Limited Apportionment Company Filing Deadline is March 31, 2011; Deadline to Select TICL Coverage is March 1, 2011

Insurers seeking limited apportionment company (“LAC”) status for 2011 must petition the Florida Office of Insurance Regulation (“OIR”) within the first 90 days of 2011, meaning by March 31, 2011. Applications received after this deadline will not be considered. Companies that had LAC status in 2010 must renew it this year. 

To view the 2011 LAC application, click here.

LACs are those that have surplus as regards policyholders of $25 million or less, and write 25 percent or more of their total nationwide property insurance premium in Florida.

The main benefits of LAC status are:

1. the ability to purchase a low-cost drop-down layer of reinsurance from the Florida Hurricane Catastrophe Fund (“FHCF”), a benefit that is also available to insurers that purchased such coverage in 2008 and those approved to participate in the Insurance Capital Build-Up Incentive Program; and
2. the ability to pay any regular assessments that may be levied by Citizens Property Insurance Corporation (“Citizens”) for its high-risk account on a monthly basis, as such amounts are recouped from insureds, provided that the full amount of the regular assessment is paid within 12 months after being levied by Citizens. Companies that do not have LAC status must pay the full amount of any Citizens regular assessments within 30 days after they are levied.  

LACs also are eligible for a deferment of a regular assessment levied by Citizens, but only if the OIR determines that any such regular assessment will result in an impairment of the LAC’s surplus. 

Companies who are interested in LAC status for the FHCF reinsurance benefit should note that effective December 12, 2010, certain changes became effective to Rule 19-8.010, F.A.C., which relates to the FHCF Reimbursement Contract (“Contract”). 

The changes, which provide for the Contract to be effective from June 1, 2011 through May 31, 2012, also specify that an insurer must elect the FHCF’s Temporary Increase in Coverage Limits (“TICL”) by March 1, 2011; otherwise, the company will be deemed to have rejected it.   Last year’s Contract (2010-2011) required election of TICL coverage by June 1.

Further, only six of the prior eight TICL coverage options will be available for the 2011-2012 Contract year.  The $7 billion and $8 billion coverage options will no longer be available. 

As a point of clarification regarding the selection of TICL layer coverage by March 1, companies need to submit their selections on all coverage options by the March 1 date.  However, there is a separate amendment that allows the company to modify their initial selections prior to June 1.  To do so, the company must re-select every coverage option on the form even if the company is only changing one item.  This allows a company to select no TICL coverage at March 1 but then change its mind and select coverage prior to June 1 (or vice versa).  To view the relevant amendment to the 2011-2012 FHCF Contract, click here.

In view of the need to file the LAC application prior to the expiration of the applicable deadline, and the new deadline for selection of TICL coverage, companies should carefully evaluate their circumstances and apply for LAC status and/or make their TICL selections in a timely manner, if appropriate.

Should you have any questions or concerns regarding LAC status, or the new FHCF Contract, please do not hesitate to contact Colodny Fass.

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