NOTICE OF ORDER
NOTICE IS HEREBY GIVEN that the Office of Insurance Regulation has issued the following:
IN THE MATTER OF:
CITIZENS PROPERTY CASE NO: 85730-06
INSURANCE CORPORATION
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ORDER APPROVING CITIZENS HIGH-RISK ACCOUNT BOND ISSUANCE AND RELATED DOCUMENTS
THIS MATTER came before the Office of Insurance Regulation for consideration and final agency action upon the request of Citizens Property Insurance Corporation (Citizens), pursuant to Section 627.351(6), Florida Statutes, as amended (the Citizens Act), and Sections 19(B) and 20 of Citizens Plan of Operation (the Plan of Operation), for approval of the issuance by Citizens of its High-Risk Account Senior Secured Bonds, Series 2006A, in the aggregate principal amount of not exceeding $3,100,000,000 (the Series 2006A Bonds) and related documentation. The Series 2006A Bonds are to be issued pursuant to that certain Trust Indenture dated as of August 6, 1997 (the 1997 Indenture), as amended as described below, and as further amended by that certain Fourth Supplemental Indenture (the Fourth Supplemental Indenture and, together with the 1997 Indenture as amended as described below, the Indenture), by and between Citizens and Wachovia Bank, National Association, as successor Indenture Trustee. The Fourth Supplemental Indenture is to be in substantially the same form as the copy attached to this Order as Exhibit A. Citizens is also entering into or will utilize, as applicable, other related documents and agreements in connection with the issuance of the Series 2006A Bonds.
On June 25, 1997, in Case No. 19495-96-CO, the Treasurer and Insurance Commissioner entered an order approving the 1997 Indenture and the issuance thereunder by Florida Windstorm Underwriting Association (FWUA), as predecessor to Citizens High-Risk Account, of $750,000,000 aggregate principal amount of Series 1997A Senior Secured Notes, and further approving that certain Pledge, Security and Trust Agreement dated as of August 6, 1997 (the 1997 Pledge and Security Agreement).
On November 18, 1998, in Case No. 25858-98-CO, the Treasurer and Insurance Commissioner entered an order approving the issuance by FWUA under the 1997 Indenture, as amended by that certain Series 1999A Supplemental Trust Indenture dated as of March 31, 1999 (the First Supplemental Indenture), of $1,000,000,000 aggregate principal amount of Series 1999A Senior Secured Insured Notes, and further approving the First Supplemental Indenture and a First Amendment, dated as of March 31, 1999, to the 1997 Pledge and Security Agreement.
On August 1, 2002, in Case No. 61930-02-CO, the Treasurer and Insurance Commissioner entered an order approving, among other things, the transfer of all policies, obligations, rights, assets and liabilities of FWUA, including bonds, notes and other debt obligations thereof, and the financing documents pertaining to them, to Citizens High-Risk Account and, in connection with such transfer, also approving a Second Supplemental Indenture dated as of August 1, 2002 and a Second Amendment to Pledge, Security and Trust Agreement dated as of August 1, 2002.
On April 20, 2004, in Case No. 75881-04-CO, the Chief Financial Officer of the State of Florida (the Chief Financial Officer) entered an order approving the issuance by Citizens under the 1997 Indenture, as amended by that certain Third Supplemental Indenture dated as of May 1, 2004 (the Third Supplemental Indenture), of $750,000,000 aggregate principal amount of its High-Risk Account Senior Secured Bonds, Series 2004, and further approving the Third Supplemental Indenture and a Third Amendment to Pledge, Security and Trust Agreement dated as of May 1, 2004.
On July 8, 2005, in Case No. 79863-05-CO, the Chief Financial Officer entered an order approving a Standby Purchase Contract between Citizens and the State of Florida Department of Financial Services (the Department) pursuant to which Citizens may issue to the Department, and the Department may purchase from Citizens, up to $750,000,000 aggregate principal amount of Citizens High-Risk Account Senior Secured Short Term Notes, to be issued under the 1997 Indenture and an indenture supplemental thereto.
Citizens is a statutorily-created corporation, established pursuant to the Citizens Act. Citizens, through its High-Risk Account, has become a significant provider of residential and commercial windstorm insurance in the State of Florida, thereby creating the imminent potential of a substantial shortage of funds to meet its policyholder claims and other obligations in the event of a catastrophic hurricane or other weather-related event. The Citizens Act authorizes Citizens to borrow funds for the High-Risk Account by issuing bonds or by incurring other indebtedness and to pledge assessments under the Act and other funds available to Citizens High-Risk Account as the source of security and repayment for such borrowings. In order to provide funds to, among other things, meet policyholder claims and other obligations of the High-Risk Account, it is in the best interest of Citizens for it to issue the Series 2006A Bonds. The Citizens Act and the Plan of Operation authorize Citizens to issue bonds in the absence of a hurricane or other weather-related event and the Plan of Operation contains a determination by the Board that such advance financings constitute financing mechanisms under the Act that will allow Citizens to efficiently meet the financial obligations of the High-Risk Account and that such financings are reasonably necessary to effectuate the requirements of the Act.
Prior to issuance of the Series 2006A Bonds and the execution and delivery of the Fourth Supplemental Indenture and the related documentation, Citizens Board of Governors (the Board) will adopt a resolution (the Authorizing Resolution) authorizing and approving the issuance of the Series 2006A Bonds, the Fourth Supplemental Indenture and such related documentation. The approvals granted in this Order are subject to the Boards adoption of the Authorizing Resolution.
As required by Section 19(B) of the Plan of Operation, Citizens has filed with the Office of Insurance Regulation a statement of the purpose of the Series 2006A Bonds and an estimate of the costs to be incurred by Citizens in connection with the issuance of the Series 2006A Bonds.
The Office of Insurance Regulation, having considered this submission, and being otherwise advised in the premises, hereby finds that:
1. The Office of Insurance Regulation, by and through the Insurance Commissioner, has jurisdiction over the subject matter of, and the parties to, this proceeding pursuant to the Citizens Act.
2. The Series 2006A Bonds are being issued for the purpose of providing additional resources to assist Citizens in covering policyholders claims and expenses attributable to a deficit in the High-Risk Account and are hereby determined to be for a valid purpose under the Citizens Act. The Indenture is hereby deemed to be a trust indenture within the meaning of, and is approved for purposes of, Section 19(B) of the Plan of Operation.
3. Pursuant to the Citizens Act, and Sections 19(B) and 20 of the Plan of Operation, Citizens has authority to enter into the Fourth Supplemental Indenture, to issue the Series 2006A Bonds under the Indenture and to make the same payable and secured as provided in the Indenture.
IT IS THEREFORE ORDERED:
That, subject to the Boards adoption of the Authorizing Resolution, the Office of Insurance Regulation hereby APPROVES, the Fourth Supplemental Indenture, the issuance of the Series 2006A Bonds under the Indenture and the pledge by Citizens of the Regular Assessments, the Emergency Assessments and the other Pledged Revenues (as such terms are defined in the Indenture) to secure the Series 2006A Bonds.
Each prior order described hereinabove entered by the Treasurer and Insurance Commissioner or the Chief Financial Officer, that is, those orders entered in Case Nos. 75881-04-CO and 79863-05-CO, are hereby approved, ratified and confirmed by the Office and adopted by the Office as if originally entered by the Office.
DONE and ORDERED this 16th day of May, 2006.
______________________________
KEVIN M. MCCARTY
COMMISSIONER
NOTICE OF RIGHTS
Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section 120.68, Florida Statutes, and Rule 9.110, Fla.R.App.P. Review proceedings must be instituted by filing a petition or notice of appeal with the General Counsel of the Office of Insurance Regulation, acting as the Agency Clerk, at 612
