Florida’s residual market for commercial insurance is closer to realizing its plan to provide coverage for businesses with property valued under $1 million that can’t obtain coverage in the private insurance market. Officials had originally hoped that the JUA would begin offering policies Sept. 1 but details were still being worked out as of yesterday.
The Property and Casualty Joint Underwriting Association has hired a company partially owned by Microsoft co-founder Paul Allen to act as servicing carrier. International Catastrophe Insurance Managers, LLC, (ICAT) launched ICAT Specialty Insurance Co. in Florida in July. ICAT specializes in commercial catastrophe insurance coverage in catastrophe-exposed communities.
ICAT, which is based in Colorado, got the JUA contract after outlining its proposal before officials on Aug. 25 at the first meeting of the newly-activated JUA, according to Jonathon Kees, assistant director of communication for the Florida Office of Insurance Regulation. Kees said another meeting was held yesterday.
Under the conditions of the agreement, ICAT will write the policies and perform site inspections while the JUA retains responsibility for funding of the policies.
ICAT’s minimum monthly compensation will be the greater of 11 percent of the gross written premiums or $100,000. In addition, it will collect a policy fee ($175), inspection fee ($100), claims filing fee ($450) and a producer appointment fee ($125).
In addition to ICAT’s ability to meet the hoped-for Sept. 1 implementation, the company was selected for its experience with wind peril underwriting for small commercial accounts, its highly automated platform and the fact that it was already licensed to write property insurance in the state.
In its presentation to the JUA, ICAT also touted its catastrophe claims expertise, noting that it handled 6,500 commercial catastrophe claims in its territories in 2004 and 2005 alone.
According to the plan, producers will be given passwords to gain access ICAT’s automated system and be instructed to complete applications online. Agents must verify that a “good faith effort has been made to find coverage and coverage is not available in the private market.”
The average base rate for the JUA policies is $1.49 per $100 of coverage. This rate is further affected by the number of stories in the building, distance to coast and a variety of other factors.
Agents are to receive a 5 percent commission. ICAT’s procedures call for agents to be able to bind quotes after a 10-day waiting period and for policies to be issued within 10 days of the effective date. Property inspections are to be ordered at binding, with appropriate underwriting action taken within 60 days.
Each policy is issued with a provision stipulating that it will be non-renewed at the end of the policy period and instructing the insured to secure coverage in the standard market prior to policy expiration.
Another provision notes that recovery is subject to JUA funding.
The policies will cover only losses caused by wind and hail. In total, there is $2 million in coverage available per insured including structure ($1 million limit), business personal property and tenants’ improvements and betterments ($750,000 limit), and business income (up to $250,000).
If total structure values exceed $1 million, coverage will be denied. Structure coverage excludes buildings under construction. ICAT will conduct on-site inspections to determine property values and will require 100 percent insurance-to-value.
Structures constructed partially or completely over water are deemed ineligible for coverage, as are risks “that present substandard conditions of a nature that would render them uninsurable.”
There is a minimum five percent deductible but “significant premium savings” are available with 10 percent and 15 percent deductibles. Deductibles are applied to each wind/hail loss separately.
In order for coverage to be in effect, the business personal property must be physically located at the actual underwritten location. Also, tenants can obtain stand-alone coverage for objects of improvement. Ineligibility for BPP and TIB protection does not preclude the purchase of structure coverage.
With employees located in Colorado, Florida and Georgia, ICAT said it has contracts with more than 200 independent claims adjusters.
Gov. Jeb Bush and his Cabinet approved the reactivation of the JUA as a short-term way to ease insurance availability problems for small businesses. Eight storms inflicting $38 billion in insured losses have created a crisis in Florida’s property insurance market.
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