Citizens Advances Surplus Note Proposal
The Board of Governors of Citizens Property Insurance Corporation has approved a surplus note proposal for further refinement and review. The board’s decision followed review and recommended approval by Citizens’ depopulation committee.
The proposal calls for Citizens to loan up to $350 million to participating insurers in the form of surplus notes (subordinated debt). The interest rate on the notes would track the 10-year Treasury rate, and the notes would have 20-year terms. A principal fogiveness feature, however, would allow up to 20% of the loan amount to be forgiven in each of the note’s first five years if the participating insurer suffers catastrophe losses. A participating insurer would be required to keep policies out of Citizens for 10 years.
The board directed Citizens’ staff to refine certain aspects of the proposal and report back to the depopulation committee. The final committee then will be brought back to the full board.