Some Things You May Want To Know About
Alabama Insurance Underwriting Association
11/21/2011
Alabama Insurance Underwriting
Association
1


Established in 1971 by order of Commissioner of
Insurance regulation 482-1-052-.02
482-1-052-.02 Purpose- A Plan known as the Alabama Insurance
Underwriting Association is hereby established as a result of a demonstrated need to provide an equitable method whereby adequate fire and extended coverage insurance may be made available in the “Beach Area” of Alabama.
The Plan shall provide for the establishment of a “Pool” of all licensed insurers writing fire and extended coverage insurance in Alabama, for the purpose of insuring those eligible risks not written on a voluntary basis.
Recommendations of the various segments of the property insurance industry shall be taken into consideration in the promulgation of the plan. The Plan of
Operation and the Articles of Agreement, along with any revisions thereto, shall be submitted to and approved by the Commissioner before the effective date thereof. A copy of the approved Plan of Operation and Articles of
Agreement, together with any approved revisions thereto, will be maintained for public inspection in the Department of Insurance
Alabama Insurance Underwriting
Association
11/21/2011 2

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• Act # 2008-392 signed by Governor Riley on May 16, 2008
• Effective November 1, 2008
• Codifies existing A.I.U.A. Plan of Operation
• Authorizes A.I.U.A. Board of Directors to retain surplus, borrow money, issue bonds
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Alabama Insurance Underwriting
Association
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• Provide essential property insurance in eligible coastal areas of Baldwin and Mobile counties to enable owners of insurable property to obtain financing for the purchase and improvement of their property.
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Alabama Insurance Underwriting
Association
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• All licensed insurers writing P&C coverage insurance in
Alabama
• Current Members (Plan year 2011)
• 485 Companies
• 329 Exempt from participation
• 306 write no P & C in AL
• 156 Companies are subject to assessments ranging from .0001% up to 19.5546%
• 69 Companies report voluntary written premium in eligible areas
• 23 voluntarily write sufficient coastal property to be exempt from
AIUA assessments
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Alabama Insurance Underwriting
Association
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• Board of Directors
• Member companies elect 9
• Commissioner of Insurance appoints 2
• Board appoints a Manager
• Board/Manager determine Plan of Operation
• Scope
• Rules
• Forms
• Rates
• Commissioner of Insurance approves Plan of Operation
• Manager implements/administers Plan
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Alabama Insurance Underwriting
Association
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• AIUA historical records indicate that the original wind pool boundaries were developed around 1966 by a Mr.
Marvin H. Haynie, a building inspector with the “Rating
Bureau” (a.k.a. Insurance Services Office), who was tasked to create the boundaries “at his discretion”.
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Alabama Insurance Underwriting
Association
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Alabama Insurance Underwriting
Association
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Alabama Insurance Underwriting
Association
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
How is Participation Determined?
• Proportion of the Net Direct premium written (adjusted for eligible premium voluntarily written in AIUA territories) to the Aggregate
Net Direct premium in the state for all companies for the preceding calendar year.
Fire
Home
CMP
Voluntary Credit Adjustment Factors
Zone 1 Zone 2 Zone 3
125.0% 100.0% 75.0%
Zone 4
50.0%
100.0%
75.0%
75.0%
50.0%
50.0%
37.5%
37.5%
25.0%
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Alabama Insurance Underwriting
Association
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
How is Participation Determined?
2010 VOLUNTARY PREMIUMS REPORTED; 2011 PARTICIPATION YEAR
ZONE 1 FIRE
ZONE 2 FIRE
ZONE 3 FIRE
ZONE 4 FIRE
ZONE 1 HO
ZONE 2 HO
ZONE 3 HO
ZONE 4 HO
ZONE 1 CMP
ZONE 2 CMP
ZONE 3 CMP
ZONE 4 CMP
AGGREGATE FACTOR
2,631,501.58 X 125%
6,108,353.85 X100%
8,968,545.71
X.75
10,265,989.20
X.50
9,840,524.84
X 1.00
43,491,936.24
X.75
59,446,285.85
X .50
84,280,147.31
X .375
2,014,637.75
X .75
5,955,393.86
X .50
15,383,487.20
X .375
13,030,914.44
X .25
261,417,717.83
CREDIT
3,289,376.98
6,108,353.85
6,726,409.28
5,132,994.60
9,840,524.84
32,618,952.18
29,723,142.93
31,605,055.24
1,510,978.31
2,977,696.93
5,768,807.70
3,257,728.61
138,560,021.45
ho fire
103,787,675.19
21,257,134.71
CMP 13,515,211.55
ASSOCIATION TOTAL $38,070,296
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Alabama Insurance Underwriting
Association
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
How is Participation Determined?
1 Net Direct Premium written by your company in the State
2 Net Direct Premium written by all companies in the State
3 Your percentage of total Net Direct Premiums written in the State (Item 1 divided by Item 2)
4 Total Zone 1, 2, 3, & 4 premiums written by AIUA – AIUA Plan Year XXXX
5 Total Zone 1, 2, 3, & 4 Voluntary Premiums Written by all companies (Sum of Item 8 for all companies)
6 Total Zone 1, 2, 3, & 4 premiums written by AIUA and ALL companies (Sum of Item 4 plus Item 5)
7 Your company’s maximum required share of premiums written (Item 3 multiplied by Item 6)
8 Total Voluntary premiums written by your company in Zone 1, 2, 3, & 4
9 Your maximum possible allocation from AIUA (Sum of Item 7 minus Item 8)
10 Your Final Percentage of Participation (Item 9 for your company divided by the sum of Item 9 for all companies)
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Alabama Insurance Underwriting
Association
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How is Participation Determined?
Company A
Company B
Company C
Company D
Company E
Total Net Direct
Premiums - All
Companies
Total Voluntary
Premiums Written by All Companies
AIUA Written Premium
% of Net
Written
Premium in
Maximum
Share of
Net Direct
Premium
$40,000,000
$75,000,000
Voluntary Written
Premium
State
(Market
$2,750,000
$6,200,000
Share)
8.00%
15.00%
Coastal
Premiums
Written
$5,272,000
$9,885,000
Maximum Dollar
Allocation
Participation
Percentage
$2,522,000 10.08800%
$3,685,000 14.74000%
$150,000,000
$125,000,000
$110,000,000
$12,350,000
$16,475,000
$3,125,000
30.00% $19,770,000
25.00% $16,475,000
22.00% $14,498,000
$7,420,000 29.68000%
$0 0.00000%
$11,373,000 45.49200%
$500,000,000
$40,900,000
$25,000,000
Total Premiums
Written by All
Companies and AIUA $65,900,000
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Alabama Insurance Underwriting
Association
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• Written Premiums
• Operating Budget developed annually by AIUA
Manager
• Board approves Operating Budget
• NOTE: AIUA operating expense (excluding reinsurance) is under 20% and that includes the 3.6% premium tax AIUA pays each year.
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Alabama Insurance Underwriting
Association
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• Earned Premiums
• Assessments from Member companies (Catastrophe funding)
• Assessment based on Participation Percentage as calculated by AIUA
• An Important Fact To Consider: The cost of assessments is borne by the Member Company paying the assessment. Alabama does not currently have a pass-through or recoupment mechanism
(unlike many other coastal wind pools).
• Reinsurance
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Alabama Insurance Underwriting
Association
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• Current PML (December 2010)
• $284M (100-year event)
• $628M (250-year event)
• Current Reinsurance Treaty
• $300M XS $100
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Alabama Insurance Underwriting
Association
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$615M
Blended Model
Return Period
250 yrs.
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Alabama Insurance Underwriting
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Association


Earned Premiums Net of Reinsurance
Investments (Total Other Income)
Change in assets not admitted
T OTAL I NCOME
Claims Paid
Loss Expense
C LAIMS & L OSS E XPENSE
O PERATING C OST
P (L) SINCE 1974
11/21/2011
Alabama Insurance Underwriting
Association
143,653,906
14,602,079
(246,877)
158,009,108
120,312,113
9,573,790
129,885,903
47,389,181
(19,265,976)
18

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• New Applications
• Plan Year 2007-2008 – 3,321
• Plan Year 2008-2009 – 5,613
• Plan Year 2009-2010 – 6,821
• Plan Year 2010- 2011 – 6,609 *
• *August 2011
• Average # of New Applications per Month
• 486 (Nov 2007 – August 2011)
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Alabama Insurance Underwriting
Association
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• Renewal Retention
• Plan Year 2006-2007 – 90.0%
• Plan Year 2007-2008 – 86.0%
• Plan Year 2008-2009 – 87.0%
• Plan Year 2009-2010 – 88.0%
• Plan Year 2010-2011 – 86.0%*
• *August 2011
• Average # PIF Increase per Month
• 2006-2011 = 296
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Alabama Insurance Underwriting
Association
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• Plan Year 2006-2007 ------283
• Plan Year 2007-2008 ------ 128
• Plan Year 2008-2009 ------ 326
• Plan Year 2009-2010 ------ 372
• Plan Year 2010-2011*------ 382
• *August 2011
• Average # PIF Increase per Month
• 2006-2011 = 296
11/21/2011
Alabama Insurance Underwriting
Association
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
• Assume 87% Retention of existing PIF
• Assume Average PIF Increase per Month of 296
• 22,682 + (296 X 14)
• 26,826 PIF at October 2012
• 26,826 X $2,007 (avg Prem) = $ 53,839,782 WP
• 26,826 X $173,388 (avg TIV) = $ 4,651,306,488 TIV
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Alabama Insurance Underwriting
Association
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
Companywide By Coastal Zone
Personal Lines
Jun 11 Dec 10 Percent
Commercial Lines
Jun 11 Dec 10 Percent
Hurricane:
Zone 1
Zone 2
Zone 3
Zone 4
Exposures
5,061
5,553
4,103
7,325
22,042
Exposures
5,312
4,776
3,560
5,757
19,405
Change
(4.7%)
16.3%
15.3%
27.2%
13.6%
Exposures
35
17
27
22
101
Exposures Change
50 (30.0%)
23 (26.1%)
30 (10.0%)
25 (12.0%)
128 (21.1%)
Zone 1
Zone 2
Zone 3
Zone 4 in Ones
Aon Benfield Analytics | Catastrophe Management
Proprietary & Confidential
Total
Jun 11
Exposures
5,096
5,570
4,130
7,347
22,143
Dec 10
Exposures
5,362
4,799
3,590
5,782
19,533
Percent
Change
(5.0%)
16.1%
15.0%
27.1%
13.4%
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Alabama Insurance Underwriting
Association
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
Personal Lines: Excludes Mobile Home and Contents-Only Risks
Coverage A Coverage B Coverage C Coverage D
Garage or Contents or Additional
Appurtenant Personal Living
Hurricane:
Zone 1
Zone 2
Zone 3
Zone 4
US $ in Ones
Home
157,296
166,781
124,517
143,224
Structures
672
1,801
651
3,217
Property
27,944
31,682
28,593
35,256
Expenses
-
-
-
-
Total
185,912
200,264
153,761
181,697
Percent of Cov A
Deductible Jun 11 Dec 10
9,797
10,034
6,683
7,033
6.2% 6.0%
6.0% 5.9%
5.4% 5.2%
4.9% 4.8%
Aon Benfield Analytics | Catastrophe Management
Proprietary & Confidential
Alabama Insurance Underwriting
Association
11/21/2011 24

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• 99.6% Residential
• 66% Owner Occupied – Primary
• 12% Owner Occupied – Seasonal/Secondary
• 15% Tenant non-Seasonal
• 7% Tenant – Seasonal
• 81% of the Residential Property insured by AIUA is occupied by residents who live and work in
Baldwin and Mobile counties
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Alabama Insurance Underwriting
Association
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• 91% Actual Cash Value Loss Settlement
• Depreciation
• No Additional Living Expense Coverage
• 9% Replacement Cost Loss Settlement
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Alabama Insurance Underwriting
Association
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•
•
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Routine
•
•
•
•
•
• In-house
Catastrophe
Pilot Catastrophe Services
Allied American Adjusters
Fountain Group
Coggin
Shaffer-Wood
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Alabama Insurance Underwriting
Association
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Alabama Insurance Underwriting
Association
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