Florida House Insurance and Banking Subcommittee Considers Citizens Property Insurance Rates, Reinsurance and Proposed Surplus Notes Depopulation Program
Dec 5, 2012
The Florida House of Representatives’ Insurance and Banking Subcommittee (“Subcommittee”) met yesterday, December 4, 2012. State Representative Bryan Nelson, the Chairman, provided time for Subcommittee members to introduce themselves and then introduced the Subcommittee Staff members.
Florida Department of Financial Services Legislative Affairs Director Ashley Mayer gave a presentation on her agency and outlined its functions.
Drew Breakspear, Commissioner of the Office of Financial Regulation, presented a similar overview of his agency, as did Florida Office of Insurance Regulation Chief of Staff Audrey Brown.
Citizens Property Insurance Corporation (“Citizens”) President and CEO Barry Gilway, the main focus of the meeting, gave an overview of the State-run insurer.
Citizens Chief Financial Officer Sharon Binnun, who also spoke, outlined the composition of Citizens’ three accounts. Both Mr. Gilway and Ms. Binnun discussed Citizens’ efforts to depopulate itself. Ms. Binnun also highlighted various initiatives by Citizens’ Board of Governors to reduce its exposure. She also enumerated Citizens’ claims-paying resources, explaining that it currently has $6 billion in surplus and $5.1 billion in pre-event liquidity.
Mr. Gilway summarized the changes instituted by SB 408. He noted that the legislation is having a significant impact on Citizens’ sinkhole losses.
He also summarized Citizens’ proposed Surplus Notes Depopulation Program (“Program”). At the request of Chairman Nelson, Ms. Binnun outlined how the Program was developed and its various aspects.
State Representative Frank Artiles noted that he was “struggling” with whether it was better for Citizens to purchase pre-event bonds or reinsurance. Ms. Binnun stated that she felt it was a combination of both.
Several Subcommittee members said they were open to giving Citizens more control over its rates, which are currently capped at 10 percent a year. Chairman Nelson proposed the idea of allowing Citizens to raise its rates an additional 3 percent higher in order to let the company buy reinsurance.
Ms. Binnun continued her presentation, illustrating various scenarios and effect of the proposed Program on Citizens’ assessment potential. She outlined the requirements for participation.
Chairman Nelson questioned why the financial requirements to participate in the Program were restrictive and noted that smaller companies would not qualify for the Program. Ms. Binnun stated that two to three companies have expressed interest in participating. Chairman Nelson suggested that maybe the Program should be expanded so more companies can participate.
Representative Artiles questioned whether Citizens has done a market conduct exam on the companies interested in participating in the Program. Ms. Binnun noted that the Florida Office of Insurance Regulation approval of the participants is required, and that perhaps a financial examination of these companies might be more appropriate.
Dan Sumner, Citizens’ General Counsel, summarized the existing statutory authority that would allow Citizens to institute the Program without additional legislative authority.
State Representative John Wood urged Citizens’ staff to “get creative,” and added that Florida needs relief quickly. He indicated that he did not think additional authority was necessary.
Representative Wood also said he thought Citizens should “get more aggressive” in raising its rates even if it means policyholders in South Florida will pay more.
“I’m not going to have Dade County take down the whole state of Florida,” he said.
With no further business before the Subcommittee, the meeting was adjourned.
To view the meeting packet, click here.
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