Florida’s Citizens Property Insurance Corporation Board of Governors Agrees to Hire Consultants to Review Surplus Notes Depopulation Program
Oct 19, 2012
Florida’s Citizens Property Insurance Corporation (“Citizens”) Board of Governors (“Board”) voted today, October 19, 2012, to spend an estimated $400,000 on two outside financial consultants to evaluate the proposed Surplus Notes Depopulation Program (“Program”), which is intended to reduce Citizens’ exposure and potential for assessments.
To view the meeting materials, click here.
After brief discussion, the Board voted to approve two emergency procurement measures: One to hire Goldman Sachs to provide financial advisory review services, and another to retain an as-yet-undetermined firm to conduct actuarial or related assessments of the Program. The second advisor was approved subject to Citizens’ staff selecting a vendor. Each contract amount was set at a maximum price of $200,000.
Board member Carol Everhart recused herself from the vote, citing a possible conflict of interest.
In response to concerns from lawmakers and policyholders about the Program, Citizens’ Depopulation Committee had agreed at its October 9 meeting to hire third-party financial advisors to evaluate it. This outside review will include an evaluation of potential benefits to Citizens and the Florida insurance-buying public through the potential reduction of exposure and catastrophe assessments in relation to risk undertaken.
Board member Chris Gardner said that a third-party review is essential and noted that Citizens needs to work harder to explain the benefits of its programs to both officials and policyholders. He suggested that Citizens’ existing depopulation program also be given close scrutiny in regard to monitoring the success of existing takeouts. Citizens CEO and President Barry Gilway lauded the idea and said he likely will present it to the Board in December.
Mr. Gilway noted that Citizens has the potential to return $1.5- to $2 billion of risk to the private market under the proposed Program by extending approximately $350 million in one-time loans to Florida private market insurers.
In return, those companies would commit to assuming large blocks of Citizens policies and renewing them for a minimum of 10 years, he said. The reduction in exposure would directly reduce the potential assessment burden for all Florida policyholders, as well as reduce Citizens’ underwriting needs by $2.4 billion over 10 years, Mr. Gilway told the Board.
“We are committed to independent review to determine whether we have all the proper procedures requirements and safeguards in place to ensure that this program is a prudent investment and in the best interest of Citizens policyholders and all Florida taxpayers,” Mr. Gilway said. “Citizens has the absolute duty to protect our policyholders and Florida taxpayers from the risk of assessment. To let this opportunity slip by would be an abandonment of our fiduciary responsibility.”
Board Chairman Carlos Lacasa said Goldman Sachs was selected because of its brand name and credibility.
In other business, Citizens spokeswoman Christine Ashburn noted that a new banner with hyperlinks has been added to Citizens’ website to make it easier to find the available depopulation information. The new banner says “Has another company offered you coverage?” and includes a direct link to all other available depopulation and Frequently Asked Questions, Ms. Ashburn stated.
Florida Insurance Consumer Advocate Robin Westcott also told the Board she has been working with members of Citizens, the Florida Office of Insurance Regulation (“OIR”) and the agent community to add additional information to the OIR website.
With no further business before the Board, the meeting was adjourned.
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