Florida’s Commercial JUA Now Open for Small Business Risks

September 18, 2006

Originally slated for a Sept. 1 start date, Florida’s residual market for commercial insurance began providing coverage for small businesses on Sept. 15.

A signing event took place midday on Sept. 15 and by mid-afternoon more than 60 agents were registered with the program, according to Dan Sumner, interim JUA director.

“Any qualified insurance agent in Florida can be appointed,” Sumner said during a teleconference. “Agents can be appointed immediately in real time after completing an online application.”

The program is designed to provide interim coverage for small businesses with property valued under $1 million that can’t obtain coverage in the private insurance market. The coverage seeker must have been turned down by three licensed insurance companies and one surplus lines company in order to qualify for coverage in the new Property and Casualty Joint Underwriting Association (JUA) program.

The JUA has thus far hired one company to act as servicing carrier. International Catastrophe Insurance Managers, LLC, (ICAT) launched ICAT Specialty Insurance Co. in Tampa in July. ICAT specializes in commercial catastrophe insurance coverage in catastrophe-exposed communities.

Bob Lotane, communication director for the Florida Office of Insurance Regulation, said ICAT is not an exclusive service provider for the program.

“We can retain as many servicing carriers as necessary,” Lotane said. “ICAT was the only company licensed in Florida that could meet the desired timeframe.”

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.

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).

Agents may register to access the online system by going to www.fmap.org/commercial.html. Agents must register with FMAP’s Commercial Program prior to registering with ICAT.

According to the plan, producers who register 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).

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.

While the JUA is out of the starting gate, its future beyond a year is unknown. 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.

“Our concern was to get the thing off the ground and get policies in place for a year,” Lotane said. “The new governor and cabinet will decide whether or not to continue.”

“We are very pleased to work with the Office of Insurance Regulation and the PCJUA to develop an insurance solution for Florida’s small commercial business owners,” commented Ed Kelly, president of ICAT. He said ICAT’s technology platform provides real-time quoting capability to Florida agents and brokers.

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