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Some Things You May Want To Know About Alabama Insurance Underwriting Association

Some Things You May Want To Know About Alabama Insurance Underwriting Association. Established in 1971 by order of Commissioner of Insurance regulation 482-1-052-.02.

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Some Things You May Want To Know About Alabama Insurance Underwriting Association

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  1. Some Things You May Want To Know About Alabama Insurance Underwriting Association Alabama Insurance Underwriting Association

  2. 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 Alabama Insurance Underwriting Association

  3. 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 Alabama Insurance Underwriting Association

  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. Alabama Insurance Underwriting Association

  5. 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 Alabama Insurance Underwriting Association

  6. 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 Alabama Insurance Underwriting Association

  7. 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”. Alabama Insurance Underwriting Association

  8. Alabama Insurance Underwriting Association

  9. Alabama Insurance Underwriting Association

  10. 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. Alabama Insurance Underwriting Association

  11. How is Participation Determined? Alabama Insurance Underwriting Association

  12. How is Participation Determined? Alabama Insurance Underwriting Association

  13. How is Participation Determined? Alabama Insurance Underwriting Association

  14. 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. Alabama Insurance Underwriting Association

  15. 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 Alabama Insurance Underwriting Association

  16. Reinsurance • Current PML (December 2010) • $284M (100-year event) • $628M (250-year event) • Current Reinsurance Treaty • $300M XS $100 Alabama Insurance Underwriting Association

  17. 2009 Reinsurance Structure Blended Model Return Period $615M 250 yrs. Alabama Insurance Underwriting Association

  18. Profit/Loss (1974 -2010) Alabama Insurance Underwriting Association

  19. 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) Alabama Insurance Underwriting Association

  20. 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 Alabama Insurance Underwriting Association

  21. 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 Alabama Insurance Underwriting Association

  22. 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 Alabama Insurance Underwriting Association

  23. Trends – Policy Count Changes Aon Benfield Analytics | Catastrophe Management Proprietary & Confidential Alabama Insurance Underwriting Association

  24. Trends - Average Limits & Deductibles Aon Benfield Analytics | Catastrophe Management Proprietary & Confidential Alabama Insurance Underwriting Association

  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 Alabama Insurance Underwriting Association

  26. Policy Types • 91% Actual Cash Value Loss Settlement • Depreciation • No Additional Living Expense Coverage • 9% Replacement Cost Loss Settlement Alabama Insurance Underwriting Association

  27. Claims • Routine • In-house • Catastrophe • Pilot Catastrophe Services • Allied American Adjusters • Fountain Group • Coggin • Shaffer-Wood Alabama Insurance Underwriting Association

  28. Questions and/or Comments Alabama Insurance Underwriting Association

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