Introduction to FIGA
The Florida Insurance Guaranty Association (FIGA) serves as a critical safety net for the Florida insurance market. Established by the state legislature, FIGA is a non-profit corporation designed to protect policyholders and claimants from financial loss when an admitted insurance company becomes insolvent and is ordered into liquidation by a court of competent jurisdiction.
For students preparing for the complete FL 2-20 exam guide, understanding FIGA is essential. It is not an insurance company; rather, it is a statutorily created mechanism that steps into the shoes of the insolvent insurer to handle outstanding claims and return unearned premiums, within specific statutory limits.
Its primary goal is to provide a mechanism for the payment of covered claims under certain insurance policies, to avoid excessive delay in payment, and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer. You can test your knowledge on this topic with our practice FL 2-20 questions.
Membership and Governance
Membership in FIGA is mandatory for all insurance companies that are licensed to write direct property and casualty insurance in Florida. These are known as admitted carriers. If a company wants to conduct business in the state for the lines of insurance covered by FIGA, they must participate in the association as a condition of their Certificate of Authority.
FIGA is governed by a Board of Directors. This board is composed of individuals representing member insurers, who are recommended by the industry and appointed by the Florida Department of Financial Services. The association operates under a Plan of Operation approved by the Department, ensuring that it functions transparently and according to state statutes.
- Admitted Carriers: Must belong to FIGA and pay assessments.
- Surplus Lines Carriers: Are NOT members of FIGA, and their policies are not protected by this association.
- Reinsurers: Generally do not participate in FIGA.
FIGA Claim Limits and Deductibles
Covered Claims and Exclusions
FIGA does not cover every type of insurance policy or every dollar of a loss. A covered claim is defined as an unpaid claim, including one for unearned premiums, which arises out of and is within the coverage of an insurance policy to which the FIGA Act applies.
For a claim to be covered, it must exist before the insolvency is declared or arise within a specific window (typically 30 days) after the order of liquidation. The claim must also be made by a Florida resident or involve property permanently located in Florida.
Key Exclusions: FIGA does not cover Life, Annuity, Health, or Disability insurance (these are covered by a separate association, FLAHIGA). Additionally, it does not cover Credit Insurance, Mortgage Guaranty, Financial Guaranty, Ocean Marine, or Surety bonds. Perhaps most importantly for the 2-20 exam, Surplus Lines insurance is strictly excluded from FIGA protection.
FIGA Coverage Comparison
| Feature | Covered by FIGA | Excluded from FIGA |
|---|---|---|
| Policy Types | Homeowners, Auto, Workers' Comp | Life, Health, Surplus Lines |
| Residency | Florida Residents | Non-Residents (mostly) |
| Carrier Type | Admitted (Authorized) | Non-Admitted (Surplus Lines) |
| Claim Maximums | Statutory Caps Apply | No FIGA Recovery Available |
Funding and Assessments
FIGA is funded through assessments levied against member insurance companies. When the association needs funds to pay the claims of an insolvent member, it calculates the necessary amount and charges the remaining healthy member companies based on their market share.
There are two primary types of assessments:
- Regular Assessments: These are capped at a specific percentage (typically 2%) of the member's net direct written premium for the previous calendar year.
- Emergency Assessments: If regular assessments are insufficient to cover claims related to property insurance, the association may levy an emergency assessment (capped at 4%) to pay off bonds issued to fund claim payments.
Ultimately, these costs are passed on to Florida policyholders. Member insurers are permitted to recoup the assessment by adding a small surcharge to the premiums of their own policyholders, which must be clearly identified on the declarations page or premium notice.
Exam Tip: The $100 Deductible
On the Florida 2-20 exam, remember that FIGA claims are subject to a statutory deductible of $100. This is in addition to any deductible already present in the original insurance policy. This deductible does not apply to workers' compensation claims, which are usually paid in full without the standard FIGA caps.