Florida Catastrophic Storm Florida Catastrophic Storm Risk Management CenterRisk Management Center

OutlineOutline

Financial Situation of the Florida Financial Situation of the Florida Hurricane Catastrophe Fund (FHCF) Hurricane Catastrophe Fund (FHCF) 2008 vs. 20092008 vs. 2009

2009 Legislation2009 Legislation Implementation of the Florida Implementation of the Florida

Mitigation Discount ProgramMitigation Discount Program

October 2008 Obligations $29 BillionOctober 2008 Obligations $29 Billion Shortfall in Ability to Fund Shortfall in Ability to Fund

Obligations $15 – $18 BillionObligations $15 – $18 Billion October 2009 Obligations $23 BillionOctober 2009 Obligations $23 Billion Shortfall in Ability to Fund Shortfall in Ability to Fund

Obligations $7 BillionObligations $7 Billion What Changed? Improved Ability to What Changed? Improved Ability to

Borrow and LegislationBorrow and Legislation

Florida 2008 vs. 2009Florida 2008 vs. 2009Florida Hurricane Catastrophe FundFlorida Hurricane Catastrophe Fund

Property Insurance Legislation 2009Property Insurance Legislation 2009HB 1495 Cat Fund/Citizens Property Insurance HB 1495 Cat Fund/Citizens Property Insurance

PackagePackage Reduces the TICL layer to $10 billion for the 2009 contract Reduces the TICL layer to $10 billion for the 2009 contract

year (only $5.6 billion purchased) and reduces an additional year (only $5.6 billion purchased) and reduces an additional $2 billion per year until TICL is eliminated after the 2013 $2 billion per year until TICL is eliminated after the 2013 hurricane season. hurricane season.

Increases TICL premium by a factor of 2 for the 2009 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 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. 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 Allows the rate freeze to expire for Citizens Property Insurance Corporation, but caps annual increases to 10 Insurance Corporation, but caps annual increases to 10 percent per policyholder. Proposed implementation will also percent per policyholder. Proposed implementation will also allow decreases in certain territories but they are also allow decreases in certain territories but they are also capped at 10 percent. capped at 10 percent.

Requires the Florida Commission on Hurricane Loss Requires the Florida Commission on Hurricane Loss Projection Methodology Commission to hold public hearings Projection Methodology Commission to hold public hearings on mitigation discounts and to provide a report of on mitigation discounts and to provide a report of recommendations for improvements in the process of recommendations for improvements in the process of assessing, determining, and applying discounts. assessing, determining, and applying discounts.

HB 1171/SB 2036 Rate deregulation billHB 1171/SB 2036 Rate deregulation bill: Would have : Would have allowed insurers with significant surplus to issue a allowed insurers with significant surplus to issue a residential insurance policy not subject to OIR review for rate residential insurance policy not subject to OIR review for rate excessiveness. The Governor vetoed the bill.excessiveness. The Governor vetoed the bill.

Florida Mitigation DiscountFlorida Mitigation DiscountTimelineTimeline

1993 1993 Legislature Enacts Mitigation Statute Following Hurricane Legislature Enacts Mitigation Statute Following Hurricane

AndrewAndrew

19971997 Insurers Required to Meet or Exceed Specified Discounts Insurers Required to Meet or Exceed Specified Discounts

20002000 Discount Statute Expanded to Include Construction Techniques Discount Statute Expanded to Include Construction Techniques

20022002 Initial ARA Study Released Initial ARA Study Released

20032003 (February) Insurers Required to File Modified Discounts (50%) (February) Insurers Required to File Modified Discounts (50%)

20072007 (March) Insurers Required to File Modified Discounts (100%) (March) Insurers Required to File Modified Discounts (100%)

20072007 (June) Mandatory Discount Notice Form Updated (June) Mandatory Discount Notice Form Updated

20072007 OIR to Re-evaluate Discounts OIR to Re-evaluate Discounts

20082008 (October) ARA Updated Report (October) ARA Updated Report

Florida Office of Insurance RegulationFlorida Office of Insurance Regulation

Florida Office of Insurance Florida Office of Insurance Regulation’s Information Regulation’s Information Memorandum 02-0470M was Memorandum 02-0470M was issued June 6, 2002.issued June 6, 2002.

It advised insurers of the availability It advised insurers of the availability of the study of the study Development of Loss Development of Loss Relativities for Wind Resistive Relativities for Wind Resistive Features of Residential Structures Features of Residential Structures (ARA, March 2002).(ARA, March 2002).

Informational Memorandum OIR-03-Informational Memorandum OIR-03-001M issued January 23, 2003:001M issued January 23, 2003:

– Listed credits including a 50% Listed credits including a 50% tempering factortempering factor

Rule 690-170-017 Windstorm Mitigation Rule 690-170-017 Windstorm Mitigation Discounts was amended 12-17-06. Discounts was amended 12-17-06.

It required filings by March 2, 2007 and It required filings by March 2, 2007 and implemented credits at 100%.implemented credits at 100%.

It stated credits must be set forth in Form It stated credits must be set forth in Form OIR-B1-1699 and OIR-B1-1700 without any OIR-B1-1699 and OIR-B1-1700 without any modification unless supported by a detailed modification unless supported by a detailed alternate study.alternate study.

Informational Memorandum OIR-07-03M was Informational Memorandum OIR-07-03M was issued Feb. 27, 2007. Reminder of March 1, issued Feb. 27, 2007. Reminder of March 1, 2007, filing requirement of new windstorm 2007, filing requirement of new windstorm mitigation discounts. mitigation discounts.

2008 Florida Residential Wind Loss Mitigation 2008 Florida Residential Wind Loss Mitigation Study (ARA Final Report) has not been Study (ARA Final Report) has not been implemented.implemented.

1.1. Is there fraud in the inspection reports?Is there fraud in the inspection reports?

2.2. Should the model used in determining Should the model used in determining credits be the same one used for making credits be the same one used for making rates?rates?

3.3. Was moving the base to the worse risk Was moving the base to the worse risk appropriate?appropriate?

ProblemsProblems