Dear Fellow Fire Insurance Exchange Member:
For more than eight decades, Farmers Insurance Group has provided its customers with coverage options to help them manage risk and meet their insurance needs. We strive to deliver the best value and experience to every customer we're privileged to serve. Farmers appreciates your business and looks forward to continuing to earn your confidence for many years to come.
Fire Insurance Exchange is one of the insurers comprising Farmers Insurance Group®. Fire Insurance Exchange along with Farmers Insurance Exchange and Truck Insurance Exchange, and their subsidiaries and affiliates, provide automobile, homeowners, personal umbrella and business owners insurance. For more information, please visit farmers.com.
As a member of Fire Insurance Exchange, you have the right to vote for representatives of the Exchange Board of Governors. Attached is a proxy postcard for your vote in our 2019 Annual Meeting of Members of Fire Insurance Exchange. You may vote in person at the meeting or you may appoint a proxy to act on your behalf by executing and returning this proxy postcard. Additional information on Farmers Insurance Exchange can be found in the FAQ on the other side of this page.
Kenneth W. Bentley
Chair of the Board of Governors of Fire Insurance Exchange
As a member of Fire Insurance Exchange, we want you to understand the basics of the operation of an Exchange because, as you will see below, you are an owner of the Exchange.
An Exchange is an insurance organization, which operates in most ways like any other insurance company, but with a few key differences. Fire Insurance Exchange was organized under a provision in the California Insurance Code, which allows insureds to "exchange" policies with other insureds. Because the insureds cannot practically be involved in actually issuing policies, collecting premium, paying commissions to agents, etc., they appoint a third party - called an "attorney-in-fact" (AIF) - to perform those duties on their behalf for a fee. That appointment is made through a document called a "Subscription Agreement." You were asked to sign a Subscription Agreement at the time you applied for insurance with Fire Insurance Exchange and that is how you became a member (aka subscriber).
You do. Subscribers of the Exchange are owners until such time as they no longer have insurance from the Exchange. Subscribers elect a Board of Governors which supervises the financial affairs of the Exchange and the performance of the AIF in conformity with the Subscription Agreement terms.
Under the Subscription Agreement mentioned above, members appoint FUA to perform certain of the tasks, such as policy issuance and collection of premium, which are involved in running an insurance operation. The Subscription Agreement specifies an AIF fee of 20 percent of premium, although FUA has taken less than that amount.
FUA is a wholly owned subsidiary of Farmers Group, Inc. (FGI), which is part of the Zurich Insurance Group, Ltd (ZIG), a Swiss company. Neither FUA, FGI nor ZIG has any ownership interest in Fire Insurance Exchange, which is owned by its subscribers (insureds).
Your premium dollar covers Exchange costs including losses incurred, acquisition costs, taxes, license fees, the AIF fee, and any contributions to surplus. For 2017, the AIF fee was 12.5 percent of the premium dollar, which included the AIF profit of 7.06 percent of the premium dollar for that year. The results of the Fire Insurance Exchange were impacted by the large number of catastrophe losses but the company still maintained a strong capital base with surplus of $787 million.
If premiums collected exceed claims payments and other expenses (including the fee for the AIF), then the Exchange retains those net premium earnings (as contributions to surplus). If premiums are not sufficient to cover claims and expenses, the Exchange will lose money. That's one reason it is important to build a cushion against possible future losses. The AIF does not participate in claims losses and does not enjoy any net premium earnings. Importantly, subscribers are not responsible for any losses the Exchange might suffer.
You can go to www.farmers.com/about-us for most questions. If you have additional questions, please contact:
Subscriber Relations Office
Fire Insurance Exchange
Attn: Corporate Secretary
P.O. Box 4461
Woodland Hills, CA 91365