Citizens Property Insurance Corporation

Transcription

1 Citizens Property Insurance Corporation Barry Gilway, President/CEO and Executive Director January 16, 2013

2 Citizens Existing Book of Business 2

3 What Could Citizens Look Like? Estimated exposure reduction could be $250 billion, or 42%. Properties Citizens will likely cover as the Insurer of Last Resort include the following characteristics: Coastal Properties Older Homes Older Mobile Homes Portion of the Sinkhole Prone areas Older, Taller and Higher Value Condominium Associations Rental Properties Commercial Non Residential As of 12/31/12 Policy Count Returned to Private Market Citizens Retains Percent Reduction PLA 860, , ,502 60% Coastal Account 446, , ,163 27% CLA 8,146 4,000 4,146 49% Total 1,314, , ,811 49% Note: Excludes risks tagged for takeout and special class risks. 3

4 Progress in Reducing Exposure

5 2012 Exposure Reduction PLA policy decline of 143,000 or 14% o 25% reduction in PLA new business o Increased number of policies depopulated of approximately 225,000 More depopulation in Coastal account than prior years Elimination of coverage for homes over $1 million Continued progress toward rate adequacy 5

6 2012 Exposure Reduction 6

7 Reduction in New Business 7

8 Number of Policies Assumed by Year 8

9 2012 Initiatives to Reduce Citizens Exposure Initiatives that reduced Citizens 2012 total exposure by approximately $29.1 billion Personal Lines: $1 million coverage limit (Coastal Account) Discontinue Builder s Risk for new business (phase out existing business) Reduce Coverage B default from 10% to 2% Eliminate option to Schedule individual Coverage B items Reduce Coverage C default from 50% to 25% Implement mandatory 10% Sinkhole Deductible Commercial Lines: Discontinue Builder s Risk for new business (phase out existing business) Eliminate coverage for special class items but for in ground pools and masonry fences Note: Excluding coverage for screen enclosures and carports will take effect through 2013 and is expected to contribute significantly to reducing exposure 9

10 Historical Average Rate Need HO 3 and HW 2 Rate Indications Year All Perils All Perils Excluding Sinkhole % 50.6% % 35.0% % 29.4% The decrease in rate indications over time may be attributed to the following Glide Path Coverage limit reductions Removal of coverage for screen enclosures Coverage of loss from dropped objects Hurricane catastrophe model revisions 10

11 Anticipated Actuarially Sound HO-3 and HW-2 Policies Year Number of Actuarially Sound HO 3 Policies PLA HO 3 Coastal HO 3 CoastalHW 2 Percent of Policies Number of Actuarially Sound HO 3 Policies Percent of Policies Number of Actuarially Sound HO 3 Policies Percent of Policies ,532 20% 7,379 10% 18,989 12% ,414 32% 10,396 14% 22,083 14% ,170 42% 14,743 20% 25,512 17% ,808 53% 19,202 26% 29,050 19% ,637 63% 24,574 33% 32,073 21% ,054 71% 31,206 42% 35,861 23% Assumptions: 1) Underlying book of business does not change significantly 2) There is not a significant difference in loss trend and premium trend 3) There is not a significant change in the hurricane models 4) Reinsurance costs do not change significantly 11

12 Personal Lines Account Multi-Peril Coverage (HO3) 2013 Rate Indication by Territory Notes: Data is based on inforce policies as of 12/31/2011, excluding Builders Risk, CoverageA over than 1 million, and some policies with older roofs. 12

13 Coastal Account Multi-Peril (HO-3) and Wind-Only (HW-2) 2013 Rate Indication by Territory 13

14 Consumer Choice Clearinghouse Goals Ensure only those policies that are statutorily eligible for coverage with Citizens are being written by Citizens Ensure that all Citizens applicants have access to every possible insurance option before choosing Citizens Ensure that all Citizens renewal customers have expanded access to every possible insurance option before choosing to renew with Citizens Provide all Citizens Agents expanded market access Provide Carriers expanded market distribution Meet the unique needs of all users 14

15 Consumer Choice Clearinghouse Concept Real time solution for risk submission that validates whether there is capacity in the private market Process Workflow: 1. Confirm submitted risks against a set of underwriting and exposure criteria provided by participating private carriers 2. For each carrier where the risk is acceptable, prepare a rate indication and basic underwriting acceptability for private carrier(s) and Citizens 3. Results are sent back to the producing agent in a comparative format that includes coverage and pricing 4. Rate/Capacity: a. If there is private market capacity available, and the rate is less than 115% of Citizens rate, agent may place the business with one of the carriers; agent access to Citizens (epas) will be declined b. If there is capacity, but the premiums are greater than 115% of Citizens, a quote for the private carrier(s) will be offered along side the Citizens quote. The policyholder may elect to place the business with the private carrier or Citizens. c. If no capacity is available in the private market, the risk is deemed eligible for Citizens and the agent will have the ability to submit the risk through epas All Renewal Business would be submitted to this facility 15

16 Consumer Choice Clearinghouse New Business Concept 16

17 Consumer Choice Clearinghouse Renewal Concept Citizens Consumer Choice 17

18 Other Considerations to Reduce Exposure

19 Residual Market Comparison FISCAL YEARS ENDING 2011 Avg Premium per Exposure Premium $1000 Exposure (3) = {(2) / [(1)/ 1,000]} Average Premium per Policy Market Share (000s) (1) (000s) (2) Louisiana (a) $ 9.02 $ 1, % 21,854, ,175 Georgia (a) % 3,481,039 21,999 Florida , % (a) 510,675,121 3,071,858 Texas (a) , % 87,062, ,814 North Carolina (a) , % 74,499, ,734 (a) Source: Property Insurance Plans Service Office, Inc. (PIPSO), "PIPSO Reports" July 2012, "2011 Property Insurance Plans Compilation of Expenses and Associated Ratios" 2012, "2011 FAIR and Beach Plan Underwriting Results and Market Penetration Report" Notes: 1. Exposure, not PML, is presented above. Therefore, the above comparison does not consider the estimated probabilities of occurrences. 2. Certain residual markets may write more or less commercial property coverage than Citizens which may have a disproportionate impact on the overall exposure. 3. Residual markets above include both FAIR Plans and Beach Plans, where applicable. 4. Market Share is determined using net written premium. 19

20 Residual Market Comparison (cont d) Summary of Applicant Eligibility Criteria of Selected Residual Market Carriers: Louisiana Citizens Property Insurance Corporation (Louisiana) Any person having an insurable interest in Insurable Property is entitled to apply for Coverage Rates for residential policies (excluding wind only policies) shall exceed by at least 10% the average rates charged by the insurer that had the highest average rate in that Parish among the ten insurers with the greatest direct written premium for that line of business in the preceding year Georgia Underwriting Association (Georgia) Applicant should seek coverage from the voluntary market prior to seeking coverage from the Georgia Underwriting Association Citizens Property Insurance Corporation (Florida) Premium for coverage from the authorized insurer is more than 15 percent greater than the premium for comparable coverage from the corporation Risks must meet certain underwriting criteria to be eligible Applications must include rejection, cancellation, or nonrenewal notice 20

21 Residual Market Comparison (cont d) Summary of Applicant Eligibility Criteria of Selected Residual Market Carriers (cont d): Texas FAIR Plan (Texas) Consumers must have been declined residential property insurance by at least two insurance companies licensed to write and actually writing insurance in Texas Consumers must also have not received a valid offer of comparable residential property coverage from an insurance company licensed in Texas (excl. surplus lines carriers) Risks must meet certain underwriting criteria to be eligible (eg. property cannot be vacant, condemned, etc.) Risks are written for one year terms; insured must reapply in the voluntary market every two years Texas Windstorm Insurance Association (Texas) Must have been declined by at least one insurer authorized to engage in the business of, and writing, property insurance providing windstorm and hail insurance coverage in first tier coastal counties or coverage that is not substantially equivalent to what is offered by TWIA Insured with TWIA must reapply for coverage every three years North Carolina Joint/Insurance Underwriting Associations (North Carolina) Applicant should attempt to purchase through the voluntary market prior to seeking coverage through the JUAs 21

22 Legislative Concepts to Return Citizens to the Insurer of Last Resort Rates Provide statutory language outlining a risk load factor that appropriately accounts for Citizens unique role as a residual market insurer Allow Citizens to pass through the cost of Florida Hurricane Catastrophe Coverage and private reinsurance outside of the 10% glide path Increase the statutory 10% glide path Eliminate the statutory 10% glide path (Pre HB 1A law) Eligibility Increase the 15% statutory eligibility rule Eliminate the 15% statutory eligibility rule (Pre HB 1A law) Provide that policyholders cannot opt out of takeout offers and must re apply for coverage before returning to Citizens (Pre HB 1A law) Make necessary statutory provisions to allow Citizens to adequately shop the market to keep out policies prior to issuing coverage Implement a statutory eligibility limit for commercial residential structures Other Require agents to certify annually they represent at least one other carrier that is actively writing business in Florida Consider statewide sinkhole facility 22

23 Appendices

24 Appendix 1 Sources for Residual Market Eligibility Criteria Louisiana Citizens Property Insurance Corporation (Louisiana) Georgia Underwriting Association (Georgia) Citizens Property Insurance Corporation (Florida) Texas FAIR Plan (Texas) Texas Windstorm Insurance Association (Texas) pg=1&p_tac=&ti=28&pt=1&ch=5&rl=4903 North Carolina Joint/Insurance Underwriting Associations (North Carolina) nciua.org/html/about ncjua.htm nciua.org/html/about nciua.htm 24