Florida Hurricane Catastrophe Fund Reviews 2011 Reimbursement Contract, Data Call

 

On September 29, 2010, the Florida State Board of Administration’s (“SBA”) Florida Hurricane Catastrophe Fund (“FHCF”) held a Rule Development Workshop to discuss the following proposed Rules, addendums and respective forms (click on the hyperlinks to access the full text of each document containing the proposed revisions):

Rule 19-8.010 – Reimbursement Contract

• 2011 Reimbursement Contract
• Addendum No. 1 to Reimbursement Contract (Optional $10 Million)
• Addendum No. 2 to Reimbursement Contract (TICL Option)
• Addendum No. 3 to Reimbursement Contract (Citizens)
• Optional Amendment to Change Prior Elections

Rule 19-8.028 – 2011 Reimbursement Premium Formula

Rule 19-8.029 – Insurer Reporting Requirements

• 2011 Insurer Reporting Requirements (Form FHCF-D1A Data Call)
• Interim Loss Report (Form FHCF-L1A)
• Proof of Loss Report (Form FHCF-L1B)

Rule 19-8.030 – Insurer Responsibilities

• 2011 Exposure Examination Advance Preparation Instructions (Form FHCF-EAP1)
• 2011 Loss Reimbursement Examination Advance Preparation Instructions (Form FHCF-LAP1)

FHCF Officials present at the meeting were Chief Operating Officer Jack Nicholson, Senior Attorney Tracy Allen, Director of Operations Anne Burt, Director of Examinations Gina Wilson and, for Paragon Strategic Solutions, Managing Director Martin Helgestad.

Most of the proposed Rule changes were non-substantive and elicited no comments from those in attendance at the Workshop. 

Within the Reimbursement Contract section relating to commutation, however, proposed revisions would require an insurer to execute a final commutation agreement after 36 months.  This action would constitute a complete and final release of all SBA obligations with respect to claims and losses.  Should the insurer choose not to execute the final commutation agreement, the SBA would be released from all obligations 60 months following the FHCF Contract Year if no indicated reimbursable loss has been filed. 

Of note, the Reimbursement Premium is now due at 2:00 p.m., rather than 5:00 p.m., and the bank address has changed. 

While no changes were made to the Interim Loss Report Form, the Proof of Loss Report Form was revised to provide additional documentation for claims files.  This documentation would include the first notice of loss; the coverage type for the amount of loss; the amount of policyholder legal fees and/or public adjuster fees paid; payment history; and all adjuster reports, including public adjuster reports and diary/claim notes. 

The following specific changes to the FHCF Data Call documents were noted: 

• For certain types of businesses, the term “masonry” has been split into two categories under the heading of “Construction Type” to provide for “Masonry” and “Masonry with Reinforced Concrete Roof.”
• Also under the “Construction Type” heading, the term “Superior” has been split into two categories: “Superior” and “Superior with Reinforced Concrete Roof.”
• FHCF Florida Building Code indicator codes and instructions have been revised.
• Under the category of “Structure Opening Protection,” the term “None or Unknown” has been split into two categories.
• Under the category of “Roof Shape, Gable,” the term “Other or Unknown” also has been split into two categories.
• Reporting of “Roof Deck Attachment” has been eliminated.

FHCF Advisory Council Reviews Workshop Discussion

The FHCF Advisory Council convened via teleconference following the Rule Workshop to discuss the proposed Reimbursement Contract and Data Call updates.

Changes to the Florida Building Indicator Code prompted particular concern among Council members, inasmuch as the term comprises ancillary data that designates whether a structure has the following mitigation features:  Structure Opening Protection, Roof Shape or Roof-Wall Connection.   Since these terms are reiterated on the Form, Dr. Nicholson suggested eliminating them and simply leaving the “Florida Building Indicator Code.”

Documenting the year in which a structure was built, and thus, under what edition of the Florida Building Code it was constructed, also prompted debate.  Dr. Nicholson reminded the Council members that insurers have been advocating this type of documentation in order to better determine the appropriate award of wind mitigation credits.   The current Data Call Form codes identifying the Building Code construction year have been characterized as “misleading” to insurers.  Although a motion was made to delete the three ancillary Florida Building Indicator data fields listed above, it was not approved.

Whether or not to specify if a structure was built under the 2001 Code or 1994 South Florida Code, or whether it is located in Miami-Dade or Broward counties also was debated.  

The Council approved proposed Rule 19-8.010 relating to Reimbursement Contracts and resolved to take up proposed Rules 19-8.029 and 19-8.030 for further discussion at its next meeting on October 19, during which FHCF bonding estimates and FHCF 2004-2005 hurricane-related losses also will be reviewed.

 

Florida Hurricane Catastrophe Fund Strengthened by Recent Legislation

As part of the SBA’s quarterly report during a Florida Cabinet meeting on September 28, 2010, SBA Director Ash Williams summarized State of Florida SBA-managed investments, among which include investments relating to the FHCF.

According to Mr. Williams, the FHCF is in the strongest position since its creation in 1993.  Adding that he believes recent legislative changes have strengthened the FHCF, he reported that it has approximately $6 billion in cash; which, when added to its pre-event financing and ability to issue post-event bonds, will allow the FHCF to meet all of its financial obligations.

A short, more detailed report on the FHCF’s investments was provided and showed that, although the FHCF has some risky investments, these have performed well and actually profited over a ten-year period.

After this overview, Florida Attorney General Bill McCollum asked Mr. Williams about the Local Government Investment Pool (“LGIP”), explaining that some newspapers have reported that an LGIP liquidation could realize a highly substantial loss.  Mr. Williams stated that liquidation was not a realistic, nor fiscally-responsible option, even though some LGIP investments were performing poorly.

Mr. Williams then formally introduced the SBA’s new Inspector General, Melinda Miguel, and advised that the SBA is continuing to search for a Chief Operating Officer and Chief Financial Officer.

 

 

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

 

 

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