Caribbean Watch: Puerto Rico anti-fraud law, Axis US$200mn cat bond

Puerto Rico signs anti-fraud Medicare law

Puerto Rico continued its push to enact reforms affecting the nation's insurance and health care industries, with governor Ricardo Rosselló Nevares signing into law Monday a fraudulent claims law (House 1627), creating a civil mechanism for handling cases where false claims are made to the government of Puerto Rico.

The signature comes on the heels of the governor signing two other bills into law Sunday aimed at strengthening the nation's insurance system infrastructure and encouraging more reinsurance in the local market.

The law - which stems from the US federal false claims act - establishes that a newly created Medicaid Fraud Control Unit under Puerto Rico's justice department would handle possibly fraudulent Medicaid claims in the future.

The creation of a local fraud unit working in conjunction with the Medicaid management information system (MMIS) ensures the allocation of US$1.2bn in federal funds for the island's BBA Disaster Relief Fund.

"With this law we join 49 states and Washington DC as jurisdictions that have dedicated units to address Medicaid health program fraud. The timely detection of this behavior will be helpful for the beneficiaries of this program as it ensures the availability and continuity of these funds," said the governor in a statement.

This new law also allows and promotes whistleblowers to report any fraudulent act against the government. When reporting a fraudulent act the informer may collect the amount recovered by the government.

Currently, 30 states have fraudulent claim laws. The execution and processing of these claims consistently result in the recovery of millions of dollars to the treasury.

Puerto Rico health secretary Rafael Rodríguez Mercado, welcomed the new law by stating that it "will allow the government to continue to recover credibility at the federal level, to process more aggressively those who misuse these funds and ensure that the funds allocated are available to better meet the needs of bona fide beneficiaries."

Pictured: A man gestures while riding his bike in front of a mural with the Puerto Rican flag painted in the aftermath of Hurricane Maria, in Loiza, Puerto Rico, September 28, 2017.

Axis Capital places US$200mn cat bond

Axis Capital Holdings recently placed a US$200mn catastrophe bond in the capital markets designed to protect the company against named storms in the US, Puerto Rico and the US Virgin Islands, as well as European windstorms, in addition to US and Canada earthquake loss.

Cory L. Anger, global head of insurance-linked securities structuring, GC Securities, the placement and structuring agent for the deal, said the bond is the second issued through the Northshore Re II Ltd. Vehicle, as reported by ratings agency A.M. Best's news service, Best's Insurance News.

"The deal that we did was an annual aggregate state, province and country-weighted, industry-insured, loss-triggered deal that would provide protection for a single limit of $200 million over a four-year risk period," said Anger. She noted the bond is an annual aggregate cover and has a franchise deductible where if the loss amount is over a certain threshold the entire amount gets accrued in the annual aggregate index.

Any event alone or combination of events could trigger the cat bond, depending on how they happen and if they meet certain loss thresholds, she said.

The insurance-linked securities market overall "continues to outpace growth relative to traditional capital growth and alternative capital in all of its forms represents around $85 billion or more at this point," said Anger.