Citizens Issue Brief Released by Banking and Insurance Committee
The Florida Senate Banking and Insurance Committee released its issue brief (2012-226) regarding Citizens Property Insurance Corporation on September 1, 2011. As one would expect all of the numbers are very large.
The brief provided up to date information on the total policies in force and the surplus in each of the three statutorily created accounts: Personal Lines (PLA); Commercial Lines (CLA); and Coastal Account (Coastal). As of July 31, 2011, there were a total of 1,408,584 policies in force and a total surplus of $5.742 billion, with $2.686 billion of that amount allocated to the Coastal or high risk account. On the exposure side, the paper reports the exposure numbers for Citizens remain very high. The probable maximum loss for a 1-in-100 year event is $24.518 billion with $15.99 billion representing coastal account risks and $8.52 billion in the PLA/CLA account.
The brief went on to discuss what would happen in the event Citizens incurred a deficit and the sequence of how assessments would be levied to make up the shortfall. The first to be assessed would be Citizens’ policyholders at a rate of up to 15% of premium per account for a total maximum of 45% collected over a 12-month period. Citizens estimates it current total surcharge capacity to be $1.172 billion – $391 million for the Coastal account and $781 million for the commercial and personal lines accounts. Once the surcharge of Citizens’ policyholders is exhausted regular assessments and emergency assessments are the next to be levied. Citizens’ regular assessment capacity (those assessments levied on insurers rather than directly on policyholders) is projected at approximately $5.580 billion.
The paper also looked at how Citizens would respond to some recent storm years. A repeat in 2011 and 2012 of the storm seasons of 2004 and 2005, which saw Florida hit with a total of eight major storms, would produce losses of $7.649 billion. These losses would require assessments of $391 million from Citizens’ policyholders and $1,553 billion from insurers. Interestingly, the paper states this scenario would not trigger coverage from the Florida Hurricane Cat Fund.
The paper then analyzes what impact a repeat of Hurricane Andrew would have on Citizens. The brief reports that Citizens would suffer losses of $14.651 billion if the storm made landfall during this year. This storm would trigger $6.726 billion in FHCF loss payments and would require assessments of $391 million from policyholders and $1.752 billion from regular assessments.