Florida Hurricane Catastrophe Fund Advisory Council Approves 2013 Premium Formula, Rule 19-8.028 Notice
Mar 22, 2013
The Florida Hurricane Catastrophe Fund (“FHCF”) Advisory Council (“Council”) met yesterday, March 21, 2013, to obtain approval for the FHCF Premium Formula for the 2013 Contract Year, and to file Rule 19-8.028, F.A.C. (Reimbursement Premium Formula) for Notice of Proposed Rule, and then for adoption if no hearing is requested by the public.
Representatives of Paragon Strategic Solutions gave a presentation on the 2013 FHCF Premium Formula, which experienced a zero percent exposure trend for the third year, they explained. Statutory changes to the Premium Formula include mandatory cash build-up factor increases from 20 to 25 percent, optional Temporary Increase In Coverage Limit (“TICL”) premium factor increases from 500 to 600 percent and maximum TICL limit declines from $4 billion to $2 billion.
The FHCF’s projected pre-event notes expense is $43.3 million, with $14.5 million for partial-year coverage in 2012. The maximum mitigation credit/debit increased to 30 from 20 percent. Florida Public Model commercial losses are now being used.
The overall indications for the 2012 Reimbursement Premium are: FHCF $1.262 billion and TICL $.003 billion for a $1.265 billion total. The 2013 projections are FHCF $1.343 billion, TICL $.002 billion for a total of $1.345 billion, equating to a 6.3 percent total rate change.
Special features of TICL include optional coverage placed above the mandatory FHCF layer. Options are available in $1 billion increments, with a 2013 maximum option of $2 billion that decreases by $2 billion per year and expires after 2013.
As of March 18, 2013, 155 companies (99.3 percent) purchased no TICL; two companies (.2 percent) purchased $1 billion; and five companies (.5 percent) purchased $2 billion. No revisions are expected, but can be made until June 1, 2013.
Five models are used to determine the modeled losses of modeled exposure, gross losses and FHCF layer losses. For 2013, the modeled exposure was $2.075 billion–a -2 percent change. The gross losses are $3.517 billion–a -3.4 percent change. The FHCF layer losses are $.982 billion–a -2.4% change.
FHCF member companies are required to adjust primary rates for mitigation. Hurricane models show significant differentiation in risk for exposures with these features. Classifications first used with FHCF rates in 2009 were capped at +/- 10 percent and capped at +/- 20 percent in 2010 through 2012. A recommend increase in cap was made to +/- 30 percent in 2013.
The Council approved the 2013 FHCF Premium Formula and the filing of Rule 19-8.028 for notice and ultimate adoption.
The next Council meeting was scheduled for March 28, 2013 at 10:00 a.m.
The meeting was then adjourned.
To view the meeting materials, click on the hyperlinks below.
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