Florida Cat Fund HB 1495-Related Regulatory Developments
Jun 25, 2009
The following are recent Florida Hurricane Catastrophe Fund (“FHCF”) regulatory developments occuring as a result of House Bill 1495 becoming law on June 1, 2009:
With Florida’s hurricane season, the FHCF 20009-2010 Reimbursement Contract Year and recently-passed HB 1495 all having an effective date of June 1, 2009, an emergency rule was necessary to incorporate related changes made by HB 1495 that impact the FHCF Reimbursement Contract. Key changes to the law as a result of HB 1495 that must be reflected in the Contract are the Florida Legislature’s extension of the $10 million optional FHCF coverage program to the current Contract Year and the reduction in the amount of Temporary Increase in Coverage Level (“TICL”) optional coverage.
The current subsection (15) of the Emergency Rule has been amended to reflect that the contract and addenda have been revised. The full text is:
19ER09-1 (19-8.010) Reimbursement Contract
(1) through (14) No change.
(15) The reimbursement contract for the 2009-2010 contract year, including all Addenda, required by Section 215.555(4), F.S., which is called Form FHCF-2009K-“Reimbursement Contract” or “Contract” between (name of insurer) (the “Company”)/NAIC #( ) and The State Board of Administration of the State of Florida (“SBA”) which administers the Florida Hurricane Catastrophe Fund (“FHCF”), rev. 05/09, as amended, is hereby adopted and incorporated by reference into this rule. This contract is effective from June 1, 2009 through May 31, 2010.
(16) No change.
Rulemaking Authority 215.555(3) FS. Law Implemented 215.555 FS. History-New 5-31-94, Amended 8-29-95, 5-19-96, 6-19-97, 5-28-98, 5-17-99, 9-13-99, 6-19-00, 6-3-01, 6-2-02, 11-12-02, 5-13-03, 5-19-04, 8-29-04, 5-29-05, 11-13-05, 5-10-06, 9-5-06, 5-8-07, 8-13-07, 6-8-08, 9-2-08, 3-30-09, 5-28-09.
THIS RULE TAKES EFFECT UPON BEING FILED WITH THE DEPARTMENT OF STATE UNLESS A LATER TIME AND DATE IS SPECIFIED IN THE RULE.
EFFECTIVE DATE: May 28, 2009
The Florida State Board of Administration (“SBA”) has issued a Notice of Development of Rulemaking to discuss proposed amendments to Rule 19-8.010 relating to the FHCF Reimbursement Contract and changes made by the 2009 Legislature, which include the cash build-up factor and changes to available optional coverage levels for the 2009-2010 Contract Year.
If requested in writing and not deemed unnecessary by the agency head, a Rule Development Workshop will be scheduled.
Because of the passage of HB 1495, the SBA has issued a revised estimate of the FHCF’s Borrowing Capacity and the projected year-end FHCF balance as of December 31, 2009. This estimate, which is $4.460 billion, represents the amount of assets available to pay claims (not including any bond proceeds) resulting from Covered Events that may occur during the Contract Year of June 1, 2009 through May 30, 2010. FHCF’s projected post-event borrowing capacity estimate is $8 billion.
Given the current state of the financial markets, the range of potential borrowing capacity estimates is dependent on many factors, such as the size of the event, the markets accessed, the time necessary to access such markets, and the interest rates utilized. The estimated borrowing capacity and projected available year-end cash balance, together with other liquid resources, provides the FHCF with a total estimated loss reimbursement capacity of $15.960 billion over the next twelve months. Greater detail can be obtained in the “May 2009 Estimated Loss Reimbursement Capacity Report,” which, when it was revised, presumed passage of HB 1495. To view the Report, click here.
The SBA has announced that, since April 24, 2009, a change has been made to FHCF proposed Rule 19-8.029: Insurer Reporting Requirements. The change reinstates the words “and notarized” from subsection (8), which had been stricken for removal.
With the passage of HB 1495, Florida law has been changed to provide statutory authority to require notarization; therefore, striking this language is now unnecessary. The relevant sentence in paragraph (8) now reads as follows: “The FHCF shall have the right to rely upon the information provided by the Company to the FHCF on this form until receipt by the FHCF of a new properly completed and notarized FHCF C-1 from the Company.” The proposed Rule as previously published was withdrawn.
The SBA has announced that, because of the passage of HB 1495, proposed Rule 19-8.028: Reimbursement Premium Formula relating to the Florida Hurricane Catastrophe Fund has been changed as follows: Paragraph (3)(l) has been amended to incorporate Addenda to the Reimbursement Premium Formula and Rates. HB 1495, which became law on May 27, 2009, requires a five percent cash build-up factor be added to the FHCF Premium Formula and effects changes to the TICL coverage options and prices.
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