Citizens Property Insurance Corporation Board of Governors Meeting Report: January 31
Feb 2, 2011
The Citizens Property Insurance Corporation (“Citizens”) Board of Governors (“Board”) met on January 31, 2011 to review a long-term lease for office space in Tallahassee and a contract for reinsurance brokerage and advisor services.
To access the meeting materials, click here.
Tallahassee Office Space
With little discussion, the Board unanimously approved a $10.8 million, six-year contract for office space. The contract includes two five-year renewal options.
“Instinctively I would rather own what we have, but I think the reality of the situation is – we don’t know what our size is going to be – we are going to have to try to shrink ourselves back to the original intent,” said one Board member. “Who knows how much space we will need or how many people we will have? Part of me hates to continue to pay rent, but I suspect that is the best thing to do.”
Reinsurance Broker and Advisor Services
The Board unanimously agreed to use a “round robin” approach to hiring a reinsurance broker and advisor by hiring multiple brokers, whose services will be rotated over the duration of a three-year contract, with two one-year renewal periods. If the Board does not purchase private reinsurance during the contract term, the cost for all analytical services will not exceed $300,000 per year.
It was explained that handling its reinsurance brokerage needs in this manner will not cost Citizens more money, because the fees will be divided among the selected brokers. Of the brokers hired, two will be used each year.
The participating vendors are Guy Carpenter and Willis Re. Aon Benfield was included as a participating vendor, but did not agree to the arrangement because of concerns about how fees would be split with the other brokers. The Aon Benfield representative, however, told the Board his company would like more details on how the co-broking situation would work. Previously, Aon Benfield indicated it was unwilling to work as a co-broker under any circumstances.
Fees for the reinsurance and advisor services are contingent upon Citizens actually purchasing reinsurance.
After an annual analysis, the Board will decide whether to purchase reinsurance for the upcoming hurricane season. If the Board decides to buy reinsurance, the brokers’ fees for each contract will vary based on the vendors for each contract year. The brokerage and advisory fees in any contract year will be about half the standard reinsurance brokerage and advisory fee rate.
Among other items, Board members also approved a six-month contract extension for GIS Geographic Information Services from April 1, 2011 to September 31, 2011, with no additional renewals or extensions.
With no further business before the Board, the meeting was adjourned.
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