Florida Provides Guidance for Required Filings Related to the Reinsurance to Assist Policyholders (RAP) Program

Florida Provides Guidance for Required Filings Related to the Reinsurance to Assist Policyholders (RAP) Program

 

On June 3, 2022, the Florida Office of Insurance Regulation (OIR) issued Informational Memorandum OIR-22-02M regarding the implementation of items related to the Reinsurance to Assist Policyholders (RAP) Program. The RAP Program was recently created through Senate Bill 2-D, which was signed by the Governor on May 26, 2022. The bill is designed to incorporate important reforms in an effort to stabilize Florida’s property insurance market.

The OIR’s Information Memorandum is intended to help inform all personal and commercial residential property insurers conducting business within the state about the newly enacted legislation and provide guidance to facilitate the expedited review of the rate filings required by the RAP Program established by the bill. Among other things, the RAP Program:

  • Authorizes a $2 billion dollar reimbursement layer of reinsurance for hurricane losses directly below the mandatory layer of the Florida Hurricane Catastrophe Fund (FHCF);
  • Requires all eligible insurers to participate in the RAP Program for one year:
    • Insurers that do not have private reinsurance within the RAP layer of coverage for the 2022-2023 contract year must participate during the 2022-2023 contract year;
    • Insurers that have private reinsurance at the RAP layer for the 2022-2023 contract year must defer using RAP Program coverage until the 2023-2024 contract year; and
    • A RAP insurer that has any private reinsurance that duplicates RAP coverage for the 2022-2023 contract year must notify the State Board of Administration (SBA) of the private reinsurance and must defer participation in the RP program until the 2023-2024 contract year; and
  • Specifies that insurers do not pay premiums for RAP Program coverage, but must reduce rates to reflect savings:
    • Insurers that participate in the RAP Program for 2022-2023 must reduce their rates by June 30, 2022 to reflect the savings from RAP coverage; and
    • Insurers that defer using the RAP Program until 2023-2024 must reduce rates to reflect savings by May 1, 2023.

 

The Memorandum includes guidance about the MAP Program’s required rate filing. It states that insurers shall not make any other changes to its rates in the filing and explains:

The cost savings identified in the filing may be measured by either:

  1. Providing a current reinsurance premium quote as if the RAP layer (or any part of it) had been purchased in the private reinsurance market and using this quote to estimate what the reinsurance premium would have been for the RAP layer. This premium is reduced by the expected RAP layer recoveries (measured using a hurricane catastrophe model), adjusted by the LAE and variable expense costs and divided by the in-force premium; or
  2. Using the expected RAP layer recoveries (measured using a hurricane catastrophe model), adjusted by the LAE and variable expense costs and divided by the in-force premium.

 

It also clarifies that for either scenario, the reduction in hurricane rates for the RAP cost savings needs to reflect the expected recoveries (measured using a hurricane catastrophe model) adjusted by variable expense cost (from the latest rate filing) divided by in-force hurricane premium.

The OIR will expedite the review of these required rate filings and has provided a streamlined rate filing process through the Insurance Regulation Filing System (IRFS). Additional information regarding the RAP program is available on the SBA website here. If you have questions regarding the Informational Memorandum, please contact the OIR at InformationalMemoranda@floir.com.  

 

 

Link to Informational Memorandum OIR-22-02M

Link to FL SB 2-D