Florida Hurricane Catastrophe Fund Advisory Council Meeting Report: May 18
May 18, 2010
The Florida Hurricane Catastrophe Fund (“FHCF”) Advisory Council (“Council”) met in Tallahassee today, May 18, 2010.
Upon calling the meeting to order, Council Chairman David Walker recognized John Forney of Raymond James and Associates, Inc. to explain the FHCF’s 2010 estimated loss reimbursement capacity.
The FHCF’s claims paying capacity for the 2010 hurricane season is over $25.5 billion, given the current market conditions. This includes $6.02 billion in the projected fund balance, $3.5 billion in pre-event bonds and $15.941 billion in post-event bonding capacity.
Given the above figures, Mr. Forney indicated that the FHCF should be able to meet its loss reimbursement obligations. He added that the projected Temporary Increase in Coverage Limits (“TICL”) purchase for 2010 is $2.72 billion.
Mr. Forney noted that the FHCF’s assessment base is trending down. In the last three years, the cumulative decrease has equated to $4.24 billion (approximately 11 percent), which is largely attributable to the economic decline.
Following Mr. Forney’s presentation, the Council approved the FHCF’s May 2010 estimate of loss reimbursement capacity as presented.
Next, Mr. Forney updated the Council on the Series 2010A bond issue, reporting that, despite difficult market conditions, the FHCF was able to access the bond market for $700 million relatively easily.
FHCF Chief Operating Officer Dr. Jack Nicholson presented the following Rules relating to the FHCF Reimbursement Contract to the Council for approval to file notice of rulemaking for final adoption:
- Rule 19-8.010 Reimbursement Contract
- Rule 19-8.012 Ineligibility
- Rule 19-8.013 Issuance of Revenue Bonds
- Rule 19-8.029 Insurer Reporting Requirements
- Rule 19-8.030 Insurer Responsibilities
The only change from the previously adopted Emergency Rules relative to Rule 19-8.013, which is necessary if 2010 legislation extending the FHCF exemption from assessment liability for medical malpractice insurance to 2013 is signed by the Governor. The proposed Rules were approved unanimously.
In his staff report, Dr. Nicholson reviewed Senate Bill 1460, which was enacted into law, thereby restoring the FHCF Contract Year to June 1 through May 31. The bill also caps the FHCF mandatory coverage limit at $17 billion unless sufficient capacity exists. Future growth is limited to increases in the FHCF’s cash balance attributable to the mandatory coverage layer.
Dr. Nicholson also reviewed House Bill 7217, which extends the FHCF medical malpractice assessment exemption as referenced above.
He briefly discussed Senate Bill 2044, noting that many interested parties have contacted the Governor and encouraged him to sign the bill. Also known as the Omnibus Property Insurance Bill, SB 2044 includes many changes to existing law that are considered to be favorable to the FHCF, specifically in regard to public adjuster-related statutes.
Dr. Nicholson reviewed House Bill 7119, noting that this bill, which relates to public records exemptions in reference to trade secret information, requires the recording of meetings.
Additional Reports
- FHCF losses are expected to be $787 million from the 2004 and 2005 hurricane seasons.
- The FHCF’s 2010 Participating Insurer Workshop will be held on June 3 and 4 in Orlando, Florida and include discussions on public adjusters, mitigation discounts and regulatory matters.
- The Florida Commission on Hurricane Loss Projection Methodology is scheduled to meet on June 8, 2010 to discuss submissions received for review under the 2009 Standards, even though hurricane models are only required to be reviewed every two years and no review is required this year.
- The FHCF withdrew its Internal Revenue Service Private Letter Ruling request in which it had sought tax-exempt status for pre-event notes and bonds. This action does not impact post-event bonding.
Following Dr. Nicholson’s report, the meeting adjourned.
The agenda, Dr. Nicholson’s presentation and Mr. Forney’s presentation, which provides further detail on the FHCF’s obligations and claims paying capacity, are attached for review.
Should you have any comments or questions, please contact Colodny Fass.
To unsubscribe from this newsletter, please send an email to bellis@cftlaw.com.