Florida Hurricane Catastrophe Fund Issues Emergency Rules, Estimated 2010 Claims-Paying Capacity Report
May 24, 2010
Notice of Emergency Rules Issued for Florida Hurricane Catastrophe Fund (“FHCF”)
To implement new Florida legislation in advance of the June 1 start of the 2010 Hurricane Season, the FHCF has adopted Emergency Rules.
CS/SB 1460, which became effective on April 15, 2010, revises the FHCF Contract Year, as well as changes the FHCF’s capacity and insurers’ retentions.
To address a legislative glitch inadvertently passed in 2009, CS/SB 1460 changed the FHCF Contract Year back to June 1 through May 31. The bill also adds a new requirement that the annual FHCF Reimbursement Contract must be adopted by February 1 each year and executed by insurers by March 1.
Further, CS/SB 1460 freezes the FHCF’s capacity and retention and requires it to publish its maximum statutory adjusted capacity for the mandatory coverage for each Contract Year, the maximum statutory coverage for any optional coverage and the aggregate retention used to calculate an individual insurer’s retention multiples by January 1 of the immediately preceding Contract Year.
The Emergency Rules to implement the above are as follows:
RULE NO: RULE TITLE
19ER10-1: 19-8.010, Reimbursement Contract
19ER10-2: 19-8.012, Procedures to Determine Ineligibility for Participation in the Florida Hurricane Catastrophe Fund and to Determine Exemption from Participation in the Florida Hurricane Catastrophe Fund due to Limited Exposure
19ER10-3: 19-8.013, Revenue Bonds Issued Pursuant to Section 215.555(6), F.S.
19ER10-4: 19-8.029, Insurer Reporting Requirements
19ER10-5: 19-8.030, Insurer Responsibilities
To view the complete text of the Emergency Rules, click here.
Notice of Proposed Rule Issued for Florida Hurricane Catastrophe Fund Reimbursement Premium Formula
The Florida State Board of Administration (“SBA”) issued a Notice of Proposed Rule to amend Rule 19-8.028 relating to the FHCF Reimbursement Premium Formula that would establish the 2010-2011 FHCF Contract Year premium formula and adopts rates, accordingly.
If requested, a hearing will be scheduled. To view the complete text of the proposed Rule, click here.
Florida Hurricane Catastrophe Fund Issues May 2010 Estimated Claims Paying Capacity Report
Pursuant to Florida law, the SBA has announced the FHCF estimated borrowing capacity, estimated claims-paying capacity and projected balance of as of December 31, 2010. The Fund’s projected post-event borrowing capacity estimate is $15.941 billion.
The FHCF’s estimated borrowing capacity and projected available year-end cash balance, together with other liquid resources, provides it with a total estimated claims-paying capacity of $25.461 billion over the next twelve months.
According to the SBA, 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 SBA’s obligation for the payment of reimbursable losses is limited by Section 215.555(4)(c)2., Florida Statutes, and shall not exceed the actual claims-paying capacity of the FHCF.
The FHCF’s projected year-end asset balance on December 31, 2010 is estimated to be $6.020 billion, which represents the amount of assets available to pay claims, not including any bond proceeds, incurred from Covered Events that may occur during the June 1, 2010 through May 31, 2011 FHCF Contract Year.
In its announcement, the SBA stated its recognition that its good faith estimate is being made while highly volatile global financial market conditions exist; therefore, changing market conditions could dramatically impact the FHCF’s actual claims-paying capacity either positively or negatively. Current conditions may or may not be the same if and when the SBA determines that it is necessary to seek the issuance of revenue bonds.
Greater detail can be obtained in the FHCF’s “May 2010 Estimated Claims Paying Capacity Report,” which can be accessed by clicking here.
Should you have any questions or comments, please contact Colodny Fass.
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