Creation of Citizens Property Insurance Corporation
Citizens was created in 2002 in the merger of the state’s two insurers of last resort, the Florida
Windstorm Underwriting Association (FWUA) and the Florida Residential Property and Casualty
Joint Underwriting Association (FRPCJUA). The merger has allowed Citizens to become exempt
from all federal taxes, resulting in millions of dollars in annual savings. Citizens is also designed to
realize additional administrative and economic efficiencies over its predecessor organizations.
Quick Reference
– FWUA: created in 1972 to provide wind-only coverage in coastal regions.
– FRPCJUA: created in December, 1992 following Hurricane Andrew for Floridians unable to
find homeowners insurance.
2
Citizens Board of Governors
3
Member
Appointed By
County
Occupation
Bruce Douglas
Chairman
Governor
St. Johns County
Chief Executive Officer
Douglas Capital Management
Gloria Fletcher
Vice Chair
President of the Senate
Alachua County
Gloria W. Fletcher, P.A.
Richard DeChene
Governor
Leon County
Retired - CNA
Allan Katz
Chief Financial Officer
Leon County
Attorney
Akerman Senterfitt
Andrea “Andy” Bennett
Chief Financial Officer
Manatee County
President
A.M. Bennett & Company
Carol Everhart
President of the Senate
Pinellas County
Vice President
BB&T
Jay Odom
Speaker of the House
Okaloosa County
President
Crystal Beach Development Company of
Northwest Florida
Earl Horton
Speaker of the House
Pinellas County
Executive Vice President
Bouchard Insurance, Inc.
Staff/Facilities
Location
Jacksonville Main Office - 6676 Corporate Center Parkway
377
Jacksonville - 8301 Cypress Plaza Drive
105
Tallahassee Main Office - Monroe Park Towers
101 N. Monroe Street
59
Tallahassee – Citizens Centre
2101 Maryland Circle
116
Tampa
302 Knights Run Avenue
153
TOTAL
Total employees does not include contract consultant or temporary employees
4
# of Employees
810 Employees
Overview of Accounts
Each of the following three accounts are separate statutory accounts and have separate
calculations of surplus, plan year deficit and assessment bases. Assets may not be
commingled or used to fund losses in another account.
• Personal Lines Account (PLA) - Multi-peril policies
– Former FRPCJUA : Homeowners, mobile homeowners, dwelling fire, tenants,
condominium unit owners and similar policies.
• Commercial Lines Account (CLA) - Multi-peril policies
– Former FPCJUA: Condominium association, apartment building and homeowners
association policies.
– Currently developing statutorily mandated commercial non-residential program.
• High-Risk Account (HRA) – Wind-only policies
– Former FWUA: Personal lines wind-only policies, commercial residential wind-only
policies and commercial non-residential wind-only policies issued in coastal HRA
eligible areas.
– In the process of introducing statutorily mandated multi-peril residential and
commercial policies to be written in eligible areas.
5
Citizens Coverage Areas
6
•
The Personal and Commercial Lines
Accounts write personal and commercial
residential coverage, respectively, in all 67
counties.
•
The High-Risk Account (HRA) writes in
29 counties.
PLA Risk Counts–12/31/07
7
CLA Risk Counts– 12/31/07
8
1,200,000
$300,000
1,000,000
$250,000
800,000
$200,000
600,000
$150,000
400,000
$100,000
200,000
$50,000
-
$0
2004
9
2005
2006
2007
Exposure (Coverages A & C Only)
(millions)
Policy Count
PLA/CLA Policy and Coverage Trend
P
T
&
HRA Risk Counts – 12/31/07
10
HRA Policy and Coverage Trend
HRA Policy Count (PIF) and Risk Exposure (TIV)
500,000
$250,000
400,000
$200,000
Policy Count
350,000
300,000
$150,000
250,000
200,000
$100,000
150,000
100,000
$50,000
50,000
-
$0
2004
11
2005
2006
Nov 2007
Exposure (Coverages A & C Only)
(millions)
450,000
PIF *
TIV (Cov A
& C Only) *
Risk Count Growth by Account – as of 12/31/07
Risk Count Growth
900,000
800,000
700,000
Risk Counts
600,000
PLA
500,000
CLA
400,000
HRA
300,000
200,000
100,000
2004
12
2005
2006
2007
Florida Residential Admitted Market Breakdown
All Other
17%
Florida
Domestics
34%

13
Citizens
21%
"Pup"
Companies
28%
The Florida residential property insurance admitted market is divided into 4 major
parts based on policy counts:
Citizens – 21%
“Pups” of the major national writers – 28%
Florida-only domestic companies – 34%
Others, including USAA, etc. – 17%
PLA Policy Trends
PLA Policy Count Trend
PLA Policy Counts by Policy Form
MHO3
11%
1,000,000
900,000
MHO4
0%
DP1
3%
DP3
22%
MDP1
10%
Tenant
DP1
DP3
Number of Policies
800,000
HO3
700,000
Mobile
Homeowners
600,000
Condo Unit
Owners
HO6
7%
HO4
HO6
MDP1
HO4
0%
Dwelling
MHO3
HO3
47%
500,000
MHO4
Homeowner
400,000
2004
2005
2006
Homeowner
245,635
179,969
340,675
410,600
Dwelling
113,180
122,169
185,952
221,992
Condo Unit Owner
27,124
25,757
47,338
59,038
Mobile Homeowner
23,244
59,195
166,757
190,502
Tenant
6,305
2,117
2,870
4,420
300,000
Nov 2007
200,000
100,000
2004
14
2005
2006
Nov 2007
CLA Policy Trends
CLA Risk Count Trend (Includes only non-special class risks)
CLA Risk Counts by Product
Homeow ners
Associations
13%
100,000
Apartment Buildings
17%
90,000
80,000
Number of Policies
70,000
Homeowners
Associations
60,000
50,000
Condo
Associations
40,000
30,000
Apartment
Buildings
20,000
Apartment
Buildings
Condo
Associations
Condo
Associations
70%
Homeow ners
Associations
10,000
Note: The assumption of the Poe Group commercial
residential policies during 2006 caused a large portion
of the significant increase in risk counts.
2004
2005
2006
Nov 2007
2004
15
2005
2006
Nov 2007
Apartment Buildings
4,948
3,680
16,939
14,919
Condo Associations
12,137
9,651
50,339
63,462
Homeowners Associations
2,008
1,944
8,861
12,005
Determination of Rates
• Starting in 2002, rates were based on the “top twenty” insurers
• Citizens rates were chosen to be equal to the highest rated
company in a particular territory
• Citizens’ rates were set to be uncompetitive
• Only eligible for insurance with Citizens if you could not get
insurance elsewhere
16
Rates
• In 2006, the “highest rated” mandate was relaxed
• Citizens’ rates were ordered to be based on actuarial principles
• Rate indications showed Citizens’ rates to be inadequate
• Rate increases went into effective 1/1/2007
• A policyholder is now eligible for coverage by Citizens only if
any offers from admitted insurers are more than 15% higher
than Citizens’ rates for comparable coverage
17
Rates
• The rate increases effective January 1, 2007 were rescinded by
legislative action. Any amounts collected were ordered to be
refunded, and rates were frozen at 12/31/06 levels for all of
2007 and 2008
• Thereafter, Citizens will submit recommended rates to OIR
and OIR will set rates within 45 days; no challenge is allowed.
• The senate is considering a bill that would extent the rate
freeze until 1/1/2010 with severe restrictions on rate increases
in years 2011, 2012, 2013
18
Depopulation Programs and Projections

Only non-bonus takeout contracts for PLA and HRA are currently available.
 Assuming carrier must remove during the 18-month contract period a minimum of
either:
• 10,000 policies with wind coverage; or
• Policies with wind coverage with TIV (coverages A, B, C, and D) of $2 billion.
 Each assumption during a contract period must remove a minimum of either:
• 2,500 policies; or
• TIV of $500 million.

Policies must be retained by the assuming carrier for a minimum of three (3) years.

CLA takeout program being developed. Projected implementation to occur in 2008.

Projected number of policies to be assumed during 2008:
•
•
19
PLA: 320,000
CLA: 5,500
Historical Depopulation – Policy Counts
Policies Removed During the Year (as Portion of Total Policies)
1,800,000
1,600,000
Policy Count
1,400,000
1,200,000
Policies
Removed
1,000,000
800,000
Remaining
Policies
600,000
400,000
200,000
2003
Policy Removal
PLA
HRA
Total Policies Removed
Total Policies Remaining
20
2004
2005
12/31/2003
2006
2007
12/31/2004
12/31/2005
12/31/2006
12/31/2007
145,959
218,128
26,225
247,923
12,457
75,556
41,628
28,219
158,416
293,684
67,853
247,923
820,255
873,996
810,017
1,298,922
1,344,240
28,219
-
-
Capital Build-UP Incentive Program
• Created in 2006 for the purpose of increasing the availability of
residential property insurance
• The Florida legislature appropriated $250 Million for use in providing
Surplus Notes to qualified companies
• Estimated that 1.7 million policies were written by other companies as a
result of this program
• This program has also lead to 165K policies being removed from
Citizens
• Estimated that 480K policies have been kept of Citizens due to this
program
21
Capital Build-UP Incentive Program – Goals
22
•
Further spread of hurricane risk to new capital in Florida
•
Continued depopulation of Citizens
•
Mitigation of policy growth in Citizens
•
Reduction in exposure and assessment potential for Florida
•
Currently considering making more capital available for 2008
Wind Mitigation Credits
• In 2001, there were changes to the Florida Building Codes
• ARA conducted a study to quantify the impact of the new building
codes
• Studied characteristics such as roof covering, roof shape, roof-to
wall connections, openings, building height, roof framing, etc
• Developed hurricane severity relativities
• OIR has mandated wind premium discounts based on results of
this study
23
Windstorm Mitigation Credit Statistics – as of 9/30/07
For Personal Residential and Commercial Residential Policies Only
Program
24
Number
of Policies
including
wind
Number of
Policies
with WMC
Percentage
of Policies
with WMC
Total Wind
Mitigation
Credits
Personal Residential – Multi Peril
628,662
189,536
30%
$87,790,347
Personal Residential – Wind Only
358,581
185,424
52%
$144,516,217
Commercial Residential – Multi Peril
10,897
4,917
45%
$44,881,524
Commercial Residential – Wind Only
16,746
5,622
34%
$70,439,886
Total Residential
1,014,886
385,499
38%
$347,627,974
Reduction in Coverage
25
•
Offer higher hurricane deductibles
•
Exclude screen enclosures – offer buyback
•
Exclude sinkhole coverage – offer buyback
•
Limit HO coverage A amount to $1 million
•
Offer lower coverage B coverage
•
Over $750K and in a WBDR, must have storm shutters
•
Within 2,500 of coast, must be built to Code Plus (built after 1/1/2009)
Florida Hurricane Cat Fund
• Purpose : Improve the availability and affordability of property
insurance in Florida by providing inexpensive reinsurance to insurers
• Created in 1993 after Andrew
• Under the control and direction of the State Board of Administration of
Florida (SBA - Board of Trustees: Governor, CFO, Attorney General )
• Nine member committee – 3 Consumer reps, 3 industry business
professionals (agent, reinsurer, primary insurer), 3 technical
professionals (meteorologist, engineer, & actuary)
• Participation is mandatory
• FHCF provides more then 50% of all reinsurance coverage in the state
26
Florida Hurricane Cat Fund
27

Insurers pay the FHCF a premium based on their proportionate
residential risk in the state – $1.4B of premium in 2007

Insurers have individual retentions – Industrial-wide retention of
$6.1B in 2007

After the retention is filled, FHCF reimburses insurers for 90% of
their covered residential losses; insurers pay 10% co-payment
(There are 25% and 45% co-payment options available)

FHCF’s total liability is defined and limited statutorily – maximum
2007 liability was $27.85B
FHCF - Funding
28

The FHCF receives annual reimbursement premiums from participating
insurers; these premiums are actuarially set to be equal to the average
annual expected loss for the FHCF

If losses occur, and accumulated reimbursement premiums are insufficient
to pay claims, the FHCF can issue tax-exempt bonds secured by emergency
assessments for up to 30 years on a broad range of P&C insurance
premiums in the state (This liability for losses is limited to the lesser of the
statutory maximum or what the FHCF can raise in the capital markets)

The “post-event” bonds would be repaid by an ongoing emergency
assessment of up to 6% per year on direct premiums for most P&C lines of
business in Florida (current assessment base is $37.4B)

The FHCF has one tax-exempt bond issue outstanding in the amount of
$1.35B with a final maturity of 2012, secured by a 1% emergency
assessment
FHCF - Liquidity
29

$2.8 B of proceeds from 2006 pre-event extendible note transaction

$1.0 B from 2006 reimbursement premiums

$1.4 B collected from 2007 reimbursement premiums

Total of $5.2 B on hand
Funding the FHCF
30
Citizens’ Financial Highlights
• 2007 net income of $1.46 b on net earned premium of $3.16b
• 2008 budgeted income of $1.54 b
• 2008 year end surplus of $4.18 b
• Cash and investments of over $10 b
• Cash paying ability before emergency assessments of over $22 b
– This includes premium revenue, surplus, pre-event financing, and
FHCF reimbursements
31
Assessment Base is Broad and Diverse
All Others
$8.48 B
24%
Total Premium Subject to Assessment
Direct Written
$33.3B
Surplus Lines
$4.1B
Total
Commercial
$3.80 B
11%
$37.4B
Homeowners
$7.70 B
22%
32
Auto
$14.86 B
43%
Assessment Base is Broad and Diverse
 The following lines are subject to assessment in 2008:
Fire
Allied Lines
Multiple Peril Crop
Farmowners Multiple Peril
Homeowners Multiple Peril
Commercial Multiple Peril (non liability)
Commercial Multiple Peril (liability portion)
Mortgage Guaranty
Ocean Marine
Inland Marine
Financial Guaranty
Earthquake
Other Liability
Products Liability
33
Private Passenger Auto No Fault
Other Private Passenger Auto Liability
Commercial Auto No Fault
Other Commercial Auto Liability
Private Passenger Auto Physical Damage
Commercial Auto Physical Damage
Aircraft (all perils)
Fidelity
Surety
Burglary and Theft
Boiler and Machinery
Credit
Aggregate Write-Ins
Community Association Self - Insurance
Citizens’ Assessment Types1

Non-homestead assessment – levied on non-homestead Citizens’ policyholders, up to
a total of 10% of premium for each account with a deficit (up to 30% total); billed
immediately

Citizens policyholder surcharge – levied on all Citizens’ policyholders up to an
additional 10% of premium of premium for each account with a deficit (up to 30%
total); billed on renewal/new business

Additional Citizens policyholder assessment – levied on all Citizens’ policyholders
up to 10% of premium for each account with a deficit (up to 30% total); billed on
renewal/new business

Regular assessment – levied on all non-Citizens property and casualty policyholders
up to 10% of premium for each account with a deficit (up to 30%); billed on
renewal/new business

Emergency assessments – levied on all P&C policyholders up to 10% of premium
(per account); this assessment is collected for as many years as necessary to cover
deficits, but not exceed 10% per account in a calendar year (per account).
34
PLA/CLA Projected Claims Paying Resources (2008 Hurricane Season)
(Not to scale)
$14.656 Billion
1 in 220-year PML
Citizens’
Policyholder
Surcharge - $800
Million
Additional
Assessment $800M
Regular Assessments $5.800 Billion
100 Year PML - $8.59 Billion
Non Homestead
Assessments $140
million
100 Year PML - $9.278 Billion
$7.116 Billion
1 in 68-year PML
Remaining Surplus - $1.302 Billion
As of 12/31/07
$5.814 Billion
1 in 49-year PML
1 in 27-year PML
10% of
$2.019
B or
$202 M
from
Surplus
FHCF Recovery - TICL
(90% of $2.019 Billion= $1.817 Billion)
FHCF Recovery - Regular
10% of
$2.826
B or
$283 M
from
Surplus
1 in 5-year PML
35
Liquidity Target
$3.794 Billion
(90% of $2.826 Billion xs $969 Million)
$2.543 Billion
FHCF Attachment Point - $969 Million
Surplus - $969 Million
$0.969 Billion
HRA Projected Claims Paying Resources (2008 Hurricane Season)
(Not to scale)
$14.615 Billion
1 in 100-year PML
Emergency Assessments
$2.032 Billion
(.40% for 30 years)
100 Year PML $14.615 Billion
As of 12/31/07
$12.583 Billion
1 in 76-year PML
Remaining
Citizens’
Policyholder
Surcharge $330 Million
1 in 55-year PML
1 in 5-year PML
$9.847Billion
10% of
$3.42 B
($ 342M)
from AAs
+CPS
FHCF Recovery - TICL
10% of
$4.79 B
($ 479
M)
from
AAs +
CPS
FHCF Recovery - Regular
1 in 31-year PML
1 in 6-year PML
Remaining Regular
Assessments - $2.406
Billion
(90% of $3.420 Billion)
$3.078 Billion
(90% of $4.789 Billion xs $1.638 Billion)
$4.310 Billion
FHCF Attachment Point $1.638 Billion
Citizens NH+ Additional Assessment + CPS - $213 M
Surplus - $1.425 Billion
36
Liquidity Target
$6.427 Billion
$1.638 Billion
$1.425 Billion
Claim Stats for 2004-2005 Hurricanes as of 12/31/07
Claim Payments by Hurricane 2004-2005
10%
Hurricane
42%
20%
Total Claims Payments
% of Total
Payments
Charley
530,837,268
10%
Frances
1,075,967,150
20%
Ivan
837,407,191
15%
Jeanne
431,944,992
7%
Dennis
85,128,853
2%
Katrina
191,229,225
4%
7,329,607
0%
Wilma
2,313,717,737
43%
TOTAL
5,381,250,727
100%
Rita
15%
0%
4%
37
7%
2%
Charley
Frances
Ivan
Katrina
Rita
Wilma
Jeanne
Dennis
Data includes PLA, HRA, and CLA
claims.
Insured Losses in Florida 2004-2005……..Who Paid
($ in 000's)
Storm
Charley
Frances
Ivan
Citizens'
Florida Insured Losses (Net of
Losses
FHCF)
$
Jeanne
10,158,405
7,952,636
3,314,848
$
3,634,646
%
536,360
1,111,990
947,376
5%
14%
29%
444,297
12%
FHCF Losses
$
%
2,271,452
1,516,459
405,162
22%
19%
12%
309,954
9%
Net
Governmental
Losses
$
%
2,807,812
2,628,449
1,352,538
28%
33%
41%
754,251
21%
2004 TOTAL
$
25,060,535
$
3,040,023
12%
$
4,503,027
18%
$
7,543,050
30%
Dennis
Katrina
Rita
$
297,399
853,000
25,243
$
93,563
216,647
9,304
31%
25%
37%
$
373
241
0
0%
0%
0%
$
93,936
216,888
9,304
32%
25%
37%
1,675,057
17%
4,767,516
49%
6,442,573
67%
Wilma
2005 Total
9,659,383
$
10,835,025
$
1,994,572
18%
$
4,768,130
44%
$
6,762,702
62%
2004 - 2005 Total $
35,895,560
$
5,034,595
14%
$
9,271,157
26%
$
14,305,752
40%
FL quasi-governmental entities paid almost 40% of 2004-2005 losses
(even without considering FIGA payments for Poe insolvency)
38
Reported Claims and Complaints
180,000
12%
156,274
160,000
120,000
10%
8%
7.70%
100,000
6%
80,000
5.09%
4.01%
60,000
51,634
4%
33,233
40,000
20,821
20,000
0
Frances
Ivan
Jeanne
Total Claims Reported
39
0.67%
6,196
Charley
2%
24,599
16,805
0.11%
0.02%
Dennis
Katrina
Percentage of Complaints
896
Rita
0%
Wilma
Percentage of Complaints
Total Claims Reported
140,000
10.06%
9.60%
Florida Residential Property Insurance Market
= Quasi-governmental entity
FIGA
(Florida Insurance
Guaranty Assoc.)
Private Insurers
(5.2 million policies;
205 insurers)
Residential Policyholders
(6.5 million risks)
40
Private Reinsurers
(approx. 125)
FHCF
($28 B in coverage;
approx. 50% mkt share)
Citizens
(1.3 million policies)
$10 billion residential premium (estimated),
representing $2 trillion of insured property
value