Thenumber of policies to be assumed by private carriers in 2016 through thedepopulation program of CitizensProperty Insurance Corp. may decline at a considerably faster pace thanthe state-run insurer had originally expected.
Thecontinued challenges associated with non-weather-related water losses thatcaused Citizens' second-quarter financial results to have alsomaterially altered private carriers' appetite for the assumption of certainrisks on the company's books.
Companyofficials expect about 65,000 policies to be removed in 2016, down from 272,492in 2015 and 416,723 in 2014. Citizens' 2016 budget originally estimated that119,597 policies would be removed through depopulation during the year.
"Ifthey do … it would not be a smart decision on the part of the CEO," headded.
Withdepopulation activity slowing and Citizens' ability to increase rates toaccount for rising water claims restricted by a statutory glide path, thecompany is likely to see growth in coastal property business in both thepersonal lines account and the higher-risk coastal account, Gilway said.
"Marketsare shutting down in south Florida," he said. "New business has noplace to go but us. … Anything with water risk … you're going to see growth."
Hesaid Citizens expects to see growth of between 25,000 and 30,000 policies in2017. Citizens had 491,695 policies in force as of Aug. 31, down from 600,555policies as of the same date in 2015, but up from the company's policy count of485,588 as of Feb. 29.
Gilwaysaid private carriers have demonstrated an increasing appetite for wind-onlybusiness on a relative basis as reinsurance costs "continue toplummet," and he views those types of accounts as a "betteropportunity for depopulation" than multiperil risks. A Citizens officialsaid during a Sept. 27 board committee meeting that the company anticipates theemergence of "additional outlets" for wind-only policies in the formof new entities planning to enter that niche.
"Wind-onlyis a reinsurance play," Gilway explained.
Citizensprojects that 22,500 wind-only policies will be assumed in 2016 through depopulation.Although that marks a decline from 59,107 policies in 2015, wind-only businessaccounts for a 34.6% share of the company's overall depopulation projection for2016, up from 21.7% of the actual total in the prior year.
Privatecarriers assumed 48,360 policies from Citizens through Sept. 20 overall,including 27,556 personal residential multiperil policies in the personal linesaccount, 12,556 personal residential wind-only policies in the coastal accountand 7,000 personal residential multiperil policies in the coastal account.
's HeritageProperty & Casualty Insurance Co. was by far the most activetakeout company as it accounted for 19,962 of the policies removed, all ofwhich occurred during the first five months of the year. Six other companiesalso removed policies: StateNational Cos. Inc.'s National Specialty Insurance Co., , ,Anchor Property & CasualtyInsurance Co., WestonInsurance Co. and Avatar Property & Casualty Insurance Co.
FLOIRapproved Octobertakeouts by Safepoint, Heritage and United Insurance Holdings Corp.'s The regulator also signed off on November takeouts by Safepoint, Weston, SouthernOak, National Specialty and HCIGroup Inc.'s Homeowners Choice Property & Casualty Insurance Co. Inc.
"The[probable maximum losses] on the commercial book of business are dropping likea rock," he said, adding that he expects the book to continue to shrink.The lower PMLs will impact Citizens' reinsurance needs, and Gilway said thecompany will consider buying "some component of reinsurance as asurplus-protection component" in both the personal and commercial linesaccount. Its private reinsurance purchases have historically focused on thecoastal account.