Florida Senate Insurance-Related Interim Project Update: Sinkhole Project Deadline Extended; Financial Products as Reinsurance Project Scaled Back
Sep 10, 2010
Senate Sinkhole Project Deadline Extended to December 2010
In order to analyze information returned from the recent Florida Office of Insurance Regulation (“OIR”) data call as thoroughly as possible, the October 1 deadline for the Florida Senate’s Interim Project 2011-104, entitled “Issues Relating to Sinkholes,” has been officially extended to December 2010. Notwithstanding, Senate staff members have indicated their expectation that the Project will be concluded by the end of October.
Among the sinkhole-related issues that will be evaluated in the data review are insurer sinkhole investigations and reports; the burden of proof in sinkhole claim disputes; fraudulent practices pertaining to sinkhole claims; the procedures and time parameters for the stabilization and repair of damaged buildings and structures, including the payment by insurers of sinkhole claims; the accountability and liability of engineers and geologists involved in sinkhole claims; the neutral evaluation process, including the selection and qualifications of the sinkhole neutral evaluator; and the purpose and effectiveness of Florida’s Sinkhole Database, the oversight of which is the responsibility of the Florida Department of Financial Services.
Project on Financial Products That Serve As Alternatives to Reinsurance Scaled Back
A Senate Interim Project to examine and evaluate various financial products that could serve as alternatives to reinsurance has been scaled back after the OIR determined that the availability of such options would be governed by the ceding insurer’s state of domicile rather than Florida law. Further, the National Association of Insurance Commissioners (“NAIC”) indicated that, if a state implemented these types of products, that state’s NAIC accreditation could be jeopardized.
During the 2010 Legislative Session, Florida lawmakers had considered a proposal that would have allowed insurers to transfer risk by purchasing certain financial products in lieu of buying traditional reinsurance, which is more expensive. However, Florida law does not qualify these products as reinsurance. Under current law, authorized Florida insurers that purchase reinsurance are allowed to receive credit on their financial statements only if the reinsurance is a type that is approved and acceptable to the OIR, as specified in s. 624.610, F.S. The 2010 legislation, which was not passed, would have provided for the aforementioned financial products to be treated as reinsurance under Florida law.
To view the complete Senate Interim Work Plan, click here.
Should you have any comments or questions, please contact Colodny Fass.