FPCA Homeowners Division Members: Senate Banking and Insurance Committee to Release PCB on Citizens

Feb 25, 2014

Florida Property and Casualty Association Homeowners Division Members:

In preparation for the 2014 Regular Legislative Session, the Senate Banking and Insurance Committee (“Committee”) has spent much of the interim committee weeks discussing proposals relating to Citizens Property Insurance Corporation (“Citizens”).  As a result of these discussions, the Committee Chairman David Simmons is expected to soon release a proposed committee bill (“PCB”) on Citizens.  The PCB will include many of the ideas discussed during the interim.  Below is a brief summary of the issues we expect to see in the PCB:

I.             Citizens shall stop writing NEW multiperil Commercial-Residential policies in the Costal Account and instead offer All Other Peril (AOP) policies along with Wind Only.

a.            Addresses an inequity in rates that results in commercial-residential buildings covered by a multi-peril policy paying less than the same building insured by Citizens with a wind-only policy and an AOP policy at current rates.

b.            Citizens’ AOP coverage is comparable to the private market, allowing for more takeout opportunities.

c.             This proposal will not affect current Citizens commercial-residential multi-peril policyholders, who are allowed to continue renewing their multi-peril policies.

II.            Applies a 15 percent limit on rate increases to all commercial non-residential policies.

a.            A 15 percent glide-path on rate increases for commercial non-residential policies should, based on current projections, result in all of Citizens commercial nonresidential policies achieving close to actuarial soundness after 4 years.

b.            There are 21,467 policies insuring 30,480 buildings with a total exposure of $14.27 billion and a 1-100 PML of $1.175 billion.

c.             Average commercial non-residential wind-only policy is 24.3 percent below actuarially sound. The average commercial non-residential multi-peril policy in the Coastal account is 73.5 percent below actuarially sound.

d.            Average commercial non-residential multi-peril policy in the Commercial Lines Account is right around being actuarially sound.

e.            There has been a 42 percent drop in policy count since 2007.

III.           Allows Citizens 18 months to develop and establish a Citizens Clearinghouse for commercial residential policies.

a.            A commercial clearinghouse would help enforce the 15 percent eligibility requirement for new Citizens applicants, and encourage private-market insurers to offer coverage to existing Citizens policyholders.

b.            Private market insurers are actively writing commercial residential policies that insure newer buildings with a replacement cost greater than $10 million.

c.             Citizens estimates 5-15 percent of its current commercial residential policies would be attractive to the private market.

IV.          Requires Citizens to annually report their bonding capacity, claims paying capacity and their current cash balance as of December 31 of each year. 

V.            Removes the requirement that insurers offer a $500 deductible option for non-hurricane losses. Insurers will be able to offer a $500 deductible option for non-hurricane losses, but will not be required to do so.


While this is not a comprehensive list of all the issues discussed during the interim, it is a starting point for Committee discussions this Session.

We will continue to keep you updated as additional information is released.  In the meantime, please feel free to contact this office if you would like to discuss further.