Florida Governor Charlie Crist signed the omnibus insurance bill (HB 1495) into law yesterday, along with 40 other bills. Over the next six years, this measure is intended to reduce the state’s property-catastrophe exposure to USD12 billion, with private reinsurers making up the difference.
Major provisions of the HB 1495:
- Maintain the USD10 million limited apportionment company coverage option that allows eligible insurers to purchase this coverage until December 31, 2011 (this provision was also included in HB 569 in the event the Bill didn’t pass or was vetoed)
- Reduce the Temporary Increase in Coverage Limit (TICL) layer by USD2 billion a year for the next six years to decrease the Florida Hurricane Catastrophe Fund (”FHCF”) exposure
- Increase TICL premium by a factor of 2 for the 2009 contract year and then by factors of 3, 4, 5, and 6 in subsequent contract years
- Reinstate the cash build-up factor for the mandatory FCHF layer increasing premium by 5 percent for the 2009 contract year and then by 10 percent, 15 percent, and 20 percent for subsequent contract years and finally 25 percent in 2013 and thereafter
- Require the FHCF to reduce its reimbursement amounts to insurers uniformly if the FHCF lacks sufficient funds to pay all claims
- Repeal the USD4 billion State Board of Administration-approved FHCF coverage program that (a) has never been offered and (b) would be additional TICL limit
- Cap Citizens Property Insurance Corporation (”Citizens”) rate increases at 10 percent per policyholder per year
- Allow Citizens to include the cost of the FHCF cash build-up factor in its rates, in addition to the 10 percent per policy per year increase
- Extend the required reduction of Citizens’ high-risk boundaries to December 21, 2010
- Permit insurers to recoup reinsurance costs in a regular rate filing by up to 10 percent for costs that correspond to replacing or financing TICL
Statements concerning, tax, accounting, legal or regulatory matters should be understood to be general observations based solely on our experience as reinsurance brokers and risk consultants, and may not be relied upon as tax, accounting, legal or regulatory advice which we are not authorized to provide. All such matters should be reviewed with your own qualified advisors in these areas.