FIGA Board of Directors Recommends 2009 Assessments of 0.8 Percent On ‘All Other Accounts’
Oct 30, 2009
On Friday, October 30, 2009, the Florida Insurance Guaranty Association (“FIGA”) Board of Directors (“Board”) met in Tampa. Below is a summary of the meeting and actions taken by the Board, including a recommendation for assessments that was approved unanimously.
The Board engaged in significant discussions regarding a potential assessment on “All Other Accounts” for 2009. “All Other Accounts” are all Property Lines, excluding Automobile Physical Damage and Liability accounts.
FIGA could have cash problems in February or March of 2010 from insurer insolvencies due to new adverse developments from the bankruptcy of Poe Insurance Companies and the recent insolvencies of American Keystone and First Commercial Insurance Companies. These events have triggered the need for potential assessments.
Assessing premiums on “All Other Accounts” this year at half-percent would net $78 million, which would leave $27 million in remaining liabilities. Any recommended assessment must be approved by the Florida Office of Insurance Regulation (“OIR”), which typically takes two weeks.
The Board discussed other remedies if assessments are not made, or are insufficient. Options included borrowing from the FIGA automobile physical damage or liability accounts. Also, FIGA has the ability to issue bonds.
FIGA anticipates $128 million in liabilities, of which $118 million would be needed in assessments. A 0.76 percent assessment would cover this amount, with no positive fund balance. A one percent assessment would leave approximately $30 to $40 million in fund surplus. $50 million would be a conservative reserve, according to Board Chairman John Watson.
Chairman Watson recommended that the Board approve the assessment for 2009, along with a reserve amount, given the possibility of future insurer insolvencies.
The Board members agreed that assessments are prudent and discussed what the proper and adequate assessment percentage should be. Following the discussion, the FIGA Board of Directors recommended assessments on “All Other Accounts” in the amount of 0.8 percent.
During the Receivers Report, it was noted that FIGA likely will not have to participate in the Superior and New America Insurance Company insolvencies. However, because of circumstances involving the First Commercial Insurance Company and American Keystone Insurance Company insolvencies, it was agreed that FIGA will need to become involved with this process. At this time, the organization is in the information-gathering stage.
FIGA Operations Manager Tom Streukens gave an update on the financial reports for the American Guaranty Fund Group (“AGFG”) and FIGA as of September 30, 2009. FIGA assets total $141 million with revenue at $57 million.
In the Claims Report, it was noted that there is increased claims activity from new and reopened claims from the insolvencies of Vanguard, First Commercial and American Keystone insurance companies, which were precipitated by Hurricane Wilma claims. FIGA is well positioned to handle the claims internally.
The Legal Report included an update on Florida FIGA-related legislative and regulatory issues. In 2009, legislation was passed that required insurance agents to explain the existence of FIGA to their customers. Also, it was reported that the Florida Hurricane Catastrophe Fund (“FHCF”) Temporary Increase In Coverage Limits layer is being phased out by a reduction of $2 billion per year. This is intended to assist the FHCF in being able to meet all of its claims paying obligations. The Legal Report also included discussions on proposed changes to the FIGA Plan Of Operation and changes to the AGFG Management Contract. The Board approved the latter.
FIGA’s recent Finance and Audit Committee meeting was discussed and the Board adopted the following items from that meeting:
- The transfer of funds from Evergreen to Wells Fargo to achieve additional basis points
- Authority given by the FIGA Finance and Audit Committee to review and give FIGA Management the ability to submit a 990 Tax Form. FIGA’s Board will receive copies before approval for review.
- FIGA’s contract with Raymond James
- The 2010 Budget
AGFG requested the creation of a joint committee that would comprise members of FIGA’s finance and workers’ compensation committees to create a proposed Request for Proposal for audit services in 2010.
Following discussion, the Board meeting was adjourned.
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