Citizens Property Insurance Corporation Presentation to the Financial Services Commission

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Citizens Property Insurance Corporation

Presentation to the Financial Services Commission

Barry Gilway, President/CEO and Executive Director

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An Historical Look at Citizens Growth by Account

Policy Counts by Year and Account

Account 1996 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1-2012 PLA 936,837 102,792 164,274 383,283 416,529 407,387 743,592 845,857 629,467 609,652 829,406 1,003,856 973,581 Coastal Account 465,739 414,123 397,676 433,077 453,755 399,418 403,509 446,181 445,200 410,436 445,679 460,161 457,970 CLA 0 198 2,157 3,863 3,702 3,212 8,841 12,911 9,570 9,126 8,453 8,374 8,347 Transition Policies n/a n/a n/a n/a n/a n/a 142,980 n/a n/a n/a n/a n/a n/a

Total 1,402,576 517,113 564,107 820,223 873,986 810,017 1,298,922 1,304,949 1,084,237 1,029,214 1,283,538 1,472,391 1,439,898 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1996 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q1-2012 Poli cy C o u n ts PLA Coastal Account CLA Liquidation of Poe Financial Group due to

2004/2005 claims

High volume of depopulation activity

Liquidation of 3 FL domestic carriers and State

Farm partial withdrawal from market

Increase in financial scrutiny of private carriers

by the media. High volume of

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A Multi-Year Look at Probable Maximum Loss (PML)

100-Year Probable Maximum Loss by Account

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2012 Estimated Claims-Paying Ability

Notes:

1.Surplus amounts consist of preliminary (unaudited) 2011 surplus and 2012 projected net income. 2.Pre-Event Liquidity does not represent risk transfer and any monies drawn must be repaid.

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Implement Basic Product

• Offer a basic product that will not compete with preferred products offered in the private market.

– Implementing coverage changes resulting in a $2B reduction in the PML.

– Developing a named peril HO8.

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Completed Aggressive Risk Transfer Program

• The transfer and removal of risk reduces exposure and minimizes assessment potential.

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Return of Policies to the Private Market

• Policies should be returned to and stay in the private market. – Year-to-date 80,288 policies have been removed,

representing $19.8B in exposure.

– Recent Depopulation Summit spurred interest in removing policies and generated creative proposals.

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Facilitating the Return of Policies to the Private Market

• Authorized insurers interested in removing policies from Citizens:

– Obtain access to confidential claims and underwriting files to evaluate books of business in detail.

– Receive approval, by order, from the Office of Insurance Regulation for takeout plan.

– Work with Citizens to select policies for removal and to notify policyholders and agents.

– Receive acceptance of takeout offer from policyholders and agents.

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Public Education Campaign

• Policyholders in Florida need to know the whole story about Citizens. We are developing a comprehensive education campaign focused on funding and coverage differences.

– Survey Floridians to see whether or not they know about assessment potential

– Schedule editorial board visits throughout the state – Hold town hall meetings

– Create educational materials for companies and agents to use when discussing insurance choices

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Developing a Comprehensive Sinkhole Strategy

• Citizens sinkhole loss experience is not sustainable.

– Since 2007, Citizens has collected $206 million in sinkhole premiums while paying $1.2B in losses and allocated loss adjustment expenses.

– Citizens now requires inspections for new business requesting sinkhole coverage, in 16 counties and will implement a sinkhole re-underwriting program for existing business in 2013.

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Questions

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Initiatives to Reduce Citizens Exposure – Status Update

Personal Lines

Effective 1/1/2012 Multiperil New and Renewal Business; 2/1/12 Wind-only New and Renewal Business

•Eliminate coverage for screen enclosures and carports

Effective 2/1/2012 New Business; 5/1/2012 Renewal Business

• Decrease maximum coverage in Coastal Account to $1M

• Expand sinkhole inspection to additional 12 counties (total 16 counties)

• Discontinue Builder’s Risk

• Implement mandatory 10% Sinkhole Deductible • Eliminate Personal Liability increase limit ($300,000) • Eliminate option to schedule individual Coverage “B” items • Eliminate increased mold options: Property and Liability

• Eliminate increased Loss Assessment Coverage of $2,000/$3,000 (HO-3) and $3,000 (HO-6 types) • Change Coverage “B” default to 2%, roll back in-force and require re-election of higher limits • Change Coverage “C” default to 25%, roll back in-force and require re-election of higher limits

• Revise guidelines to require 30+ year old homes have a 4 point inspection showing the electrical and plumbing systems have been updated and are in good working order

• Eliminate optional endorsement for Permitted Incidental Occupancies (business use at residence premises)

Effective 1/1/2013 Renewal Business (date being confirmed)

• Implement sinkhole reunderwriting program for existing business; start with Hillsborough County and phase-in.

Commercial Lines

• Discontinue Builder’s Risk

Effective 5-1-2012 New Business; 6/1/2012 Renewal Business

• Eliminate coverage for all Special Class Items except for in-ground pools and masonry fences, for business other than condominium associations • Eliminate Business Income and Extra Expense Coverage

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Initiatives to Reduce Citizens Exposure – Status Update

Personal Lines - Initiatives to be filed with 2013 Rate filing in 3rd_{Quarter 2012}

• Restrict Ordinance & Law to Apply Only to Coverage A (Structural Coverage)

• Evaluate Automatic Expiration of Wind Mitigation Credits After 5 Years from Inspection

Personal Lines – Initiatives to be filed in 2013

• Eliminate Liability Coverage for Incidental Exposures Related to Auto, Watercraft, Animal, Home Business and Off Premises Liability

• Eliminate coverage for losses caused by “dropped objects” • Revise Contract to Reduce Exposure to Water Losses

• Expand “vacancy penalty” to Further Restrict Coverage and Address Additional Occupancies

Commercial Lines - Initiatives to be filed with 2013 Rate filing in 3rd_{Quarter 2012}

• Implement a Commercial Residential coverage limit

• Reduce Debris Removal Coverage from $10,000 to $5,000 • Remove Class B and C Opening Protection Credits

• Implement separate hurricane deductible for business personal property

• Eliminate Coverage Extension for Increased Cost of Construction (Ordinance & Law) • Implement Exclusion for Losses Where Damage is Only to Exterior Paint damage • Increase minimum All Other Perils Deductible -

• Implement a Sublimit for Mold