The challenges associated with the 2017 North Atlantic hurricane season, which came to a close Nov. 30, were not solely financial in nature.
As Citizens Property Insurance Corp. detailed in materials to be presented during a forthcoming meeting of the claims committee of its board of governors, the state-run insurer faced several significant operational impediments in its response to Irma, the first major hurricane to strike Florida in 12 years.
The deployment of "large numbers" of independent adjusters by the Texas Windstorm Insurance Association and the National Flood Insurance Program in the aftermath of Hurricane Harvey west of the state meant that Citizens' vendors "struggled to find qualified resources to respond to Hurricane Irma," Chief Claims Officer Jay Adams said in a presentation. He noted that Citizens twice increased its day rate and fee schedule rate to compete for resources and used various strategies such as outbound communications efforts, aerial imagery and drone inspection to help offset the shortage it encountered.
That the Florida Keys were particularly hard hit by Irma created additional hurdles.
"There are logistical obstacles for adjusting claims in the middle and lower keys from the mainland," the company said in board committee meeting materials. "The availability of contractors in the Keys places additional strains on costs and the pricing in the estimating software does not reflect all of the market conditions at [the] time of settlement."
The company opened a "strike force office" in Key West, Fla., to handle all claims in the region.
The Florida Office of Insurance Regulation put total estimated insured losses in the state stemming from Irma at nearly $5.88 billion as of Nov. 13. It is due to update its Irma-related claims information Dec. 4. Citizens reiterated in a Nov. 29 release that it expects to pay out approximately $1.2 billion on up to 70,000 Irma-related claims. It received 62,757 Irma-related claims as of Nov. 29, of which 21,755 have been closed, and it paid out total indemnity of $354.3 million across its personal residential and commercial property books of business.
S&P Global Market Intelligence previously reported that Citizens produced a net underwriting loss of more than $1.11 billion in the third quarter, which represented its largest such setback during a three-month period ended Sept. 30 in 13 years.
Citizens is one of at least six U.S. property and casualty groups or stand-alone P&C entities to produce a third-quarter statutory net underwriting loss in excess of $1 billion, joining the U.S. P&C units of American International Group Inc., Berkshire Hathaway Inc., Liberty Mutual Holding Co. Inc. and the group led by State Farm Mutual Automobile Insurance Co. S&P Global Market Intelligence calculates that the Texas Windstorm Insurance Association, which said in October that it expects ultimate losses and loss adjustment expenses attributable to Hurricane Harvey of approximately $1.13 billion, produced a net underwriting loss of $1.02 billion in the third quarter.
In contrast to Citizens, which had policyholders' surplus of $6.46 billion as of Sept. 30, the Texas Windstorm Insurance Association reported a $668.4 million deficit and received approval subsequent to the end of the third quarter to release the remaining balance of its catastrophe reserve trust fund.
Citizens ranked as Florida's No. 2 personal and commercial residential property insurer as of Sept. 30, with 452,394 policies in force in the applicable business lines, according to Florida Office of Insurance Regulation statistics. Universal Insurance Holdings Inc.'s Universal Property & Casualty Insurance Co., the state's largest personal and commercial residential property insurer by Sept. 30 policies in force, reported gross and net losses and loss adjustment expenses from Irma of $450 million and $35 million, respectively.
The state-run insurer has a dominant position in the personal and commercial residential property market of Monroe County, Fla., which includes the Florida Keys. It accounted for 35.1% of the applicable policies in force and 58.6% of the dollar value of exposure for policies that include wind coverage as of Sept. 30, based on data collected by the Florida Office of Insurance Regulation as of Dec. 1.
Citizens said that Miami-Dade County accounted for nearly 38.6% of the submitted Irma-related claims through Nov. 29. Broward and Monroe counties represented 15% and 14.5%, respectively, of the company's Irma-related claims volume.
