Florida Hurricane Catastrophe Fund Contract Year Remedy Bills Advancing Rapidly
Mar 2, 2010
House Bill 949 relating to the Florida Hurricane Catastrophe Fund (“FHCF”) was approved unanimously by the Florida House of Representatives’ Full Appropriations Council on Education and Economic Development today, March 2, 2010. With the vote representing HB 949’s passage through its final committee of reference, it is now ready for consideration on the House floor.
A similar bill, SB 1460, was debated today on the Senate floor, rolled to third reading and is now ready for final passage.
The bills are 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 either HB 949 or 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 both HB 949 and SB 1460 would return the FHCF contract year to June 1 through May 31 beginning June 1, 2010.
To view complete information on each bill, including legislative staff analyses, click here.
Should you have any questions or comments, please contact Colodny Fass.
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