Florida House of Representatives Advances Senate Version of Florida Hurricane Catastrophe Fund Contract Year Glitch Bill
Mar 23, 2010
SB 1460, the Florida Senate’s version of a bill that would provide a remedy for the Florida Hurricane Catastrophe Fund (“FHCF”) Contract Year glitch was substituted for HB 949, the House of Representatives’ version, after both bills were considered on the House Special Order calendar today, March 23, 2010.
SB 1460 will now be rolled to third reading for a final vote in the House. If passed, the bill will be sent to Florida Governor Charlie Crist for signature into law.
SB 1460 is designed to provide a remedy for the FHCF Contract Year, which, after being legislatively curtailed in 2009, has created unintended consequences for insurers due to the way in which the cost of reinsurance is amortized on their financial statements.
Without passage of SB 1460, an insurer’s 2010 financial statement will show a larger-than-normal expense associated with the purchase of FHCF reinsurance. Specifically, the statement will show an expense equal to five months of FHCF reinsurance costs from January 1, 2010 to May 31, 2010. The statement also will show an expense equal to 12 months of FHCF reinsurance costs over the seven-month period from June 1, 2010 to December 31, 2010, which will result in a reduction of an insurer’s pre-tax income and surplus by more than what it is historically reduced each year for the purchase of FHCF reinsurance. This reduction could impact the financial solvency of some insurance companies, as well as negatively impact their rating from rating agencies.
To remedy the negative financial impact of the transitional FHCF contract year, the provisions of SB 1460 would return the FHCF Contract Year to June 1 through May 31, beginning June 1, 2010.
Should you have any questions or comments, please contact Colodny Fass.
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