Lessons Learned from Hurricane Irma Irma s Impact: Insurance Industry Perspective BACK UP INFORMATION

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1 Lessons Learned from Hurricane Irma Irma s Impact: Insurance Industry Perspective BACK UP INFORMATION Barry Gilway, President and CEO FHCF 18 th Annual Participating Insurers Workshop 1

2 2017 Proposed Risk Transfer Program This deck presented by Jennifer Montero, Chief Financial Officer at: Citizens Board of Governors Quarterly Meeting, April 2017

3 Coastal Account Proposed Risk Transfer Program Surplus Exposed 50% See Notes & Assumptions on Page 3 Citizens projects approximately $1.650 billion in additional funds which can be used to fund a 1-in-28 year event following a 1-in-100 year event, other multiple events, or additional LAEs. 1 (Not to scale)

4 PLA/CLA Projected Layer Chart Surplus Exposed 32% Citizens projects approximately $2.790 billion in additional funds which can be used to fund a 1-in-132 year event following a 1-in-100 year event, other multiple events, or additional LAEs. See Notes & Assumptions on Page 3 2 (Not to scale)

5 Notes and Assumptions ASSUMPTIONS Citizens 2017 Budgeted DWP $1.0 Billion (Coastal $419 Million; PLA/CLA $583 Million) Citizens Policyholder Surcharge Maximum % Per Account 15% 2017 Regular Assessment Base (projected) $40.5 Billion Regular Assessment Maximum % Per Account 2% for Coastal; 0% for PLA/CLA 2015 Emergency Assessment Base $41.5 Billion Coastal PMLs are based on modeled losses as of December 31, 2016 per AIR Touchstone, Version 4.0.0; losses are reduced by 7.5% to reflect estimated decreases in exposure before the beginning of hurricane season. PLA/CLA PMLs are based on modeled losses as of December 31, 2016 per AIR Touchstone, Version 4.0.0; losses are increased by 5% to reflect estimated increases in exposure before the beginning of the 2017 hurricane season. All PMLs reflect the Standard Sea Surface Temperature (SSST) Event Catalog including Demand Surge, excluding Storm Surge, and include 10% of loss to account for loss adjustment expense (LAE). Interim Return Periods are derived by Linear Interpolation 2017 Projected Surplus = unaudited 2016 surplus budgeted net income - adjustment for risk transfer cost in excess of budgeted Citizens 2017 FHCF coverage is based on preliminary retention estimates and payment multiples. Actual Citizens FHCF attachment and limits of coverage could differ significantly from estimates. NOTES These charts are imperfect! They attempt to show projected claims-paying resources, but they are approximations only. Four significant complicating factors are described below: 1) Coastal PML vs. PLA/CLA PML: An actual 100-year PML event in Coastal Account may not be a 100-year PML event for PLA/CLA. The relative magnitude of actual losses for Coastal and PLA/CLA will depend on the storm size and path 2) Combining PLA and CLA: The PLA and CLA are separate accounts for deficit calculation and assessment purposes, but are combined for FHCF and credit purposes. It is impossible to accurately show the PML resources situation of these accounts on either separate or combined charts since simplifications must be made in either case that could prove materially inaccurate. Although we show the combined accounts, there is no guarantee that they will have deficits at the same time or of similar magnitude 3) Non-residential exposure: Commercial non-residential (CNR) exposures in the CLA and Coastal Account are not reinsured by FHCF. Actual deficits and assessments may be significantly different than an aggregated PML would otherwise indicate. The charts include a provisional estimate for CNR losses of 16.5% in the Coastal Account for all return times. CNR is a negligible portion of the PLA/CLA Accounts and so is not considered in that chart 4) Liquidity: These charts do not show the liquidity needs of the accounts. An account with ample PML resources may still require liquidity as many of the PML resources are not available immediately following a major hurricane. The timing and magnitude of receivables such as FHCF recoveries and assessments are unknown. 3

6 Hurricane Irma Case Study This deck presented by Jay Adams, Chief Claims at: PIPSO Conference

7 Citizens Catastrophe Planning Enterprise wide activity Each business unit dedicates a Cat Coordinator Task list is developed at the business unit level of all activities required for each phase of response Watch Phase Imminent Phase Recovery Phase Conduct annual Cat Plan Testing exercises Critical business functions Generator & Satellite deployments Mock Cat exercise with deployment of resources 2

8 Catastrophe Phases Watch Phase Initiated when a hurricane s path may impact Florida. Initiated several days in advance Independent Adjuster (IA) Firms are put on notice of deployment Imminent Phase Initiated when there is a high probability of a named storm impacting Florida as forecasted by NOAA IA Firm deployments occur Citizens Call Center vendors are put on notice for increased volume Landfall Phase The first 24 hours after the storm makes landfall. EOC Deployment CAT Orientations Activating Independent Adjuster resources Recovery Phase Post landfall of the event Phase continues until the response warrants a reduction in staff Scalable model invoked 3

9 Non Catastrophe Primary functions Non CAT claims candling MCM (Full adjustment) Task (Estimates only) Non Weather Water Secondary functions support of CAT Fast Track (Phone adjusted claims) Team Leads Desk Adjusters Respond to all CAT s as first responders until CAT deployments are complete and handle small CAT s 4

10 Catastrophe Primary function to operate in Task model No orientation during deployments On-line training No ClaimCenter access Xactanalysis used for assignments 5

11 Tier 1 Tropical Storms CAT Response Levels Non CAT Vendor only leveraging MCM Tier 2 Hurricane (CAT 1 & 2) Non CAT Vendor leveraging MCM Immediate response Non CAT Vendor providing Team Leads & Desk Adjusters CAT Vendor providing Task Adjusters 6

12 CAT Response Levels Tier 3 Hurricane (CAT 3 and above) Phase 1 Non CAT Vendor leveraging MCM Immediate response Non CAT Vendor providing Team Leads & Desk Adjusters Phase 2 Non CAT Vendor switches to handling all Non CAT claims Non CAT Vendor providing Team Leads & Desk Adjusters CAT Vendor providing Task Adjusters Citizens Staff and Desk Adjuster IA s (Litigation) produce closings in the Desk Adjuster model 7

13 Catastrophe Response Center (CRC) Provide immediate response to policyholders following a CAT Assist policyholders with filing their first notice of loss (FNOL) Issue advance claim payments for Additional Living Expenses (ALE) if eligible Answer general questions Set realistic expectations for the claims process Advise CAT management staff of front-line issues and trends Partner with the Department of Financial Services (DFS) for participation in the Insurance Villages 8

14 Catastrophe Response Center (CRC) Field Service Vehicles Each FSV is equipped with a mobile generator and satellite solutions. 9

15 Emergency Power and Data Solutions Citizens has implemented mobile power (generators) and data solutions (satellite services) 72 hour mobilization anywhere in Florida (2) satellites capable of supporting 1,100 concurrent users (2) 800KW generators capable of supplying power to a 45-65K square foot building 10

16 Mobile Satellite Solutions 11

17 Mobile Generator Solutions 12

18 Hurricane Irma Case Study National Hurricane Center Forecast Challenges Category 5 storm eventually downgraded to Category 4 Storm Track Forecasts Key West landfall Miami landfall Miami landfall Middle Keys landfall through Central FL Lower Keys landfall through Tampa September 10, MPH winds 80 miles of hurricane force winds 220 miles of tropical storm force winds 13

19 Catastrophe Resource Needs Catastrophe response is handled by Independent Adjusters Multiple contracts in place to secure resources Leverage Independent Adjusters in Non Catastrophe work Just in time deployments Staff provides oversight to Catastrophe response 14

20 Forecasting Resource Needs Leverage Citizens GIS tool to import National Hurricane Center forecasted track to extract Policies in Force 15

21 Resource Calculator 16

22 Resource Calculator 17

23 Technology game changers High resolution aerial imagery Accurate Weather Research Data Xactimate Claims Experience Geomni Roof Reports for Xact estimates Drone technology Inspection Program 18

24 NICB Aerial Imagery NICB provided post event reconnaissance within 72 hours Only provider successful at producing timely images Available to entire industry Before-and-after street level and aerial views of impacted areas Citizens GIS team overlaid PIF and Wind data over images for analysis 19

25 NICB Post Loss Aerial Imagery 20

26 ISO Accurate Weather Research Data Differentiate Wind versus Surge Wind speed and duration Barometric pressure 21

27 ISO Accurate Weather Research Data 22

28 Xactware Geomni Roof Reports 23

29 Xactware Geomni Roof Reports 24

30 Drones 25

31 Inspection Program Targeted those in Property industry Licensed Independent Adjusters with no appointment Home Inspectors Real Estate Agents Insurance Agents Partnered with contracted Vendor 3 days of Inspection Training Leveraged Adjuster Assist Software Assigned lower severity claims for inspection 26

32 Adjuster Assist Software 27

33 Irma Statistics Personal Commercial Total New Claims 65,752 2,185 67,937 Closed Claims 55,931 1,943 57,874 Total Incurred $885,605,027 $70,700,156 $956,305,184 Average Paid $16,130 $67,059 $17,138 % CWP 55% 33% 54% 28

34 SIU CAT Response Strategies SIU Desk / Research Team deployment Address public adjuster issues Conduct front end research on wind versus surge causation Field investigator quick strike teams Address hotline complaints Deployment of SIU to remote (temporary) claims office Address fraud and abuse by third parties Co-inspect claims with adjusters Deployed SIU field to photograph risks where SIU had an active investigation prior to storm Leveraged Analytics to identify claim outliers, expose crime rings and provide claim trending (AOB, representation). 29

35 First Notice of Loss Reporting Times Insured submits FNOL immediately following Irma landfall Attorneys, Public Adjusters, and Loss Consultants heavily engage in reporting weeks out from Irma landfall 30

36 SIU Analytics Red bar indicates claims with Cat characteristics that are not coded as CAT Water damage claims Avoidance of CAT deductible 31

37 SIU Impact Completed over 2,500 wind/surge research investigations to assist adjusters in loss determination. Opened 338 SIU claim investigations, resulting in a penetration percentage of 0.6% Opened 2 investigations involving agents, including one that bound 60+ risks within a few days of the storm. Submitted 50 referrals to the Fraud Bureau 13 investigations open /active with DIFS 1 arrested / charged filed 6 turned over to other agency (public adjuster license violations) 32

38 Irma Response Strengths Flexible and adaptable Claims staff Strong lines of communication both internally and externally Increased utilization of technology Strike Zone office capability 33

39 Irma Response Opportunities Independent Adjusting Firms Management Quality & Quantity of resources Assignment of claim territories through ClaimCenter Leverage resources more appropriately Underutilization of XactAnalysis 34

40 Irma Response Action Plans Leverage XactAnalysis fully Assignment processes Management Enhancements Evaluation of system needs to develop operational efficiencies IT cross functional support training Efficiencies to improve claims productivity 35

41 Irma Related Solicitations Aerial Imagery Pre event imagery Post event imagery Drone services Inspector Program Fast Track claims handling Catastrophe Adjusting Enterprise Resiliency 36

42 Hurricane Irma Preparation and Response

43 Communications Efforts Nine press releases were sent to advise the press and stakeholders of important developments and recovery efforts Website traffic on Irma-focused pages remained steady throughout the month of September There were 25,027 views of the Hurricane Irma page and FAQ page From 9/5-9/30, there was an average of 12,600 sessions per day 1

44 Communications Efforts Customer and agent s were leveraged to ensure customers and agents were both prepared and informed about storm-related and recovery activities A total of 18 s were sent throughout September with over 637,941 recipients Social media posts also were used to help promote a message of preparedness and notify of CRC locations Ads were rotated on both Twitter and Facebook to ensure maximum reach and relevance The combined campaigns amassed 655,130 impressions for Citizens accounts 2

45 Communications Efforts Radio advertising encouraged pre-storm preparations and notified listeners of the CRC locations in four key markets: Tampa Bay, Miami, Ft. Myers/Naples and the Keys A total of 1,810 radio spots ran from 9/8-9/30 Print advertising broadcast CRC locations including satellite locations ran in the Keys to reach residents returning to their homes. The ads provided resource information for those recovering after Irma to connect with assistance through several methods including web, phone and in-person locations. 3

46 Communications Efforts Education materials were created to assist agents and customers with their understanding of poststorm coverage questions and claim handling procedures. FAQs were developed and published on the website within a week after the storm to provide immediate answers to Hurricane Irma claims questions. Statistics and claim-related information has been shared with industry stakeholders, the Office of Insurance Regulation and legislative partners as part of Citizens ongoing efforts to help customers recover. 4

47 Forecasting Resource Needs; Potential Miami Landfall GIS tool extraction for Hurricane Irma Landfall in Miami Dade County. County CNR-M CNR-W CR-M CR-W PR-M PR-W Grand Total BREVARD BROWARD DUVAL FLAGLER HILLSBOROUGH MARTIN MIAMI-DADE MONROE ORANGE PALM BEACH SAINT LUCIE VOLUSIA Grand Total