EXHIBIT 10.6
AMENDED REIMBURSEMENT CONTRACT
(This Reimbursement Contract Supercedes All Prior Versions
with an Effective Date of June 1, 2004)
EFFECTIVE: JUNE 1, 2004
(CONTRACT)
between
LIBERTY AMERICAN INSURANCE COMPANY
PINELLAS PARK, FL
(Company)
NAIC # 10955
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 "Statute", 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 I - SCOPE OF AGREEMENT
As a condition precedent to the SBA's obligations under this Contract, the
Company, an Authorized Insurer or an entity writing Covered Policies 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.
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 provided in Article XIV. The SBA will only disburse funds to
the Company, except as provided for in Article XIV of this Contract.
ARTICLE III - TERM
This Contract shall apply to Loss Occurrences which commence during the period
from 12:01 a.m., Eastern Time, June 1, 2004, to 12:01 a.m., Eastern Time, June
1, 2005 (Contract Year).
The Company must designate a coverage level and, make the required selections on
pages 19 and 20 within this Contract. Note: Due to 2004 legislation, which has
just become law, a Company has a transitional option which can be selected by
executing Schedule 1, which is provided with and is a part of this Contract. The
Company shall return this fully executed Contract (two originals) to the FHCF
Administrator so that the Contract is received by the FHCF Administrator no
later than 5 p.m., Central Time, June 1, 2004. Failure to do so will result in a
referral to the Office of Insurance Regulation within the Department of
Financial Services for administrative action. Furthermore, the Company's
coverage level under this Contract will be deemed as follows:
(1) For Companies that are a member of a National Association of Insurance
Commissioners (NAIC) group, the same coverage level selected by the other
Companies of the same NAIC group shall be deemed. If executed Contracts
for none of the members of an NAIC group have been received by the FHCF
Administrator, the coverage level from the prior Contract Year shall be
deemed.
(2) For Companies that are not a member of an NAIC group under which other
Companies are active participants in the FHCF, the coverage level from the
prior Contract Year shall be deemed.
(3) For New Participants that are a member of an NAIC group, the same coverage
level selected by the other Companies of the same NAIC group shall be
deemed.
(4) For New Participants, as that term is defined in Article V(21) herein,
that are not a member of an NAIC group under which other Companies are
active participants in the FHCF, the 45% coverage level shall be deemed.
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, this 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 ARTICLE XVIII herein.
(3) The aggregate liability of the FHCF with respect to all Reimbursement
Contracts covering this contract year shall not exceed the limit set forth
under Section 215.555(4)(c)1., Florida Statutes. For specifics regarding
loss reimbursement calculations, see section (3)(c) of ARTICLE X herein.
(4) Reimbursement amounts shall not be reduced by reinsurance paid or payable
to the Company from other sources.
(5) After the end of each calendar year, the SBA shall notify insurers of the
estimated Borrowing Capacity and the Balance of the Fund as of December
31. 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 Balance of the Fund as of December 31.
(6) The obligation of the SBA with respect to all Contracts covering a
particular Contract Year shall not exceed the Balance of the Fund 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 the
limit in accordance with Section 215.555(4)(c)1., Florida Statutes. 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 Fund 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 the limit in accordance with
Section 215.555(4)(c)1. and (6), Florida Statutes.
(2) ACTUARIALLY INDICATED
This term means, with respect to Premiums paid by Companies for
reimbursement provided by the FHCF, an amount determined in accordance
with the definition provided in Section 215.555(2)(a), Florida Statutes.
(3) ADDITIONAL LIVING EXPENSE (ALE)
ALE losses covered by the FHCF are not to exceed 40 percent of the insured
value of a Residential Structure or its contents based on the coverage
provided in the policy. Fair rental value, loss of use, loss of rents, or
business interruption losses are not covered by the FHCF.
(4) 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 Strategic Solutions Inc., 3600 American
Boulevard West, Minneapolis, Minnesota 55431. The telephone number is
(800) 689-3863, and the facsimile number is (800) 264-0492.
(5) AUTHORIZED INSURER
This term is defined in Section 624.09(1), Florida Statutes.
(6) BORROWING CAPACITY
This term means the amount of funds which are able to be raised by the
issuance of revenue bonds or through other financing mechanisms, less bond
issuance expenses and reserves.
(7) CITIZENS PROPERTY INSURANCE CORPORATION (CITIZENS)
This term means an entity formed under Section 627.351(6), Florida
Statutes and refers to both Citizens Property Insurance Corporation High
Risk Account and Citizens Property Insurance Corporation Personal Lines
and Commercial Lines Accounts.
(8) CONTRACT
This term means this Reimbursement Contract for the current Contract Year.
(9) 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.
(10) COVERED POLICY OR COVERED POLICIES
(a) Covered Policy, as defined in Section 215.555(2)(c), Florida
Statutes, is further clarified to mean 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 such Policy Contract insures a Residential Structure, as
defined in definition (26) herein, or the contents of a Residential
Structure, located in the State of Florida, or ALE coverage as
defined in definition (3) herein.
(b) Due to 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
Note that where particular insurance exposures are reported on an
annual statement is not dispositive of whether or not the exposure
is a Covered Policy.
(c) This definition applies only to the first-party property section of
Policy Contracts pertaining strictly to the structure, its contents,
appurtenant structures, or ALE coverage.
(d) Covered Policy also includes any collateral protection insurance
policy covering personal residences which protects both the
borrower's and the lender's financial interest, in an amount at
least equal to the coverage for the dwelling in place under the
lapsed homeowner's policy, if such policy can be accurately reported
as required in Section 215.555(5), Florida Statutes. A Company will
be deemed to be able to accurately report data if the required data,
as specified in the Premium Formula adopted in Section 215.555(5),
Florida Statutes, is available.
(e) See Article VI of this Contract for specific exclusions.
(11) ESTIMATED CLAIMS-PAYING CAPACITY OF THE FHCF
This term means the sum of the projected Balance of the Fund as of
December 31 of a Contract Year, plus any reinsurance 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.
(12) EXCESS POLICIES
This term, for the purposes of the FHCF, means a policy that provides
insurance protection for large commercial property risks that provides a
layer of coverage above a primary layer (which is insured by a different
insurer) that acts much the same as a very large deductible.
(13) FLORIDA DEPARTMENT OF FINANCIAL SERVICES (DEPARTMENT )
This term means that Florida regulatory agency charged with regulating the
Florida insurance market and administering the Florida Insurance Code.
(14) FLORIDA INSURANCE CODE
This term means those chapters in Section 624.01, Florida Statutes, which
are designated as the Florida Insurance Code.
(15) 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.
(16) FUND BALANCE OR BALANCE OF THE FUND AS OF DECEMBER 31
These terms mean the "Net assets: Unrestricted" as indicated on the
unconsolidated FHCF Statement of Net Assets 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; amounts needed for administration for the then
current State of Florida fiscal year which have not been spent and which
are not reflected on the FHCF Statement of Net Assets; and the amount of
undispersed mitigation funds appropriated for the then current State of
Florida fiscal year.
(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. A Company is a member of a group
as designated by the NAIC until such Company is assigned another group
designation or is no longer a member of a group recognized by the NAIC.
(18) 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 and excludes Loss Adjustment
Expenses.
(19) 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
Section 215.555(4)(b)1., 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.
(20) NEW PARTICIPANT(s)
This term means all Companies which are granted a certificate of authority
by the Department after the beginning of the FHCF's Contract Year on June
1 and begin writing Covered Policies on or after the beginning of the
Contract Year, or which already have a certificate of authority and begin
writing Covered Policies on or after the beginning of the Contract Year. A
Company that removes exposure from either Citizens entity, as that term is
defined in (7) above, pursuant to an assumption agreement effective after
June 1 and had written no other Covered Policies on or before June 1 is
also considered a New Participant.
(21) OFFICE OF INSURANCE REGULATION
This term means that office within the Department of Financial Services
and which was created in Section 20.121(3), Florida Statutes.
(22) PAYOUT MULTIPLE
This term means the multiple as calculated in accordance with Section
215.555(4)(c), Florida Statutes, unless the transitional option provided
under Schedule 1 of this contract is chosen by June 1, 2004, which is
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 December 31 of the Contract Year. The multiple is finally determined
once Reimbursement Premiums have been billed as of December 31 and the
amount of bond proceeds has been determined.
(23) PREMIUM
This term means the same as Reimbursement Premium.
(24) PROJECTED PAYOUT MULTIPLE
The Projected Payout Multiple is used to calculate a Company's projected
payout pursuant to Section 215.555(4)(d)2.b., Florida Statutes, unless the
transitional option provided under Schedule 1 of this contract is chosen
by June 1, 2004. 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.
(25) REIMBURSEMENT PREMIUM
This term means 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, as described in Rule 19-8.028, F.A.C.
(26) RESIDENTIAL STRUCTURES
This term means dwelling units used as a home or residence for other than
transient occupancy, as that term is defined in Section 83.43(10), Florida
Statutes. These include the primary structure and appurtenant structures
insured under the same policy and any other structures 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. COVERED RESIDENTIAL STRUCTURES DO NOT INCLUDE any
structures listed under Article VI herein.
(27) RETENTION
The Company's Retention means the amount of hurricane losses incurred by
the Company below which the Company is not entitled to reimbursement from
the FHCF. The Company is eligible for reimbursement only after its paid
covered losses exceed its Retention. The Company's Retention is
established in accordance with the provisions of Section 215.555(2)(e),
Florida Statutes, unless the transitional option provided under Schedule 1
of this contract is chosen by June 1, 2004. The Company's Retention shall
be determined by
multiplying the Retention Multiple by the Company's Reimbursement Premium
for the Contract Year.
(28) 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 2004-2005 Contract Year shall be equal to $4.5 billion,
divided by the estimated total industry Reimbursement Premium at the
90% reimbursement percentage level for the Contract Year as
determined by the SBA unless the transitional option provided under
Schedule 1 of this contract is chosen by June 1, 2004.
(b) The Retention Multiple as determined under (28)(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 (28)(a) above;
2. If the Company elects a 75% reimbursement percentage, the
adjusted Retention Multiple is 120% of the amount determined
under (28)(a) above; or
3. If the Company elects a 45% reimbursement percentage, the
adjusted Retention Multiple is 200% of the amount determined
under (28)(a) above.
(29) ULTIMATE NET LOSS
(a) This term means all losses of the Company under Covered Policies,
prior to the application of the Company's FHCF Retention and
reimbursement percentage, and 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 Net
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.
ARTICLE VI - EXCLUSIONS
This Contract does not provide reimbursement for:
(1) Any losses not defined as being within the scope of a Covered Policy.
(2) Any policy which excludes wind or hurricane coverage.
(3) Any Excess Policy or deductible buy-back policy that requires
individual ratemaking.
(4) Any liability of the Company attributable to losses for fair rental value,
loss of use, loss of rents, or business interruption.
(5) Any collateral protection policy that does not meet the definition of
Covered Policy as defined in Article V(10) herein.
(6) Any reinsurance assumed by the Company.
(7) Any exposure for: hotels, motels, timeshares, or other similar structures
that are rented out daily, weekly, or monthly; homeowner associations, if
no habitational structures are insured under the policy; shelters, camps
or retreats; vacant properties insured under a commercial policy; and
boats insured under a separate policy or endorsement.
(8) Commercial healthcare facilities and nursing homes, unless the facility is
part of a structure primarily consisting of other residences.
(9) Any exposure under commercial policies covering only appurtenant
structures or structures that do not function as a habitational structure
(e.g. a policy covering only the pool of an apartment complex).
(10) Personal contents in a commercial storage facility covered under a policy
that covers only those personal contents.
(11) Policies covering only Additional Living Expense.
(12) Any liability of the Company for extra contractual obligations and excess
of original policy limits liabilities.
(13) Losses in excess of the sum of the Balance of the Fund as of December 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 financing mechanisms, up
to the limit pursuant to Section 215.555(4)(c), Florida Statutes.
(14) Any liability assumed by the Company from Pools, Associations, and
Syndicates. Exception: Covered Policies assumed from Citizens under the
terms and conditions of an executed assumption agreement between the
Authorized Insurer and Citizens are covered by this Contract.
(15) All liability of the Company arising by contract, operation of 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 or 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.
(16) 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.
(17) 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.
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 provisions in Article XIII
relating to inspection of records and examinations.
ARTICLE VIII - LOSS REIMBURSEMENT ADJUSTMENTS
(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.
(2) REIMBURSEMENT ADJUSTMENTS
Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the
right to seek the return of excess loss reimbursements or advances which
have been paid to the Company along with interest thereon. Excess loss
reimbursements or advances are those payments or advances made to the
Company by the SBA on the basis of incorrect exposure submissions or
resubmissions, incorrect calculations of Reimbursement Premiums or
Retentions, payments in excess of the projected payout, 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. The Company will be sent an
invoice showing the due date for adjustments along with the interest due
thereon through the due date. The applicable interest rate for interest
credits, and for interest charges for adjustments beyond the Company's
control, will be the average rate earned by the SBA for the FHCF for the
first five months of the Contract Year. The applicable interest rate for
interest charges due to adjustments resulting from incorrect exposure
submissions or Proof of Loss Reports will accrue at this rate plus 3%.
Interest will continue to accrue if not paid by the due date.
ARTICLE IX - REIMBURSEMENT PREMIUM
(1) The Company shall, in a timely manner, pay the SBA its Reimbursement
Premium for the Contract Year. The 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. A Company may
choose to estimate its own Premium installments. However, if the Company's
estimation is less than the provisional Premium billed, an interest charge
will accrue on the difference between the estimated Premium and the final
Premium. If a Company estimates its first installment, the Administrator
shall bill that estimated Premium as the second installment as well, which
will be considered as an estimate by the Company. No interest will accrue
regarding any provisional Premium if paid as billed by the FHCF's
Administrator, except in the case of an estimated second installment as
set forth in this Article. Also, if a Company makes an estimation that is
higher than the provisional Premium billed but is less than the final
Premium, interest will not accrue. 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. Interest will also accrue on Premiums
resulting from submissions or resubmissions finalized after December 1 of
the Contract Year. 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 the Contract Year. The
applicable interest rate for interest credits will be the average rate
earned by the SBA for the FHCF for the first five 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 19ER04-2 (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 as outlined in the Data Call adopted for the Contract
Year under Rule 19ER04-2 (19-8.029), F.A.C., 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 as outlined in the Supplemental Instructions for New
Participants section of the Data Call adopted for the Contract Year
under Rule 19ER04-2 (19-8.029), F.A.C., 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.
(d) The requirement that a report is due on a certain date means that
the report shall be in the physical possession of the FHCF's
Administrator in Minneapolis no later than 5 p.m. on the due date.
If the applicable due date is a Saturday, Sunday or legal holiday,
then the actual 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 submission, neither
the 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) Pursuant to the provisions of Section 215.557, Florida Statutes, the
reports of insured values under Covered Policies by ZIP Code
submitted to the SBA pursuant to Section 215.555, Florida Statutes,
are confidential and exempt from the provisions of Section
119.07(1), Florida Statutes, and Section 24(a), Art. I of the State
Constitution.
(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 December 1 of the Contract Year. In addition,
if a company has been placed under regulatory supervision by a State
or control of the Company has been transferred through any legal or
regulatory proceeding to a state regulator or court appointed
receiver or rehabilitator (referred to in the aggregate as "State
action"), the full annual provisional Reimbursement Premium as
billed and any outstanding balances will be due on August 1, or the
date that such State action occurs after August 1 and before May 31
of the Contract Year.
(b) A New Participant that first begins writing Covered Policies prior
to December 1 of the Contract Year 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 based on its actual exposure as of December
31 of the Contract Year, as reported on or before March 1. To
recognize that New Participants 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, then the Company shall
pay $1,000. 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) A New Participant that first begins writing Covered Policies on or
after December 1 but through and including May 31 of the Contract
Year shall pay the FHCF a final Reimbursement Premium of $1,000 upon
execution of this Contract.
(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 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, as set out on
the invoice sent to the Company. If the applicable due date is a
Saturday, Sunday or legal holiday, then the actual 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., Eastern 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, this Contract, and any rules adopted
pursuant to the Statute. For a Company participating in a
quota share primary insurance agreement(s) with Citizens
Property Insurance Corporation High Risk Account, Citizens and
the Company shall report only their respective portion of
losses under the quota share primary insurance agreement(s).
Pursuant to Section 215.555(4)(c), Florida Statutes, the SBA
is obligated to pay for losses not to exceed the Actual
Claims-Paying Capacity of the FHCF, up to the limit in
accordance with Section 215.555(4)(c)1., Florida Statutes, for
any one Contract Year.
(b) LOSS REPORTS
1. At the direction of the SBA, the Company shall report its
projected Ultimate Net Loss from each Loss Occurrence 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
19ER04-2 (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, incurred and
paid, with respect to each Loss Occurrence during the Contract
Year on the Proof of Loss Report, Form FHCF-L1B, as adopted in
Rule 19ER04-2 (19-8.029), F.A.C.
3. Quarterly thereafter until all claims and losses resulting
from the Loss Occurrence(s) are fully discharged, the Company
shall render to the FHCF revised Proof of Loss Reports with
respect to each Loss Occurrence. If the Company's Retention
must be recalculated as the result of an exposure
resubmission, and if the recalculated Retention changes the
FHCF's reimbursement obligations, then the Company shall
submit additional Proof of Loss Reports for recalculation of
the FHCF's obligations.
4. The SBA will determine and pay, as soon as practicable after
receiving Proof of Loss Reports described and adopted in Rule
19ER04-2 (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.
5. 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.
6. If a Covered Event occurs during the Contract Year, but after
December 31, at the direction of the SBA, Companies shall file
an Interim Loss Report within 30 days after the Covered Event
and Proof of Loss Reports quarterly thereafter. Subparagraphs
3-6 above regarding Proof of Loss Reports shall apply.
7. 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 Ultimate Net 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) LOSS REIMBURSEMENT CALCULATIONS
1. In general, the Company's paid Ultimate Net Losses must exceed
its FHCF Retention before any reimbursement is payable from
the FHCF. Each Company sustaining reimbursable losses will
receive the amount of reimbursement due under the Contract up
to the amount of the Company's payout. If more than one
Covered Event occurs in any one Contract Year, any
reimbursements due from the FHCF shall take into account the
Company's Retention for each Covered Event. However, the
Company's reimbursements from the FHCF for all Covered Events
occurring during the Contract Year shall not exceed, in
aggregate, the Projected Payout Multiple or Payout Multiple,
as applicable, times the individual Company's Reimbursement
Premium for the Contract Year.
2. In determining reimbursements under this Contract, 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
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 projected Balance of the
Fund as of December 31 of the Contract Year, exclusive
of any bonding capacity of the FHCF, exceeds $2 billion.
Further, if the Company is a member of an NAIC group,
the Company may not receive reimbursement under this
provision if any other member of the NAIC 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
Contract, but not to exceed for all Loss Occurrences, an
amount equal to the Projected Payout Multiple or the
Payout Multiple, as applicable, times the individual
Company's Reimbursement Premium for the Contract Year.
For a limited apportionment company, any amount payable
under this provision shall be reduced by the amount (if
any) payable under (a) above.
c. Thereafter, pursuant to Section 215.555(4)(d)2.c.,
Florida Statutes, establish the prorated reimbursement
level at the highest level for which any remaining fund
balance or bond proceeds (as limited by Section
215.555(4)(c), Florida Statutes) are sufficient to
reimburse entities created pursuant to Section
627.351(6), Florida Statutes, for reimbursable losses
exceeding the amounts payable pursuant to (b) above for
the Contract Year. The proration shall be determined
based on each entity's share of their aggregate
reimbursable losses exceeding the amounts payable
pursuant to (b) above. Any additional reimbursements
pursuant to this paragraph shall not include losses
under an entity's FHCF Retention and will be at the 90%
Reimbursement Percentage. In order to determine the
amount available for additional reimbursements, the SBA
will review reported loss information from all Companies
and determine that all Companies 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 available for such
additional reimbursements. Such additional reimbursement
amounts shall not be limited due to the transitional
provision created for the 2004-2005 Contract Year.
3. 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 development of the Covered Events involved.
(d) COMMUTATION
1. Not less than 36 months or more than 60 months after the end of the
Contract Year, the Company shall report to the FHCF all claims and
losses, both reported and unreported, for the Contract Year which
are not finally settled and which may be reimbursable losses under
this Contract. The Company and the SBA or their respective
representatives may, by mutual agreement, determine the capitalized
value of all claims and losses, both reported and unreported,
resulting from Loss Occurrences commencing during the Contract Year,
and the Company shall provide the SBA with a copy of a written
opinion on such capitalized value by the Company's certifying
actuary. Payment by the SBA of its portion of any amount or amounts
so mutually agreed and certified by the Company's certifying actuary
shall constitute a complete and final release of the SBA in respect
of all claims and losses, both reported and unreported, under this
Contract.
2. If agreement on capitalized value cannot be reached within 60 days
after the Company reports its claims and losses to the FHCF, the
Company and the SBA may mutually appoint an actuary or appraiser to
investigate, determine and capitalize such claims or losses. If both
parties then agree, the SBA shall pay its portion of the amount so
determined to be the capitalized value of such claims or losses.
3. If the parties fail to agree, then any difference shall be settled
by a panel of three actuaries, one to be chosen by each party and
the third by the two so chosen. If either party does not appoint an
actuary within 30 days, the other party may appoint two actuaries.
If the two actuaries fail to agree on the selection of a third
actuary within 30 days of their appointment, each of them shall name
two, of whom the other shall decline one and the decision shall be
made by drawing lots. All the actuaries shall be regularly engaged
in the valuation of property claims and losses and shall be members
of the Casualty Actuarial Society and of the American Academy of
Actuaries. None of the actuaries shall be under the control of
either party to this Contract. Each party shall submit its case to
its actuary within 30 days
of the appointment of the third actuary. The decision in writing of
any two actuaries, when filed with the parties hereto, shall be
final and binding on both parties.
4. The reasonable and customary expense of the actuaries and of the
commutation (as a result of 2. and 3. above) shall be equally
divided between the two parties. Said commutation shall take place
in Tallahassee, Florida, unless some other place is mutually agreed
upon by the Company and the SBA.
(4) ADVANCES
(a) The SBA may make advances for loss reimbursements as defined herein,
at market interest rates, to the Company in accordance with Section
215.555(4)(e), Florida Statutes. The market interest rate shall be
the average rate earned by the SBA for the FHCF for the first five
months of the Contract Year. All interest charged 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
Proof of Loss Report for the Covered Event for which the advance was
issued qualifying the Company for reimbursement equal to or
exceeding the amount(s) of the advance(s). If 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 Proof of Loss Report but will continue until
the Company reimburses the FHCF for the overpayment. The Company's
final reimbursement shall be reduced by an amount equal to the
amount of the advance(s) and the interest thereon. The specific type
of advances enumerated in the Statute follow.
1. Advances to Companies to prevent insolvency.
a. Section 215.555(4)(e)1., Florida Statutes, provides that
the SBA shall advance to the Company amounts necessary
to maintain the solvency of the Company, up to 50
percent of the SBA's estimate of the reimbursement due
to the Company. In determining insolvency for this
advance, a Company will be considered insolvent if it is
unable to pay its policyholders for justifiable claims.
b. The requirements for an advance to a Company to prevent
insolvency are that the Company demonstrates that it is
likely to qualify for reimbursement, that the Company
demonstrates that the immediate receipt of moneys from
the SBA is likely to prevent the Company from becoming
insolvent, and that the Company provides the information
in (4)(b) below to aid in the SBA's determination to
grant an advance.
c. The SBA's final decision regarding an application for an
advance to prevent insolvency 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.
2. Advances to entities created pursuant to Section 627.351(6),
Florida Statutes.
a. Section 215.555(4)(e)2., Florida Statutes, provides that
the SBA may advance to an entity created pursuant to
Section 627.351(6), Florida Statutes, up to 90% of the
lesser of the SBA's estimate of the reimbursement due or
the entity's share of the actual aggregate Reimbursement
Premium for that Contract Year, multiplied by the
current available liquid assets of the FHCF.
b. The requirements for an advance to entities created
pursuant to Section 627.351(6), Florida Statutes are
that the entity must demonstrate to the SBA that the
advance is essential to allow the entity to pay claims
for a Covered Event and that the entity provides the
information in (4)(b) below to aid in the SBA's
determination to grant an advance.
c. The SBA must determine that its assets are sufficient
and sufficiently liquid to fulfill its obligations to
other Companies under the Contract prior to granting an
advance.
3. Advances to limited apportionment companies.
a. Section 215.555(4)(e)3., Florida Statutes, provides that
the SBA may advance the amount of estimated
reimbursement payable to limited apportionment
companies.
b. The requirement for an advance to limited apportionment
companies is that they make an application to the SBA
and provide the SBA with a report of their exposures and
losses in order to determine Retention levels and loss
reimbursements payable.
c. The SBA must determine that its assets are sufficient
and sufficiently liquid to fulfill its obligations to
other Companies under the Contract prior to granting an
advance.
(b) Companies shall request a specific amount for the advance from the
SBA and, for those Companies or entities designated in (4)(a)1. and
(4)(a)2. above, shall 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:
1. Current assets;
2. Current liabilities other than liabilities due to the Covered
Event;
3. Current liabilities due to the Covered Event, paid and unpaid,
submitted on the Proof of Loss Report, Form FHCF-L1B, as
adopted in Rule 19ER04-2 (19-8.029), F.A.C.;
4. Evidence of estimated Retention breached by payment of paid
losses from the Covered Event;
5. Current surplus as to policyholders;
6. Estimate of expected liabilities due to the Covered Event;
7. Estimate of other expected liabilities not due to the Covered
Event;
8. Amount of reinsurance available to pay claims for the Covered
Event under other reinsurance treaties;
9. 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
will need to provide its exposure data prior to September 1 in
order that the appropriate calculations may be made.
(c) The information outlined herein shall be supplied in the form of a
letter, signed by two executive officers of the Company, with the
supporting information attached.
(d) In determining whether or not to grant an advance, the SBA shall:
1. Carefully review and consider all the information submitted by
such Companies;
2. Consult with all relevant regulatory agencies seeking all
relevant information about the Company's financial and
solvency condition;
3. Carefully review its currently available liquid assets; and
4. Review the damage caused by the Covered Event and when that
Covered Event occurred.
(e) 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.
(5) DELINQUENT PREMIUM PAYMENTS
Failure to submit a Premium or Premium installment when due is a violation
of the terms of this Contract and Section 215.555, Florida Statutes.
Interest on late payments shall be due as set forth in Article IX(2) of
this Contract.
(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 examinations of the
Company's exposure and claims data.
(7) DELINQUENT SUBMISSIONS
Failure to submit an exposure submission or resubmission when due is a
violation of the terms of this Contract and 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
Any 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 verify, 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 outlined herein, and in any
administrative rules adopted pursuant to Section 215.555, Florida Statutes.
Companies writing covered collateral protection policies, as defined in
definition (10) of Article V herein, must be able to provide documentation that
the policy covers personal residences, protects both the borrower's and lender's
interest, and that the coverage is in an amount at least equal to the coverage
for the dwelling in place under the lapsed homeowner's policy.
(1) EXAMINATION REQUIREMENTS FOR EXPOSURE VERIFICATION
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 examination of the Company's exposure
submissions. The Company shall also retain complete and accurate records
of any completed exposure examination for any Contract Year in which the
Company incurred losses until the completion of the loss reimbursement
examination for that Contract Year. The records to be retained shall
include the exam file which supports the exposure reported to the SBA and
any other information which would allow for a complete examination of the
Company's reported exposure data. The exam file shall be prepared
according to the SBA Exam File Specifications outlined in the Data Call.
The Company must also have available, at the time of the examination, a
copy of its underwriting manual, a copy of its rating manual, and staff to
respond to the questions of the SBA or its agents. 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, the Company may retain either the actual application or may
retain the actual application in an electronic format.
(2) EXAMINATION REQUIREMENTS FOR LOSS REPORTS
The Company shall retain complete and accurate records of all reported
losses and/or advances submitted to the SBA until the SBA has completed
its examination of the Company's reimbursable losses. The records to be
retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B,
adopted in Rule 19ER04-2 (19-8.029), F.A.C. The Company must also retain
the required exposure exam file for the Contract Year in which the loss
occurred, and must have available any other information which would allow
for a complete examination of the Company's losses.
(3) EXAMINATION PROCEDURES
(a) The FHCF will send an examination notice to the Company providing
the commencement date of the examination, the site of the
examination, any accommodation requirements of the examiner, and the
reports and data which must be assembled by the Company and
forwarded to the FHCF upon request. The Company shall be prepared to
choose one location in which to be examined, unless otherwise
specified by the SBA.
(b) The reports and data are required to be forwarded to the FHCF as set
forth in an examination notice letter. The information is then
forwarded to the examiner. If the FHCF receives accurate and
complete records as requested, the examiner will contact the Company
to inform the Company as to what policies or other documentation
will be required once the examiner is on site. Any records not
required to be provided to the examiner in advance shall be made
available at the time the examiner arrives on site.
(c) At the conclusion of the examiner's work and the management review
of the examiner's report, findings, recommendations, and work
papers, the FHCF will forward a preliminary draft of the examination
report to the Company and require a response from the Company by a
date certain as to the examination findings and recommendations.
(d) If the Company accepts the examination findings and recommendations,
and there is no recommendation for resubmission of the Company's
exposure data, the examination report will be finalized and the exam
file closed.
(e) If the Company disputes the examiner's findings, the areas in
dispute will be resolved by a meeting or a conference call between
the Company and FHCF management.
(f) 1. The recommendation of a loss reimbursement examination could
require the Company to resubmit its loss reports or exposure data.
2. If the recommendation of the examiner is to resubmit the Company's
exposure data for the Contract Year in question, then the FHCF will
send the Company a letter outlining the process for resubmission
and including a deadline to resubmit. The resubmission will include
a data file to be submitted to the FHCF's Administrator and an exam
file to be submitted to the offices of the SBA. The resubmission is
also required to be accompanied by a detailed written description
of the specific changes made to the resubmitted data. Once the
resubmission is received by the FHCF's
Administrator, the FHCF's Administrator calculates a revised
Reimbursement Premium for the Contract Year which has been
examined. The SBA shall then review the resubmission with
respect to the examiner's findings, and accept the
resubmission or contact the Company with any questions
regarding the resubmission. Once the SBA has accepted the
resubmission as a sufficient response to the examiner's
findings, the FHCF's Administrator will send the Company an
invoice for any Reimbursement Premium and interest due or to
refund Reimbursement Premium, as the case may be. Once the
resubmission has been approved, the exam file is closed.
3. If the recommendation of the examiner is either to resubmit
the Company'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 Company 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 same procedures outlined in
Article XIII(3)(f)2. apply.
(g) If the Company continues to dispute the examiner's findings
and/or recommendations and no resolution of the disputed
matters is obtained through discussions between the Company
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 examiner's list of errors is made available in the
examination report sent to the Company. Given that the
examination 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 EXAMINATIONS
The costs of the examinations shall be borne by the SBA. However, in order
to remove any incentive for a Company to delay preparations for an
examination, the SBA shall be reimbursed by the Company for any
examination expenses incurred in addition to the usual and customary
costs, which additional expenses were incurred as a result of the
Company's failure, despite proper notice, to be prepared for the
examination or as a result of a Company's failure to provide requested
information. 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
Participating insurers must notify the FHCF immediately upon becoming insolvent.
Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay
the "net amount of all
reimbursement moneys" due an insolvent insurer to the Florida Insurance Guaranty
Association for the benefit of Florida policyholders.
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 Contract 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 28-111,
F.A.C., a person whose substantial interests are affected by a decision of
the SBA regarding the FHCF may request a hearing within 21 days shall have
waived his or her 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 the Agency Clerk, General Counsel's Office, State Board of
Administration of Florida, P.O. Box 13300, Tallahassee, FL 32317-3300,
within the 21 day period.
ARTICLE XVIII - REIMBURSEMENT CONTRACT ELECTIONS
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. If the Company
is a member of an NAIC group, all members must elect the same reimbursement
percentage, and the individual executing this Contract on behalf of the Company,
by placing his or her initials in the box under (a) below, affirms that the
Company has elected the same reimbursement percentage as all members of its NAIC
group. If the Company is an entity created pursuant to Section 627.351, Florida
Statutes,
the Company must elect the 90% reimbursement percentage. The Company shall not
be permitted to change its reimbursement percentage during the Contract Year.
The Company shall be permitted to change its reimbursement percentage at the
beginning of a new Contract Year, but may not reduce its reimbursement
percentage if a Covered Event required the issuance of revenue bonds, until the
bonds have been fully repaid.
The Reimbursement Percentage elected by the Company for the prior Contract Year
effective June 1, 2003 was as follows: Philadelphia Indemnity Insurance Company
- - 90%
(a) NAIC GROUP AFFIRMATION: Initial the following box if the Company is part of
an NAIC Group:
[TBM]
(b) REIMBURSEMENT PERCENTAGE ELECTION: The Company hereby elects the following
Reimbursement Percentage for the Contract Year from 12:01 a.m., Eastern
Time, June 1, 2004, to 12:01 a.m., Eastern Time, June 1, 2005, (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 [(TBM)] 90%
REPORTING EXPOSURE FOR A SINGLE STRUCTURE, WITH A MIX OF COMMERCIAL HABITATIONAL
AND COMMERCIAL NON-HABITATIONAL EXPOSURE, WRITTEN ON A COMMERCIAL POLICY
This section is applicable to all Companies with exposure for single structures
with a mix of commercial habitational and commercial non-habitational exposure
written under a Commercial Policy. If the Company does not write this type of
exposure and this section DOES NOT apply, please initial the N/A box below which
completes this ARTICLE. If the Company DOES write this type of exposure, please
read and complete the remainder of this ARTICLE.
[TBM]
N/A
COMMERCIAL-RESIDENTIAL CLASS CODE
If a single structure is used for both habitational and non-habitational
purposes and the structure has a commercial-residential class code (based on a
classification plan on file with and reviewed
by the Administrator), the entire exposure for the structure should be reported
to the FHCF under the Data Call, and the FHCF will reimburse losses for the
entire structure as well.
COMMERCIAL NON-RESIDENTIAL/BUSINESS CLASS CODE
If a single structure is used for both habitational and non-habitational
purposes and the structure has a commercial non-residential or business class
code (based on a classification plan on file with and reviewed by the
Administrator), the habitational portion of that structure should be identified
and reported to the FHCF under the Data Call.
However, in recognition of the unusual nature of commercial structures with
incidental habitational exposure and the hardship some companies may face in
having to carve out such incidental habitational exposure, as well as the losses
to such structures, the FHCF will accommodate these companies by allowing them
to exclude the entire exposure for the single structure from their Data Call
submission, providing the following two conditions are met:
(1) The decision to not carve out and report the incidental habitational
exposure shall apply to all such structures insured by the Company; and
(2) If the incidental habitational exposure is not reported to the FHCF, the
Company agrees it shall not report losses to the structure and the FHCF
shall not reimburse any losses to the structure.
Initial the CARVING box below if the Company is able to carve out and report its
incidental habitational exposure, OR, if this requirement presents a hardship,
the Company must communicate its decision to not carve out and to not report the
incidental exposure by having the individual executing this Contract on behalf
of the Company placing his or her initials in the NOT CARVING bow below.
[ ] OR [ ]
CARVING NOT CARVING
By initialing the CARVING OR NOT CARVING box above, the Company is making an
irrevocable decision for the corresponding Contract Year Data Call submission
and any subsequent submissions.
IMPORTANT NOTE: SINCE THIS ELECTION WILL IMPACT YOUR DATA CALL SUBMISSION,
PLEASE SHARE THIS DECISION WITH THE INDIVIDUAL(S) RESPONSIBLE FOR COMPILING YOUR
DATA CALL S
ARTICLE XIX - SIGNATURES
APPROVED BY:
Florida Hurricane Catastrophe Fund
By: State Board of Administration of the State of Florida
By: Linda Letta, General Counsel for 7/12/2004
Coleman Stipanovich Date
Executive Director
Approved as to legality:
By: Thomas A. Bink, General Counsel 7/12/2004
Linda Lettera Date
General Counsel
FL Bar ID#311911
Liberty American Insurance Company
COMPANY
By: T. Bruce Meyer, Treasurer 5/17/2004
Name/Title Date