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GALLAGHER ORDERS PLAN DESIGNED TO BENEFIT POLICYHOLDERS, IN RESPONSE TO COURT MANDATE GRANTING PRUDENTIAL PARTIAL RELIEF

 TALLAHASSEE, Fla., Oct. 27 /PRNewswire/ -- Responding to the First District Court of Appeal's Oct. 25 mandate that the state allow Prudential Property and Casualty Insurance Co. to non-renew at least some of its homeowners' policyholders in South Florida, State Treasurer and Insurance Commissioner Tom Gallagher today ordered the company to proceed, but said consumers must voluntarily agree to participate and receive a bonus from the insurance company.
 "Florida enacted a moratorium against non-renewals and cancellations of homeowners' policies due to hurricane risk in an effort to stabilize the market and protect consumers in the aftermath of Hurricane Andrew," Gallagher said in a statement today. "Overall, the moratorium has greatly benefited the citizens although some insurance companies, including Prudential, have objected and sought exemptions from the freeze. The First District Court of Appeal's order this week gives Prudential some of the relief it sought; while we must comply with the court's mandate, our goal is to carry it out consistent with our commitment to protect consumers."
 Among the requirements of Gallagher's order, issued today:
 -- Prudential is granted a partial exemption from the moratorium to
 the extent of $500 million in claims exposure in Dade and Broward
 counties;
 -- To achieve a reduction in exposure of $500 million, Prudential
 shall send to its policyholders in Dade and Broward a letter
 drafted by the insurance department offering to refund the
 policyholders' pro-rate a premium on their Prudential policies
 and to pay the first year's premium on a replacement policy.
 Policyholders will have 60 days to respond to the voluntary,
 written offer.
 -- If the voluntary plan fails to result in a $500 million reduction
 in exposure for Prudential; the department will review the matter
 and issue a further order. The department estimates
 approximately 13,000 policyholders will be required to
 voluntarily comply with the offer in order to reduce the
 company's exposure by $500 million in Dade and Broward counties.
 IN THE MATTER OF:
 PRUDENTIAL PROPERTY &
 CASUALTY INSURANCE CO.
 OF INDIANA Case No. 93-L-713NJA
 FINAL ORDER GRANTING PARTIAL EXEMPTION
 THIS CAUSE came on before the undersigned Treasurer of the State of Florida, acting in his capacity as Insurance Commissioner, on remand from the District Court of Appeal, First District, in Case No. 93-2893, Prudential Property and Casualty Insurance Company of Indiana (Prudential) -v- Department of Insurance.
 On June 8, 1993, the Governor approved legislation passed during Special Session B, 1993, by which the Legislature imposed a moratorium on cancellations and nonrenewals of homeowners policies in this state. Chapter 93-401, Laws of Florida, included an exemption provision by which insurers could demonstrate to the Department that the proposed cancellations or nonrenewals were necessary to avoid an unreasonable risk of insolvency.
 On May 20, 1993, Prudential filed an application for exemption, pursuant to an emergency rule adopted prior to the legislative action. The Department issued its final decision by letter dated August 10, 1993. Prudential petitioned the District Court of Appeal, First District, for relief from the Department's August 10 decision.
 By its opinion issued October 25, 1993, the Court partially reversed the Department's decision and remanded this matter to the Department, and instructed the Department to grant and exemption on terms that are consistent with its opinion.
 Therefore, upon consideration of Prudential's May 20 application, its testimony at the public hearing on its application held on June 3, and the court's October 25 instructions, the Department finds:
 1. Prudential is subject to a risk of a probable maximum loss of $1.5 billion in claims in the event of a severe hurricane in north Dade and south Broward counties.
 2. Prudential has $700 million in capital and surplus on its balance sheet and approximately $300 million in available reinsurance, for a total of $1 billion.
 3. The difference is therefore $500 million in excess of the total available capital, surplus, and reinsurance.
 Based on the findings set out above, and in response to the directions of the District Court of Appeal in its October 25 opinion, the Department concludes:
 1. That Prudential is entitled to an exemption from the moratorium to the extent of $500 million in claims exposure in Dade and Broward counties.
 2. That both property insurers and the Department have a responsibility to contribute to an orderly, stable market for property insurance in the state.
 Based on these findings and conclusions and being otherwise advised in the premises, IT IS ORDERED:
 1. Prudential is granted a partial exemption from the moratorium posed by Chapter 93-401, Laws of Florida, to the extent of $500 million in claims exposure in Dade and Broward counties.
 2. In order to achieve the authorized level of claims exposure reduction, Prudential shall send to its policyholders in the two affected counties a letter substantially in the form attached hereto, offering to refund the policyholders' prorata premium on their Prudential policies and to pay the first year's premium on a replacement policy, whether in the voluntary market or in the Florida Residential Property and Casualty Joint Underwriting Association (FRPCJUA), in exchange for the policyholders' voluntarily cancelling or nonrenewal of their Prudential policies. Or, Prudential will pay for both a homeowners and a windstorm policy if the covered property is in an area eligible for windstorm coverage through the Florida Windstorm Underwriting Association. And the written offer shall contain a description of coverage differences between the current Prudential policy and a policy issued by the FRPCJUA; and it shall include an election form and a return envelope for the use of the policyholder. The written offer may include a date by which the policyholder must respond to the offer, which date shall be at least sixty (60) days from the date of the written offer.
 3. Prudential is authorized to reduce its level of claims exposure by more than $500 million if the numbers of Prudential policyholders affirmatively responding to the written offer described above result in such a reduction.
 4. Prudential shall report to the Department within fifteen (15) days of the date established pursuant to paragraph 2., above, on the results of the written offer. If the written offer does not result in a reduction in claims exposure of at least $500 million, then the Department shall issue a further order describing the steps to be taken to reach the authorized reduction.
 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, acting as the agency clerk, at 612 Larson Building, Tallahassee, Florida, and a copy of the same with the appropriate district court of appeal within thirty (30) days of the rendition of this Order.
 DONE and ORDERED this 26th day of October, 1993.
 Tom Gallagher, Treasurer and
 Insurance Commissioner
 Copies furnished to:
 Deborah Bello-Monaco, CPCU
 Prudential Property and Casualty Insurance Company
 23 Main Street
 Holmdel, N.J. 07733
 Katz, Rutter, Haigler, Alderman, Davis and Marks, P.A.
 Highpoint Center, Suite 1200
 P.O. Box 1877
 Tallahassee, FL 32302-1877
 Dear Policyholder:
 The First District Court of Appeals has overturned the decision by the Florida Department of Insurance which prevented Prudential Property and Casualty Insurance Co of Indiana from nonrenewing homeowners insurance policies due to hurricane risk. The court ordered the insurance department to allow some nonrenewals in Dade and Broward Counties, by Prudential.
 In order to minimize the market disruption and difficulty for Prudential's insureds, Prudential has agreed to carry out a voluntary plan for consumers. Therefore Prudential is offering to you and other Prudential residential property insurance policyholders in Dade and Broward Counties, the following opportunity, if you agree to cancel or nonrenew your Prudential homeowners policy:
 1. Prudential will immediately refund the unearned portion of the premium applicable to your current policy period;
 2. Prudential will pay the entire first year premium on any homeowner policy you purchase to replace your Prudential policy.
 3. If you must buy both a homeowners policy and a windstorm policy, Prudential will pay the entire first years premium for both policies.
 4. If your policy covers property in an area eligible for windstorm coverage through the Florida Windstorm Underwriting Association, and if you agree to cancel the wind and hail portion of your Prudential policy, you may retain your Prudential policy for the remainder of your homeowners policy coverage, and Prudential will; immediately refund to you an amount equal to the discount we provide on policies containing an exclusion for those coverages, and; we will pay the entire first years premium for your Florida Windstorm Underwriting Association policy.
 In many cases the only coverage available to replace your Prudential policy will be a policy from the Florida Residential Property and Casualty Joint Underwriting Association (FPCJUA). Enclosed with this letter is a description of the differences between your current Prudential policy and the FPCJUA policy.
 If you chose to take advantage of Prudential's offer, please so indicate on the election form also enclosed, and return it to us in the self-addressed, stamped envelope enclosed for that purpose. Please note that the election forms have to be received in our office within 60 days from the date of this letter.
 Sincerely,
 Prudential
 -0- 10/27/93
 /CONTACT: Jill Chamberlin, press secretary of the Office of the Treasurer, Department of Insurance, 904-922-3108, ext. 2840/


CO: Florida Department of Insurance; Prudential Property and Casualty
 Insurance Co. ST: Florida, Indiana IN: INS FIN SU:


AW-JB -- FL009 -- 7525 10/27/93 16:55 EDT
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Date:Oct 27, 1993
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