IN THE MATTER OF:
CITIZENS PROPERTY CASE NO: 86087-06
INSURANCE CORPORATION
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ORDER APPROVING LINE OF CREDIT TRANSACTION FOR CITIZENS PROPERTY INSURANCE CORPORATIONS PERSONAL LINES ACCOUNT AND COMMERCIAL LINES ACCOUNT
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 Section 19(B) of Citizens Plan of Operation, as amended (the Plan of Operation), for approval of a revolving line of credit in the principal amount of not exceeding $710 million (the Line of Credit) for Citizens Personal Lines Account and Commercial Lines Account (collectively, the Accounts). 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 Line of Credit and an estimate of the costs to be incurred by Citizens in the procurement of the Line of Credit.
Citizens is a statutorily-created corporation, established pursuant to the Citizens Act. Citizens, through the Accounts, has become a significant provider of residential property and casualty insurance in the State of Florida and, as such, must have immediate access to funding sources for the Accounts pending receipt of the Accounts ordinary and customary revenue and reinsurance and other reimbursement funds, to meet policyholder claims and other obligations resulting from ordinary losses or catastrophic hurricanes or other weather-related events. The Citizens Act authorizes Citizens to borrow funds for the Accounts by incurring indebtedness and to pledge assessments under the Citizens Act and other funds available to the Accounts as the source of security and repayment for such borrowings. In order to provide funds to meet policyholder claims and other obligations of the Accounts pending receipt of the Accounts ordinary and customary revenue and reinsurance and other reimbursement funds, it is in the best interest of Citizens to obtain the Line of Credit and to enter into the Credit Agreement.
The Citizens Act, Section 627.351(6)(c)(3), Florida Statutes, states that Citizens may issue bonds or incur other indebtedness in the absence of a hurricane or other weather-related event, upon a determination by Citizens (see Exhibit A, letter dated June 9, 2006, from Ms. Murphy, Citizens Deputy Executive Director), subject to approval by the Office, that such action would enable it to efficiently meet the financial obligations of Citizens and that such financings are reasonably necessary to effectuate the requirements of this subsection.
The Line of Credit will be made available to the Accounts through a 364-Day Revolving Credit Agreement by and among Citizens, JPMorgan Chase Bank, National Association, as Administrative Agent, and the other lenders named therein (the Credit Agreement). In connection with the Line of Credit, Citizens will execute certain promissory notes contemplated by the Credit Agreement. The Credit Agreement is to be in substantially the same form as the copy attached to this Order as Exhibit B.
At a meeting on June 8, 2006, Citizens Board of Governors (the Board) adopted a resolution (the Authorizing Resolution) authorizing and approving the Line of Credit, the Credit Agreement, and any related documentation.
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 Line of Credit is for the purpose of providing funds to the Accounts for the payment of policyholder claims and expenses attributable to ordinary losses or catastrophic hurricanes or other weather-related events. As a result, the Line of Credit will enable Citizens to efficiently meet its financial obligations and is reasonably necessary to effectuate the requirements of the Citizens Act.
3. The Credit Agreement is a loan agreement within the meaning of, and is approved for purposes of, Section 19(B) of the Plan of Operation and Section 627.351(6)(c)(3), Florida Statutes.
4. Pursuant to the Citizens Act and Section 19(B) of the Plan of Operation, Citizens has authority to enter into the Credit Agreement, obtain the Line of Credit and issue the promissory notes contemplated by the Credit Agreement.
IT IS THEREFORE ORDERED:
That the Line of Credit and the Credit Agreement, including the loans to be extended to the Accounts thereunder, the issuance and delivery of the promissory notes contemplated by the Credit Agreement and the pledge by Citizens of the Regular Assessments and the CAT Fund Reimbursements (as such terms are defined in the Credit Agreement) to secure such loans, are hereby APPROVED.
Citizens shall file with the Office, as a part of its regularly required reports, a quarterly update with respect to the Accounts of the amounts borrowed, amounts used for the payment of claims and related costs, amounts repaid, and the amounts anticipated to be required by assessment for repayment of debt.
DONE and ORDERED this 12th day of June 2006.
OFFICE OF INSURANCE REGULATION
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KEVIN M. MCCARTY
COMMISSIONER
