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Florida JUA offers commercial cover

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TALLAHASSEE, Fla.—Florida's new property/casualty joint underwriting association this week will begin accepting submissions from eligible businesses seeking commercial property coverage.

To qualify, businesses and their agents must establish that coverage for wind and hail risks--the only causes of loss underwritten through the PCJUA program--is unattainable in the admitted and surplus lines markets. Coverage for other perils still must be written in the private insurance market, though the PCJUA has said it may eventually offer a full-coverage policy. In addition, the facility will not write wind-only coverage in areas of the state where Citizens Property Insurance Corp.--Florida's insurer of last resort--writes that coverage.

Boulder, Colo.-based underwriting manager International Catastrophe Insurance Managers L.L.C., which specializes in providing coverage to companies in cat-exposed regions of the United States, will serve as the PCJUA's first underwriter.

Initially, policies will be written on ICAT paper with maximum coverage limits of $2 million, including structural, contents and business interruption coverage. The minimum deductible available is 5%.

If the PCJUA is unable to fund all losses through premiums, it is required by law to assess commercial property insurers in the state to help fund the deficit.

"It's a very risky venture...the fact that (the program's developers) are limiting it to smaller businesses is critically important right now," said Sam Miller, executive vp at the Florida Insurance Council. "They are trying to make sure that the rates are not going to compete with the private carriers."

"One of the things that concerns us is that the JUAs have typically been a destabilizing force in the market," said Tony Abella Jr., a vp at Arthur J. Gallagher & Co.'s risks management services division in Miami.

"However, we recognize that there is a crisis right now in Florida for commercial property coverage, and the JUA could be a viable short-term solution if managed effectively," Mr. Abella said. "If this thing isn't effectively administered, the potential effect is that it creates such a burden on the market that the voluntary market may pull out of the state."

The PCJUA was enacted by regulators last month under an emergency state law permitting the creation of such facilities.