Florida's first self-insurance fund for condominium associations, which have been stung by soaring premiums for windstorm coverage, was approved by state regulators last week.
The CAM (Community Association Management) Self Insurance Fund, now open to the 900 buildings managed by the Continental Group in Florida, will allow associations to lock in 80 percent of its premium rate for three years and provides savings of 20 percent to 35 percent off their current policies.
The fund has just begun to market its policies since it was approved Nov. 1.
''I think it's a very intriguing proposition to many buildings [where unit owners] are frustrated by the fact that their insurance has gone up 200 percent to 400 percent in the last five years,'' said Peter Gordon, president of the fund and an executive with a Continental Group affiliate company.
Made possible by a provision in the massive insurance reform bill passed by the state Legislature during its special session in January, these self-insurance funds are expected to provide coverage at lower rates.
There are several other self-insurance funds seeking approval from state regulators.
The CAM fund is set up as a nonprofit entity. The fund is buying its back-up insurance coverage from Berkshire Hathaway, the giant Omaha, Neb.,-based insurance company run by Warren Buffet, and the Florida Hurricane Catastrophe Fund, which provides less expensive back-up coverage than what insurers can buy in the private market.
The reinsurance the fund is buying from Berkshire Hathaway will cover 100 percent of fire, theft and other water damage -- say from broken pipes -- for the insurance fund.
The bulk of the hurricane losses will be covered by reinsurance purchased from the state's CAT fund.
If a massive storm hits the state and losses to a large number of buildings exceed the amount of reinsurance the CAM fund has purchased, the fund has the ability to assess the individual unit owners in the buildings to make up any shortfall in money needed to pay claims.
In a worst-case scenario, Gordon estimated such surcharges could range from about $500 to $2,000 depending on the amount of damage, and the value and size of a building.
Stephen Titleman, president of Continental's property management division, said the maximum exposure per property would be $150 million.
The fund expects to write premiums of $8 million during its first year of operation and up to $17.7 million by its third year.
About 10 percent of its premiums will cover operating expenses and the other 90 percent will be used to purchase back-up insurance coverage.
COMMENT: CONDO OWNERS BEWARE!