Florida Commission on Hurricane Loss Projection Methodology To Redraft Windstorm Mitigation Report by January 21

The Florida Commission on Hurricane Loss Projection Methodology (“Commission”) met on January 15, 2010 to further compile recommendations from the Commission’s Windstorm Mitigation Committee (“Committee”) on the applicability and usage of windstorm mitigation credits in Florida.  By law, the Commission is required to present a report on the State’s windstorm mitigation credit system to the Governor and legislative leadership by February 1, 2010. 

At the outset of the meeting, Commissioner Jack Nicholson recommended that the draft report previously released by the Commission should be rescinded, and that the Commission start anew by adding provisions from either the draft report or draft summary back into a new document.  Dr. Nicholson said that he made this recommendation based on several comments he had heard recently from interested parties who expressed concern with certain aspects of the draft report.  Dr. Nicholson explained that he did not intend to author a new report, but only to encapsulate the recommendations and suggestions heard during the Committee’s recently concluded information-gathering process.

After some discussion on that process, the Commission agreed to insert provisions that addressed the issues raised by Dr. Nicholson and further debate on the report continued.

Of interest, the Commission agreed that the report should contain a provision requiring mitigation rates to be based on an average building structure if base rates are set on the same criteria.  However, if base rates are set using the weakest structure criteria, then mitigation rates should be based accordingly.  The Commission also agreed that insurers should have to issue both debits and credits for various types of structures.

Debate ensued regarding a suggestion that an independent entity be used to maintain database-type information on home mitigation features.

After a break, the Commissioners continued their review of the report’s executive summary.  Commission Chairman Randy Dumm noted that the objective of this meeting was to finalize the summary as much as possible.  He also commented that the Florida insurance market situation has deteriorated, which has been compounded by the adverse effects of mitigation credits. 

The proposed report provides several indications that problems in the market exist.  For example:

• Although there have been no major Florida storms in four years, 102 of 210 insurers had underwriting losses for the second quarter of 2009.
• A majority of the homes qualifying for significant windstorm mitigation credits under the My Safe Florida Home program did so without having to undertake any additional windstorm mitigation activities.

During a discussion on Citizens Property Insurance Corporation (“Citizens”), Florida Insurance Consumer Advocate Sean Shaw commented that language in the report suggesting a need for Citizens depopulation is unnecessary and outside the scope of the Commission’s charge.

Chairman Dumm remarked that the current mitigation credit system results in lower premiums for insurers.  Commissioner Howard Eagelfeld challenged the magnitude of the mitigation problems. 

Florida Office of Insurance Regulation Deputy Commissioner Belinda Miller suggested that it is innapropriate to assume that mitigation discounts lead to insurer financial problems. 

Acknowledging that several unresolved issues remain in the Commission’s current mitigation report draft, Dr. Nicholson suggested that one Commissioner work with the document to provide a clean draft for full consideration.  A motion by Dr. Nicholson that Chairman Dumm be granted the authority to finalize the draft for the next meeting on January 25 was unanimously approved.

This draft will be available by January 21, 2010 in preparation for the Commission’s January 25 final meeting on the topic.

Complete materials from the January 21 meeting are available at the Commission’s Web site, which is accessible by clicking here:  http://www.sbafla.com/methodology/wmc.asp.

Should you have any questions or comments, please contact Colodny Fass.

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