Florida Insurance Conference on Financial Reporting September 14, 2011 Florida P&C Guaranty Funds

1 Presenter Tom Streukens, Director of Operations American Guaranty Fund Group Representing: Florida Insurance Guaranty Association Florida Workers’ Compensation Insurance Guaranty Association

2 Presentation Overview 1)American Guaranty Fund Group Guaranty Fund Group 2)Florida Insurance Guaranty Association 3)Florida Workers’ Compensation Insurance Guaranty Association 4)Revenue Sources 5)Assessments Basis / Calculation 6)Assessment Over Recoupment 7)2010 and 2011 Legislation 8)Questions?

3 What is American Guaranty Fund Group?  Formed in 2004  Management company for FIGA and FWCIGA  Controlled by FIGA and FWCIGA  34 staff  Governed by a separate Board

4 Florida Insurance Guaranty Association  FIGA is a statutorily created nonprofit corporation established in 1970; its mission is to pay covered claims of property and casualty insolvent insurers (excluding workers’ compensation) Membership in FIGA is mandatory for all insurers as a condition of their authority to transact business in Florida FIGA is organized into two separate accounts:  Auto Account  All Other Insurance Account Statutorily limited to $300,000 (additional $200,000 for residential homeowner claims) Covers P&C lines not excluded by (i.e.: Fidelity, Surety, Credit, Surplus Lines, Title, Workers Compensation) Five to Nine Member Board (the Board currently consists of 7 members):  Board candidates are recommended by member insurers and approved by the Department of Financial Services  Members are all industry representatives  Members serve four year terms

5 Florida Workers’ Compensation Insurance Guaranty Association  FWCIGA is a statutorily created nonprofit corporation established in 1997; its mission is to pay covered claims of insolvent workers’ compensation insurers. Created by the merger of the workers’ compensation line from FIGA and the Florida Self Insurance Fund Guaranty Association Membership in FWCIGA is mandatory for all insurers as a condition of their authority to transact business in Florida No statutory cap for workers’ compensation claims and a $300,000 cap for employers liability claims Covers workers’ compensation and employee liability claims (effective 2010) Eleven Member Board (the Board currently consists of 10 members):  Insurance Consumer Advocate  CFO Designee  Nine board candidates are recommended by member insurers and approved by the Department of Financial Services  Members serve four year terms

6 Revenue Sources  FIGA and FWCIGA activities are funded from the following sources: Distributions of funds from assets of insolvent insurers Reimbursements from FHCF due the insolvent insurers for hurricane claims paid by FIGA Assessments are levied by OIR after certification by applicable Board: FIGA  Regular Assessment: maximum of 2% per year on each insurer’s net direct written premium  Emergency Assessment: provides up to an additional 2% per year on the “All Other” account to pay claims or debt incurred to pay claims of “insurers rendered insolvent by the effects of a hurricane” FWCIGA  Regular Assessment: maximum of 2% per year on each insurer’s and 1.5% on each self insurance funds net direct written premium  Emergency Assessment: provides up to an additional 1.5% per year on insurer’s and self insurance funds Investment Income earned on assets. Bonding (FIGA only) – Florida Insurance Assistance Interlocal Agency (FIAIA)

7 History of Insolvent Companies (2004 – Present)

8 Assessment Basis / Calculation  Net Direct Written Premium  Premium data is obtained from the Office of Insurance Regulation and the NCIGF based on statements filed with the NAIC  Board reviews cash needs at least annually for assessment determination purposes  Board certify the need for an assessment and OIR levies the assessment  FIGA had 7,094 open claims with outstanding reserves of $147 million as of June 30,  FWCIGA had 1,096 open claims with outstanding reserves of $260 million as of June 30,  Recent assessment history: FIGAFWCIGA 2010No assessmentNo assessment % regularNo assessment 2008No assessmentNo assessment 20072% regularNo assessment 20062% regularNo assessment 2% emergency 2005No assessment2% insurers / 1.5% SIF’s

9 FIGA Assessment Over Recoupment  2010 change gave insurers the option of remitting over recoupments to FIGA alleviating the administrative burden of returning very small amounts of monies to large numbers of policyholders.  Recoupment can only be remitted if it is 15% or less of the assessment paid by the insurer  Must be remitted within 60 days after the 12-month collection period  Informational filing to the OIR of final accounting no later than 90 days after completion of the recoupment process  Remittance to FIGA:  Check payable to the Florida Insurance Guaranty Association P.O. Box 14249, Tallahassee, FL  Include documentation supporting the over recoupment calculation and documentation supporting the OIR information filing (if completed).  If paying for multiple companies be sure to included individual company names and adequate support to determined the over recoupment amount by company.

and 2011 Legislation 2010 – HB 159 – Guaranty Associations (e ffective date: July 1, 2010)  (14) – transferred the responsibility for employers liability coverage from FIGA to the Florida Workers’ Compensation Insurance Guaranty Association with a $300,000 limit.  (2)(a) - Collapsed the auto liability and auto physical damage accounts into a single account  (3)(f) – streamlined the assessment recoupment process Factor selected by insurer to recoup over a 12 month or longer period Informational filing to the OIR 15 days before implementing recoupment factor Informational filing to the OIR of final accounting no later than 90 days after completion of the recoupment process If recoupment exceeds 15% of the assessment - return to policyholders If recoupment is 15% or less of the assessment – remit to FIGA 2011 – SB 408 – Property and Casualty Insurance  (3) – limits the payment of sinkholes claims to cost of testing and actual repairs. Claims for attorney fees, public adjuster fees or payment to policyholder are not covered claims.  95.11(2) – First party loss statute of limitation tied to date of loss  – Three year windstorm / hurricane notice requirement  (5) – Two year limitation on initial, supplemental or reopened sinkholes claims

11 Other  SSAP 35 Revision.  Adopted GAAP guidance (with some statutory modifications) for establishing liability for guaranty fund assessment.  The National Conference of Insurance Guaranty Funds (NCIGF) has a useful tool on its website to track guaranty fund assessments levied by all guaranty associations.

Thomas D. Streukens Director of Operation (850) Florida Insurance Guaranty Association