Florida Hurricane CAT Fund Emergency Assessment Workshop for Authorized Insurers Meeting 7/28/06

The Florida Hurricane Catastrophe Fund Emergency Assessment Workshop for Authorized Insurers was held today. A summary of the issues discussed is as follows:

There is no statutory requirement that policyholders be notified of the FCHF assessment. The FHCF and OIR are, however, recommending that insurers include the FHCF assessment in a line item on the declaration page for two reasons: (1) this is a multi-year assessment and (2) there may be concurrent assessments and the insureds should know what amount is for which assessment.

There were several questions about warranty companies, crop insurance, surety and bailbondsman insurance. These are currently outstanding issues that the FHCF and the OIR are trying to work through. Although asked about a timeframe, the FHCF did not give one regarding when they expect there to be some resolution to these issues.

There were several questions regarding what qualifies as “premium” which is assessable. The FHCF uses the NAIC definition of premium. Further clarification was provided regarding MGA fees. The FCHF stated that if an insurer reports MGA fees on a write-in line, the MGA fees are still assessable because MGA fees are expressly excluded from the assessment.

There is no penalty if an insurer elects to pay all or part of the assessment rather than charging its policyholders because this would inure to the benefit of the policyholders.

If an insurer is unable to collect the assessment, it should cancel the policy because the assessment is considered part of the premium.

There was a significant amount of discussion dealing with returned premium. The FHCF indicated that it is adding a new field to the Reporting System to indicate returned premium amounts. An insurer must return the pro rata share of the FHCF assessment with returned premium. Additionally, insurers must report any negative written premium.

The FHCF indicated that it intends to clarify some of the language in the Rule to make sure it coincides with the reporting requirement.

This issue is still very much evolving. We will continue to keep you informed of all developments.

Should you have any questions, please feel free to call this office.

Regards,

Fred E. Karlinsky