OIR Memorandum Provides Guidance on Reinsurance Coverage
OIR has issued an informational memo OIR-10-01M notifying property insurers of a modified approach to the OIR’s requirements for minimum reinsurance coverage for catastrophe reinsurance. The memo states: “This year the Office of Insurance Regulation (Office) will be looking at the totality of the catastrophe risk from multiple storms and ultimately the insurer’s ability to pay its claims. The Office is not requiring any specific level of catastrophe reinsurance such as the 1 in 100 year probable maximum loss level. Rather, the Office will look at the entire spectrum of catastrophe risk for each insurer recognizing it is equally important to protect the surplus of the insurer from multiple storms of a smaller magnitude.” The memo does not identify what replaces this past test but does say the “amount of risk retained by the property insurer should be such that the insurer will be solvent whether a large storm impacts Florida or multiple smaller storms impact Florida.” The memo does identify one numerical test however, when it states: “property insurers need to retain some of the catastrophe risk but should limit retention of risk per storm that exceeds approximately half of the surplus above the legally required minimum.” Finally, the memo does encourage the use of alternative risk transfer mechanisms especially for addressing multiple storm scenarios.