Florida Catastrophic Storm Risk Management Center

Outline Financial Situation of the Florida Hurricane Catastrophe Fund (FHCF) 2008 vs Financial Situation of the Florida Hurricane Catastrophe Fund (FHCF) 2008 vs Legislation 2009 Legislation Implementation of the Florida Mitigation Discount Program Implementation of the Florida Mitigation Discount Program

October 2008 Obligations $29 Billion October 2008 Obligations $29 Billion Shortfall in Ability to Fund Obligations $15 – $18 Billion Shortfall in Ability to Fund Obligations $15 – $18 Billion October 2009 Obligations $23 Billion October 2009 Obligations $23 Billion Shortfall in Ability to Fund Obligations $7 Billion Shortfall in Ability to Fund Obligations $7 Billion What Changed? Improved Ability to Borrow and Legislation What Changed? Improved Ability to Borrow and Legislation Florida 2008 vs Florida Hurricane Catastrophe Fund

Property Insurance Legislation 2009 HB 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. 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 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 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. 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. 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. 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 Discount Timeline 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 Florida Office of Insurance Regulation’s Information Memorandum M was issued June 6, It advised insurers of the availability of the study Development of Loss Relativities for Wind Resistive Features of Residential Structures (ARA, March 2002).

Informational Memorandum OIR M issued January 23, 2003: –Listed credits including a 50% tempering factor

Rule Windstorm Mitigation Discounts was amended It required filings by March 2, 2007 and implemented credits at 100%. It required filings by March 2, 2007 and implemented credits at 100%. It stated credits must be set forth in Form OIR-B and OIR-B without any modification unless supported by a detailed alternate study. It stated credits must be set forth in Form OIR-B and OIR-B without any modification unless supported by a detailed alternate study. Informational Memorandum OIR-07-03M was issued Feb. 27, Reminder of March 1, 2007, filing requirement of new windstorm mitigation discounts. Informational Memorandum OIR-07-03M was issued Feb. 27, Reminder of March 1, 2007, filing requirement of new windstorm mitigation discounts Florida Residential Wind Loss Mitigation Study (ARA Final Report) has not been implemented Florida Residential Wind Loss Mitigation Study (ARA Final Report) has not been implemented.

1. Is there fraud in the inspection reports? 2. Should the model used in determining credits be the same one used for making rates? 3. Was moving the base to the worse risk appropriate? Problems