Monroe counties is about 50 percent of the total in each of the three accounts.

Citizens' High Risk Account, Old Florida Windstorm Underwriting Association

Citizens' High Risk Account provided wind coverage only until this year, with the policy supplemented by a policy for fire and other perils from a private carrier like Allstate or State Farm. The High Risk Account operates only in designated areas in 29 of Florida's 35 coastal counties, generally within 1,000 feet of the Atlantic Ocean, Gulf of Mexico or Intercoastal Waterway, and on barrier islands. One major exception is the so-called I-95 Corridor, east of I-95 in Dade, Broward and Palm Beach counties, an area that is as wide as 10 to 12 miles in certain sections. All of Monroe County (the Florida Keys) is eligible, as well as all of the cities of Pensacola, Sarasota, Daytona Beach, South Daytona Beach and Ormond Beach.

The Citizens High Risk Account operates in portions of the following counties: Bay, Brevard, Broward, Charlotte, Collier, Dade, Duval, Escambia, Flagler, Franklin, Gulf, Hernando, Indian River, Lee, Levy, Manatee, Monroe, Nassau, Okaloosa, Palm Beach, Pasco, Pinellas, St. Johns, St. Lucie, Santa Rosa, Sarasota, Volusia, Wakulla and Walton. The High Risk Account operates in most of coastal Florida, with the notable exception of Hillsborough County, where private market windstorm insurance has remained available, largely because of protection afforded the region by huge Tampa Bay.

CFS Sink Overseeing Task Force on Resolution of Citizens Outstanding Claims 

From a June 8 news release by the Department of Financial Services

In an ongoing effort to improve Citizens' policyholder and applicant services, Florida Chief Financial Officer Alex Sink is overseeing work of the legislatively-created Task Force on Citizens Property Insurance Claims Handling and Resolution. The public is encouraged to attend (meetings around the state of the task force) and...offer personal testimony. The Department of Financial Services will also have consumer assistance on site to help Floridians with questions regarding Citizens claims and policies.

The Citizens task force was created by House Bill 1A during the 2007 special session of the Florida Legislature.  The task force is composed of four full members, with one appointment each by the Governor, Chief Financial Officer, President of the Senate and Speaker of the House. In addition there are three ex-officio voting members: the Insurance
Commissioner, Insurance Consumer Advocate and Executive Director of Citizens Property Insurance Corporation or their designees.

Specifically, the committee is directed to develop recommendations for Citizens to complete claims remaining from the 2004 and 2005 hurricane seasons.  This committee report is due to the Governor, Chief Financial Officer, President of the Senate and Speaker of the House by July 1, 2007.  The task force is additionally charged with evaluating Citizens'
procedures on claims handling, claims resolution and customer service, with a final report and recommendations due July 1, 2008.

CFO Sink has also created a Web site dedicated to the task force, its duties, appointments, and upcoming meetings.  Floridians who would like to learn more about the task force are encouraged to visit the Web site at:

Task Force on Citizens Property Insurance Corporation Claims Handling & Resolution