Insurers push back in Temporary Increase in Coverage Limit fight

Aug 3, 2012

The following article was published in The Florida Current on August 3, 2012:

Insurers Push Back in TICL Fight

By Gray Rohrer

Upset over not being granted a waiver to avoid paying for optional state-backed reinsurance they say is unnecessary, two insurance companies are fighting back against the decision to block the waiver.

“We’re being placed in a position to buy unwanted, unfunded and duplicative reinsurance coverage,” said American Integrity Insurance Co. of Florida President and CEO Bob Ritchie.

American Integrity and American Coastal Insurance Co. reserved Temporary Increase in Coverage Limit (TICL) coverage from the Florida Hurricane Catastrophe Fund (Cat Fund) in March. As hurricane season approached, the companies decided to buy private reinsurance but did not opt out of TICL by the June 1 deadline. Both have filed a waiver to void their TICL coverage.

A third company, Cypress Property and Casualty Insurance Co., will follow suit and will soon file a waiver request. Cypress President and CEO Gary Harger said that Cat Fund chief operating officer Jack Nicholson did not notify him when rating agencies decided not to give credit for TICL coverage.

“At that time nobody knew what the reinsurance market would do in terms of pricing for TICL,” Harger said of the initial TICL reservation. “We are a buyer of reinsurance coverage from the Cat Fund and we can only do that if our rating agency gives us credit for it.”

Nicholson does not like TICL coverage because it is underfunded, but says he is bound by statute to collect premiums from companies that signed up for it.

According to a biannual report released in May, the Cat Fund could only pay for $15.56 billion in claims this year – short of the $17 billion mandatory coverage called for in law and the $317 million in additional TICL coverage. Nicholson claims he’s bound by statute to enforce their initial reservation for the coverage, and said that ignoring the deadline would provide an incentive to game the system.

“It’s stuff they chose and failed to change,” Nicholson said. “That’s why the deadline’s in the statute.”

But Ritchie points to a different statute he thinks should prompt Nicholson to grant the waiver.

Statute 120.542(2) states: “Variances and waivers shall be granted when the person subject to the rule demonstrates that the purpose of the underlying statute will be or has been achieved by other means by the person and when application of a rule would create a substantial hardship or would violate principles of fairness.”

American Integrity and American Coastal each missed their first payment on the TICL coverage on Wednesday. American Integrity missed a $1.3 million payment and American Coastal missed their $1 million first installment.

The State Board of Administration, which oversees the Cat Fund, has until Aug. 25 to grant the waivers. If not granted, the matter could wind up in administrative court, where the state could be arguing for TICL payments despite its phaseout in 2013.

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