Barry Gilwayis CEO Florida Citizens PropertyInsurance Corp.

Citizens Property Insurance Corporation's Board of Governorsthis week took a bold yet responsible step to reduce the risk toFlorida taxpayers while protecting Citizens policyholders in theevent of a catastrophic storm. 

On Wednesday, our board approved a measure in which Citizenswill transfer up to 60,000 policies to Heritage Property andCasualty Insurance Co., a well funded, efficiently runFlorida-based company that has already assumed 54,000 policiesunder a separate takeout measure approved by the Office ofInsurance Regulation last year. 

Wednesday's agreement, which was also approved by stateinsurance regulators after a thorough review, is the culmination ofnegotiations dating back to March and will reduce Citizens'exposure by $16 billion. More importantly, the agreement will cutpotential assessments on Floridians by $439 million in the event ofa 1-100 year storm. 

Our goals are clear and specific. Reduce the size of Citizenswhile serving our customers who rely on us to protect what in mostcases is their most valuable asset. The deal approved this weekaccomplishes both of those objectives. 

Under the agreement, Heritage will take over up to 60,000policies and pay claims and other expenses going back to January 1,2013. Citizens will pay Heritage approximately $52 million inpolicyholder premium to pay current and future losses, expenses andthe placement of reinsurance. In addition, Heritage has agreed tohonor Citizens' premium caps already in place and keep customersfor at least three years. 

In addition to reducing exposure, Citizens will save $10 millionimmediately by reducing its premium to the Florida HurricaneCatastrophe Fund, which will calculate its 2013 season premiums atthe end of June. The deadline made swift board action a criticalcomponent of the agreement. But make no mistake, Citizens and stateinsurance regulators did their homework and carefully evaluated allaspects of the Heritage agreement.  

For the 60,000 policyholders, the arrangement may provide morecoverage options and will reduce their assessment risk, which forCitizens policyholders can reach 45 percent ofpremium. 

While Citizens is in the best financial shape it has ever been,we cannot lose sight of the cold hard fact that we fall about $4billion short in the event of a major storm. That means thatFlorida taxpayers will be hit by assessments to pay those claims.Step by step we are taking the difficult yet necessary steps toreduce the risk of that "hurricane tax."  

The Heritage agreement, which includes company guarantees notnormally included in takeout arrangements, represents the kind ofrapid, well-executed action that is needed to respond to quicklyevolving market conditions. That said, the transaction did notappear overnight but was closely modeled after a transactioncompleted earlier this year and followed months of negotiationsbetween senior Citizens financial officials and thecompany. 

I am proud of our dedicated and talented Citizens staff forputting together an agreement that protects the interests of ourpolicyholders while taking the necessary steps to reduce the sizeof Citizens and return it to its original purpose as an insurer oflast resort.