Outline • Financial Situation of the Florida Hurricane Catastrophe Fund (FHCF) 2008 vs. 2009 • 2009 Legislation • Implementation of the Florida Mitigation Discount Program
Florida 2008 vs. 2009Florida Hurricane Catastrophe Fund • October 2008 Obligations $29 Billion • Shortfall in Ability to Fund Obligations $15 – $18 Billion • October 2009 Obligations $23 Billion • Shortfall in Ability to Fund Obligations $7 Billion • What Changed? Improved Ability to Borrow and Legislation
Property Insurance Legislation 2009HB 1495 Cat Fund/Citizens Property Insurance Package • Reduces the TICL layer to $10 billion for the 2009 contract year (only $5.6 billion purchased) and reduces an additional $2 billion per year until TICL is eliminated after the 2013 hurricane season. • Increases TICL premium by a factor of 2 for the 2009 contract year, by a factor of 3 for 2010, by a factor of 4 for 2011, by a factor of 5 for 2012, and by a factor of 6 for 2013. • Allows the rate freeze to expire for Citizens Property Insurance Corporation, but caps annual increases to 10 percent per policyholder. Proposed implementation will also allow decreases in certain territories but they are also capped at 10 percent. • Requires the Florida Commission on Hurricane Loss Projection Methodology Commission to hold public hearings on mitigation discounts and to provide a report of recommendations for improvements in the process of assessing, determining, and applying discounts. • HB 1171/SB 2036 Rate deregulation bill: Would have allowed insurers with significant surplus to issue a residential insurance policy not subject to OIR review for rate excessiveness. The Governor vetoed the bill.
Florida Mitigation DiscountTimeline 1993 Legislature Enacts Mitigation Statute Following Hurricane Andrew 1997 Insurers Required to Meet or Exceed Specified Discounts 2000 Discount Statute Expanded to Include Construction Techniques 2002 Initial ARA Study Released 2003 (February) Insurers Required to File Modified Discounts (50%) 2007 (March) Insurers Required to File Modified Discounts (100%) 2007 (June) Mandatory Discount Notice Form Updated 2007 OIR to Re-evaluate Discounts 2008 (October) ARA Updated Report
Florida Office of Insurance Regulation’s Information Memorandum 02-0470M was issued June 6, 2002. It advised insurers of the availability of the study Development of Loss Relativities for Wind Resistive Features of Residential Structures (ARA, March 2002). Florida Office of Insurance Regulation
Informational Memorandum OIR-03-001M issued January 23, 2003: • Listed credits including a 50% tempering factor
Rule 690-170-017 Windstorm Mitigation Discounts was amended 12-17-06. • It required filings by March 2, 2007 and implemented credits at 100%. • It stated credits must be set forth in Form OIR-B1-1699 and OIR-B1-1700 without any modification unless supported by a detailed alternate study. • Informational Memorandum OIR-07-03M was issued Feb. 27, 2007. Reminder of March 1, 2007, filing requirement of new windstorm mitigation discounts. • 2008 Florida Residential Wind Loss Mitigation Study (ARA Final Report) has not been implemented.
Problems • Is there fraud in the inspection reports? • Should the model used in determining credits be the same one used for making rates? • Was moving the base to the worse risk appropriate?