Florida Hurricane Cat Fund Loss Adjustment Expense Reimbursement to Increase as of July 1, 2019
Jun 28, 2019
By Wes Strickland, Sandy Fay, and Michael Billmeier
During the 2019 session, the Florida Legislature passed CS/CS/CS/HB 301. The bill increases the loss adjustment expense (LAE) reimbursement from the Florida Hurricane Catastrophe Fund (“Fund”) from 5 percent of the reimbursed losses to 10 percent of the reimbursed losses. The Governor signed the bill on June 19, 2019, and it has been codified as chapter 2019-108, Laws of Florida. The new rate is effective for contracts and rates effective on or after July 1, 2019.
Section 215.555, Florida Statutes, requires the Fund to reimburse the insurer for 45 percent, 75 percent, or 90 percent of its losses from each covered event in excess of the insurer’s retention, plus 5 percent of the reimbursed losses to cover LAE. Chapter 2019-108, Laws of Florida, requires the Fund to increase the LAE to 10 percent of the reimbursed losses for contracts and rates effective on July 1, 2019.
The State Board of Administration (SBA), which administers the Fund, has issued a Notice of Development of Rulemaking. The proposed amendment to Rule 19.8-010, F.A.C., provides with respect to any reimbursements “under the Reimbursement Contract for the 2019-2020 Contract Year, the 5% Loss Adjustment Expense Allowance provided [in the Reimbursement Contract] shall be supplemented by an additional Loss Adjustment Expense Allowance equal to 5% of the reimbursed losses, provided that the total of a company’s reimbursed losses, Loss Adjustment Expense Allowance, and Supplemental Loss Adjustment Expense Allowance does not exceed the company’s Coverage Limit under the Reimbursement Contract.”
The proposed amendment to Rule 19-8.028 would incorporate a May 30, 2019 revision to the Fund’s 2019 Ratemaking Formula Report. According to the revised report, the change in the LAE reimbursement is expected to make the overall average rate change 5.07%, compared to 2.83% without the change.
It is anticipated that the SBA will approve the publication of the notice of proposed rules at its July 23, 2019, meeting. The public comment period takes place for 21 days after publication of the notice. If requested within the 21-day period, a hearing will be held. If no member of the public timely requests a rule hearing or if a rule hearing is requested but no notice of change is needed, the rules will be adopted as filed.
You may view the official documents on the Fund’s website at the following link: https://www.sbafla.com/fhcf/FHCFRules/ProposedRules.aspx