Insurance Capital Build-up Incentive Program Response to Office of Insurance Regulation Draft 6/05/06

Please see the following email that we are considering to send to Claude Mueller, Sharon Binnum and Jack Nicholson regarding the Capital Build-up Incentive Program. Please note that this is a rough draft and any comments or suggestions are welcome, including any input as to whether we should even send the email. Fred needs to review this and may have additional comments and revisions once he has had a chance to review; however, I wanted to get this out for your review now. Please send me any comments by 11:00 am tomorrow since we would like to send this at that time. Thanks for your help. Here is the draft:

Pursuant to our recent conversations regarding the Insurance Capital Build-up Incentive Program (“Program”) established in Senate Bill 1980, I wanted to confirm our position and the position of several of our clients pertaining to the interpretation of certain statutory provisions applicable under the Program.

As you are aware, our firm represents a significant number of insurance companies that are authorized in the State of Florida, including a significant number of the recent start-ups that have been formed over the last couple years, as well as many foreign insurers that have entered the Florida market to write homeowner’s insurance. Many of our clients would like to expand their business in Florida and would be amenable to applying for the matching state contributions available under the Program by infusing additional, substantial capital into their companies. Unfortunately, they are confronted with the interpretation of the Bill regarding the minimum writing ratio commitment applicable as a condition for eligibility for the matching funds.

As currently set forth in the implementation of the Program, this commitment would be particularly difficult, if not impossible, to keep for many insurers. We respectfully suggest that this interpretation imposes burdens on many carriers in direct contravention of the stated purposes and intent of this legislation, which is to make new capital, and thus capacity, available in the Florida residential property insurance market at this critical juncture in the state’s overall economy. As it is currently structured, the Program will not make state matching contributions available to numerous insurers who otherwise are ready and willing to commit to the Florida insurance market significant amounts of new capital which, quite obviously, would benefit Florida policyholders and assist in stabilizing the Florida market.

In view of the foregoing, we request that all parties pursue reasonable reform in the current interpretation of the legislation in order to open the Program up to all insurers who are willing to commit much needed capital to the Florida market. This Program should be available to all insurers who are capable and willing to commit to write significant business in the Florida market. Your efforts in this regard would only serve to further the stated purposes and intent of the Program, assist in enhancing capacity in Florida, promote competition within the voluntary market, assist in depopulating Citizens, and, ultimately, lower the cost of insurance throughout the state.

We look forward to further dialogue on this issue and are willing to assist in any way we can to assure that this Program is a success.

Regards,

Richard J. Fidei