Item L5BOARD OF COUNTY COMMISSIONERS
AGENDA ITEM SUMMARY
Meeting Date: _August 15, 2012 Division: BOCC_3
Bulk Item: Yes No X Department: Heather Carruthers —Dist 3
Presentation
Staff Contact /Phone 4: _Carol Schreck
305-292-3430
AGENDA ITEM WORDING:
Presentation by Annalise Mannix, Executive Director of Fair Insurance Rates in Monroe (FIRM)
followed by discussion and direction regarding County involvement with a data project to verify
constriction quality of Key' strictures, next steps and possible long-term solutions to windstorm
insurance crisis.
ITEM BACKGROUND: Citizens Property Insurance Corp. is the windstorm "insurer of last resort"
for the State of Florida. Windstorm insurance is required by mortgage holders, and approximately
95% of Monroe homes that are insured for windstorm are insured by Citizens. Citizens rates have
been increasing by 10% annually (as limited by State legislation) with no end in sight. Citizens is
currently engaged in a re -inspection process and in depopulation efforts that are resulting in either
startling, unaffordable increases in premiums for Monroe residents, or in a cancellation of windstorm
coverage altogether. This is damaging to the Keys real estate market and economic recovery. Fair
Insurance Rates in Monroe (FIRM) is actively seeking a solution to this coverage that would result in
greater affordability and stability for Monroe County residents.
PREVIOUS RELEVANT BOCC ACTION:
Prior action includes past presentations and past County financial commitment to attorneys and
actuaries hired to fight Citizens' increases as well as Memorandums of Understanding with Marathon,
Layton, Islamorada, Key Colony Beach and Key West for cost sharing of same attorneys and actuaries.
3/15/2006: Res 144-2006 requesting use of hurricane reconstruction sales tax to relieve a proposed
increase in windstorm insurance rates.
3/15/2006: Res 145-2006 recommending specific reductions to Citizens windstorm insurance rates
reflective of actual costs.
3/15/2006 Res 146-2006 setting forth actions to be taken to address windstorm insurance rates.
3/15/2006: Res 147-2006 requesting the governor provide immediate relief from windstorm rate
increases for residents of Monroe County.
3/21/2006 Res 150-2006 setting forth recommendations to include in proposed legislation on
windstorm insurance tares provisions to protect affordable rental housing (non -homesteaded)
properties.
8/16/2006 Res 304-2006 strongly encouraging the Florida Legislature to study and enact
legislation addressing the insurance crisis in Florida.
5/20/2009 Res 151-2009 opposing HB 1171 and SB 2036, opposing any legislation having the
result of abrupt deregulation of the insurance industry, removing effective consumer protection against
unregulated rates, and seeking Governor Crist's veto if the legislature passes such bills.
CONTRACT/AGREEMENT CHANGES:
STAFF RECOMMENDATIONS:
TOTAL COST:O INDIRECT COST: 0 BUDGETED: Yes No
DIFFERENTIAL OF LOCAL PREFERENCE:
COST TO COUNTY: 0 SOURCE OF FUNDS:
REVENUE PRODUCING: Yes No 0 AMOUNT PER MONTH
APPROVED BY: County Atty OMB/Purchasing Risk Management
DOCUMENTATION: Included x Not Required
DISPOSITION:
Revised 7/09
AGENDA ITEM #
Year
Citizens Evolution I
o The need for "hurricane insurance" was
demonstrated by Hurricane Donna which hit
Marathon in 1960 —
o In 1970, the Florida Windstorm Underwriting Association (FWUA)
was established to provide windstorm insurance to Floridians who
could not get such coverage in areas where
• there were no other options
• lack of such coverage would harm the economy
• minimum Florida Building Code standards were enforced
Monroe County hes historically met or exoeeoe these a ,,
o In 1975, the National Flood Insurance Program began offering flood
insurance, including coverage for storm surge in hurricanes.
• However, damage from storm surge was never "subtracted" from the
models used to set humcane insurance rates — known today as
windstorm insurance.
Citizens Evolution......
o After Hurricane Andrew in 1992, the private market
stopped writing hurricane (aka "windstorm) insurance in
much of Florida. The FWUA became the Joint
Underwriting Authority to fill the windstorm coverage gap.
o In 2000, the JUA became Citizens Property Insurance
Corporation, Inc.
o Citizens today has 1.3 million policies statewide,
including sinkhole and multi -peril policies.
'4*f-erC ITIZENS
Citizens in Monroe Im
o A study by the Office of Insurance Regulation in
February 2006 found that there was no reasonable
degree of competition for windstorm insurance in
Monroe County.
o Today, Citizens Property Insurance is the only option
for most property owners for windstorm coverage in
Monroe County.
• Citizens writes approximately 95 % of the windstorm policies in the
Florida Keys.
• Citizens has approximately 24,000 policies in force here.
• Other properties are either covered by surplus lines, by institutional
insurance providers (for government properties) or "go bare".
Citizens in Monroe [contmuedl
o Available data for the past 18 years indicates that Monroe County
has generated premiums significantly in excess of claims for both
the Joint Underwriting Authority (Citizens' predecessor) and
Citizens.
• Between 1995 and 2001 (including Hurricane Georges, the
Keys most significant wind event in the past 30 years) when
JUA rates were as little tenth of what Citizens rates, the gross
profit from Monroe County (premiums less claims) was over
$74 million.
• Between 2003 and 2011 — through two of the worst storm
seasons in history— Monroe County generated a gross profit
(premium less claims) for Citizens of $504,334,876.
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Citizens in Monroe(continued) r
o An analysis of territories with comparable or lesser
wind events between 2003 and 2011 confirms that
Monroe had:
• the lowest loss per policy in force
• the lowest paid loss per $1,000 of exposure
• the lowest exposure -to -premium ratio.-�
o This suggests that Monroe County is actually a pretty
good wind risk.
Depopulation
o There is a desire to depopulate Citizens Property
Insurance, reduce the State's financial risk and eliminate
the possibility of assessments. Citizens is implementing
a series of policy changes to do this. These include:
• Re -inspections (and subsequent retraction of mitigation credits)
• Elimination of Builders Risk coverage
• The "million -dollar home" exclusion
• Elimination of coverage for "short-term rentals"
Monroe Realities '
FIRM has been arguing that windstorm rates are
overstated in Monroe County for two fundamental reasons:
o Wind vs. Water Due to our low elevation, the greater damage from
any hurricane of a Category 3 or greater will be caused by storm
surge (paid by flood insurance), not wind.
o Building Strength: For decades, buildings in the Keys have been
required to be constructed to withstand wind -storms with gusts in
excess of 150MPH.
• Even pnor to codes, buildings were built to withstand storms and to
survive on islands inaccessible by roads, where supplies amved by ship.
In other words, we are required to build structures that will
withstand a Category 4 hurricane, and we will be flooded in a
hurricane of a Category 3 or greater.
What FIRM Has Asked of Citizens --
IMMEDIATELY
o Stop depopulation in Monroe County —
including short term rentals, and corporate
policies which force wind policies to be
cancelled thereby increasing rates.
o Re -instate Builders Risk insurance. _
o Revitalize the re -inspection process in
Monroe County.
3
What FIRM Has Asked of Citizens( ..........
LONGER TERM
o Fund a pilot project to depopulate Citizens
the right way that will include
• Developing a full actuarial analysis for Monroe
County. This analysis will:
Utilize the Florida Public Hurricane Model, the new
RMS model and the AIR model
• Include engineering data regarding structures in
Monroe County, confirmed by physical inspection of a
statistically valid sampling of buildings
Distinguish damage that will be caused by storm surge
(and paid by good insurance) from that caused by wind
What FIRM Has Asked of Citizens lusfinsetl]
• With the results of the study, Monroe County could
• Shop the Monroe book of business in the private market, or
Establish a mutual insurance company for Monroe County
(and potentially other coastal areas), or
• Help Citizens establish fair, actuarially sound rates for
Monroe County
. The cost of the study will be approximately
$350,000.
• The cost represents less than one percent of the annual
premium Citizens collects in Monroe County.
Citizens stands to drop $9.5 billion in exposure if an
alternative is found for Monroe County.
Smart Depopulation - RMS
A STATISTICAL DEMONSTRATION
o In 2011, Risk Management Solutions (RMS)
conducted the "largest ever numerical modeling
study (WRF) of hurricane behavior during
landfall."
o The result was a significant finding that risk
along the coasts may have been overstated
in past models.
4
Smart Depopulation - RMS
Analysis based on
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Smart Depopulation - RMS
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Analysis of actual
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Smart Depopulation - RMS
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The combined_...__
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What do we need?
o Modelers agree that they are able to distinguish between damage
from wind versus water but have not been required to do so
o We need to have the Monroe County book of business modeled with
storm surge "switched on" for
Tm —da P.- Nur — Model (used In rah promulgation)
Ttie RMS Modal(uzed ror rate eMreinsuranu estimates) jqM
• Ttia NR 1].O ModN (uxd tar rate eMrelnsuranca swim)
o Citizens is investigating the feasibility of this option.
• Could set a "precedent" to do the same for other temtories
• Funding options still unknown
o The private models could be run through private risk management
firms — cost to be determined.
What do we need? [continued]
o We need accurate, verifiable data on the buildings in Monroe County.
o Much of this data resides in our building departments in the form of
approved plans, permits, inspections, photos, etc.
o This data would include:
• Construction & renovation dates
• Finished elevation
• Construction type-/
Window glass
,ems
• Root details �
• Location '�pl
What do we need? [continued)
A sample of building data analyzed by models ^-�R
6
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What do we need? lcontinuedl 4eeelb. +
o This data can be used to:
• Confirm or contradict results of Citizens' re -
inspections, helping homeowners save their
mitigation credits
• Factually demonstrate the strength of our building stock
• Fully populate all the data fields in models, rather than having the
models default to the lowest level of strength
For instance, the models include data fields for things like the quality
of the ties and straps in a home, but the Citizens forms don't require
that level of detail, and insurance agents don't ask for it.
• Allow us to identify broad -based mitigation improvement
opportunities
What are we asking from you?
Direction to your staff to assist with
compilation and analysis of building
data (which may require funding)
Consideration going
forward regarding the
possibility of assisting with
funding these efforts
Conclusion I1
o In reality, Monroe County is not as risky to insure for
windstorm as existing, inaccurate models suggest.
o Steps currently being taken to depopulate Citizens in Monroe
County are killing jobs and damaging our recovering economy.
o With the corrected data and a real analysis of Monroe
County's risk, we can find a permanent solution to the Citizens
windstorm insurance crisis.
Who is FIRMA '
o Fair Insurance Rates in Monroe
o Grassroots group founded in Key West in February
2006to address skyrocketing windstorm insurance
rates in Monroe County
o Run primarily by volunteers and funded by donations
0 501(c)(4) organization
OUR MISSION: "To advocate for, promote and encourage the promulgation of
fair, impartial and actuarially sound windstorm insurance rates for owners of
commercial and residential properties within the geographic boundaries of
Monroe County, Florida."
Who is FIRM? [continued]
www.FIRMkeys.org
Annalise Mannix, P.E., Executive Director
amannix(a)aol.com
Commissioner Heather Carruthers, President
ca rruthers-heather(a) m on roeco u my-fl. g ov
Mel Montagne, ARM, CRS, Board Member
mmontagne keysinsurance.com
8
What do we need? [cantinuedl
w
What do we need? [continued]
o This data can be used to:
• Confirm or contradict results of Citizens' re-
inspections, helping homeowners save their
mitigation credits
• Factually demonstrate the strength of our building stock
• Fully populate all the data fields in models, rather than having the
models default to the lowest level of strength
• For instance, the models include data fields for things like the quality
of the ties and straps in a home, but the Citizens forms don't require
that level of detail, and insurance agents don't ask for it.
• Allow us to identify broad -based mitigation improvement
opportunities
What are we asking from you? i
Direction to your staff to assist with
compilation and analysis of building
data (which may require funding)
Consideration going
forward regarding the
possibility of assisting with
funding these efforts
[/
m
conclusion
o In reality, Monroe County is not as risky to insure for
windstorm as existing, inaccurate models suggest.
o Steps currently being taken to depopulate Citizens in Monroe
County are killing jobs and damaging our recovering economy.
o With the corrected data and a real analysis of Monroe
County's risk, we can find a permanent solution to the Citizens
windstorm insurance crisis.
Who is FIRM?
o Fair Insurance Rates in Monroe
o Grassroots group founded in Key West in February
2006 to address skyrocketing windstorm insurance
rates in Monroe County
o Run primarily by volunteers and funded by donations
0 501(c)(4) organization
OUR MISSION: "To advocate for, promote and encourage the promulgation of
fair, impartial and actuarially sound windstorm insurance rates for owners of
commercial and residential properties within the geographic boundaries of
Monroe County, Florida."
Who is FIRM? [continued]
www.FIRMkeys.org
Annalise Mannix, P.E., Executive Director
amannix(&aol.com
Commissioner Heather Carruthers, President
Carruthers-heather(a)mon roecou nty-fl.gov
Mel Montagne, ARM, CRS, Board Member
mmontagne &keysinsurance.com
8