Overview
The formation of the FHCF was triggered by Hurricane Andrew in 1992 which prompted cancellations and non-renewals of property insurance policies. Insurance companies were exiting and threatening to exit the Florida insurance market. FHCF was established to stabilize the market and protect property owners. Our client, the State Board of Administration of Florida (SBA), was faced with a new statute that created the FHCF but provided minimal details on how the fund would be administered. The SBA determined that it needed outside expertise to successfully implement the FHCF.

Paragon was awarded the business due to our comprehensive approach to the program. We provided a detailed analysis, relying on the broad experience and capabilities of our people but encouraging a creative approach in developing a proposed solution. There were immediate concerns that needed to be addressed, including:

• Original FHCF legislation, because of many factors, was opposed by several insurers.  The marketplace could be described as hostile, as there were multiple legal actions trying to block and/or rescind the formation of the FHCF.  Paragon worked with the SBA to identify and implement FHCF enhancements that eliminated industry concerns, such as offering deductibles and establishing three different and distinct coverage levels.
• The original legislation was only a few pages long.  Paragon worked with the SBA to establish a much more comprehensive legislation that includes rules, forms and other documents to fully detail and refine the operation of the FHCF.
• The SBA faced the challenge of implementing the newly created FHCF, administering a program that required extensive data collection and processing, large volume premium calculation, billing, and collections, and claims processing for a potential $11 billion of capacity.  Paragon responded with a proposed database and management system to gather, store, and analyze the data, along with specific claims handling and payment procedures.

Goals
Paragon now performs an extensive range of services, many of which are beyond the initial terms of the FHCF contract. Currently there are 246 companies that participate in the FHCF. Some of the services performed by Paragon include:

• Collection and processing of over $1.2 trillion of exposure data;
• Annual calculation of $500 million in premium;
• Collection and preparation of monthly financial statements;
• Responsibility and authority to issue up to $11 billion in claim checks; and
• Web site development and maintenance.

Our more comprehensive look at the services performed for the SBA included:

• Database management;
• Exposure processing and analysis ($1.1 trillion for 2002);
• Cash management ($500 million for 2002);
• Financial reporting (monthly/quarterly/annual financial statements);
• Management reporting;
• Contract administration;
• Assist in drafting new Florida Administrative Code Rules and annual updates to existing rules;
• Assist in drafting legislative changes;
• Website management;
• Public speaking engagements;
• Government and public presentations; and
• Consulting on a variety of issues.

In order to effectively administer the FHCF, we were tasked with developing a comprehensive database tool that could handle the FHCF’s volume requirements.  Utilizing internal actuarial and IT resources, we:

• Built customized Access database processing and storage systems to meet the client’s needs (used internally in our role as Administrator);
• Built customized Validation Software for the industry to use when compiling their FHCF exposure submissions; and
• Built and currently maintain customized Access database systems used by SBA in-house.

In addition to our existing contract to administer the FHFC, Paragon has also been contracted by the SBA to provide actuarial services.  We are currently in our ninth year on this services agreement.  Services provided (annually) include:

• Developing FHCF reimbursement premium formula;
• Establishing actuarially indicated and supported rates;
• Defining the analyses and consultative services to be provided by hurricane catastrophe modeling vendors;
• Presenting actuarial findings to the Board Trustees, FHCF Advisory Council, legislative staffs or committees, and other governmental agencies with oversight responsibilities; and
• Providing loss reserving services.

Paragon has been and remains the administrator of the FHCF since 1994 and is in the third year of another five year contract.  In 2000, the business went through a formal RFP process in which Paragon was awarded the business over several competitors.

Paragon has worked closely with the SBA since 1994 to identify all issues, recommending and implementing solutions and exceeding expectations.  We have demonstrated our vast experience and depth of skill within Paragon and our corporate parent Benfield in consulting with the SBA and providing innovative solutions.  This entire process has established a relationship of mutual trust and respect, which led to the expansion of Paragon services performed for the SBA.