House Insurance Committee To Hear CFO’s FHCF Risk Reduction Proposal

A presentation entitled “CFO Sink’s Risk Reduction Proposal” is part of the agenda for a House Insurance Committee (“Committee”) Workshop scheduled for Friday, February 8, 2008 at 8:30 a.m. regarding Florida Hurricane Catastrophe Fund (“FHCF”) Risk Reduction.

The presentation, which will be given by Florida Department of Financial Services Director of Legislative Affairs Michael Carlson, consists of an overview of the FHCF, Florida Chief Financial Officer Alex Sink’s proposal to reduce the amount of financial exposure borne by Floridians in the FHCF and proposed legislation to effect the suggested changes as follows:

CFO Sink’s Proposal

• Makes the FHCF a division in the State Board of Administration governed by the Governor and Cabinet and headed by a director appointed by the Governor and Cabinet

• Maintains the three optional coverages enacted in HB 1A, but amends the Temporary Increase in Coverage Limits or “TICL” option

• Does not change the expiration of the TICL optional coverage (currently set to expire in 2009)

• Reduces the TICL coverage available from $12 billion to $9 billion, which reduces the FHCF’s risk exposure by $3 billion annually

• Requires the FHCF to reimburse insurers selecting TICL coverage for 70 percent of its losses rather than allowing the insurer to choose to be reimbursed 45, 75, or 90 percent of losses

• Makes conforming changes to various insurance statutes reflecting the change of the FHCF to a division ofthe State Board of Administration

• Does not change the other two optional coverages available

• The FHCF estimates the proposal could reduce FHCF assessments by $200 million
annually in the event of a storm or series of storms that caused insurers to make claims from the TICL coverage

CFO Sink’s Risk Reduction Proposal would reduce risk in the TICL coverage level from $12 billion to $9 billion, and would increase co-insurance from 10 percent to 30 percent.  This is expected to reduce the State’s exposure by approximately $3 billion, thereby reducing risk to Floridians and having a potential projected annual savings impact to policies of 1.5 – 3.2 percent or $111.2 – 217.5 million.  Over 30 years, that would translate to an estimated $3.3 – 6.5 billion of savings to Floridians.

To view CFO Sink’s complete presentation and proposed legislation, click here.

 

Should you have any questions or comments, please do not hesitate to contact this office.

 

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