AdminFL.Hurricane (FHCF) Flashcards
What is FHCF?
Florida Hurricane Compensation Fund, a trust fund provides portion reimbursement to FL residential property insurers in case of a FL hurricane disaster
Reason of creation?
Hurricane Andrew caused billions of dollar losses
Unstable insurance market may have negative impact on FL economy
FHCF is to ensure stability of the market as an ongoing source of reimbursement
Why lower premium?
No profit margin
Exempt from federal taxes
Is participation mandatory?
Yes, if insurer is authorized to write policy for residential property.
What does it cover?
A percetage of losses between a defined layer retention and limit + 10% of allowance as LAE
Percentage is selected by insurer during contracting
How to determine the retention and limit?
Given a percentage, there will be
retention multiplier * insurer premium = retention level
Payout multiplier * insurer premium = Limit
Premium is actuarially determined based on insurer exposure and by line, construction type, zip code, acceptable hurricane loss projection model
How FHCF support the payout?
Recevie the actuarially determined premium, invest it, issue bond if payout is larger than cash resources and engage in risk transfer activities (such as pre-event debt) to ensure liquidity
FHCF’s responsibility
- Admin, financial operations, audit prep, claim examination, debt financing and legal
- Contract and oversee the external service prodiver (such as actuarial services)
- Relies on SBA (State borad of administration) for fund investment and IT services
- Advisory council provides guidance on the implementation of FHCF
Reimbursement to insurer is not limited. Explain
Potential obligation are limited by
- Cash resource
- risk transfer recoveries
- Amount FHCF can borrow from issueing bond
How oftern does FHCF recalculate payout capability?
Every May and October for next 12 and 24 months period
How issued bond being repaid?
FHCF will have emergency assessment on insurer’s premium. Some LOBs are exempt
Max assessment
6% of One year Loss
10% of multiple year losses
Who handles the bond issuance?
State board administration finance corp handles the technical part but still FHCF is responsible for it overall
How does FHCF meet the liquidity need?
Issue pre-event debt to have cash available for prompt payout. This doesn’t add to the total payout capacity as it will be paid back with interest soon.
