FAJUA Board of Governors Meeting Report: April 14
Apr 15, 2009
The Florida Automobile Joint Underwriting Association Board (“FAJUA”) of Governors (“Board”) met on Tuesday, April 14, 2009, in Miami. Chairman Michael Puchades opened the meeting with an introduction of new member Stephen Hylka, of Liberty Mutual.
General Manager’s Report
FAJUA General Manager Eugenia Tyus reported that she had met recently with Florida Insurance Commissioner Kevin McCarty, who said Florida has one of the highest rates of uninsured motorists in the country, estimated at 29 percent. Commissioner McCarty said he believed this was a result of the economy, as well as prohibitively high rates for “insurers of last resort.” He indicated he would be amenable to discussing a rate filing with the Board.
Mr. Puchades asked agent representatives for input on the issue of uninsured motorists. Ed Langston responded that there were many factors contributing to the decision to forego insurance, despite Commissioner McCarty’s opinion regarding cost factors. Baron Channer asked how the FAJUA’s rates had risen relative to the voluntary market, and Ms. Tyus responded that, despite efforts to remain competitive, FAJUA rates had increased 51.5 percent for private passenger vehicles and 62 percent for commercial vehicles.
FAJUA and agent representatives have met with the Florida Department of Transportation to discuss remedies to limit the number of uninsured motorists on Florida’s roads.
Automobile Insurance Plan Service Office (“AIPSO”) representative Thomas Assad said that, with rate indications in September, AIPSO also will provide an in-depth analysis in response to Commissioner McCarty’s concerns.
General Counsel’s Report
The FAJUA General Counsel reported that, with 10 cases, the organization’s litigation was at a historic low. There are also fewer claims.
At its most recent meeting, the Board reviewed a letter from Commissioner McCarty in which he asked for an examination of operating costs. The Board complied, and its response to the Commissioner was received favorably.
In December, 2008, the FAJUA contracted with Dovetail, a policy administrator. Confidence was expressed in Dovetail’s work, and the Board was advised that the company’s contract would have to be re-evaluated in September, 2009.
FAJUA Finance Committee Chairman Kevin Leeman said that negative cash flow projections indicated that an assessment of $8 million would be required by the end of 2009, which is earlier than initially anticipated.
While the FAJUA Pension Plan has lost assets, it is still 88 percent funded, so there is no cause for immediate concern.
Regarding FAJUA investments, Florida’s Special Purpose Investment Account (“SPIA”), a government-pooled account in which the bulk of the FAJUA’s investments are held, continues to be the most attractive investment option despite its lower yields. FAJUA Staff will research the safety of SPIA funds over the next several weeks.
The FAJUA Pension Plan (“Plan”), which separated from AIPSO last year and became a distinct entity, requires clarification of post-retirement and post-employment benefits. With only one current retiree, the need for funding has been extremely limited and has been done on a cash-as-needed basis. Members debated whether the Plan should be funded in advance as an ongoing operational expense in the annual FAJUA budget.
In addition, there is currently no formal policy document for the post-retirement and post-employment benefit plans. Therefore, the Finance Committee will draft recommended language for a formal document and research funding options.
Bill Ferguson, of Thomas Howell Ferguson P.A., reported that no material weaknesses or significant deficiencies had been determined in the FAJUA’s financial audit for the first three quarters of 2008. He added that the FAJUA is not required to maintain a surplus.
Mr. Ferguson said he will continue to work on claims projections and next year’s budget with the FAJUA Budget Committee while the Committee concentrates on administrative costs. After discussion, it was decided that vendor and consultant fees should be more transparent in future budgets.
AIPSO and Residual Audit Report
Mr. Assad gave an overview of AIPSO, a not-for-profit organization that provides management consulting, legal and other ancillary services to residual auto markets throughout the United States.
Mr. Leeman said that in 2007, AIPSO established a task force to examine its audit program for the first time in 15 years. The result was the “Residual Market Audit Report Overview,” which examined sampling methodology, scope and limitations of the auditing process. That report will, in turn, be replaced by the “Executive Summary Document,” which will be distributed subsequently to the Board.
The International Organization for Standardization (“ISO”), with which AIPSO contracts for copyrighted material, has created a new Symbols Table for 2011. The Table, which now contains 27 symbols, will be expanded to 75 symbols, with changes to Rules 14, 15, 36, 37 and 98. The rounding methodology will also be adjusted.
A motion to adopt the new ISO Symbols Table passed unanimously.
Mr. Puchades announced that, because Florida Chief Financial Officer Alex Sink has requested his involvement in other State matters, he is submitting his resignation as FAJUA Board Chairman. He asked the Board to nominate prospective successors. Board member Brian Fleming was nominated. A vote was taken and Mr. Fleming was elected the new Board Chairman for a two-year tenure.
With all business concluded, the meeting adjourned.
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