Citizens Property Insurance Actuarial and Underwriting Committee Agrees Coverage Risk for Mobile Home Screened Enclosures, Short-Term Rentals Remains Too High To Resume

Nov 29, 2012


Citizens Property Insurance Corporation (“Citizens”) will continue refusing to insure mobile home screened-in enclosures if its Board of Governors (“Board”) takes the advice of the Actuarial and Underwriting Committee (“Committee”), which met yesterday, November 28, 2012.

To view the meeting materials, click here.

Citing a possible $1 billion increase in exposure, Committee members agreed the risk of insuring such structures remains too high, even though some mobile home dwellers insist the coverage is required by their mortgages and, in some instances, their mobile home community prospectus.  Committee members agreed to recommend that Citizens’ Board continue holding the line on refusing to offer such coverage.

Earlier this year, Citizens filed to remove coverage of such structures from all personal lines policies because of the risk.

The Committee also agreed to refer the issue of insuring short-term rentals as they relate to Citizens Personal Lines Account to the Market Accountability Committee for consideration.  

Short-term rentals have been a much-discussed topic:  In February 2012, the Board re-classified upscale condominiums where more than 25 percent of the units are short-term rentals as Commercial Non-residential risk; the change applied to new business and renewals with policies over $1 million.

Additionally, Committee members discussed the possibility of re-instating Builders’ Risk policy options, but decided to wait to take action until a thorough analysis of the issue and related risks was completed.  Citizens nixed Builders’ Risk coverage earlier this year for both its Commercial and Personal Lines Accounts, discontinuing new business in March and renewals in June.

During the discussion on short-term rental, Citizens’ Chief Insurance Officer Yong Gilroy explained that the company is trying work with reinsurance brokers to size up the existing market.

Committee member Tom Lynch said he supports the additional research, but was skeptical about the short-term rental issue.

“I am not sure this is the mission of Citizens,” Mr. Lynch stated.

Board member Carol Everhart said she would like to see what the definition of short-term rental is going to look like.

“There are existing policies that have been on the books a long time,” she said. “If we are going to do this, everyone should be affected the same way.”

On the topic of Builders’ Risk, it was explained that a delay in action on this topic would give the private market time to “step up and provide capacity” for properties under construction in Monroe County and other areas in Florida.

Committee member John Rollins said he wants to make sure Citizens doesn’t become a large inadequately-funded provider of such insurance by default.  He worried that the offering of Builders’ Risk policies might give developers incentive to build properties in high-risk areas.

The issue of whether to re-instate coverage for screened-in enclosures in mobile home communities spurred much talk, though Committee members ultimately decided against it.

“We are going to lose our shirt on it,” Mr. Lynch said, referring to the possible $1 billion in exposure such coverage could add. 

“What I have seen is these things are the first to go.  They cause so much damage because they hit the building first, then they go flying off,” Mr. Lynch added.

 Ms. Everhart said mobile home residents have nowhere but Citizens to turn.

“I think we have to go back to we are the market of last resort and these people don’t have anywhere else to go,” Ms. Everhart said.  “I don’t see any numbers to show us what the loss ratios are on mobile homes.”

Mr. Rollins called the structures “very scary.”

“No matter how well these things are attached, they seem to splinter and go flying through the park,” Mr. Rollins said.  “I have a problem with consciously voting to bring back something that is a real public safety issue.”

He called the issue a “Catch 22.”

Mr. Gilroy said no mobile home underwriting guidelines exist.  He added that it would be challenging to try to place such guidelines on mobile homes only, and then validate and manage the process.

Ms. Everhart urged consideration nevertheless.

“I guess I am kind of pleading for the mobile home community to have availability,” she said.  “I believe only those who needed it to be in compliance . . . would be the ones who would take it.  You probably would not get a lot of takers.”

In other business, the Committee heard the following updates:

Sinkhole Underwriting

  • Citizens’ Sinkhole Underwriting project will be deferred until 2014, because policies in force with the sinkhole endorsement have dropped 15 percent in the highest risk part of Florida.
  • The volume of new sinkhole loss coverage endorsement requests has significantly decreased since the introduction of the shared-cost inspection program.
  • Deferring to 2014 will allow a new two-year claim reporting limitation to be in effect, so those new claims will be subject to more specific structural damage definition language.

Personal Lines Underwriting

  • Total Personal Lines transactions increased in 2012 over the prior year by 13 percent to 1.4 million transactions for new applications, endorsements, cancellations and claim referrals.
  • Cycle times fluctuated during the first half of 2012, hitting a peak of 14 days in July.
  • Strategies implemented to address heavy volumes and service delays showed dramatic improvement in cycle time in the last half of the year.

 Commercial Lines Underwriting

  • Cycle times have been maintained between 11 and 12 days, significantly below the cycle time goal of 25 days.
  • The cycle time represents significant improvement over 2011 where the average cycle time was approximately 20 to 25 days.

Commercial Re-Underwriting Inspections

As of October 31, 2012:

  • 683 properties with in-force policies have been fully inspected and processed
  • 214 policy assignments were cancelled due to a refocusing of the program
  • The remaining 860 policies currently being processed by Citizens’ Underwriting should be completed by December 31, 2012

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


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