Citizens to Obtain Review of Surplus Note Program
The Board of Governors of Citizens Property Insurance Corporation has agreed to spend $200,000 for a review of its proposed surplus note program by Goldman Sachs. In addition, the board authorized up to $200,000 for another review by a firm with actuarial experience.
The surplus note program would allocate up to $350 million of Citizens’ surplus to companies seeking to remove policies and retain them for at least 10 years. The amount of each insurer’s surplus note will be determined according to a formula that uses the FHCF premium as a basis for measuring the relative riskiness of Citizens policies (and consequently, the amount of the surplus note attributed to particular policies). The surplus note program is intended to reduce Citizens’ policy county and the exposure for assessments it presents to all Floridians. However, as Citizens has developed the program, it has seen renewed admitted market interest in assumptions under its existing program that does not involve surplus notes. Nearly 90,000 policies were removed earlier this year, and about 300,000 have been requested for assumption in late 2o12.
A number of lawmakers and business groups have expressed support for the surplus note program. However, other legislators have questioned whether Citizens has the authority to move forward with the progam. These legislators consider decisions regarding the disposition or use of Citizens’ surplus in this manner to be a legislative decision.