Florida Senate bill SB 1770, which contains a measure to create a facility allowing smaller Florida insurers access to capital market sources of reinsurance through instruments such as catastrophe bonds and securitization, has been approved today by the Florida House of Representatives, shortly after its approval by the Florida Senate last week. The bill now returns to the Senate for final approval to be handed to the state’s governor for signing into law.
The bill was significantly amended as it was passed by the Senate and House, but the amendments were largely related to pricing for customers of Florida Citizens and aimed at removing any major hikes in rates. The section of the bill which is most interesting for the ILS and catastrophe bond market, the proposal to create the Florida Catastrophe Risk Capital Access Facility, remains largely untouched at this stage and now has a good chance of getting onto the states agenda as an action for the relevant departments.
The bill contains a measure to create the Florida Catastrophe Risk Capital Access Facility. This facility if approved would enable smaller, primary domestic insurers operating in Florida to access the capital markets through the pooling of risks and the use of instruments such as catastrophe bonds, insurance-linked securities and other risk-linked securitizations to provide reinsurance. You can read much more about the facility in our previous article here.
The bill passed its third reading in the House today, voted 111 in favour and just 6 against, and now passes back to the Senate to seek its acceptance of the changes made during the bills time in the House. The changes are extensive and amend many of the parts of the bill that affected rates for homeowners, however we understand that the Senate could well approve them as it is keen to get some sort of bill to reform insurance in Florida through in this legislative session.
The fact that the Florida Catastrophe Risk Capital Access Facility proposal remains one which calls for a mechanism for pooling hurricane insurance risk and transferring it to the capital markets using ILS and catastrophe bonds is certainly positive for the global reinsurance and ILS markets.
We’ll update you as the bill progresses, its future is still by no means certain as the Senate could rail against the amendments made by the House which removed the measures calling for actuarially sound, or risk-based, pricing. If it does indeed get signed into law the implementation and set-up of the FCRCAF will bring opportunities to the investor and risk taking side of the market and it will also be interesting to watch the structure of the facility take shape and who is involved in helping to establish it.