Florida Insurance Guaranty Association Board of Directors, Finance and Audit Committee Meeting Reports: April 2012

 

The Florida Insurance Guaranty Association (“FIGA”) Board of Directors and the FIGA Finance and Audit Committee (“Committee”) met today, April 10, 2012.  Following is a summary of the proceedings: 

 

Finance and Audit Committee Meeting

In a review of the FIGA investment report, it was noted that the organization’s investment plan is to maintain solid and stable returns.  Some financial experts think that inflation could be problematic in the near future.  As a result, the Federal Reserve is expected to keep short-term interest rates low.  It was reported that the general U.S. economy is doing better than that of Europe, partially due to a strong automobile market.

Audits for FIGA and the American Guaranty Fund Group were approved following a report by FIGA Director And General Manager Sandra Robinson. 

FIGA Director of Operations Tom Streukens provided the “agreed upon procedures” report and the “charter/checklist review” report to the Committee, which approved them prior to adjourning.

 

Board of Directors Meeting

FIGA Chairman John Watson opened the Board meeting and moved into the agenda.  The minutes from the Board’s December 1, 2011 meeting were approved. 

 

Receivers Report

In 2011, Homewise Insurance Company was placed into receivership.  The company had active policies in Florida and Louisiana.  Lighthouse and Homeowners Choice insurance companies received these policies.  Four other insurance companies were closed. 

 

Legislative/Legal Report

Legislation passed in 2012 relating to payment of FIGA claims and is presently awaiting the Governor’s signature.

FIGA successfully defeated an amendment on legislation that would have provided that surplus lines carriers that assume Citizens policies would have been under the purview of FIGA and subject to their assessments.  The underlying bill also was defeated.

It was reported that Gena v. FIGA, a significant case relating to attorney fees, recently was resolved.  The Court held that FIGA is not responsible for attorney fees prior to liquidation.  This case was a significant victory for FIGA, which would have been subject to significant fees had the Court ruled in favor of the Claimant. 

Ms. Robinson reviewed FIGA’s Plan of Operation (“Plan”), which has not been updated since the 1970s and said to be arcane.  There was some discussion about the insurance industry being fairly and adequately represented on FIGA Board.  It was agreed that the Board should be adequately represented by all lines of insurance business.

Ultimately, the Board charged FIGA staff members with reviewing possible changes to the Plan to discuss at the next meeting.

 

Claims Report

Recently, there have been eight new insurer insolvencies that have left outstanding automobile and homeowners claims.  Altogether, FIGA received 11,000 new claims.  The closing ratio was approximately 67 percent.  Sinkhole claims continue to come in and are problematic.  The average loss is $75,000 per claim. 

 

Operations Report

FIGA’s 2011 annual report and 2012 organization goals also were reviewed by Ms. Robinson.  The report was given for informational purposes. 

FIGA is reviewing and considering an administrative assessment to cover costs outside of claims handling.  Currently, administrative expenses are included in the general assessment.  This could become an annual expense passed on to insurers.  A change in statute would be required. 

Ms. Robinson reviewed FIGA’s annual contracts and vendors.  There were no significant changes in this report.  However, there may be a need for a third-party administrator specializing in automobile claims in the future. 

Mr. Streukens reviewed FIGA’s business continuity plan. 

 

Financial Report

Mr. Streukens reviewed the financial reports for both FIGA and the American Guaranty Fund Group.  As of February 29, 2012, the combined account balances are $153.7 million.  There is approximately $83 million in the auto account and $70 million in the “all other” accounts.  FIGA has a $46.6 million shortfall in the “all other” account, attributable to the Homewise insolvency, which had a significant impact.

 

Finance and Audit Committee

Treasurer Dennis Martin reviewed the Finance and Audit committee meeting held earlier.

The Board approved the Audit Committee Report and and Agreed Upon Procedures Report as supported by the committee.

 

Board Officer Election

Every two years, FIGA’s Board elects a Chairman and members per the Plan of Operation.  During today’s meeting, all current officers were approved to serve in their existing capacities for two more years.

The Board meeting concluded.

Agendas for both meetings are attached.

 

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

 

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