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11/21/2011 Alabama Insurance Underwriting Association 1 Some Things You May Want To Know About Alabama Insurance Underwriting Association.

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Presentation on theme: "11/21/2011 Alabama Insurance Underwriting Association 1 Some Things You May Want To Know About Alabama Insurance Underwriting Association."— Presentation transcript:

1 11/21/2011 Alabama Insurance Underwriting Association 1 Some Things You May Want To Know About Alabama Insurance Underwriting Association

2  Established in 1971 by order of Commissioner of Insurance regulation /21/2011 Alabama Insurance Underwriting Association 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

3  Codified by Legislative Act /21/2011 Alabama Insurance Underwriting Association 3 Act # 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

4  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. 11/21/2011 Alabama Insurance Underwriting Association 4

5 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 % 69 Companies report voluntary written premium in eligible areas 23 voluntarily write sufficient coastal property to be exempt from AIUA assessments 11/21/2011 Alabama Insurance Underwriting Association 5 Who are Plan Members?

6 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 11/21/2011 Alabama Insurance Underwriting Association 6 How is Plan administered?

7  AIUARating 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”. 11/21/2011 Alabama Insurance Underwriting Association 7

8 11/21/2011 Alabama Insurance Underwriting Association 8

9 11/21/2011 Alabama Insurance Underwriting Association 9

10 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. 11/21/2011 Alabama Insurance Underwriting Association 10 How is Participation Determined? Voluntary Credit Adjustment Factors Zone 1Zone 2Zone 3Zone 4 Fire125.0%100.0%75.0%50.0% Home100.0%75.0%50.0%37.5% CMP75.0%50.0%37.5%25.0%

11 11/21/2011 Alabama Insurance Underwriting Association 11 How is Participation Determined?

12 11/21/2011 Alabama Insurance Underwriting Association 12 How is Participation Determined?

13 11/21/2011 Alabama Insurance Underwriting Association 13 How is Participation Determined?

14 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. 11/21/2011 Alabama Insurance Underwriting Association 14 How is Plan Funded

15 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 11/21/2011 Alabama Insurance Underwriting Association 15 How are Losses paid?

16 Current PML (December 2010) $284M (100-year event) $628M (250-year event) Current Reinsurance Treaty $300M XS $100 11/21/2011 Alabama Insurance Underwriting Association 16  Reinsurance

17 Reinsurance Structure $615M Blended Model Return Period 250 yrs. 11/21/2011 Alabama Insurance Underwriting Association

18  Profit/Loss ( ) 11/21/2011 Alabama Insurance Underwriting Association 18 Earned Premiums Net of Reinsurance 143,653,906 Investments (Total Other Income) 14,602,079 Change in assets not admitted (246,877) T OTAL I NCOME 158,009,108 Claims Paid 120,312,113 Loss Expense 9,573,790 C LAIMS & L OSS E XPENSE 129,885,903 O PERATING C OST 47,389,181 P (L) SINCE 1974 (19,265,976)

19  New Business New Applications Plan Year – 3,321 Plan Year – 5,613 Plan Year – 6,821 Plan Year – 6,609 * *August 2011 Average # of New Applications per Month 486 (Nov 2007 – August 2011) 11/21/2011 Alabama Insurance Underwriting Association 19

20  Renewals Renewal Retention Plan Year – 90.0% Plan Year – 86.0% Plan Year – 87.0% Plan Year – 88.0% Plan Year – 86.0%* *August 2011 Average # PIF Increase per Month = /21/2011 Alabama Insurance Underwriting Association 20

21  Average PIF Increase per Month Plan Year Plan Year Plan Year Plan Year Plan Year * *August 2011 Average # PIF Increase per Month = /21/2011 Alabama Insurance Underwriting Association 21

22  Growth Forecast Assume 87% Retention of existing PIF Assume Average PIF Increase per Month of ,682 + (296 X 14) 26,826 PIF at October ,826 X $2,007 (avg Prem) = $ 53,839,782 WP 26,826 X $173,388 (avg TIV) = $ 4,651,306,488 TIV 11/21/2011 Alabama Insurance Underwriting Association 22

23  Trends – Policy Count Changes 11/21/2011 Alabama Insurance Underwriting Association 23 Aon Benfield Analytics | Catastrophe Management Proprietary & Confidential

24  Trends - Average Limits & Deductibles 11/21/2011 Alabama Insurance Underwriting Association 24 Aon Benfield Analytics | Catastrophe Management Proprietary & Confidential

25  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 11/21/2011 Alabama Insurance Underwriting Association 25

26  Policy Types 91% Actual Cash Value Loss Settlement Depreciation No Additional Living Expense Coverage 9% Replacement Cost Loss Settlement 11/21/2011 Alabama Insurance Underwriting Association 26

27  Claims Routine In-house Catastrophe Pilot Catastrophe Services Allied American Adjusters Fountain Group Coggin Shaffer-Wood 11/21/2011 Alabama Insurance Underwriting Association 27

28  Questions and/or Comments 11/21/2011 Alabama Insurance Underwriting Association 28


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