Cat Bond Update: Florida Assignment Of Benefits

On April 24, 2019, the Florida Legislature passed a bill (the "Act")¹ to reform the requirements for the assignment of benefits of claims for residential and commercial property insurance.  The Act is expected to become law.  Assignment of benefits in Florida has been a concern for the ILS market as related litigation has become a significant factor in losses and claims development for a number of outstanding catastrophe bonds.

Background

For a number of years, legislators in Florida had attempted to address perceived abuses in the assignment of benefits of property insurance claims.  Attorneys and contractors would find homeowners, identify a basis for a potential claim and offer "free" repairs in exchange for an assignment of these claims. Often an inflated or spurious claim would then be submitted to the insurer. In a legal dispute, under the prior statute, the insurer would be liable to pay attorney's fees in the event the insurer was found to be liable,