Florida Hurricane Catastrophe Fund Reimbursement Premium Formula Rulemaking Underway; Ratemaking Formula Report, Proposed Rates and Rating Regions Published
Apr 4, 2014
With development now underway for Rule 19-8.028 relating to the 2014 Florida Hurricane Catastrophe Fund (“FHCF”) Reimbursement Premium Formula, the FHCF Advisory Council met on March 31, 2014 to advance that process and hear a presentation on the final 2014 FHCF Ratemaking Formula Report.
To view the complete meeting materials, click here.
In summary, the Ratemaking Formula Report recommended the following:
Mandatory Rates: A 0.32% increase in FHCF mandatory rates for the 2014-2015 (2014) Contract Year based on coverage under Section 215.555, F.S. This change does not assume the FHCF’s purchase of a risk transfer product.
Mandatory Premium Change: FHCF premium for mandatory coverage will increase by $5 million, from $1.272 billion to $1.276 billion based on the recommended rate change.
Temporary Increase in Coverage Limit Rates and Limit: Persuant to Section 215.555, F.S., the Temporary Increase in Coverage Limit layer is not being provided by the FHCF for the 2014 Contract Year.
Two major factors were reported to have affected the FHCF layer of coverage for the 2014 Contract Year:
- Pursuant to Florida law, the industry retention is equal to $4.5 billion, adjusted for the increase in reported exposure from 2004 through 2012. Since exposures have grown by 57.2 percent over this period, the modeled retention for 2014 is $7.075 billion.
- As amended in 2010, the mandatory FHCF limit is equal to $17 billion until the FHCF has sufficient estimated claims-paying capacity to fund $17 billion of loss in subsequent FHCF Contract Years. Since the State Board of Administration (“SBA”) of Florida has not made this determination, the mandatory FHCF limit for 2014 is $17 billion.
To view the FHCF 2014 Ratemaking Formula Report, click here.
The Advisory Council also reviewed proposed changes to its Member Handbook, which notably included new language pertaining to ethical conduct, along with contact information updates on Advisory Council Members and FHCF Staff members.
To view the draft Handbook, click here.
Subsequent to the meeting, the FHCF posted its 2014 Proposed Rates and Rating Regions based on the FHCF 2014 Ratemaking Formula Report.
Not yet approved by the SBA, the rates assume:
- Zero percent exposure trend
- Mandatory cash build-up factor at 25 percent
- Maximum mitigation credit/debit uncapped
- Inclusion of pre-event 2013A bonds expense
- FHCF per-event retention based on $7.075 billion
- FHCF limit of $17 billion
Mitigation Construction Rating Classification Factor Relativities can be found in Exhibit XIV of the Ratemaking Formula Report.
No FHCF rates are final until approved by the SBA and the State of Florida Appropriations Bill becomes law. Once the rates are final, they will be posted to the FHCF’s Web site; however, according to Section 215.555(5)(b), F.S., the SBA may revise the FHCF Premium Formula at any time.
The FHCF notes that rates are provided for informational purposes only. Although the rates are believed to be reliable, the FHCF does not guarantee their accuracy or completeness.
Hyperlinks to the proposed 2014 FHCF rates and rating regions are provided below.
Click here for a partial list of the 2013/2014 FHCF Coverage Selections and Premium Calculations
Should you have any questions or comments, please contact Colodny Fass& Webb.
Click here to follow Colodny Fass& Webb on Twitter (@CFTLAWcom)
To unsubscribe from this newsletter, please send an email to Brooke Ellis at bellis@cftlaw.com.