Senate Banking and Insurance Committee Approves Florida Hurricane Catastrophe Fund Contract Year Change
Feb 16, 2010
During its interim meeting today, February 16, 2010, the Florida Senate Committee on Banking and Insurance unanimously approved SB 1460, which would alter the effective date of the Florida Hurricane Catastrophe Fund (“FHCF”) Contract Year.
A technical amendment by Senator Garrett Richter was adopted on to the bill. However, another amendment by Senator J.D. Alexander was withdrawn that would have, among other provisions, extended an exemption to medical malpractice insurers from FHCF assessments.
Testimony recommending a reduction in the FHCF retention was heard from Florida insurance industry representatives.
FHCF Chief Operating Officer Jack Nicholson testified that lowering the retention would be ” . . . the worst of both socialism and capitalism, because you would be socializing losses and capitalizing the profits of insurers.”
After further discussion, Senator Richter indicated that he would regard an amendment to lower the FHCF retention as hostile.
With today’s hearing representing the only committee of reference required for SB 1460, the bill next proceeds to the Senate Floor for consideration.
HB 949, the companion bill, is scheduled to be heard by the House General Government Policy Council tomorrow, February 17.
To view today’s Senate Banking and Insurance Committee meeting packet, click here.
About SB 1460
The 2009 legislative shortening of the 2010 FHCF Contract Year to seven months caused an accounting problem for insurers due to the acceleration of the recognition of an insurer’s expense (of FHCF reinsurance) resulting in potential solvency difficulties for insurers.
SB 1460 would correct the “transitional” 2010 FHCF Contract Year problem by changing the FHCF’s contract year back to June 1 through May 31, thereby eliminating these insurer solvency concerns.
The bill provides legislative intent language that emphasizes the importance of providing residential property insurers with more time to negotiate and purchase private reinsurance and a greater degree of certainty regarding the coverage provided by the FHCF. To facilitate these goals, the bill requires the FHCF’s aggregate coverage and aggregate retention to be published in the Florida Administrative Weekly by January 1 of each year, the FHCF’s reimbursement contract to be adopted by February 1 of each year, and insurers to execute their FHCF reimbursement contract by March 1 of each year (with an effective date of June 1).
These procedures are expected to afford insurers greater opportunity to better estimate their coverage from the FHCF, as well as their private reinsurance needs. These changes are also expected to result in lowering reinsurance costs for insurers, which could, in turn, benefit consumers by lowering their premiums.
To view the complete Senate Committee on Banking and Insurance staff analysis, click here.
Should you have any questions or comments, please contact Colodny Fass.
To unsubscribe from this newsletter, please send an email to sgray@cftlaw.com.