Florida Insurance Guaranty Association Board Approves Investment Strategy Changes, Third-Party Administrator Fee Schedule Revisions
Sep 6, 2011
The Florida Insurance Guaranty Association (“FIGA”) Board of Directors (“Board”) met via teleconference today, September 6, 2011.
Because of Standard and Poor’s recent downgrade of U.S. government securities, FIGA has determined it needs to make changes to its investment strategy. Whereas its current investment policy requires certain minimum securities ratings at the time of purchase, the new policy would apply to investments purchased after the downgrade.
FIGA’s Finance and Audit Committee, which met on August 23, recommended the following changes to the investment strategy:
- Bifurcate U.S. agency securities into two categories: guaranteed securities (those backed by the full faith and credit of the U.S. Treasury) and non-guaranteed securities (those not backed by the full faith and credit of the U.S. Treasury);
- Apply an “n/a” rating for guaranteed securities;
- Apply an “AA-/Aa3” rating for non-guaranteed securities (same as the rating for Corporate Bonds); and
- Clarify that the requirement that the minimum 25 percent of funds required to be invested in U.S. Treasury or agency securities only applies to guaranteed securities.
These revisions were adopted by the Board, which then considered an addendum to FIGA’s claims administration agreement. FIGA staff members recommended adding a component to the agreement’s fee schedule for claims in litigation during the stay of proceedings allowed under s. 631.67, FS.
Approximately 325 pending Personal Injury Protection-related claims from Seminole Casualty Insurance Company were in litigation as of the date of the company’s March 15, 2011 liquidation order. The order’s stay of proceedings will allow FIGA to review and resolve the claims during the stay period.
FIGA staff further recommended amending the fee schedule for third-party administrators to allow an additional $75 per file for claims resolved during the stay period. This will cover costs not contemplated under the original fee schedule for third-party administrators. It is believed that resolving claims during the stay period will ultimately result in a reduction of costs.
The addendum to FIGA’s Third-Party Administrator Fee Schedule was approved by the Board, which adjourned thereafter.
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