Compliance lapse comes at a high cost - FHCF

There was a big message in the $1.6 million in fines worked out with the Cat Fund for seemingly innocuous compliance lapses. Each of four homeowners insurance companies will be paying a $400,000 average fine to be released from its obligation to pay as much as $4 million to purchase TICL (Temporary Increase in Coverage Limit) optional reinsurance from the Florida Hurricane Catastrophe Fund (Cat Fund).

There was no injury to policyholders, as the companies had purchased coverage in the private reinsurance market in lieu of the TICL coverage, out of concern that the Cat Fund would not have resources to cover its TICL obligations. Fines were imposed because the four companies missed June deadlines for opting out of the TICL coverage (which the companies has selected earlier).

In dueling public statements reported yesterday, one carrier called the Cat Fund's actions "unconscionable," while the Cat Fund said that it was the companies' own fault and that the Cat Fund needed to set a precedent for future years. See 4 companies to pay $1.6 million in fines to get out of optional reinsurance coverage (Gray Rohrer, Florida Current, Sept. 27, 2012), which first reported the settlement between the carriers and the Cat Fund.

This summary was prepared by Perry Cone and posted at TallyInsLaw.com.

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