FHCF Advisory Council Meeting Report: January 13

On Tuesday, January 13, 2009, the Florida Hurricane Catastrophe Fund (“FHCF”) Advisory Council (“Advisory Council”) met to discuss the 2009/2010 FHCF Reimbursement Contract, Data Call and supporting Rules, as well as to receive updates on financial markets and FHCF operations.  To view the meeting notice, click here.  To view the meeting agenda, click here.

The meeting was called to order by Chairman William Huffcut of Tallahassee, Florida, with the following members in attendance:

·         John Auer, American Strategic Insurance Corporation, St. Petersburg, Florida

·         Vice Chairman Jim Henderson, Brown & Brown, Inc., Daytona, Florida

·         Campbell Cawood of Key West, Florida

·         Larry Johnson of Northbrook, Illinois

·         Robert Peduto, Swiss Re, Overland Park, Kansas

·         Joseph Varon, Quick Tie Products, Jacksonville, Florida

·         David Walker of Cearwater, Florida

Jack Nicholson, FHCF Chief Operating Officer, presented changes to the 2009/2010 FHCF Reimbursement Contract and Data Call. 

FHCF Reimbursement Contract changes include:

·         Clarification on the definition of a covered event–Damages resulting from a storm are covered under the FHCF Reimbursement Contract if the storm is declared to be a hurricane by the National Hurricane Center and causes damage in the State of Florida while hurricane status exists.  Coverage extends through any storm downgrades once the storm qualifies for coverage.  Comments received during the January 9 Rule Development Workshop were addressed and the language stricken from the definition was clarified.

·         Rental Property Coverages—Homes and condominiums have been added to the list of covered structures.  Advisory Council members discussed methods by which the definition of a covered rental property could be made clearer, but no consensus was reached.

·         Loss Reports—Annual reports from companies would be required so the FHCF can determine how close companies are to triggering coverage.

·         Commutation—The changes would allow the Florida State Board of Administration (“SBA”) to initiate commutation 36-60 months after the loss year.

·         Records Requirements—Proposed changes would give the SBA the flexibility to allow records re-submissions only if necessary.

 

FHCF Data Call changes include:

·         Verification of Exposure Fluctuations—An explanation of the exposure fluctuation is requested, rather than just verification that the fluctuation occurred.  The dollar amount and percentage threshold on fluctuations also increased because most companies were exceeding the requirements.

·         Citizens Take-Out Companies—Language was added to address the timing of policyholder opt-outs.  If notice of a policyholder opt-out is received later than June 30 of the contract year, it does not need to be reported in the FHCF Data Call.

·         Clarification on Hardie Board—There is no industry consensus on whether Hardee Board (a type of siding) should be considered as masonry or part of a home’s frame.  Thus, the definition is left to each insurer’s discretion.

Mr. Nicholson presented the following Rules to the Advisory Council for consideration:

·         19-8.010:  Reimbursement Contract

·         19-8.012:  Procedures to Determine Ineligibility for Participation in the Florida Hurricane Catastrophe Fund and to Determine Exemption from Participation in the Florida Hurricane Catastrophe Fund

·         19-8.013:  Revenue Bonds Issued Pursuant to Section 215.555(6), F.S.

·         19-8.028:  Reimbursement Premium Formula

·         19-8.029:  Insurer Reporting Requirements

·         19-8.030:  Insurer Responsibilities

Advisory Council members unanimously approved the filing for all Rules for Notice in Florida Administrative Weekly.

John Forney from Raymond James & Associates gave an update on the current financial status of the FHCF.  Mr. Forney stated that the FHCF has more cash on hand than ever, but because the total exposure of the FHCF could reach $28 billion, the FHCF may need to access bonding capacity through the financial markets. 

Mr Forney said that the FHCF has approximately $7.5 billion on hand.  Anne Burt, the FHCF Director of Operations, further stated that the 2006 floating rate notes purchased by the FHCF were not extended, and that $1.3 billion in notes will mature in March 2009.  Additionally, Mr. Nicholson stated that the FHCF is attempting to receive a private letter ruling for pre-event tax-exempt debt for 2010.

Of particular interest, the FHCF Advisory Council approved a motion to notify insurers that information contained in the next FHCF data call would be used to evaluate mitigation features and credits in the FHCF ratemaking process.  The FHCF plans to expand its rating classifications to include mitigation features.  Examples of the FHCF rating classifications include the year built, opening protections, roof shape and roof deck attachments. 

FHCF officials stated that FHCF member companies are required to adjust primary rates for mitigation.  Because reporting of this data has improved, now is an appropriate time to reevaluate mitigation factors in the ratemaking formula.  The Advisory Council discussed implementing the results of this data over time, however final approval is expected to be given at the following meeting, which is scheduled for March 20, 2009 from 9 a.m. – 3 p.m.  During this meeting, the Advisory Council is scheduled to elect its 2009 officers, vote to approve rules for adoption and vote to approve the 2009/2010 premium formula.

 

Should you have any questions or comments, please do not hesitate to contact Colodny Fass.

 

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