No risk to Citizens reinsurance from Florida OIR temporary plan – Artemis.bm

The temporary insurance arrangement for carriers with reduced liability announced last week by Florida’s Office of Insurance Regulation (OIR) does not put Citizens Property Insurance Corporation’s risk transfer plan at risk for any claims or losses through the arrangement.

Last week the Florida Office of Insurance Regulation (OIR) announced plans to implement a temporary relief plan to help carriers who have been downgraded through Citizens Property Insurance Corporation.

The announcement was made without details, and this has led to market speculation and questions about how the interim plan will work.

Artemis has learned more about the system, which appears to have little to do with reinsurance. In fact, it is a type of guarantee that will see the citizens of Florida supporting the ability of everyone who is lowered, but the requirement is still possible, carriers to pay claims above and beyond the caps established by the Florida Insurance Guaranty Association (FIGA).

The Florida Insurance Guaranty Association (FIGA), a non-profit organization created by the Florida Legislature in 1970, acts and manages claims for insurance and casualty companies in the state.

When an insurance company is declared insolvent, the compensation provided will be paid by FIGA up to special caps for different businesses, which we understand to be $500,000 for residential damage purposes, $300,000 for condos, $300,000 for non-residential businesses. and $200,000 per unit of condo association policy.

The temporary reinsurance, or guarantee, plan announced by the OIR will see Citizens covered more than just the FIGA caps.

Therefore, if the carrier is lowered, as the number still appears, the truth Citizens will intervene and support the claims above the FIGA is expected to be seen as enough to be different from Fannie Mae and Freddie Mac, we. it is being told, meaning that the claims of the policyholders will be discussed.

If the downgrade occurs, the OIR will evaluate the Florida property insurance in question and if they meet the requirements to continue writing the business (seems to be possible), then they will enter into an agreement with the resident.

The idea of ​​this is to allow carriers to continue to work, because the association and the citizens in place can continue to help policy owners, including writing new business or renewal, even though their ratings are below the levels accepted by mortgage lenders.

Therefore, the policyholders can be whole, while the lowered carrier can work to be controlled at the higher level required, for any claims that are confirmed by Florida citizens, above the FIGA caps.

We are told that these claims, for which Citizens can be paid, cannot be losses under the remaining insurance policies or transfer risks, including its risk bonds.

Therefore, these reinsurance arrangements do not face any additional risk in the event of a hurricane and there have been a number of discounted carriers that may enter the Citizens helped add on.

If the carrier is in financial trouble, then the OIR will not consider their business to be sound after the downgrade and is expected to be liquidated in the normal way.

OIR’s interim provisions are designed to help insurance companies that appear to be viable businesses, but that have lost a significant level of real estate business in Florida.

In doing so, maintaining Florida’s property insurance market position, helping policyholders to maintain interest rates and avoiding policies that go to the Citizens own portfolio of risk.

FIGA will pay its share of claims up to a cap, while Citizens can pay above that level, which limits the number and amount of claims that can be made to Citizens.

It is also important to note that FIGA does not pay fines, so this system means that costs related to litigation will not return to citizens.

The claims have been paid on the first policy, so there is no need for the owner to switch to the Citizens policy.

We are told by market sources that in the event of a hurricane in Florida and causing a large number of complaints through any unloaded carriers, there is a remote risk of Citizens surplus being hit by the system, thus increasing the risk of assessment. to be paid, but all the sources we spoke to emphasized that this is far off.

The temporary arrangement is supposed to be in place until June 2023, with the hope that carriers who have been downgraded will be able to get their money back and that other changes to property insurance in Florida will, in the meantime, improve things in the state’s insurance market.

It seems like a smart way to ensure that many insurance businesses can survive the downturn, fewer policies are flooding citizens and policyholders don’t need to look for other options during a tough market.

Read all of our news and analysis of the Florida insurance and reinsurance market.

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