At its meeting today, July 19, 2010, Citizens Property Insurance Corporation’s (“Citizens”) Actuarial and Underwriting Committee (“Committee”) unanimously approved an average statewide rate increase of zero for its 2011 commercial residential multi-peril (“CRM”) rate filings, inasmuch as the AIR v.12 model produced a negative 6.6 percent overall indication.   However, once approved, Citizens plans to rebalance the zero rate using the AIR v.12 data to account for rate decreases, some of which include the southeast Florida coastal areas of Miami-Dade, Broward and Palm Beach counties.

Citizens Senior Vice President Paul Palumbo explained to the Committee that, to develop the CRM rates, Citizens used a local application of the AIR v.12 model, which was recently approved by the Florida Hurricane Commission on Loss Projection Methodology. 

Application of the corresponding RMS Model would have resulted in a average statewide CRM increase of 12.5 percent; however, in developing the CRM rates, Citizens considered the variance in indications between AIR v.12 and RMS’s model, the indication previously filed and approved for this line in 2010, the increasing commercial residential indication generated by AIR v.11 versus AIR v.12 and the continued CRM adverse loss experience.

For the wind portion of Personal Residential policy rates on both statewide and territorial levels, Citizens used the AIR v.12 model, along with the Florida Public Hurricane Loss Model to set a minimum benchmark as required by law.

Commercial Residential Wind-Only and Commercial Non-Residential Wind-Only rates also were developed with the AIR v.12 benchmark. 

Mr. Palumbo presented a table of capped and uncapped statewide rate changes by county.   Another column in the table showed rate increase recommendations, inclusive of a provision for the cost of the Florida Hurricane Catastrophe Fund (“FHCF”) rapid cash build-up layer, which is not subject to the mandated 10 percent rate cap.   Citizens did not purchase the FHCF’s Temporary Increase in Coverage Limits layer this year.   

According to Mr. Palumbo, Citizens has never filed a zero rate indication prior to this.  However, this is the second time that Citizens has proposed implementing rates based solely on actuarial analysis.

Major components of the analysis used to develop the 2011 Citizens rates included a consideration of five years of Citizens’ non-catastrophic losses, which have steadily increased.  Also factored was five years of Citizens sinkhole-related losses, which have increased dramatically, as evidenced by Citizens’ earned sinkhole premium of S19.6 million in 2009, followed by its sinkhole-related losses of $97 million during the same period.

The Committee unanimously approved the recommended 2011 rates, which will be presented for approval at Citizens’ Board of Governors next scheduled meeting on Tuesday, July 26.

Multi-peril 2011 rates must be submitted to the Florida Office of Insurance Regulation by January 1, 2011.  Wind-only rates must be submitted by February 1.