Florida Senate Insurance Committee Reviews State Insurance Market Issues In November 3 Meeting
Nov 5, 2009
The Florida Senate Committee on Banking and Insurance Committee (“Committee”) held its second interim meeting on November 3, 2009. Testimony was given by representatives from the Florida Office of Financial Regulation (“OFR”), the Florida Hurricane Catastrophe Fund (“FHCF”) and Committee staff. To view the meeting packet, click here.
The meeting began with an overview of the banking industry by OFR Commissioner Tom Cardwell, who reviewed 2009 legislative changes effected by the Florida Securities and Investor Protection Act and other recent finance-related legislation.
Next, FHCF Chief Operating Officer Jack Nicholson gave a presentation on legislative changes to the FHCF over the past few years, starting with the FHCF expansion that was precipitated by the passage of House Bill 1A in 2007.
Dr. Nicholson explained that problems have arisen this year from the FHCF’s inability to fully fund its capacity. He pointed out that the FHCF is only obligated to pay claims from its cash reserves and up to its ability to bond, rather than to its full capacity. Thus, allegations that the FHCF is insolvent are false.
Dr. Nicholson has cautioned insurers that rely on the FHCF to pay their claims to be aware of the FHCF’s bonding ability. The financial markets have started to improve and it is estimated that the FHCF could secure approximately $11 billion in bonds, if needed. According to Dr. Nicholson, the current FHCF shortfall is approximately $4.173 billion.
Committee Chairman Garrett Richter asked whether reopened Hurricane Wilma claims impact the FHCF. Dr. Nicholson replied that the FHCF has seen adverse loss development arising from these claims.
Senator Mike Fasano suggested that the Committee should examine the role of public adjusters in the reopening of claims and requested further information on this issue.
Dr. Nicholson then reviewed changes to the FHCF that have become effective due to House Bill 1495 becoming law on June 1, 2009. These include:
- A change in the FHCF Reimbursement Contract year effective date to June 1 of each year
- An extension of the cash build-up factor
- A reduction of the Temporary Increase in Coverage Limits layer optional coverage
Dr. Nicholson stated that the enactment of HB 1495 was good for the FHCF and has resulted in a transfer of approximately $6.4 billion in risk back to the private market. He expects that private reinsurance costs will remain flat or decrease slightly next year.
Finally, Committee staff members gave a presentation on Issue Brief 2010-203, Open Government Sunset Review of Section 627.0628(3)(f), F.S., Trade Secrets Used in Hurricane Models. A proposed bill is expected to be filed that would extend the public records exemption for trade secret information used in hurricane loss projection models created by private companies.
The meeting then was adjourned.
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