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.Citizens also now projects that the Florida Office of Insurance Regulation willapprove the removal of about 500,000 policies in 2016, downfrom approximately 1.4 million in 2015. It estimates that private carriers willmake offers to assume about 140,000 policies.

Approvals by FLOIR remain "extremely high,"Citizens President and CEO Barry Gilway told the company's board on Sept. 28.But carriers are "refining selection of these accounts" such thatthey are "not going to take south Florida business" until alegislative resolution is reached for what he has characterized as the crisisassociated with the assignment of benefits on non-weather water losses.

"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. Growth is likely to occurslowly, Gilway added, as it "takes a while for capped rates and industryrates to show up in the pocketbook."

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.

Gilwaysaid that while the number of commercial lines policies removed by privatecompanies is smaller than the personal residential takeouts, that kind ofactivity has a significant impact on reducing Citizens' exposure.

"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.