(The following statement was released by the rating agency)NEW YORK, May 13 (Fitch) Fitch Ratings has affirmed the 'A+' rating on the following senior secured bonds of the Citizens Property Insurance Corp., Personal and Commercial Lines Accounts (PLA/CLA):--$1.1 billion series 2012A-1;--$150 million series 2012A-3 (SIFMA floating-rate notes).The Rating Outlook is Stable.SECURITY:  The senior secured bonds are payable from pledged revenues, including: (1) net premiums and surcharges, (2) Florida Hurricane Catastrophe Fund (FHCF or CAT fund) reimbursements, and (3) emergency assessments. The primary security, and the rating, is derived from Citizens' ability to levy emergency assessments on nearly every insurance policy holder in the state for an unlimited duration and in an unlimited cumulative amount to pay debt service on the bonds.KEY RATING DRIVERSRATING BASED ON EMERGENCY ASSESSMENTS:  The rating reflects the security derived from Citizens' ability to levy emergency assessments on nearly every insurance policy holder in the state for an unlimited duration and in an unlimited cumulative amount to pay debt service on its bonds.  TAX-LIKE ASSESSMENT SUPPORTS SIGNFICANT DEBT ISSUANCE:  Although the emergency assessment is not a special tax, it shares many characteristics of a special tax, is not subject to Citizens' insurance operations, and would support a significant level of bond issuance to cover major hurricane event scenarios.  FINANCIAL POSITION IMPROVED:  Following low catastrophe losses over the past eight years, Citizens financial position is much improved with strong growth in claims-paying resources.CORRELATION WITH FHCF:  Reinsurance coverage from the FHCF (rated 'AA' by fitch) accounts for a significant share of Citizens' pre-event resources for the personal and commercial line accounts, and thus any potential FHCF shortfall could affect Citizens' own liquidity.WEAK INSURANCE MARKET: The Florida insurance market is stabilizing but remains vulnerable and is increasingly dominated by Florida-only insurers.  Nevertheless, Citizens has been able to significantly 'depopulate' the CLA/PLA accounts, returning policyholders to the market for insurance as they renew, and leaving Citizens with reduced risk exposure.  RATING SENSITIVITIESUnusually severe hurricane activity that depletes Citizens' claims-paying resources, necessitates significant additional borrowing, and/or prompts negative legislative action could pressure the rating. CREDIT PROFILECitizens, a state-run property insurer of last resort, has statutory authority to levy assessments on insurers and policyholders in Florida following a large windstorm event to cover claims or debt service on pre- and post-event bonds.  The 'A+' rating on bonds issued for the personal lines and commercial lines accounts reflects this access to special tax-like emergency assessments, as well as Citizens' strong liquidity position, including reinsurance from the 'AA' rated Florida CAT fund, and state involvement in ensuring the availability of property insurance in Florida.  Citizens is a not-for-profit, tax-exempt entity, established by Florida statute to provide coverage for those unable to obtain insurance or affordable insurance in Florida's voluntary market. Legislation has been adopted such that it is deemed a governmental entity and not an insurance company, and is thus not allowed to declare bankruptcy.  Although it is regulated by the Florida Office of Insurance Regulation (OIR), it is not required to obtain or hold a certificate of authority issued by the OIR as is required for private insurance companies domiciled in the state.  Citizens operates three distinct and financially separate credits - the Coastal account and the personal and commercial lines accounts.  There is no cross-collateralization between the Coastal and PLA/CLA credits.TAX-LIKE ASSESSMENTS Ultimate security for the bonds is derived from Citizens' ability to levy 'emergency assessments' on nearly every insurance policy holder in the state for an unlimited duration and in an unlimited cumulative amount to pay debt service on the bonds.  The emergency assessment base, derived from the premiums written on property and casualty insurance policies in the state, is large and diverse and provides strong support for bondholders.  The assessment is levied as a uniform percentage of up to 10% of that year's aggregate statewide direct written premium (DWP) on the subject lines of insurance, or a maximum of 10% of the plan year deficit.  The lines are very broad and include all property and casualty insurance, excluding only accident and health, workers' compensation, and medical malpractice.  As the Florida economy overall was hit very hard by the recession, the base declined from a high of $37.6 billion in 2007 to a low of $33.3 billion in 2009.  The base has begun to rebound and, at the current level of $37.9 billion, could generate up to $3.79 billion per year in support of debt service for each of Citizens three operating lines.  STRONG LIQUIDITYEmergency assessments, however, are not the first source of liquidity for Citizens to meet hurricane or wind event related claims.  Citizens would first tap available funds on hand in the personal and commercial lines accounts, which include both accumulated surpluses and the proceeds of pre-event bond issuances, plus reinsurance from the Florida Cat fund.  Following several years of minimal storm activity, and with an active program to return policyholders to the insurance market ('depopulation'), Citizens expects to be able to meet the claims of a 1-in-100-year storm event from its available resources, without creating a 'plan-year deficit' that would give rise to the levying of an emergency assessment. If claims did exceed these resources, however, a plan-year deficit would exist and Citizens would be obligated to begin to levy various surcharges and assessments until its obligations are fully met.  First, Citizens would levy a surcharge on its own policyholders of up to 15% of the premium, which would generate approximately $363 million for each of the PL/CL accounts.  If the Citizens policyholder surcharge is insufficient to fund a plan-year deficit, Citizens must levy emergency assessments to recover the remaining deficit until the deficit is fully recaptured.  Emergency assessments, which can be leveraged or used to pay claims, are expected to be the repayment source for post-event bondholders, and in fact, Citizens is currently levying a 1% surcharge through 2017 to support debt service on outstanding series 2007A post-event bonds for the Coastal Account.  MARKET ACCESSWhile Citizens' liquidity is improved following several years of minimal storm activity, it is likely that in the event of a severe storm or multiple storms, Citizens would need to access the bond market when the Florida CAT fund would also bond to meet its reinsurance obligations.  While potential aggregate emergency assessments do not seem onerous, the capacity of the municipal bond market to absorb a high level of bonding is a risk factor.  Pre-event bonds, such as the outstanding bonds, are regularly issued to provide liquidity to meet potential claims-paying needs for upcoming hurricane season(s).  Net proceeds are held in interest-bearing permitted investments pending their use to pay policy claims.  Citizens has only drawn upon pre-event bonds for liquidity once in the past 10 years, following the 2004-05 storm season.  LEGAL PROTECTIONSOther bondholder protections are adequate.  There is strong state non-impairment language, citing the state constitution, that indicates legislative intent that no action be taken to impair any bond indenture or financing agreement or any revenue source committed by contract to such bond or indebtedness.  There is no revenue test for additional bonds and the unlimited capacity to issue debt is a credit weakness.  There are small debt service reserves for each series, funded from proceeds, equal to maximum annual interest, typically between 2% and 5% of proceeds.Citizens insurance lines currently account for approximately 18% of the residential market in Florida based on direct written premium, down from 26% in 2012. Florida domestic insurers are writing an increasing percentage of new business in the state as the presence of national companies has declined and Fitch considers the overall financial strength of the insurance market in Florida to be relatively weak.Contact:Primary AnalystKaren KropSenior Director+1-212-908-0661 Fitch Ratings, Inc.33 Whitehall StreetNew York, NY 10004 Secondary AnalystMarcy BlockSenior Director+1-212-908-0239 Committee ChairpersonDouglas OffermanSenior Director+1-212-908-0881Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com.Additional information is available at '
  www.fitchratings.com'.
 Applicable Criteria and Related Research:--Tax-Supported Rating Criteria, Aug. 14, 2012--U.S. State Government Tax- Supported Rating Criteria, Aug. 14, 2012.Applicable Criteria and Related Research: Tax-Supported Rating Criteria 
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015
 U.S. State Government Tax-Supported Rating Criteria
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033
 Additional Disclosure Solicitation Status 
  http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=829934
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