FHCF Advisory Council Proposes Joint FIGA/OIR Workshop To Address Proposed Reimbursement Contract Changes

The Florida Hurricane Catastrophe Fund (“FHCF”) Advisory Council (“Council”) held a meeting to discuss changes to the 2008/2009 FHCF Reimbursement Contract (“Contract”) and Data Call. To view the complete Council Meeting agenda, click here. To view the meeting notice, click here.

The meeting was called to order by Chairman William Huffcut. Other Council members in attendance included Vice Chairman Jim Henderson, Robert Peduto, David Walker, John Auer, Larry Johnson, and Joseph Varon. Also present were Senior FHCF Officer Jack Nicholson; Anne Bert, Director of Operations; Senior Vice President of Paragon Strategic Solutions, Inc., Andy Rapoport; and SBA Interim Executive Director General Bob Milligan.

Changes to the Contract and Data Call were reviewed and discussed. To view the proposed changes and drafts of the 2008 FCHF Reimbursement Contract and amendments, click here.

Some Council members expressed concern regarding a proposed plan to prioritize reimbursements. This proposed plan would reimburse claims covered by insurers’ mandatory coverage limits immediately, but hold payment on claims covered by optional coverages until December 1st.

Council concern was based on the potential that smaller insurers would become insolvent if reimbursement of optional insurance was delayed due to a previous payout of mandatory coverage after an early-season hurricane.

Concern also was voiced regarding a proposed change in Article IV of the Contract that could invoke negative public perception of FHCF liquidity issues with regard to optional coverage reimbursement. Changes to Article IV were later suggested in order to reflect the issue to be one of timing and not FHCF liquidity.

The Council passed a motion to draft a letter to the Legislature suggesting limiting coverage layer amounts to ensure companies have confidence in the FHCF’s payment ability.

Other proposed changes to the Contract were discussed, including the definition of the term “residential.” It was suggested that the number of different occupants in a residence recognized by the Contract during a 12-month period be raised from three to eight.

Discussion ensued regarding another proposed Contract provision stating that no covered loss payments will be made to the receiver of an insolvent insurer until the FHCF has completed and closed its examination of that company’s losses (unless an agreement has been entered by the court-appointed receiver specifying all data and computer systems required to complete the FHCF’s examinations be maintained). Part of this discussion included reference to the January 9, 2008 Reimbursement Contract Workshop that addressed a proposed 25 percent loss payment hold-back provision for insolvent insurers. To read a recap of the Jan. 9 meeting, click here.

It was reported that a letter had been received questioning the legal authority of the Council to enact proposed changes to the Contract. The Council proposed holding a workshop with the Florida Insurance Guaranty Association and the Florida Office of Insurance Regulation to discuss loss payment issues and make sure appropriate due diligence is completed. Notwithstanding, the Council decided to submit its proposed changes.

A motion to approve the Contract, Contract addenda, data call and proposed Rules was approved with no opposition.

Mr. Rapoport then gave an update on development of the 2008/2009 FHCF Premium Formula which is scheduled for completion in March, 2008.

Mr. Nicholson also gave an update on 2004/2005 FHCF Losses. Total losses have been adjusted to $4.8 billion, representing an increase from $4.3 billion. This gives an early indication the FHCF might have to issue additional bonds to cover losses from the 2004/2005 season, but it is too early to tell as claims are still being received. To view his presentation, complete with data tables, click here.

In reference to the upcoming FHCF March 26, 2008 meeting, the Council agreed to reschedule the meeting to commence at 9 a.m. and to continue through 4 p.m.

 

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