Some Things You May Want To Know About Alabama

Report
Some Things You May Want To Know About
Alabama Insurance Underwriting Association
11/21/2011
Alabama Insurance Underwriting
Association
1
 Established in 1971 by
order of Commissioner of
Insurance regulation 482-1-052-.02
482-1-052-.02 Purpose- A Plan known as the Alabama Insurance
Underwriting Association is hereby established as a result of a demonstrated
need to provide an equitable method whereby adequate fire and extended
coverage insurance may be made available in the “Beach Area” of Alabama.
The Plan shall provide for the establishment of a “Pool” of all licensed insurers
writing fire and extended coverage insurance in Alabama, for the purpose of
insuring those eligible risks not written on a voluntary basis.
Recommendations of the various segments of the property insurance industry
shall be taken into consideration in the promulgation of the plan. The Plan of
Operation and the Articles of Agreement, along with any revisions thereto,
shall be submitted to and approved by the Commissioner before the effective
date thereof. A copy of the approved Plan of Operation and Articles of
Agreement, together with any approved revisions thereto, will be maintained
for public inspection in the Department of Insurance
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Alabama Insurance Underwriting
Association
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 Codified by Legislative Act 2008-392
•Act # 2008-392 signed by Governor Riley on May 16, 2008
•Effective November 1, 2008
•Codifies existing A.I.U.A. Plan of Operation
•Authorizes A.I.U.A. Board of Directors to retain surplus, borrow
money, issue bonds
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Alabama Insurance Underwriting
Association
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Purpose of AIUA
• Provide essential property insurance in eligible coastal
areas of Baldwin and Mobile counties to enable owners
of insurable property to obtain financing for the
purchase and improvement of their property.
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Alabama Insurance Underwriting
Association
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Who
are Plan Members?
• All licensed insurers writing P&C coverage insurance in
Alabama
• Current Members (Plan year 2011)
• 485 Companies
• 329 Exempt from participation
• 306 write no P & C in AL
• 156 Companies are subject to assessments ranging from .0001%
up to 19.5546%
• 69 Companies report voluntary written premium in eligible areas
• 23 voluntarily write sufficient coastal property to be exempt from
AIUA assessments
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Alabama Insurance Underwriting
Association
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How
is Plan administered?
• Board of Directors
• Member companies elect 9
• Commissioner of Insurance appoints 2
• Board appoints a Manager
• Board/Manager determine Plan of Operation
•
•
•
•
Scope
Rules
Forms
Rates
• Commissioner of Insurance approves Plan of Operation
• Manager implements/administers Plan
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Alabama Insurance Underwriting
Association
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AIUA Rating Zones
• AIUA historical records indicate that the original wind
pool boundaries were developed around 1966 by a Mr.
Marvin H. Haynie, a building inspector with the “Rating
Bureau” (a.k.a. Insurance Services Office), who was
tasked to create the boundaries “at his discretion”.
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Alabama Insurance Underwriting
Association
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11/21/2011
Alabama Insurance Underwriting
Association
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11/21/2011
Alabama Insurance Underwriting
Association
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How is Participation Determined?
• Proportion of the Net Direct premium written (adjusted for eligible
premium voluntarily written in AIUA territories) to the Aggregate
Net Direct premium in the state for all companies for the preceding
calendar year.
Voluntary Credit Adjustment Factors
11/21/2011
Zone 1
Zone 2
Zone 3
Zone 4
Fire
125.0%
100.0%
75.0%
50.0%
Home
100.0%
75.0%
50.0%
37.5%
CMP
75.0%
50.0%
37.5%
25.0%
Alabama Insurance Underwriting
Association
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How is Participation Determined?
2010 VOLUNTARY PREMIUMS REPORTED; 2011 PARTICIPATION YEAR
ZONE 1 FIRE
ZONE 2 FIRE
ZONE 3 FIRE
ZONE 4 FIRE
ZONE 1 HO
ZONE 2 HO
ZONE 3 HO
ZONE 4 HO
ZONE 1 CMP
ZONE 2 CMP
ZONE 3 CMP
ZONE 4 CMP
AGGREGATE
FACTOR
2,631,501.58 X 125%
6,108,353.85 X100%
8,968,545.71 X.75
10,265,989.20 X.50
9,840,524.84 X 1.00
43,491,936.24 X.75
59,446,285.85 X .50
84,280,147.31 X .375
2,014,637.75 X .75
5,955,393.86 X .50
15,383,487.20 X .375
13,030,914.44 X .25
261,417,717.83
CREDIT
3,289,376.98
6,108,353.85
6,726,409.28
5,132,994.60
9,840,524.84
32,618,952.18
29,723,142.93
31,605,055.24
1,510,978.31
2,977,696.93
5,768,807.70
3,257,728.61
ho
103,787,675.19
fire
21,257,134.71
CMP
13,515,211.55
138,560,021.45
ASSOCIATION TOTAL $38,070,296
11/21/2011
Alabama Insurance Underwriting
Association
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How is Participation Determined?
1 Net Direct Premium written by your company in the State
$$$$$$$$$
2 Net Direct Premium written by all companies in the State
$$$$$$$$$
3 Your percentage of total Net Direct Premiums written in the State (Item 1 divided by Item 2)
%%%%%
4 Total Zone 1, 2, 3, & 4 premiums written by AIUA – AIUA Plan Year XXXX
$$$$$$$$$
5 Total Zone 1, 2, 3, & 4 Voluntary Premiums Written by all companies (Sum of Item 8 for all companies)
$$$$$$$$$
6 Total Zone 1, 2, 3, & 4 premiums written by AIUA and ALL companies (Sum of Item 4 plus Item 5)
$$$$$$$$$
7 Your company’s maximum required share of premiums written (Item 3 multiplied by Item 6)
$$$$$$$$$
8 Total Voluntary premiums written by your company in Zone 1, 2, 3, & 4
$$$$$$$$$
9 Your maximum possible allocation from AIUA (Sum of Item 7 minus Item 8)
$$$$$$$$$
10 Your Final Percentage of Participation (Item 9 for your company divided by the sum of Item 9 for all
companies)
%%%%%
11/21/2011
Alabama Insurance Underwriting
Association
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How is Participation Determined?
Company A
Company B
Company C
Company D
Company E
Total Net Direct
Premiums - All
Companies
Total Voluntary
Premiums Written
by All Companies
AIUA Written Premium
Total Premiums
Written by All
Companies and AIUA
11/21/2011
% of Net
Written
Premium in
State
Net Direct
Voluntary Written
(Market
Premium
Premium
Share)
$40,000,000
$2,750,000
8.00%
$75,000,000
$6,200,000
15.00%
$150,000,000
$12,350,000
30.00%
$125,000,000
$16,475,000
25.00%
$110,000,000
$3,125,000
22.00%
Maximum
Share of
Coastal
Premiums
Maximum Dollar
Participation
Written
Allocation
Percentage
$5,272,000
$2,522,000
10.08800%
$9,885,000
$3,685,000
14.74000%
$19,770,000
$7,420,000
29.68000%
$16,475,000
$0
0.00000%
$14,498,000
$11,373,000
45.49200%
$500,000,000
$40,900,000
$25,000,000
$65,900,000
Alabama Insurance Underwriting
Association
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How is Plan Funded
• Written Premiums
• Operating Budget developed annually by AIUA
Manager
• Board approves Operating Budget
• NOTE: AIUA operating expense (excluding reinsurance) is
under 20% and that includes the 3.6% premium tax AIUA
pays each year.
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Alabama Insurance Underwriting
Association
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How are Losses paid?
• Earned Premiums
• Assessments from Member companies (Catastrophe
funding)
• Assessment based on Participation Percentage as
calculated by AIUA
• An Important Fact To Consider: The cost of assessments is borne
by the Member Company paying the assessment. Alabama does
not currently have a pass-through or recoupment mechanism
(unlike many other coastal wind pools).
• Reinsurance
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Alabama Insurance Underwriting
Association
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Reinsurance
• Current PML (December 2010)
• $284M (100-year event)
• $628M (250-year event)
• Current Reinsurance Treaty
• $300M XS $100
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Alabama Insurance Underwriting
Association
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2009 Reinsurance Structure
Blended Model
Return Period
$615M
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Alabama Insurance Underwriting
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Association
250 yrs.
Profit/Loss
(1974 -2010)
Earned Premiums Net of Reinsurance
143,653,906
Investments (Total Other Income)
Change in assets not admitted
14,602,079
(246,877)
TOTAL INCOME
158,009,108
Claims Paid
120,312,113
Loss Expense
9,573,790
CLAIMS & LOSS EXPENSE
129,885,903
OPERATING COST
47,389,181
P (L) SINCE 1974
11/21/2011
(19,265,976)
Alabama Insurance Underwriting
Association
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New Business
• New Applications
•
•
•
•
Plan Year 2007-2008 – 3,321
Plan Year 2008-2009 – 5,613
Plan Year 2009-2010 – 6,821
Plan Year 2010- 2011 – 6,609 *
• *August 2011
• Average # of New Applications per Month
• 486 (Nov 2007 – August 2011)
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Alabama Insurance Underwriting
Association
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Renewals
• Renewal Retention
•
•
•
•
•
Plan Year 2006-2007 – 90.0%
Plan Year 2007-2008 – 86.0%
Plan Year 2008-2009 – 87.0%
Plan Year 2009-2010 – 88.0%
Plan Year 2010-2011 – 86.0%*
• *August 2011
• Average # PIF Increase per Month
• 2006-2011 = 296
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Alabama Insurance Underwriting
Association
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Average PIF Increase per Month
•
•
•
•
•
Plan Year 2006-2007 ------283
Plan Year 2007-2008 ------ 128
Plan Year 2008-2009 ------ 326
Plan Year 2009-2010 ------ 372
Plan Year 2010-2011*------ 382
• *August 2011
• Average # PIF Increase per Month
• 2006-2011 = 296
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Alabama Insurance Underwriting
Association
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Growth Forecast 2011 - 2012
•
•
•
•
Assume 87% Retention of existing PIF
Assume Average PIF Increase per Month of 296
22,682 + (296 X 14)
26,826 PIF at October 2012
• 26,826 X $2,007 (avg Prem) = $ 53,839,782 WP
• 26,826 X $173,388 (avg TIV) = $ 4,651,306,488 TIV
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Alabama Insurance Underwriting
Association
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Trends – Policy Count Changes
Companywide By Coastal Zone
Hurricane:
Zone 1
Zone 2
Zone 3
Zone 4
Personal Lines
Jun 11
Dec 10
Exposures
Exposures
5,061
5,553
4,103
7,325
22,042
5,312
4,776
3,560
5,757
19,405
Percent
Change
(4.7%)
16.3%
15.3%
27.2%
13.6%
Commercial Lines
Jun 11
Dec 10
Exposures
Exposures
35
17
27
22
101
50
23
30
25
128
Percent
Change
(30.0%)
(26.1%)
(10.0%)
(12.0%)
(21.1%)
Total
Jun 11
Exposures
Zone 1
Zone 2
Zone 3
Zone 4
Dec 10
Exposures
5,096
5,570
4,130
7,347
22,143
5,362
4,799
3,590
5,782
19,533
Percent
Change
(5.0%)
16.1%
15.0%
27.1%
13.4%
in Ones
Aon Benfield Analytics | Catastrophe Management
Proprietary & Confidential
11/21/2011
Alabama Insurance Underwriting
Association
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Trends - Average Limits & Deductibles
Personal Lines: Excludes Mobile Home and Contents-Only Risks
Coverage A Coverage B Coverage C Coverage D
Hurricane:
Home
Zone 1
Zone 2
Zone 3
Zone 4
157,296
166,781
124,517
143,224
Garage or
Appurtenant
Structures
Contents or
Personal
Property
672
1,801
651
3,217
27,944
31,682
28,593
35,256
Additional
Living
Expenses
-
Total
185,912
200,264
153,761
181,697
Percent of Cov A
Deductible Jun 11 Dec 10
9,797
10,034
6,683
7,033
6.2%
6.0%
5.4%
4.9%
6.0%
5.9%
5.2%
4.8%
US $ in Ones
Aon Benfield Analytics | Catastrophe Management
Proprietary & Confidential
11/21/2011
Alabama Insurance Underwriting
Association
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Policy Types
• 99.6% Residential
•
•
•
•
66% Owner Occupied – Primary
12% Owner Occupied – Seasonal/Secondary
15% Tenant non-Seasonal
7% Tenant – Seasonal
• 81% of the Residential Property insured by AIUA
is occupied by residents who live and work in
Baldwin and Mobile counties
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Alabama Insurance Underwriting
Association
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Policy Types
• 91% Actual Cash Value Loss Settlement
• Depreciation
• No Additional Living Expense Coverage
• 9% Replacement Cost Loss Settlement
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Alabama Insurance Underwriting
Association
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Claims
• Routine
• In-house
• Catastrophe
•
•
•
•
•
11/21/2011
Pilot Catastrophe Services
Allied American Adjusters
Fountain Group
Coggin
Shaffer-Wood
Alabama Insurance Underwriting
Association
27
Questions and/or Comments
11/21/2011
Alabama Insurance Underwriting
Association
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