Exhibit 10.18
State Board of Administration
Of Florida
Post Office Box 13300
32317-3300
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REIMBURSEMENT CONTRACT
Effective: June 1, 2001
("Contract")
between
FEDERATED NATIONAL INSURANCE COMPANY
Ft. Lauderdale, FL
(the "Company")
NAIC #27980
and
THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA ("SBA") WHICH
ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND ("FHCF")
PREAMBLE
The Legislature of the State of Florida has enacted Section 215.555, Florida
Statutes, which directs the SBA to administer the FHCF. This Contract is subject
to the Statute and to any administrative rule adopted pursuant thereto, and is
not intended to be in conflict therewith.
In consideration of the promises set forth in this Contract, the parties agree
as follows:
ARTICLE 1 - SCOPE OF AGREEMENT
As a condition precedent to the SBA's obligations under this Contract, the
Company, an authorized insurer or any joint underwriting association or assigned
risk plan under Section 627.351, Florida Statutes, in the State of Florida,
shall report to the SBA in a specified format the business it writes which is
described in this Contract as Covered Policies.
The terms of this Contract shall determine the rights and obligations of the
parties. This Contract provides reimbursement to the Company under certain
circumstances, as described herein, and does not provide or extend insurance or
reinsurance coverage to any person, firm, corporation or other entity.
The SBA shall reimburse the Company for its Ultimate Net Loss on Covered
Policies in excess of the Company's Retention as a result of each Loss
Occurrence commencing during the Contract Year, to the extent funds are
available, all as hereinafter defined.
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ARTICLE II - PARTIES TO THE CONTRACT
This Contract is solely between the Company and the SBA which administers the
FHCF. In no instance shall any insured of the Company or any claimant against an
insured of the Company, or any other third party, have any rights under this
Contract, except as provide in Article XIV.
ARTICLE III - TERM
This Contract shall apply to Loss Occurrences which commence during the period
from 12:01 a.m., Eastern Daylight Time, June 1, 2001, to 12:01 a.m., Eastern
Daylight Time, June 1, 2002 (the "Contract Year").
The SBA shall not be liable for Loss Occurrences which commence after the
effective time and date of expiration or termination. Should this Contract
expire or terminate while a Loss Occurrence covered hereunder is in progress,
the SBA shall be responsible for such Loss Occurrence in progress in the same
manner and to the same extent it would have been responsible had the Contract
expired the day following the conclusion of the Loss Occurrence in progress.
ARTICLE IV - LIABILITY OF THE FHCF
(1) The SBA shall reimburse the Company, with respect to each Loss Occurrence
commencing during the Contract Year for the "Reimbursement Percentage"
elected, that percentage times the amount of Ultimate Net Loss paid by
the Company in excess of the Company's Retention, plus 5% of the
reimbursed losses for Loss Adjustment Expense Reimbursement.
(2) The Reimbursement Percentage will be 45% or 75% or 90%, at the Company's
option as elected under Schedule A attached to and forming part of this
Contract, unless it must be adjusted for some or all Companies in the
FHCF as provided in (3) below.
(3) In determining reimbursements under this Article, the SBA shall:
(a) First, reimburse Companies qualified as limited apportionment
companies under Section 627.351(2)(b)3., Florida Statutes, for the
amount (if any) of reimbursement due under the individual
company's reimbursement contract, but not to exceed the lesser of
$10 million or an amount equal to 10 times the individual
company's Reimbursement Premium for the Contract Year. This
provision does not apply if the year-end projected balance of the
FHCF, exclusive of any bonding capacity of the FHCF, exceeds $2
billion. Further, if the Company is a member of a group, the
Company may not receive reimbursement under this provision if any
other member of the group has received reimbursement under this
provision.
(b) Next, reimburse each of the Companies for the amount (if any) of
reimbursement due under the individual company's reimbursement
contract, but not to exceed an amount equal to the Projected
Payout Multiple times the individual company's Reimbursement
Premium for the Contract Year, provided, however, that entities
created under Section 627.351, Florida Statutes, shall be further
reimbursed in accordance with subsection (c) below. If the Company
qualifies as a limited apportionment company under Section
627.351(2)(b)3., Florida Statutes, any amount payable under this
provision shall be reduced by the amount (if any) payable under
(a) above.
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(c) Thereafter, reimburse each entity created by Section 627.351,
Florida Statutes, for a pro rata share of any remaining Actual
Claims-Paying Capacity of the FHCF based on the proportion that
such entity's remaining reimbursable losses under Covered Policies
from Covered Events for the Contract Year bear to the total
remaining reimbursable losses under Covered Policies from Covered
Events for the Contract Year, for which any remaining FHCF balance
or bond proceeds are sufficient, up to a limit of $11 billion for
any one Contract Year, in accordance with Section 215.555, Florida
Statutes.
(4) Reimbursement amounts shall not be reduced by reinsurance paid or payable
to the Company from other sources; however, the Company shall not allow
recoveries from such other sources, except reinsurance recoveries from
affiliated insurers and/or reinsurers, taken together with reimbursements
under this Contract, to exceed 100% of the Company's losses under Covered
Policies from Covered Events. If such recoveries and reimbursements
exceed 100% of the Company's losses under Covered Policies from Covered
Events, and if there is no agreement between the Company and its
reinsurer(s) to the contrary, any amount in excess of 100% of the
Company's losses under Covered Policies from Covered Events shall be
returned to the SBA.
(5) Annually, the SBA shall notify the Company of the FHCF's estimated
Borrowing Capacity for the next contract year, the projected year-end
balance of the FHCF, and the Company's estimated share of total
reimbursement premium to be paid to the FHCF for the Contract Year. In
May and October of each year, the SBA shall publish in the Florida
Administrative Weekly a statement of the FHCF's estimated borrowing
capacity and the projected year-end balance of the FHCF..
(6) The obligation of the SBA with respect to all reimbursement contracts
covering a particular year shall not exceed the balance of the FHCF as of
December 31 of that contract year, together with the maximum amount the
SBA is able to raise through the issuance of revenue bonds or other means
available to the SBA under Section 215.555, Florida Statutes, up to a
limit of $11 billion for any one contract year. The obligations and the
liability of the SBA are more fully described in Rule 19-8.013, Florida
Administrative Code (F.A.C.). If reimbursement premiums are used for debt
service in the event of a temporary shortfall in the collection of
emergency assessments, then the amount of the premiums so used will be
reimbursed to the SBA when sufficient emergency assessments are received.
ARTICLE V - DEFINITIONS
(1) Actual Claims-Paying Capacity of the FHCF
This term means the sum of the balance of the FHCF as of December 31 of a
Contract Year, plus any reinsurance purchased by the FHCF, plus the
amount the SBA is able to raise through the issuance of revenue bonds up
to a limit of $11 billion pursuant to Sections 215.555(4)(c) and (6),
Florida Statutes.
(2) Actuarially Indicated
This term means, with respect to Premiums paid by insurers for
reimbursement provided by the FHCF, an amount determined in accordance
with the definition provided in Section 215.555(2)(a), Florida Statutes.
(3) Administrator
This term means the entity with which the SBA contracts to perform
administrative tasks associated with the operations of the FHCF. The
present Administrator is Paragon Reinsurance Risk Management Services,
Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The telephone
number is (▇▇▇) ▇▇▇-▇▇▇▇, and the facsimile number is (▇▇▇) ▇▇▇-▇▇▇▇.
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(4) Authorized Insurer
This term is defined in Section 624.09(1), Florida Statutes.
(5) Borrowing Capacity
This term means the amount of funds which are able to be raised by the
issuance of revenue bonds or through other financial mechanisms.
(6) Contract
This term means this Reimbursement Contract for the current Contract
Year.
(7) Covered Event
This term means any one storm declared to be a hurricane by the National
Hurricane Center, which causes insured losses in Florida, both while it
is still a hurricane and throughout any subsequent downgrades in storm
status by the National Hurricane Center. Any storm, including a tropical
storm, which does not become a hurricane is not a Covered Event.
(8) Covered Policy
(a) This term means only that portion of a binder, policy or contract
of insurance ("Policy Contract") that insures real or personal
property located in the State of Florida to the extent of such
Policy Contract insures a residential structure or the contents of
a residential structure located in the State of Florida. For
purposes of this Contract, "residential" means habitational
structures and includes personal lines residential coverages,
commercial lines residential coverages, and mobile home coverages.
1. The term "covered policy" does not include any excess policy
that contains coverage for non-habitational property or
non-Florida property. "Excess policy," for purposes of the
FHCF, means insurance protection for large commercial
property risks that provides a layer of coverage above a
primary layer that acts much the same as a very large
deductible. The primary layer is insured through another
policy. The excess policy does not reimburse losses unless
the losses exceed the primary layer. Several excess policies
may be used to cover high value properties, each with
different but coordinating primary layers.
2. For personal lines residential coverages report Coverage A
(dwelling), B (appurtenant structures), and/or C (contents)
exposure and any increases to these coverages.
3. For commercial lines residential coverages, include all
Coverage A (dwelling), B (appurtenant structures), and/or C
(contents) exposure which directly covers, or is used in
relation to, covered habitational structures and any
additional coverages or coverage extensions which increase
the limit of coverage for habitational structure. Some of
the coverages may include, but are not limited to, valuable
papers, signs, moneys and securities, outdoor property,
personal effects, and fine arts. Also report Coverage A, B,
and/or C exposure which directly covers, or is used in
relation to, habitational structures covered under a
farmowners policy. Additional coverages: Report exposure
from additional coverages and coverage extensions only if
such coverages increase the limit of coverage provided
under Coverages A, B, and C and is directly related to the
covered habitational structure.
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(b) Residential structures (personal lines residential, commercial
residential, and mobile home) are those dwelling units used as a
home, residence or sleeping place for other than short-term,
transient occupancy, as that term is defined in Sections 83.43(10)
and 509.013(11), Florida Statutes. These include the primary
structure and appurtenant structures, including the contents
therein, insured under the same policy and any other structure or
contents covered under endorsements associated with a policy
covering a residential structure, the principal function of which
at the time of loss was as a primary or secondary residence.
(c) Because of the specialized nature of the definition of Covered
Policies, Covered Policies are not limited to only one line of
business in the Company's annual statement required to be filed by
Section 624.424, Florida Statutes. Instead, Covered Policies are
found in several lines of business on the Company's annual
statement. Covered Policies will at a minimum be reported in the
Company's statutory annual statement as:
-Fire
-Allied Lines
-Farmowners Multiple Peril
-Homeowners Multiple Peril
-Commercial Multiple Peril (non
liability portion, covering
condominiums and apartments)
-Inland Marine
(d) Specific companies will report Covered Policies in other lines of
business, as their specific situation requires. Note, however,
that where particular insurance exposures are reported on an
annual statement is not dispositive of whether or not the exposure
is a Covered Policy. This definition applies only to the
first-party property section of Policy Contracts pertaining
strictly to the structure or its contents. Insured losses from
coverages other than those pertaining strictly to damage to the
structure or its contents, that may be afforded under Policy
Contracts, are not reimbursable under this Contract.
(9) Estimated Claims-Paying Capacity of the FHCF
This term means the sum of the projected year-end balance of the FHCF as
of December 31 of a contract year, plus any reinsurance if purchased by
the FHCF, plus the most recent estimate of the borrowing capacity of the
FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes.
(10) Florida Department of Insurance (DOI)
This term means that Florida regulatory agency charged with regulating
the Florida insurance market which is established in Section 20.13,
Florida Statutes, and administers the Florida Insurance Code.
(11) Florida Insurance Code
This term means those chapters in Section 624.01, Florida Statutes, which
are designated as the Florida Insurance Code.
(12) Florida Residential Property and Casualty Joint Underwriting Association
(JUA) The term refers to an entity formed under Section 627.351(6),
Florida Statutes.
(13) Florida Windstorm Underwriting Association (FWUA)
This term refers to an entity formed under Section 627.351(2), Florida
Statutes.
(14) Formula or the Premium Formula
This term means the formula approved by the SBA for the purpose of
determining the Actuarially Indicated Premium to be paid to the FHCF. The
Premium Formula is defined as an approach or methodology which leads to
the creation of premium rates. The resulting rates are therefore
incorporated as part of the Premium Formula and are the result of the
approach or methodology employed.
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(15) Fund Balance as of 12/31
This term means the "Fund balance: Unrestricted" as indicated on the
unconsolidated FHCF Balance Sheets for the then current Contract Year, to
which is added: reported FHCF losses (including loss adjustment expense)
for the then current Contract Year, whether paid or unpaid by FHCF, as of
December 31, and from which is subtracted: any reinsurance recovered
prior to, or recoverable as of, December 31; any obligations paid or
expected to be paid with bonding proceeds or receipts from emergency
assessments.
(16) Ground-up Losses
This term means all losses under the "Covered Policy" definition
including losses which would otherwise be considered part of the
Company's retention.
(17) Insurer Group
For purposes of the coverage option election in Section 215.555(4)(b),
Florida Statutes, "Insurer Group" means the group designation assigned by
the National Association of Insurance Commissioners (NAIC) for purposes
of filing consolidated financial statements. An insurer is a member of a
group as designated by the NAIC until such insurer is assigned another
group designation or is no longer a member of a group recognized by the
NAIC.
(18) Joint Underwriting Association (JUA)
This term means any entity created under Section 627.351, Florida
Statutes, and which engages in the writing of Covered Policies.
(19) Loss Occurrence
This term means the sum of individual insured losses incurred under
Covered Policies resulting from the same Covered Event. "Losses" means
direct incurred losses under Covered Policies, excluding losses
attributable to additional living expense and business interruption
coverages and excluding Loss Adjustment Expenses.
(20) Loss Adjustment Expense Reimbursement
(a) Loss Adjustment Expense Reimbursement shall be 5% of the
reimbursed losses under this Contract as provided in Article IV,
pursuant to subsection (4)(b)1. of Section 215.555, Florida
Statutes.
(b) To the extent that loss reimbursements are limited to the payout
multiple applied to each Company, the 5% Loss Adjustment Expense
is included in the total payout multiple applied to each Company.
The Loss Adjustment Expense Reimbursement will not be paid in
addition to payments for other loss reimbursements.
(21) Payout Multiple
This term means the multiple derived by dividing the claims-paying
capacity of the FHCF by the total industry Reimbursement Premium for the
FHCF for the Contract Year billed as of 12/31 of the Contract Year. The
multiple is finally determined once reimbursement premiums have been
billed as of 12/31 and the amount of bond proceeds has been determined.
(22) Premium
This term means the same as Reimbursement Premium, which is the premium
determined by multiplying each $1,000 of insured value reported by the
Company in accordance with Section 215.555(5)(b), Florida Statutes, by
the rate as derived from the Premium Formula.
(23) Projected Payout Multiple
The Projected Payout Multiple is used to calculate an insurer's projected
payout pursuant to Section 215.555(4)(d)2.b., Florida Statutes. The
Projected Payout Multiple is derived by dividing the estimated single
season Claims-Paying Capacity of the FHCF by the estimated total industry
Reimbursement Premium for the FHCF for the Contract year. The Company's
Reimbursement Premium as paid to the SBA for the Contract Year is
multiplied by the Projected Payout Multiple to estimate the Company's
coverage from the FHCF for the Contract Year. The SBA will pay no
reimbursement for any losses under this Contract unless the Company
incurs losses from Covered Events for Covered Policies in excess of its
FHCF retention.
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(24) Retention
The Company's Retention means the amount of hurricane loss incurred by an
insurer below which an insurer is not entitled to reimbursement from the
FHCF. An insurer is eligible for reimbursement only after its paid
covered losses exceed the retention level established for that insurer.
An insurer's retention level is established in accordance with the
provisions of subsection (2)(e) of Section 215.555, Florida Statutes. The
Company's Retention shall be determined by multiplying the Retention
Multiple by the Company's Reimbursement Premium for the Contract Year.
(25) Retention Multiple
(a) The Retention Multiple is applied to the Company's Reimbursement
Premium to determine the Company's Retention. The Retention
Multiple for the Contract Year shall be equal to $3 billion,
adjusted to reflect the percentage growth in FHCF exposure for
covered policies since 1998, divided by the estimated total
industry Reimbursement Premium at the 90% Reimbursement Percentage
level for the Contract Year as determined by the SBA.
(b) The Retention Multiple as determined under (25)(a) above shall be
adjusted to reflect the Reimbursement Percentage elected by the
Company under this Contract as follows:
1. If the Company elects a 90% Reimbursement Percentage, the
adjusted Retention Multiple is 100% of the amount
determined under (25)(a) above;
2. If the Company elects 75% Reimbursement Percentage, the
adjusted Retention Multiple is 120% of the amount
determined under (25)(a) above; or
3. If the Company elects a 45% Reimbursement Percentage, the
adjusted Retention Multiple is 200% of the amount
determined under (25)(a) above.
(26) Ultimate Net Loss
(a) The term means the Company's actual loss (excluding loss
adjustment expense) arising from each Loss Occurrence during the
Contract Year, provided, however, that the Company's loss shall be
determined in accordance with the deductible levels reported to
the FHCF for the exposure sustaining the loss.
(b) Salvages and all other recoveries, excluding reinsurance
recoveries, shall be first deducted from such loss to arrive at
the amount of liability attaching hereunder.
(c) All salvages, recoveries or payments recovered or received
subsequent to a loss settlement under this Contract shall be
applied as if recovered or received prior to the aforesaid
settlement and all necessary adjustments shall be made by the
parties hereto.
(d) Nothing in this clause shall be construed to mean that losses
under this Contract are not recoverable until the Company's
Ultimate Loss has been ascertained.
(e) The SBA shall be subrogated to the rights of the Company to the
extent of its reimbursement of the Company. The Company agrees to
assist and cooperate with the SBA in all respects as regards such
subrogation. The Company further agrees to undertake such actions
as may be necessary to enforce its rights of salvage and
subrogation, and its rights, if any, against other insurers as
respects any claim, loss, or payment arising out of a Covered
Event.
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ARTICLE VI - EXCLUSIONS
This Contract does not provide reimbursement for:
(1) All business not defined as being within the scope of this Contract.
(2) Any reinsurance assumed by the Company.
(3) Any liability assumed by the Company from Pools, Associations and
Syndicates. Exception: Covered Policies assumed from the JUA and from the
FWUA under the terms and conditions of an executed assumption agreement
between the authorized insurer and either such association are covered by
this Contract.
(4) All liability of the Company arising by contract, operation or law, or
otherwise, from its participation or membership, whether voluntary or
involuntary, in any insolvency fund. "Insolvency Fund" includes any
guaranty fund, insolvency fund, plan, pool, association, fund or other
arrangement, howsoever denominated, established or governed, which
provides for any assessment of or payment or assumption by the Company of
part of all of any claim, debt, charge, fee, or other obligation of an
insurer, or its successors or assigns, which has been declared by any
competent authority to be insolvent, or which is otherwise deemed unable
to meet any claim, debt, charge, fee or other obligation in whole or in
part.
(5) Any liability of the Company for loss or damage caused by or resulting
from nuclear reaction, nuclear radiation, or radioactive contamination
from any cause, whether direct or indirect, proximate or remote, and
regardless of any other cause or event contributing concurrently or in
any other sequence to the loss.
(6) Any liability of the Company for extra contractual obligations and excess
of original policy limits liabilities.
(7) Any policy meeting the definition contained in Section 624.6085, Florida
Statutes, regarding collateral protection insurance.
(8) Losses in excess of the sum of the funds which are available at 12/31 of
the Contract Year and the amount the SBA is able to raise through the
issuance of revenue bonds or by the use of other financial mechanisms, up
to a limit of $11 billion, pursuant to Section 215.555(4)(c), Florida
Statutes.
(9) Any policy which excludes wind or hurricane coverage.
(10) The FHCF provides coverage for losses caused by any one storm declared to
be a hurricane by the National Hurricane Center which causes losses in
the state which damages the primary structure, appurtenant structures,
and/or contents, as provided in the definition of Covered Policy, and
which causes an opening in a roof or wall through which the rain enters
through this opening. The FHCF does not provide coverage for water damage
which is generally excluded under property insurance contracts and has
been defined to mean flood, surface water, waves, tidal water, overflow
of a body of water, or spray from any of these whether or not driven by
wind.
(11) Any "excess policy" that contains coverage for non-habitational property
or non-Florida property.
ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES
The Company shall investigate and settle or defend all claims and losses. All
payments of claims or losses by the Company within the terms and limits of the
appropriate coverage parts of Covered Policies shall be binding on the SBA,
subject to the terms of this Contract, including the provision in Article XIII
relating to inspection of records and audits.
ARTICLE VIII - PAYMENT ADJUSTMENT
(1) Offsets
Section 215.555(4)(d)1., Florida Statutes, provides the SBA with the
right to offset amounts due and payable to the SBA from the Company
against any reimbursement amounts due and payable to the Company from the
SBA as a result of the liability of the SBA.
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(2) Reimbursement Adjustments
Section 215.555(4)(d)1., Florida Statutes, provides the SBA with the
right to seek the return of excess loss reimbursements which have been
paid to the Company. Excess loss reimbursement are those payments made to
the Company by the SBA on the basis of incorrect exposure submissions or
resubmissions, incorrect calculations of reimbursement premiums or
retentions, incorrect proof of loss reports, incorrect calculation of
reinsurance recoveries, or subsequent readjustment of policyholder
claims, including subrogation and salvage, or any combination of the
foregoing. Regarding incorrect reinsurance recoveries, please see also
Article X(3)(b)4.
ARTICLE IX - REIMBURSEMENT PREMIUM
(1) The Company shall, in a timely manner, pay the SBA its Reimbursement
Premium for the Contract Year. The annual Reimbursement Premium for the
Contract Year shall be calculated in accordance with Section 215.555,
Florida Statutes with any rules promulgated thereunder, and with Article
X(2).
(2) Since the calculation of the actuarially-indicated premium assumes that
the Companies will pay their reimbursement premiums timely, interest
charges will accrue under the following circumstances. If a Company
chooses to estimate its own premium installments, then an interest charge
will accrue on any premium which is underestimated. No interest will
accrue regarding any provisional premium, if paid as billed by the FHCF's
Administrator. However, if the premium payment is not received from a
Company when it is due, an interest charge will accrue on a daily basis
until the payment is received. An interest credit will be applied for any
premium which is overpaid as either an estimate or as a provisional
premium. Interest shall not be credited past December 1 of any contract
year. The applicable interest rate for interest credits will be the
projected average rate earned by the SBA for the FHCF for the first six
months of the Contract Year. The applicable interest rate for interest
charges will accrue at this rate plus 3%.
ARTICLE X - REPORTS AND REMITTANCES
(1) Exposures
(a) If the Company writes Covered Policies on or before June 1 of the
Contract Year, the Company shall report to the SBA, unless
otherwise provided in Rule 19-8.029, F.A.C., no later than the
statutorily required date of September 1 of the Contract Year, by
zip code or other limited geographical area as specified by the
SBA, its insured values under Covered Policies as of June 30 of
the Contract Year, and other data or information in the format
specified by the SBA.
(b) If the Company first begins writing Covered Policies after June 1
but prior to December 1 of the Contract Year, the Company shall
report to the SBA, no later than March 1 of the Contract Year, by
zip code or other limited geographical area as specified by the
SBA, its insured values under Covered Policies as of December 31
of the Contract Year, and other data or information in the format
specified by the SBA.
(c) If the Company first begins writing Covered Policies on or after
December 1 but through and including May 31 of the Contract Year,
the Company shall not report its exposure data for the Contract
Year to the SBA.
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(d) The requirements in (a) and (b), above, that reports are due on
September 1 and March 1, as applicable, means that the report
shall be in the physical possession of the FHCF's Administrator
in Minneapolis no later than 5 p.m., Central Time, on September
1 or March 1, as applicable. If September 1 or March 1 is a
Saturday, Sunday or legal holiday, and if September 1 or March
1's being a Saturday, Sunday or legal holiday means that neither
the United States Postal Service nor private delivery services
are operating that day, then the applicable due date will be the
day immediately following September 1 or March 1, as applicable,
which is not a Saturday, Sunday or legal holiday. For purposes
of the timeliness of the submission, neither United States
Postal Service postmark nor a postage meter date is in any way
determinative. Reports sent to the SBA in Tallahassee, Florida,
will be returned to the sender. Reports not in the physical
possession of the FHCF's Administrator by 5 p.m., Central Time,
on the applicable due date are late.
(e) Confidentiality of exposure reports. Pursuant to the provisions
of Section 215.557 Reports of insured values, the reports of
insured values under covered policies by zip code submitted to
the State Board of Administration pursuant to Section 215.555, as
created by s. 1., ch. 93-409, Laws of Florida, or similar
legislation, are confidential and exempt from the provisions of
Section 119.07(1) and section 24(a), Art. I of the State
Constitution. This exemption is subject to the Open Government
Sunset Review Act in accordance with Section 119.04, Florida
Statutes.
(2) Reimbursement Premium
(a) If the Company writes Covered Policies on or before June 1 of
the Contract Year, the Company shall pay the FHCF its
Reimbursement Premium in installments due on or before August 1,
October 1 and December 1 of the Contract Year in amounts to be
determined by the FHCF. However, if the Company's Reimbursement
Premium for the prior Contract Year was less than $5,000, the
Company's full provisional Reimbursement Premium, in an amount
equal to the Reimbursement Premium paid in the prior year, shall
be due in full on or before August 1 of the Contract Year. The
Company will be invoiced for amounts due, if any, beyond the
provisional Reimbursement Premium payment, on or before 12/1 of
the Contract Year.
(b) If the Company first begins writing Covered Policies after June
1 but prior to December 1 of the Contract Year, the Company
shall pay the FHCF a provisional Reimbursement Premium of $1,000
upon execution of this Contract. The Administrator shall
calculate the Company's actual reimbursement premium for the
period after June 1 and through December 31 based on its actual
exposure, as reported on March 1. To recognize that New
Companies have limited exposure during this period, the actual
premium as determined by processing the Company's exposure data
shall then be divided in half, the provisional premium shall be
credited, and the resulting amount shall be the total premium
due for the Company for the remainder of the Contract Year.
However, if that amount is less than $1,000.00, then the Company
shall pay $1,000.00. The premium payment is due no later than
May 1 of the Contract Year. The Company's Retention and Coverage
will be determined based on the total premium due as calculated
above.
(c) If the Company first begins writing Covered Policies on or after
December 1 but through and including May 31 of the Contract
Year, the Company shall pay the FHCF a Reimbursement Premium of
$1,000 upon execution of this Contract. The Company shall pay no
other Reimbursement Premium for the Contract Year.
(d) The requirement that the Reimbursement Premium is due on a
certain date means that the Premium shall be in the physical
possession of the FHCF no later than 5 p.m., Eastern Time, on
the due date applicable to the particular installment. If
remitted by check to the FHCF's Post Office Box, the check shall
be physically in the Post Office Box 550261, Tampa, FL
10
33655-0261, as set out on the invoice sent to the Company. If
remitted by check by hand delivery, the check shall be
physically on the premises of the FHCF's bank in Tampa, Florida,
as set out on the invoice sent to the Company. If remitted
electronically, the wire transfer shall have been completed to
the FHCF's account at its bank in Tampa, Florida. If the
applicable due date is a Saturday, Sunday or legal holiday, and
if the due date's being a Saturday, Sunday or legal holiday
means that neither the United States Postal Service nor private
delivery services are operating that day and if the due date's
being a Saturday, Sunday or legal holiday means that electronic
wire transfers cannot be completed, then the applicable due date
will be the day immediately following the applicable due date
which is not a Saturday, Sunday or legal holiday. For purposes
of the timeliness of the remittance, neither the United States
Postal Service postmark nor a postage meter date is in any way
determinative. Premium checks sent to the SBA in Tallahassee,
Florida, or to the FHCF's Administrator in Minneapolis,
Minnesota, will be returned to the sender. Reimbursement
Premiums not in the physical possession of the FHCF by 5 p.m.,
Easter Time, on the applicable due date are late.
(3) Claims and Losses
(a) In General
1. Claims and losses resulting from Loss Occurrences
commencing during the Contract Year shall be reported by
the Company and reimbursed by the FHCF as provided herein
and in accordance with the Statute, with this Contract,
and any rules adopted pursuant to the Statute.
2. Pursuant to Section 215.555(4)(c), Florida Statutes, the
SBA is obligated to pay losses not to exceed the Actual
Claims-paying Capacity of the FHCF, up to a limit of $11
billion for any one Contract Year.
(b) Claims Reports
1. At the direction of the SBA, the Company shall report its
ground-up losses for Covered Policies from each Covered
Event to provide information to the SBA in determining any
potential liability for possible reimbursable losses under
the Contract on the Interim Loss Report, Form FHCF-L1A, as
adopted in Rule 19-8.029, F.A.C.
2. No later than December 31 of the Contract Year, the
Company shall report to the FHCF its Ultimate Net Loss
with respect to each Loss Occurrence from the beginning of
the Contract Year on the Proof of Loss Report, Form
FHCF-L1B, as adopted in Rule 19-8.029, F.A.C.
3. Quarterly thereafter until all claims and losses resulting
from Loss Occurrences commencing during the Contract Year
are fully discharged, the Company shall render to the FHCF
revised reports of the actual amount of Ultimate Net Loss
incurred and paid to date by the Company with respect to
each Loss Occurrence commencing during the contract Year.
If the Company's retention must be recalculated as the
result of an exposure resubmission and if the
newly-recalculated retention changes the FHCF's
reimbursement obligations, then the Company shall submit
add itional reports of claims and losses for recalculation
of the FHCF's obligations.
4. Such reports shall include the actual or anticipated
reinsurance recoveries from non-affiliated insurers and/or
reinsurers on the Company's Ultimate Net Loss, and a
certification that such recoveries, together with the
actual or anticipated reimbursement from the FHCF shall
not exceed 100% of the Company's losses under Covered
Policies from Covered Events.
11
5. The SBA will determine and pay, as soon as practicable
after receiving Proof of Loss Reports described and adopted
in Rule 19-8.029, F.A.C. the reimbursement amount due based
on losses paid by the Company to date and adjustments to
this amount based on subsequent quarterly information. The
adjustments to reimbursement amounts shall require the SBA
to pay, or the Company to return, amounts reflecting the
most recent determination of losses.
6. Initial or quarterly reports received on or before the due
date for that report will be reimbursed within 30 days
following the due date or as soon as practicable after the
receipt of the report and verification of the reported
losses. Those received after the initial or quarterly
reporting due date will be reimbursed within 30 days
following the due date or as soon as practicable after the
receipt of the report and verification of the reported
losses.
7. If a Covered Event occurs during the Contract Year, but
after 12/31, Companies shall report their losses as soon as
practicable thereafter and the FHCF shall begin to
reimburse Companies for paid losses as soon as the losses
are reported and the FHCF has established the availability
of the moneys to pay the reimbursements. The FHCF shall
determine the schedule for reporting losses for Covered
Events after 12/31 by taking into consideration the date or
dates of the Covered Event's occurrence; its size;
severity; windspeeds; forward track; occurrence of
tornadoes or flooding as a result of the Covered Event;
geographical area impacted; and ability of adjusters to
assess the damage.
8. All loss reports received will be compared with the FHCF's
exposure data to establish the facial reasonableness of the
reports. Preliminarily, the FHCF will examine the reported
losses to determine whether reported losses exceed reported
exposure in the affected counties; whether the Company has
reported a low concentration of exposure in the affected
counties; and whether the ground-up loss as a percentage of
exposure in affected counties is significantly higher than
the average. Companies meeting these tests for
reasonableness will be scheduled for reimbursement.
Companies not meeting these tests for reasonableness will
be handled on a case-by-case basis and will be contacted to
provide specific information regarding their individual
book of business.
(c) Claims Reimbursement Calculations
1. In General. An insurer's covered paid losses must exceed
its FHCF retention as determined in accordance with Section
215.555(2)(e), Florida Statutes, before any reimbursement
is payable from the FHCF. If more than one Covered Event
occurs in any one Contract Year, any reimbursements due
from the FHCF shall take into account the separate
retention requirement for each insurer for each Covered
Event, as that term is defined in subsection (2)(b) of
Section 215.555, Florida Statutes.
2. Exhaustion of claims-paying capacity. This section of
Article X provides procedures for reimbursing insurers for
losses from Covered Events in those situation in which the
SBA determines, pursuant to Section 215.555(6)(a), Florida
Statutes, and Rule 19-8.013, F.A.C., that reimbursable
losses from a Covered Event are likely to exhaust the
available claims-paying capacity of the FHCF. The
"claims-paying capacity" is the total of the balance of the
FHCF as of 12/31 of the Contract Year in which the Covered
Event occurs plus the amount the SBA is able to raise, to
12
the extent allowed by law, through the issuance of bonds,
by purchasing reinsurance or through the incurrence of
other indebtedness, up to the statutory limit of $11
billion for any one Contract Year. In that situation, each
insurer sustaining reimbursable losses will receive the
amount of reimbursement due under the reimbursement
contract up to the amount of the insurer's payout, based on
the payout multiple, as calculated in accordance with
subsections (4)(c) and (4)(d)2.b. of Section 215.555,
Florida Statutes, and as defined in Article V(21) of this
Contract. For purposes of the projected payout calculation,
the "actual premium paid for that contract year," as
referenced in subsection (4)(d)2.b. of Section 215.555,
Florida Statutes, shall be the premium billed by the FHCF
as of December 31 of the Contract Year. Thereafter,
payments for additional reimbursable losses will be
available only to entities created under Section 627.351,
Florida Statutes, and will be based on a pro rata share of
the outstanding losses to the extent of any funds available
up to the $11 billion limitation. In order to determine the
amount available for payment of reimbursable losses on a
pro rata basis for entities created under Section 627.351,
Florida Statutes, the SBA will review reported loss
information from all insurers and determine that all
insurers which received payments for reimbursable losses
but which did not exceed their projected payout have
settled all, or substantially all, of their claims eligible
for reimbursement. The SBA will then determine the
remaining amount of claims-paying capacity and will pay
entities created under Section 627.351, Florida Statutes,
on a pro rata basis, up to the $11 billion limitation.
Reimbursements for all covered events occurring during the
same Contract Year will be made in accordance with this
section (3)(c)2. of Article X.
3. Exhaustion of cash, but not of claims-paying capacity. This
section of Article X provides procedures for reimbursing
insurers for losses from Covered Events in those situations
in which the SBA determines, pursuant to Section
215.555(6)(a), Florida Statutes, and Rule 19-8.013, F.A.C.,
that reimbursable losses for Covered Events will exhaust
the balance of the FHCF as of 12/31 of the Contract Year in
which the Covered Event has occurred but will not exceed
the amount the SBA is able to raise through the issuance of
bonds, reinsurance purchased, or the incurrence of other
indebtedness. In that situation, each insurer sustaining
reimbursable losses will receive the among of reimbursement
due under the Reimbursement Contract up to the amount of
the insurer's projected payout, as calculated in accordance
with subsections (4)(c) and (4)(d)2.b. of Section 215.555,
Florida Statutes, and as defined in Article V(21) of this
Contract. Thereafter, payments for additional reimbursable
losses will continue to be made based on the loss reports
required pursuant to this Contract from entities created
under Section 627.351, Florida Statutes.
4. Losses payable from cash. This section of Article X
provides procedures for reimbursing insurers for losses
from Covered Events in those situations in which the SBA
determines that the reimbursable losses will not exhaust
the balance of the FHCF as of 12/31 of the contract year in
which the Covered Event has occurred. In that situation,
each insurer sustaining reimbursable losses will receive
the amount of reimbursement due under the Reimbursement
Contract. Thereafter, payments for additional reimbursable
losses will continue to be made based on the loss reports
required pursuant to this Contract from entities created
under Section 627.351, Florida Statutes.
13
5. Reserve established. When a Covered Event occurs in a
subsequent Contract Year when reimbursable losses are still
being paid for a Covered Event in a previous Contract Year,
the SBA will establish a reserve for the outstanding
reimbursable losses for the previous Contract Year, based
on the length of time the losses have been outstanding, the
amount of losses already paid, the percentage of incurred
losses still unpaid, and any other factors specific to the
loss of development of the Covered Events involved.
(4) Advances
(a) The SBA may make advances to the Company prior to December 31 of
the Contract Year in accordance with Section 215.555(4)(e),
Florida Statutes. All interest assessed will commence on the date
the SBA issues a check for an advance and will cease at midnight
on the date upon which the FHCF has received the Company's loss
reimbursement report for the storm for which the advance was
issued qualifying the Company for reimbursement equal to or
exceeding the amount(s) of the advance(s). If, upon audit, it is
determined that the Company received funds in excess of those to
which it was entitled, the interest as to those sums will not
cease on the date of the receipt of the loss reimbursement report
but will continue until the Company reimburses the FHCF for the
overpayment. The following procedures in Article X(4) apply to the
specific type of advances enumerated in the Statute.
(b) Advances to insurers to prevent insolvency.
1. Pursuant to subsection (4)(e) of Section 215.555, Florida
Statutes, the SBA may advance certain Companies certain
percentages of the SBA's estimate of reimbursement due the
Company. Section 215.555(4)(e)1., Florida Statutes,
provides that if Companies demonstrate to the SBA that the
immediate receipt of moneys from the SBA is likely to
prevent the Company from becoming insolvent due to the
occurrence of one or more Covered Events, the SBA shall
advance, at market interest rates, up to 50 percent of the
SBA's estimate of the reimbursement due to the Company from
FHCF. A Company is insolvent if it is unable to pay its
policyholders for justifiable claims. The "market interest
rate" shall be the then current interest rate being earned
on the FHCF's investments.
2. Companies shall request a specific amount for the advance
and shall demonstrate that the immediate receipt of moneys
from the SBA is likely to prevent the Company from becoming
insolvent by providing the SBA with the following
information, determined in accordance with statutory
accounting principles, which are the rules and procedures
governing insurer financial reporting for regulatory
purposes:
a. Current assets;
b. Current liabilities other than liabilities due to
the Covered Event;
c. Current liabilities due to the Covered Event, paid
and unpaid, submitted on the Proof of Loss Report,
Form FHCF-L1B, as adopted in Rule 19-8.029, F.A.C.;
d. Evidence of estimated-retention breached by payment
of paid losses from the Covered Event;
e. Current surplus as to policyholders;
f. Estimate of expected liabilities due to the Covered
Event;
g. Estimate of other expected liabilities not due to
the Covered Event;
h. Estimate of reinsurance immediately available to pay
claims for the Covered Event under other reinsurance
treaties;
i. Estimated amount of payout from the FHCF, determined
in accordance with Section 215.555(4)(b), Florida
Statutes. This estimate is necessarily predicated on
the Company's premium which in turn is predicated on
its exposure. Therefore, if the Covered Event occurs
in June, July, or August, the Company shall provide
its exposure data prior to September 1 in order that
the appropriate calculations may be made.
14
3. Companies seeking advances pursuant to Section
215.555(4)(e)1., Florida Statutes, shall also describe any
steps they have taken to pay claims, including liquidation
of assets, and may also supply such other information as
they deem necessary and appropriate to aid the SBA in
reaching a determination regarding whether or not to grant
an advance.
4. The information outlined above shall be supplied in the
form of a letter, signed by two executive officers of the
insurer, with the supporting information attached.
5. In determining whether or not to grant an advance pursuant
to subsection (4)(e) of Section 215.555, Florida Statutes,
the SBA shall take the following steps:
a. The SBA shall carefully review and consider all the
information submitted by such Companies;
b. The SBA shall consult with all relevant regulatory
agencies seeking all relevant information about the
Company's financial and solvency condition;
c. The SBA shall carefully review its currently
available liquid assets; and
d. The SBA shall review the damage caused by the
Covered Event and when that Covered Event occurred.
6. The SBA's final decision regarding an application for an
advance under Section 215.555(4)(e)1., Florida Statutes,
shall be based on whether or not, considering the totality
of the circumstances, including the SBA's obligations to
provide reimbursement for all Covered Events occurring
during the Contract Year, granting an advance will prevent
the insolvency of the applicant Company so that the Company
is able, not only to pay its policyholders' claims arising
from the Covered Event, but also to maintain its existence
as a viable source of residential property insurance
coverage to the people of this state. A majority vote of
the Trustees in favor is required before an advance can be
granted.
7. If an advance is granted, the "market interest rate" shall
be determined with reference to the then current interest
rate earned on the FHCF's investments on the date the
Trustees' vote is taken. Pursuant to Section
215.555(4)(e)1., Florida Statutes, the amount of the
advance shall not exceed 50 percent of the SBA's estimate
of the reimbursement due the Company. The Company's final
reimbursement shall be reduced by an amount equal to the
amount of the advance and the interest thereon.
8. Any amount advanced by the SBA shall be used by the Company
only to pay claims of its policyholders for the Covered
Event or Covered Events which have precipitated the
immediate need to continue to pay additional claims as they
become due. The advance is a reimbursement which allows the
Company to continue to pay claims in a timely manner.
(c) Advances to entities created pursuant to Section 627.351, Florida
Statutes.
1. Section 215.555(4)(e)2., Florida Statutes, provides that
entities created under Section 627.351, Florida Statutes,
may receive an advance at market interest rates of up to
90% of the lesser of the SBA's estimate of reimbursement
for losses due to such entity or the entity's share of
Reimbursement Premium for that Contract Year multiplied by
the currently available liquid assets of the FHCF. The
purpose of the advance under that subsection is to allow
the entity to continue to pay additional claims from a
Covered Event in a timely manner. The "market interest
rate" shall be the then current interest rate earned on the
FHCF's investments.
15
2. The entity shall request a specific amount for the advance
and shall demonstrate that an advance is essential to allow
the entity to continue to pay claims for a Covered Event in
a timely manner once currently available liquid assets have
been exhausted by providing the SBA with the following
information, determined in accordance with the statutory
accounting principles, which are the rules and procedures
governing insurer financial reporting for regulatory
purposes:
a. Current assets;
b. Current liabilities other than liabilities due to
the Covered Event;
c. Current liabilities due to the Covered Event, paid
and unpaid, submitted on the Proof of Loss Report,
Form FHCF-L1B, as adopted in Rule 19-8.029, F.A.C.;
d. Evidence that the estimated retention will be
breached by payment of covered losses from the
Covered Event;
e. Current surplus as to policyholders;
f. Estimate of expected liabilities due to the Covered
Event;
g. Estimate of other expected liabilities not due to
the Covered Event;
h. Estimate of reinsurance available to pay claims for
the Covered Event;
i. Estimated amount of payout from the FHCF, determined
in accordance with subsection (4)(b) of Section
215.555, Florida Statutes. This estimate is
necessarily predicated on the entity's Premium which
in turn is predicated on its exposure. Therefore, if
the Covered Event occurs in June, July, or August,
the entity shall provide its exposure data prior to
September 1 in order that the appropriate
calculations may be made.
3. Entities seeking advances pursuant to subsection (4)(e)2.
of Section 215.555, Florida Statutes, shall describe any
steps they have taken to pay claims, including liquidation
of assets, and may also supply such other information as
they deem necessary and appropriate to aid the SBA in
reaching a determination regarding whether or not to grant
an advance.
4. The information outlined above shall be supplied in the
form of a letter, signed by two executive officers of the
entity, with the supporting information attached.
5. In determining whether or not to grant an advance pursuant
to subsection (4)(e) of Section 215.555, Florida Statutes,
the SBA shall take the following steps:
a. The SBA shall carefully review and consider all the
information submitted by such entities;
b. The SBA shall consult with all relevant regulatory
agencies seeking all relevant information about the
entity's financial and solvency condition;
c. The SBA shall carefully review its currently
available liquid assets; and
d. The SBA shall review the damage caused by the
Covered Event and when that Covered Event occurred
during the Contract Year.
6. The SBA's final decision regarding an application for an
advance shall be based on whether or not, considering the
totality of the circumstances, including the SBA's
obligations to provide reimbursement for all Covered Events
occurring during the Contract Year, granting an advance is
essential to allowing the entity to continue to pay
additional claims for a Covered Event in a timely manner
once currently available liquid assets have been exhausted.
A majority vote of the Trustees in favor is required before
an advance can be granted.
16
7. If an advance is granted, the "market interest rate" shall
be determined with reference to the then current interest
rate earned on the FHCF's investments on the date the
Trustees' vote is taken. Pursuant to Section
215.555(4)(e)2., Florida Statutes, the amount of the
advance shall not exceed the lesser of 90% of the SBA's
estimate of the reimbursement for reimbursable losses due
to such entity or the entity's share of the actual
Reimbursement Premium paid for that Contract Year
multiplied by the currently available liquid assets of the
FHCF. The Company's final reimbursement shall be reduced by
an amount equal to the amount of the advance and the
interest thereon.
8. Any amount advanced by the SBA shall be used by the entity
only to pay claims of its policyholders for the Covered
Event or Covered Events which have precipitated the need to
continue to pay additional claims as they become due. The
advance is a reimbursement which allows the entity to
continue to pay claims in a timely manner.
(d) Advances to limited apportionment companies.
1. Subsection (4)(e)3. of Section 215.555, Florida Statutes,
provides that any limited apportionment company qualified
under Section 627.351(2)(b)3., Florida Statutes, may
receive an advance of the amount of the estimated
reimbursement payable to such Company as calculated
pursuant to subsection (4)(d) of Section 215.555, Florida
Statutes, at market rates, if the SBA determines that the
FHCF's assets are sufficient and are sufficiently liquid to
permit the SBA to make an advance to such Company and at
the same time fulfill its reimbursement obligations to the
FHCF's other participating insurers.
2. Limited apportionment companies seeking an advance pursuant
to subsection (4)(e)3. of Section 215.555, Florida
Statutes, shall request a specific amount for the advance
and provide the SBA with the following information,
determined in accordance with statutory accounting
principles, which are the rules and procedures governing
insurer financial reporting for regulatory purposes:
a. Current assets;
b. Current liabilities other than liabilities due to
the Covered Event;
c. Current liabilities due to the Covered Event, paid
and unpaid, submitted on the Proof of Loss Report,
Form FHCF-L1B, adopted in Rule 19-8.029, F.A.C.;
d. Evidence of estimated retention breached by payment
of paid losses from the Covered Event;
e. Current surplus as to policyholders;
f. Estimate of expected liabilities due to the Covered
Event;
g. Estimate of other expected liabilities not due to
the Covered Event;
h. Amount of reinsurance available to pay claims for
the Covered Event;
17
i. Estimated amount of payout from the FHCF, determined
in accordance with Section 215.555(4)(b), Florida
Statutes. This estimate is necessarily predicated on
the Company's Premium which in turn is predicated on
its exposure. Therefore, if the Covered Event occurs
in June, July, or August, the Company shall provide
its exposure data prior to September 1 in order that
the appropriate calculations may be made.
3. Limited apportionment companies may also supply such other
information as they deem necessary and appropriate to aid
the SBA in reaching a determination regarding whether or
not to grant an advance pursuant to Section 215.555(4)(e),
Florida Statutes.
4. The information outlined above shall be supplied in the
form of a letter, signed by two executive officers of the
Company, with the supporting information attached.
5. In determining whether or not to grant an advance pursuant
to subsection (4)(e) of Section 215.555, Florida Statutes,
the SBA shall take the following steps:
a. The SBA shall carefully review and consider all the
information submitted by such companies;
b. The SBA shall consult with all relevant regulatory
agencies seeking all relevant information about the
Company's financial and solvency condition;
c. The SBA shall carefully review its currently
available liquid assets; and
d. The SBA shall review the damage caused by the
Covered Event and when that Covered Event occurred
during the Contract Year.
6. The SBA's final decision regarding an application for an
advance under Section 215.555(4)(e)3., Florida Statutes,
shall be based on whether or not, considering the totality
of the circumstances, the FHCF's assets are sufficient and
sufficiently liquid to permit the SBA to make an advance to
the limited apportionment company and at the same time
fulfill its reimbursement obligations to the FHCF's other
participating insurers. A majority vote of the Trustees in
favor is required before an advance can be granted.
7. If an advance is granted, the "market interest rate" shall
be determined with reference to the then current interest
rate earned on the FHCF's investments on the date the
Trustees' vote is taken. Pursuant to Section
215.555(4)(e)3., Florida Statutes, the amount of the
advance shall not exceed the SBA's estimate of the
reimbursement due the Company calculated in accordance with
subsection (4)(d) of Section 215.555, Florida Statutes. The
Company's final reimbursement shall be reduced by an amount
equal to the amount of the advance and the interest
thereon.
8. Any amount advanced by the SBA shall be used by the Company
only to pay claims of its policyholders for the Covered
Event or Covered Events which have precipitated either the
need to continue to pay additional claims as they become
due. The advance is a reimbursement which allows the
Company to continue to pay claims in a timely manner.
(5) Delinquent Payments
Failure to submit a Reimbursement Premium or Reimbursement Premium
installment when due is a violation of the terms of this Contract and
Section 215.555, Florida Statutes. Interest on late payment shall be due
as set forth in Article IX(2) of this Contract. In addition, the SBA will
refer any Company failing to submit such payments to the DOI for
administrative action or will take other action as appropriate pursuant
to Sections 215.555(10) and (11), Florida Statutes.
(6) Inadequate Data Submissions
If exposure data or other information required to be reported by the
Company under the terms of this Contract is not received by the FHCF in
the format specified by the FHCF and is inadequate to the extent that the
FHCF requires resubmission of data, the Company will be required to pay
the FHCF a resubmission fee of $1,000. The $1,000 fee is also applicable
to exposure resubmissions made as a result of audits of the Company's
exposure and of audits of the Company's claims data.
18
(7) Delinquent Submissions
Failure to submit an exposure submission or an exposure resubmission when
due is a violation of the terms of this Contract and of the Statute. The
SBA will refer any Company failing to submit such submissions or
resubmissions to the DOI for administrative action or will take other
action as appropriate pursuant to subsections (10) and (11) of Section
215.555, Florida Statutes.
ARTICLE XI - TAXES
In consideration of the terms under which this Contract is issued, the Company
agrees to make no deduction in respect of the Premium herein when making premium
tax returns to the appropriate authorities. Should any taxes be levied on the
Company in respect of the Premium herein, the Company agrees to make no claim
upon the SBA for reimbursement in respect of such taxes.
ARTICLE XII - ERRORS AND OMISSIONS
An inadvertent delay, omission or error on the part of the SBA shall not be held
to relieve the Company from any liability which would attach to it hereunder if
such delay, omission or error had not been made.
ARTICLE XIII - INSPECTION OF RECORDS
The Company shall allow the SBA to inspect, examine, and audit, at reasonable
times, all records of the Company relating to the Covered Policies under this
Contract, including Company files concerning claims, losses, or legal
proceedings regarding subrogation or claims recoveries which involve this
Contract, including premium, loss records and reports involving exposure data on
Covered Policies and applicable ceded reinsurance contracts. All discovered
errors, inadvertent omissions, and typographical errors associated with the data
reporting of insured values shall be corrected to reflect the proper values.
This right shall survive the termination of this Contract. The Company shall
retain its records in accordance with the requirements for records retention
regarding exposure reports and claims reports in Article X of this Contract, and
in any administrative rules adopted pursuant to Section 215.555, Florida
Statutes.
(1) Auditing Requirements for Exposure Audits
The Company shall retain complete and accurate records, in policy level
detail, of all exposure data submitted to the SBA in any Contract Year
until the SBA has completed its audit of the Company's exposure
submissions. The Company shall also retain complete and accurate records
of any Contract Year in which the Company incurred losses until the
completion of the loss reimbursement audit for that year. The records to
be retained shall include computer runs of the files used to support the
exposure reported to the SBA. The files shall include sufficient detail
to support the exposure reported to the SBA. All computer runs must
contain the policy number, policy effective date, policy expiration
date, type of business, line of business, construction type, deductible
group, zip code, county code, total number of insured risks, total
insured value - building, total insured value - appurtenant structures,
total insured value - contents, composite windstorm mitigation credit
code, BCEG code, and any other information which would allow for a
complete audit of the Company's reported exposure data or information
which is specifically requested in the data call for that Contract Year.
The Company must also have available, at the time of the audit, a copy
of its underwriting manual, a copy of its rating manual, a copy of its
most recent Certificate of Authority as issued by the Florida DOI, and a
19
copy of its Renewal Notice, indicating the lines of business the Company
is authorized to write in Florida. The Company is also required to retain
declarations pages and policy applications to support reported exposure.
To meet the requirement that the application must be retained, an insurer
may retain either the actual application or may retain, in electronic
format, all the information from the actual application.
(2) Auditing Requirements for Claims Reports
All insurers reporting losses and/or receiving reimbursements or advances
from the SBA for paid losses from Covered Events are subject to audit by
the SBA or its agents pursuant to this Article XIII for the Contract Year
during which the Covered Event occurs for which losses are reported
and/or reimbursements are made by the SBA. Therefore, the Company shall
retain complete and accurate records of all losses paid by the SBA until
the SBA has completed its audit of the Company's reimbursable losses,
whichever is later. The records to be retained are set forth as part of
the Proof of Loss Report, Form L1B and as part of the Reinsurance
Recovery Worksheet, Form FHCF-L1C, adopted in Rule 19-8.029, F.A.C., and
are also set out immediately below.
(a) All records, including the Proof of Loss Report, Form FHCF-L1B,
correspondence, and supporting documentation, must be available
with computer runs produced containing the following information:
1. Detail claims listing which supports the losses reported on
the Proof of Loss Report, Form FHCF-L1B, including: claim
number; date of loss; policy number; policy effective date;
paid loss - habitational building, appurtenant structure,
and contents; outstanding loss reserve - habitational
building, appurtenant structure, and contents; and salvage
received, if any.
2. Hard copy claim files which include documentation of the
following: claim number; claim description; policy number
and location of property; evidence of salvage received;
amount of loss adjustment expense; and copies of checks for
payment of losses.
3. Detail exposure listing which was retained at the time the
exposure data was submitted to the FHCF for the Contract
Year the loss occurred.
(b) In addition, all records relating to the Reinsurance Recovery
Worksheet, Form FHCF-L1C, as adopted in Rule 19-8.029, F.A.C.,
must be available with the supporting information listed below:
1. For reinsurance recoveries in which FHCF recoveries inure
to the benefit of the private reinsurer, provide the
reinsurance agreement(s).
2. For reinsurance recoveries in which FHCF recoveries do not
inure to the benefit of the private reinsurer, provide the
following:
a. Summary of reinsurance in effect at the date of
loss. Include subject per risk and aggregate
agreements.
b. For proportional per risk reinsurance include
percentage ceded, placement percentage, and treaty
limits.
c. For non-proportional per risk reinsurance include
attachment point, limit, percentage placed, and
treaty limits.
d. For proportional aggregate reinsurance include
attachment point, percentage ceded, placement
percentage, and treaty limit.
e. For non-proportional aggregate reinsurance include
attachment point, limit, and treaty limit.
f. For facultative reinsurance, provide summary of
coverage placed.
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3. Provide treaties or placement slips for the subject
reinsurance agreements for all layers.
4. In no per risk, facultative, or aggregate reinsurance was
in place at the time of the subject event, provide written
confirmation.
5. Documentation supporting total paid loss for all lines, all
states which reconciles to amounts reported on the
Reinsurance Recovery Worksheet, FHCF-Form L1C, Section III
A. Include summary of direct paid loss listing for loss
portion only. Do not include loss adjustment expenses.
6. Documentation supporting total incurred loss for all lines,
all states that reconciles to amounts reported on the
Reinsurance Recovery Worksheet, FHCF-Form L1C, Section III
A. Include summary of direct incurred loss listing for loss
portion only. Do not include loss adjustment expenses.
7. Documentation supporting total paid reinsurance recovery
that reconciles to amounts reported on the Reinsurance
Recovery Worksheet, FHCF-form L1C, Section III E. Include
reinsurance statements, notice of loss statements to
reinsurer, or loss bordereau.
8. Documentation supporting total incurred reinsurance
recoverable that reconciles to amounts reported on the
Reinsurance Recovery Worksheet, FHCF-Form L1C, Section III
E. Include reinsurance statements, notice of loss
statements to reinsurer, or loss bordereau.
a. The Company must retain the required exposure audit
file for the Contract Year in which the loss
occurred.
b. The Company must also have available any other
information not set out above which is specific to
its claims payment procedures and without which a
complete and accurate audit would not be possible.
(3) Audit Procedures
(a) The FHCF will send an audit notice to the participating
insurer providing the commencement date of the audit, the
site of the audit, any accommodation requirements of the
auditor, and the reports and data which must be assembled
by the participating insurer and forwarded to the FHCF upon
request.
(b) The reports and data forwarded to the FHCF upon request are
reviewed internally and forwarded to the auditor. If the
FHCF receives accurate and complete records as requested,
the auditor will contact the participating insurer to
inform the insurer as to what policies or other
documentation will be required once the auditor is on site.
Any records not provided to the auditor in advance shall be
made available at the time the auditor arrives on site.
(c) At the conclusion of the auditor's audit and the management
review of the auditor's report, findings, recommendations,
and work papers, the FHCF will forward a preliminary draft
of the audit report to the participating insurer and
require a response from the participating insurer by a date
certain as to the audit's findings and recommendations.
(d) If the participating insurer accepts the audit's findings
and recommendations, and there is no recommendation for
resubmission of the participating insurer's exposure data,
the audit report will be finalized and the audit file
closed.
(e) If the Company disputes the audit's findings, the areas in
dispute will be resolved by a meeting or a conference call
between the participating insurer and FHCF management.
(f) 1. If the recommendation of the audit is to resubmit the
insurer's exposure data for the Contract Year in question,
then the FHCF will send the participating insurer a letter
outlining the process for resubmission and including a
deadline for the resubmission to be received by the FHCF's
Administrator. Once the resubmission is received by the
FHCF's Administrator, the FHCF's Administrator calculates a
21
revised reimbursement premium for the Contract Year which
has been audited and the FHCF determines whether to send an
invoice to the participating insurer or to refund the
reimbursement premium, as the case may be. Once the
resubmission has been approved, the audit report will be
finalized and the audit file closed.
2. If the recommendation of the audit is either to resubmit
the insurer's exposure data for the Contract Year in
question or giving the option to pay the estimated premium
difference, then the FHCF will send the participating
insurer a letter outlining the process for resubmission or
for paying the estimated premium difference and including a
deadline for the resubmission or the payment to be received
by the FHCF's Administrator. If the Company chooses to
resubmit, the resubmission is received by the FHCF's
Administrator who calculates a revised reimbursement
premium for the contract year which has been audited and
the FHCF determines whether to send an invoice to the
participating insurer or to refund the reimbursement
premium, as the case may be. Once the resubmission has been
approved or the payment of the estimated premium difference
received, the audit report will be finalized and the audit
file closed.
(g) If the Company continues to dispute the audit's findings
and/or recommendations and no resolution of the disputed
matters is obtained through discussions between the insurer
and FHCF management, then the process within the SBA is at
an end and further administrative remedies may be obtained
under Chapter 120, Florida Statutes.
(h) The auditor's list of errors is made available to the
Company. Given that the audit was based on a sample of the
Company's policies rather than the whole universe of the
Company's Covered Policy exposure, the error list is not
intended to provide a complete list of errors but is
intended to indicate what Covered Policy information needs
to be reviewed and corrected throughout the Company's book
of Covered Policy business to ensure more complete and
accurate reporting in the resubmission if required and for
any future submissions.
(4) Costs of the Audits
The costs of the audits shall be borne by the SBA. However, in order to
remove any incentive for a Company to delay preparations for an audit,
the SBA shall be reimbursed by the Company for any audit expenses
incurred in addition to the usual and customary costs of the audits,
which additional expenses were incurred as a result of the Company's
failure, despite proper notice, to be prepared for the audit or as a
result of a Company's failure to provide requested information for the
audit. All requested information must be complete and accurate. The
Company shall be notified of any administrative remedies which may be
obtained under Chapter 120, Florida Statutes.
ARTICLE XIV - INSOLVENCY OF THE COMPANY
In the event of the insolvency of the Company, the SBA shall pay directly to the
Florida Insurance Guaranty Association for the benefit of Florida policyholders
of the Company the net amount of all reimbursement moneys owed to the Company.
As used in this Article, the "net amount of all reimbursement moneys" means that
amount which remains after reimbursement for (1) preliminary or duplicate
payments owed to private reinsurers or other inuring reinsurance payments to
private reinsurers that satisfy statutory or contractual obligations of the
insolvent Company attributable to Covered Events to such reinsurers; or (2)
funds owed to a bank or other financial institution to cover obligations of the
insolvent insurer under a credit agreement that assists the insolvent insurer in
22
paying claims attributable to Covered Events. Such private reinsurers or banks
or other financial institutions shall be reimbursed or otherwise paid prior to
payment to the Florida Insurance Guaranty Association, notwithstanding any law
to the contrary. The Florida Insurance Guaranty Association shall pay all claims
up to the maximum amount permitted by Chapter 631, Laws of Florida; thereafter,
any remaining moneys shall be paid pro rata to claims not fully satisfied. This
Article does not apply to a joint underwriting association, a risk apportionment
plan, or any other entity created under Section 627.351, Florida Statutes.
ARTICLE XV - TERMINATION
The FHCF and the obligations of both parties under this Contract can be
terminated only as may be provided by law or applicable rules.
ARTICLE XVI - VIOLATIONS
Pursuant to the provisions of Section 215.555(10), Florida Statutes, any
violation of the terms of this Contact by the Company constitutes a violation of
the Insurance Code of the State of the Florida. Pursuant to the provisions of
Section 215.555(11), Florida Statutes, the SBA is authorized to take any action
necessary to enforce any administrative rules adopted pursuant to Section
215.555, Florida Statutes, and the provisions and requirements of this Contract.
ARTICLE XVII - APPLICABLE LAW
(1) Applicable Law: This Contract shall be governed by and construed
according to the laws of the State of Florida in respect of any matter
relating to or arising out of this Contract.
(2) Notice of Rights: Pursuant to Chapter 120, Florida Statutes, and the
Uniform Rules of Procedure, codified as Chapters 28-101 through 28-110,
FAC, a person whose substantial interests are affected by a decision of
the SBA regarding the FHCF may request a hearing with the SBA by filing
a petition within 21 days of receipt of the written notice of the
decision. Any person who fails to file a petition within 21 days shall
have waived his right to a hearing. The hearing may be a formal hearing
or an informal hearing pursuant to the provisions of Sections 120.569
and 120.57, Florida Statutes. The petition must be filed (received) in
the office of Dr. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chief Operating Officer, Florida
Hurricane Catastrophe Fund, State Board of Administration, P.O. Box
13300, Tallahassee, FL 32317-3300 within the 21 day period.
All petitions shall contain:
(a) The name, address, and telephone number of the petitioner or
petitioners.
(b) An explanation of how each petition's substantial interests will
be affected by the SBA's decision;
(c) A statement of when and how the petitioner received notice of the
decision;
(d) A statement of all disputed issues of material fact. If there are
none, the petition must so indicate.
(e) A concise statement of the facts which the petitioner believes
entitle the petitioner to the relief sought as well as the
statutes and rules which support the petitioner's claim for
relief;
(f) A statement of the relief sought, stating precisely the action
the petitioner wants the SBA to take;
(g) Any other information which the petitioner contends is material.
Upon receipt of a petition, the SBA shall review the petition for compliance
with the SBA's requirements and timeliness. The petition will be denied for lack
of compliance and for failure to timely file. If the SBA elects to request that
an administrative law judge of the Division of Administrative hearings be
assigned to conduct the hearing, the SBA will forward the petition and all
materials filed with the SBA to the division and shall notify the petitioner or
petitioners of its action. Once This decision becomes final, the petitioner's
rights to appeal will be governed by Section 120.68, Florida Statutes.
23
Approved by:
Florida Hurricane Catastrophe Fund
By. State Board of Administration
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ 10/19/01
----------------------------------------- ----------------------------
▇▇▇ ▇▇▇▇▇▇▇ Date
Approved as to legality:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ for 10/19/01
------------------------------------------- ----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ Date
General Counsel
FL Bar ID#0251471
Federated National Insurance Company
Company
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President 05/24/01
----------------------------------------- ----------------------------
Name/Title Date
Schedule A
to the
REIMBURSEMENT CONTRACT
Effective: June 1, 2001
("Agreement")
between
FEDERATED NATIONAL INSURANCE COMPANY
Ft. Lauderdale, FL
(the "Company")
and
THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA ("SBA")
WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND
("FHCF")
Contract Year
This Schedule A shall be applicable for the Contract Year beginning 12:01 a.m.,
Eastern Daylight Time, June 1, 2001, to 12:01 a.m., Eastern Daylight Time, June
1, 2002.
Reimbursement Percentage
For purposes of determining reimbursement (if any) due the Company under this
Contract and in accordance with the Statute, the Company has the option to elect
a 45% or 75% or 90% Reimbursement Percentage under this Contract. The
Reimbursement Percentage elected by the Company for the Contract Year beginning
12:01 a.m., Eastern Daylight Time, June 1, 2000, to 12:01 a.m., Easter Daylight
Time, June 1, 2001, was as follows: 90%
The Company hereby elects the following Reimbursement Percentage for the
Contract Year beginning 12:01 a.m., Easter Daylight Time, June 1, 2001, to 12:01
a.m., Eastern Daylight Time, June 1, 2002, (the individual executing this
Contract on behalf of the Company shall place his or her initials in the box to
the left of the percentage elected for the Company):
[ ] 45% OR [ ] 75% OR [X] 90%
Note that the choice indicated immediately above is for the 2001-2002 Contract
Year.
If the Company is a member of a group, all members of the group must elect the
same Reimbursement Percentage. If the Company is a member of a group, the
individual executing this Contract on behalf of the Company, by placing his or
her initials in the box below, affirms that the Company has elected the same
Reimbursement Percentage as all members of the group:
[ RW ]
The Company shall not be permitted to change its Reimbursement Percentage during
the Contract Year. The Company shall, however, be permitted to change its
Reimbursement Percentage election at the beginning of a new Contract Year,
except that:
(1) The Company shall not be permitted to reduce its Reimbursement
Percentage if a Covered Event required the issuance of revenue
bonds, until the bonds have been fully repaid;
(2) If the Company is a member of a group, all members of the
group must continue to elect the same Reimbursement
Percentage;
(3) If the Company is a joint underwriting association or an
assigned risk plan under Section 627.351, Florida Statutes,
the Company must elect the 90% Reimbursement Percentage.