OFFICE OF INSURANCE REGULATION

Transcription

1 OFFICE OF INSURANCE REGULATION KEVIN M McCARTY COMMISSIONER IN THE MATTER OF CITIZENS PROPERTY INSURANCE CORPORATION CASENO ORDER APPROVING CERTIFICATION OF REGULAR ASSESSMENT THIS CAUSE came on for consideration upon the filing made by CITIZENS PROPERTY insurance CORPORATION hereinafter referred to as CITIZENS with the OFFICE OF insurance REGULATION hereinafter referred to as the OFFICE with a request for verification and approval of a certification of its need for a Regular Assessment pursuant to the Plan of Operation of CITIZENS and p1 Florida Statutes After a complete review of the entire record and upon consideration thereof and being otherwise fully advised in the premises the OFFICE finds as follows 1 The OFFICE has jurisdiction over the parties and the subject matter of these proceedings 2 CITIZENS has been established in accordance with the provisions of Florida Statutes as amended to provide insurance for residential and commercial property to qualified risks under circumstances specified in the Statute 3 The Board ofcitizens has certified to the OFFICE that CITIZENS has a need for a Regular Assessment in the amount of due to a 2005 Plan Year Deficit and that it

2 has satisfied the conditions specified Section 16 paragraph D of the Plan of Operation of CITIZENS specifically a Incurred Losses used in the computation of such Plan Year Deficit are supported by a projection by CITIZENS independent actuary b Investment Income or Loss projections used in the computation of such Plan Year Deficit are based on advice of CITIZENS financial advisors c The Board has determined ata properly noticed meeting the best interest ofcitizens and is consistent with the Statute and that the Assessment is in d The Regular Assessment is specifically recommended by the Board 4 The OFFICE has obtained and reviewed Board documentation fi om the May meeting and confirmed that the Board certified a 2005 Plan Year Deficit existed The OFFICE confirmed that the incurred losses were supported by an independent actuary and obtained and reviewed the 2005 actuarial opinion The OFFICE verified the income and loss documentation to the 2005 audited financial statements The OFFICE reviewed documentation including the Board sresolution fi om the September Board meeting and verified that the Board determined that the Regular Assessment was in the best interest of CITIZENS and that the Board recommended the assessment 5 The OFFICE has reviewed the arithmetic calculation used to determine the amount ofthe Regular Assessment to be levied on Assessable Insurers and Assessable Insureds 6 A copy ofthe Resolution ofthe Board of CITIZENS dated September is attached

3 WHEREFORE in consideration of the foregoing and being otherwise duly premises it is hereby ORDERED advised in the That the Certification submitted to the OFFICE by CITIZENS of its need for a regular assessment as to the 2005 Plan Year Deficit is APPROVED In accordance with Section 44 paragraph 2 of SB 1980 CITIZENS shall include in the notice of assessment to each assessable insurer the mount by which the assessment has been reduced due to the 715 million appropriation from the Florida Legislature DONE and ORDERED this t t day of 2006 f COMMISSIONER 3

4 NOTICE OF RIGHTS Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section Florida Statutes and Rule 9110 Fla RApp P Review proceedings must be instituted by filing a petition or notice of appeal with the General Counsel of the Office of Insurance Regulation acting as the Agency Clerk at 612 Larson Building Tallahassee Florida and a copy of the same with the appropriate district court of appeal within thirty 30 days ofrendition ofthis Order 4

5 RESOLUTION fl TICE O IIISURANCF PESULA110N WHEREAS Citizens Property Insurance Corporation Citizens is a statuturily created eorporatiun established pursuant to Chapter 627 PartI Section Florida Statutes as amended the Statute WHEREAS the Statute provides Citizens the authority to levy a Regular Assessment and Market Equalization Surcharge in order to recover a deficit WHEREAS Citizens Plan ofoperation as amended theplan provides authority to the Board of Governors to levy a Regular Assessment and Market Equalization Surcharge as permitted by the Statute WHEREAS the Board approved the 2005 Plan Year Deficit as follows a in the Personal Lines Account PLA b in the Commercial Lines Account CLA e in the High Risk Aeceunt HRA WHEREAS based upon a Regular Assessment base for 2005 of the PLA would have had a regular assessment of the CLA would have had a regular assessment of and the HRA would have had a regular assessment of and an emergency assessment of I WHEREAS the legislature appropriated to reduce the deficits thereby eliminating the PLA and CLA deficits and regular assessments and reducing the HRA regular assessment by to or207 WHEREAS for the 2005 Plan Year Deficit Citizens enabling statute provides that in its next rate filing or by a separate rate filing solely for this purpose Citizens shall levy upon its policyholders a Market Equalization Surcharge arising fi om a regular assessment in such account in a percentage equal to the total amount ofsuch regular assessments divided by the aggregate statewide directwri en premium for subject lines ofbusiness for the prior calendar year and based upon the regular assessment the Market Equalization Surcharge should be207 NOW THEREFORE BE IT AND IT IS HEREBY RESOLVED BY THE BOARD OF GOVERNORS OF CITIZENS PROPERTY INSURANCE CORPORATION AS FOLLOWS Section 1 Findings and Determination This Board has found and determined and does hereby declare as follows a the incurred losses in the computation ofthe Plan Year Deficit were supported by Citizens independent actuary Co the investment income or loss projections used in the computation ofthe Plan Year Deficit were based on the advice ofcitizens financial advisors c the HRA Regular Assessment and Market Equalization Surcharge of 207 are in the best interest ofcitizens and is consistent with the Statute

6 RESOLUTION Section 2 Certifications This Board hereby certifies as follows Citizens needs the Regular Assessment and Market Equalization Surcharge Co the Board has satisfied all conditions specified by the Statute and orthe Plan in order to levy an assessment Section 3 Recommendations This Board hereby recommends as follows a CO the Regular Assessment and Market Equalization Surcharge be levied interest at the rate of1per month be charged to any Assessable Insurer Assessable Insured or Citizens Policyholder that fails to timely pay its assessment or surcharge in full within the required time period THIS RESOLUTION INTRODUCED and ADOPTED by the Regular meeting on Citizens Board ofgovernors at its CHAIRMA Board ofgovemors SEAL Citizens Property Insurance Corporation ATTEST EXECUTIVE Citizens Property Insurance Corporation

7 INFORMATIONAL MEMORANDUM OIR M ISSUED November Florida Office ofinsurance Regulation Kevin M McCarty Commissioner To AllLicensed Property and Casualty Insurers in the State of Florida Subject to Assessment Information Regarding Regular Assessment by Citizens Property Insurance Corporation During its regularly scheduled meeting on September Citizens Property Insurance Corporation Citizens determined a 2005 plan year deficit existed in the High Risk Account The Legislature allocated 715 million to Citizens to assist in curing the the Board of Governors of deficits reported in the three accounts Personal Lines Account PLA High Risk Account HRA and Commercial Lines Account CLA The allocation completely satisfied the reported deficits in both PLA and CLA account and satisfied almost halfofthe 1673 billion deficit in the HRA account The Board decided that a 163 million Regular interest of Citizens and consistent with Florida Statutes Assessment is in the best on this basis the Board certified the need for a Regular Assessment An emergency assessment for the remaining deficit is expected later this year Pursuant to Section Florida Statutes and Citizens Plan of Operation once the Board certified the need for an assessment to the Office of Insurance Regulation Office the Office reviewed the arithmetic calculations involved in the Board s determination and verified and approved the certification by order A copyof the order is attached All assessable insurers are required to pay the assessment to Citizens within 30 days of receipt of an invoice from Citizens Pursuant to Section Florida Statutes insurers are permitted to recoup the assessment by adding a surcharge to policies in an amount not to exceed the amount paid by the insurer to Citizens This memorandum provides guidance on financial reporting related to the assessment and instructions on filing with the Office to recoup the assessment as allowed in Section Florida Statutes Recoupment of Residual Market Deficit Assessments Section Florida Statutes was amended by the 2006 Legislature to allow limited apportionment companies as defined in Section c to recoup any regular assessment that has been levied by or paid to Citizens Property Insurance Corporation Financial Reporting of Assessments Instructions and guidance regarding financial reporting related to the assessment can be found in SSAP 35 Guaranty Fund and Other Assessments within the Accounting Practices and Procedures Manual published by the National Association of Insurance Commissioners NAIC SSAP 35 applies SSAP 5 Liabilities Contingencies and Impairments guaranty fund and other assessments SSAP 5 requires accrual of a liability following conditions are met of Assets to when both of the Information available prior to issuance of the statutory financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the statutory financial statements It is implicit in this

8 Informational Mraomndum OIR M condition that it is probable that one or more furore events will occur confirming the fact ofthe loss or occurrence ofa liability and The mount ofloss can be reasonably estimated For the purposes ofb above loss generally means assessment or assessment rate The assessment shall be charged to expense Taxes Licenses and Fees and a liability accrued when the above criteria are met shall be SSAP 35 also requires the liability for assessments to be established gross of any probable and estimable recoveries from premium tax credits and premium surcharges recoupment isubject to conformity with the requirements of SSAP 35 to the extent an insurcn is able to recoup the assessment through future policy surcharges an asset representing those recoverables is permitted as specified in SSAP 4 Assets and Nonadmitted Assets Such recoverable does not meet the definition of an admitted asset if the insurer has not complied with the provisions of Section Florida Statutes The asset if admitted shall be established and reported independent from the liability netting of asset and liability is not permitted Any asset or liability resulting from the recording and recouping of the assessment should be reported as Aggregate Write ins as Citizens Prop 2006 Regular Assessment in the NAIC quarterly and annual financial statements Reeoupment of Assessment Instructions for recoupment of assessments and the required forms for filing are available via IFILE on the Office website at https iportal fldfs com ifile default asp Please note that a separate filing must be submitted to remove or revise the recoupment factors if it is necessary to continue the recoupment process for an additional year Any amounts collected in excess ofthat which is paid to Citizens must be refimded to the policyholders In order to avoid negative financial statement as a impact result of payment of the assessment or booking the liability without the ability to establish the corresponding assessment receivable asset the Office strongly recommends that all insurers planning to recoup should make their recoupment filing prior to December All insurers must include proof of payment with the filing Payment to Citizens must be made prior to the submission of the recoupment filing Personal lines insurers must select the recoupment only filing option insurers will need to select either the rule filing or rate filing option to submit the recoupment filing recoupment filings Commercial lines The personal lines recoupment worksheet must be completed for the Pursuant to Section 44 Of Senate Bill 1980 each insurer that recoups an assessment from its policyholders for the regular assessment must include on the premium notice or on a separate document included with the premium notice specific language concerning the 715 million appropriation to Citizens Therefore companies must submit the notice as informational with the recoupment filing to the Office with the language specified in Section 44 of Senate Bill 1980

9 Informational Memorandum OIR M If you have any questions regarding the financial reporting of the assessment please contact Property and Casualty Financial Oversight at Questions regarding the recoupment ofassessments should be directed to Property and Casualty Product Review at The Order issued to Citizens approving the Certification of the 2006 regular posted on the Office s website at www floir com Hurdcanes Citizens RegAssess htm assessment is