Florida Hurricane Catastrophe Fund Reviews 2014 Proposed Rules for Insurer Reporting, Responsibilities

Feb 10, 2014


The Florida Hurricane Catastrophe Fund Advisory Council (“Council”) held a conference call on February 7, 2014, during which David Walker, a longtime Council Member, was elected as Chairman.

After approving the October 15, 2013 meeting minutes, the Council approved the filing of the following proposed Rules for Notice (click on the hyperlink to access each proposed Rule):

Rule 19-8.013 – Issuance of Revenue Bonds

Rule 19-8.029 – Insurer Reporting Requirements

Rule 19-8.030 – Insurer Responsibilities

Rule 19-8.013, which relates to the issuance of Florida Hurricane Catastrophe Fund (“FHCF”) revenue bonds, is being revised for editorial purposes to conform to a legislative name change from the “Florida Hurricane Catastrophe Fund Finance Corporation” to the “State Board of Administration Finance Corporation.”  The Rule also deletes obsolete provisions of law. 

Rule 19-8.029 relates to 2014 FHCF Insurer Reporting Requirements–essentially the 2014 FHCF Data Call–and primarily establishes the new FHCF online reporting system.  It also adopts related forms, which will now be required to be filed electronically.   Security measures to ensure company information is protected and confidential were discussed.

Instructions on how to submit the Interim Loss Report Form were also added, as were detailed claims listing instructions to the FHCF Proof of Loss Report.

Next, Dr. Jack Nicholson, FHCF Chief Operating Officer, provided his report, in which he related that Florida Senator Alan Hays has filed a bill to reduce the FHCF off-the-top layer.  He also explained that the FHCF has engaged in pre-event notes, with $2 billion in notes having been issued in April 2013. 

Dr. Nicholson stated that the probability of dissolving the FHCF’s top layer is very unlikely.  A big change has occurred in capital markets relating to securities, which started driving the price more aggressively, he said, adding that the Council needs to look at a risk-transfer product above the FHCF’s cash balance, which currently sits at $11 million.  He also stated such a product should have no gaps, multi-year capacities and the option to move up or down each year.   This option is still being considered, he related.

Dr. Nicholson said the pre-event notes worked well last year and this year’s edition is still very attractive.  He recommended that reinsurance should be considered, as long as markets are conducive and the FHCF is not affecting market price.  He indicated his belief that it would be wise for the FHCF to look at the risk management perspective, inasmuch as this approach is appropriate, timely and comes at a good opportunity.

Mr. Walker asked where Citizens Property Insurance Corporation (“Citizens”) stands with a similar program.  Dr. Nicholson responded that Citizens does not have clearance to transact more catastrophe bonds and traditional reinsurance, adding that “We need to stay out of their way.”

Council Member Campbell Cawood expressed his concern that reducing the FHCF bonding is short-term solution to a long-term problem.  Other Council Members agreed.

With no further business, the meeting adjourned.  


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