Section 631.695 was enacted in 2006 defining a mechanism to facilitate funding to pay covered claims of the Florida Insurance Guaranty Association (FIGA) for hurricane-related insolvencies. Similar statutory language enacted after Hurricane Andrew in 1992 was removed by a statutory sunset provision.
Bonding authority – Section 631.695(2)
“The governing body of any municipality or county may issue bonds to fund an assistance program in conjunction with, and with the consent of, the Florida Insurance Guaranty Association for the purpose of paying claimants’ or policyholders’ covered claims, as defined in s. 631.54, arising through the insolvency of an insurer, which insolvency is determined by the Florida Insurance Guaranty Association to have been a result of a hurricane, regardless of whether the claimants or policyholders are residents of such municipality or county or the property to which the claim related is located within or outside the territorial jurisdiction of the municipality or county.”
The cities of Callaway and Panama City Beach formed the Florida Insurance Assistance Interlocal Agency (FIAIA) as a conduit for the future issuance of FIGA bonds (depending on the facts and circumstances at the time bonds are issued, other municipalities can be added to FIAIA). The sole purpose of FIAIA agency is to expedite the payment of covered claims for insolvent insurance companies on behalf of FIGA. FIAIA’s Board of Directors meet bi-annually and is made up of members from FIGA and the cities of Callaway and Panama City Beach.
FIAIA’s claims payment program and bond issuance are governed by the following:
- Interlocal Agreement between Callaway and Panama City Beach that sets out purpose and powers of agency, and procedures for establishing membership and governance of the Agency.
- Covered Claims Payment Assistance Program Agreement is a quad-party agreement between FIGA, the Office of Insurance Regulation, FIAIA, and the trustee that establishes the pledged revenues, covenants, and representations of each of the parties.
- Trust Indenture between FIAIA and the trustee setting forth bond security and flow of funds, along with various legal restrictions.
FIGA has the ability to levy a 2% regular and a 2% emergency assessment annually resulting in an annual assessment capacity of approximately $650 million. In the event of hurricane-related insolvencies that exceed FIGA’s assessment capacity, or the desire to spread assessments over a larger time period, the FIGA Board may elect to issue bonds through FIAIA to obtain funds to pay covered claims. FIAIA has been validated by the circuit court in Leon county to issue $750 million in bonds pursuant to Chapter 75, Florida Statutes, with a term not to exceed 30 years, and with assessments pledged to pay the bond principle, interest, and all associated costs to issue the bonds.
