Office of Insurance Regulation Rulemaking Workshop re FHCF Emergency Assessements 5/23/06

Yesterday the Office of Insurance Regulation (OIR) held a rulemaking workshop for Rule 69O-137.013 which provides parameters by which OIR will collect information from insurers to verify the collection and remittance of emergency assessments from the Florida Hurricane Catastrophe Fund. The rule also explains how the required information is to be provided to OIR and provides penalties for failure to comply. A copy of the proposed rule is attached. OIR expects to issue the order in late June after the FHCF finalizes its numbers and the Financial Services Commission approves its course of action. Insurers will collect the assessment on a “prospective” basis. The order will be effective beginning January 1, 2007.

OIR plans to clarify certain portions of the rule, including definitions of the demographic data required by the rule and information on uncollected assessments. Specifically, OIR indicated that if an insurer is not able to collect a certain portion of assessments (i.e. if the insured does not pay the assessment) it should include information on that data in the information it provides to OIR on uncollected assessments so that this situation would not constitute a violation of paragraph (5)(e). OIR also plans to correct cross-references to the applicable statutory sections relating to penalties and stated that it may issue a separate order for surplus lines issues. OIR plans to conduct a “test run” this fall using this rule, and will provide a detailed instruction sheet for insurers to use. Additionally, OIR clarified that there was no “de minimus” exemption to this rule for small books of business, and further that Florida statutes provide guidance on the treatment of earned and unearned premiums in assessments. OIR also stated that the next iteration of the rule would include specific language expanding the electronic reporting requirement under paragraph (4).

Several suggestions were made at the workshop, including providing a “show cause” provision allowing insurers to demonstrate why they might have failed to comply with certain provisions of the order, a provision differentiating penalties for willful and non-willfull violations and general flexibility in the application of the fines. Further, to clarify paragraph (6)(e), presenters recommended that OIR add the phrase “related to the assessment” at the end of the sentance.

The record will remain open for comments until end of business on Tuesday, May 30, 2006. Please keep in mind this rule is in the early stages of development and will likely undergo substantial changes due to industry input prior to the release of the formal rule. Please contact this office with any questions or concerns you may have.

Regards,

Katherine A. Scott