Florida Senate - 2009 COMMITTEE AMENDMENT
Bill No. PCS (690668) for SB 1950
Barcode 256744
LEGISLATIVE ACTION
Senate . House
Comm: RCS .
04/01/2009 .
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The Committee on Banking and Insurance (Richter) recommended the
following:
1 Senate Amendment (with directory and title amendments)
2
3 Between lines 1097 and 1098
4 insert:
5
6 (c) The plan of operation of the corporation:
7 1. Must provide for adoption of residential property and
8 casualty insurance policy forms and commercial residential and
9 nonresidential property insurance forms, which forms must be
10 approved by the office prior to use. The corporation shall adopt
11 the following policy forms:
12 a. Standard personal lines policy forms that are
13 comprehensive multiperil policies providing full coverage of a
14 residential property equivalent to the coverage provided in the
15 private insurance market under an HO-3, HO-4, or HO-6 policy.
16 b. Basic personal lines policy forms that are policies
17 similar to an HO-8 policy or a dwelling fire policy that provide
18 coverage meeting the requirements of the secondary mortgage
19 market, but which coverage is more limited than the coverage
20 under a standard policy.
21 c. Commercial lines residential and nonresidential policy
22 forms that are generally similar to the basic perils of full
23 coverage obtainable for commercial residential structures and
24 commercial nonresidential structures in the admitted voluntary
25 market.
26 d. Personal lines and commercial lines residential property
27 insurance forms that cover the peril of wind only. The forms are
28 applicable only to residential properties located in areas
29 eligible for coverage under the high-risk account referred to in
30 sub-subparagraph (b)2.a.
31 e. Commercial lines nonresidential property insurance forms
32 that cover the peril of wind only. The forms are applicable only
33 to nonresidential properties located in areas eligible for
34 coverage under the high-risk account referred to in sub
35 subparagraph (b)2.a.
36 f. The corporation may adopt variations of the policy forms
37 listed in sub-subparagraphs a.-e. that contain more restrictive
38 coverage.
39 2.a. Must provide that the corporation adopt a program in
40 which the corporation and authorized insurers enter into quota
41 share primary insurance agreements for hurricane coverage, as
42 defined in s. 627.4025(2)(a), for eligible risks, and adopt
43 property insurance forms for eligible risks which cover the
44 peril of wind only. As used in this subsection, the term:
45 (I) “Quota share primary insurance” means an arrangement in
46 which the primary hurricane coverage of an eligible risk is
47 provided in specified percentages by the corporation and an
48 authorized insurer. The corporation and authorized insurer are
49 each solely responsible for a specified percentage of hurricane
50 coverage of an eligible risk as set forth in a quota share
51 primary insurance agreement between the corporation and an
52 authorized insurer and the insurance contract. The
53 responsibility of the corporation or authorized insurer to pay
54 its specified percentage of hurricane losses of an eligible
55 risk, as set forth in the quota share primary insurance
56 agreement, may not be altered by the inability of the other
57 party to the agreement to pay its specified percentage of
58 hurricane losses. Eligible risks that are provided hurricane
59 coverage through a quota share primary insurance arrangement
60 must be provided policy forms that set forth the obligations of
61 the corporation and authorized insurer under the arrangement,
62 clearly specify the percentages of quota share primary insurance
63 provided by the corporation and authorized insurer, and
64 conspicuously and clearly state that neither the authorized
65 insurer nor the corporation may be held responsible beyond its
66 specified percentage of coverage of hurricane losses.
67 (II) “Eligible risks” means personal lines residential and
68 commercial lines residential risks that meet the underwriting
69 criteria of the corporation and are located in areas that were
70 eligible for coverage by the Florida Windstorm Underwriting
71 Association on January 1, 2002.
72 b. The corporation may enter into quota share primary
73 insurance agreements with authorized insurers at corporation
74 coverage levels of 90 percent and 50 percent.
75 c. If the corporation determines that additional coverage
76 levels are necessary to maximize participation in quota share
77 primary insurance agreements by authorized insurers, the
78 corporation may establish additional coverage levels. However,
79 the corporation’s quota share primary insurance coverage level
80 may not exceed 90 percent.
81 d. Any quota share primary insurance agreement entered into
82 between an authorized insurer and the corporation must provide
83 for a uniform specified percentage of coverage of hurricane
84 losses, by county or territory as set forth by the corporation
85 board, for all eligible risks of the authorized insurer covered
86 under the quota share primary insurance agreement.
87 e. Any quota share primary insurance agreement entered into
88 between an authorized insurer and the corporation is subject to
89 review and approval by the office. However, such agreement shall
90 be authorized only as to insurance contracts entered into
91 between an authorized insurer and an insured who is already
92 insured by the corporation for wind coverage.
93 f. For all eligible risks covered under quota share primary
94 insurance agreements, the exposure and coverage levels for both
95 the corporation and authorized insurers shall be reported by the
96 corporation to the Florida Hurricane Catastrophe Fund. For all
97 policies of eligible risks covered under quota share primary
98 insurance agreements, the corporation and the authorized insurer
99 shall maintain complete and accurate records for the purpose of
100 exposure and loss reimbursement audits as required by Florida
101 Hurricane Catastrophe Fund rules. The corporation and the
102 authorized insurer shall each maintain duplicate copies of
103 policy declaration pages and supporting claims documents.
104 g. The corporation board shall establish in its plan of
105 operation standards for quota share agreements which ensure that
106 there is no discriminatory application among insurers as to the
107 terms of quota share agreements, pricing of quota share
108 agreements, incentive provisions if any, and consideration paid
109 for servicing policies or adjusting claims.
110 h. The quota share primary insurance agreement between the
111 corporation and an authorized insurer must set forth the
112 specific terms under which coverage is provided, including, but
113 not limited to, the sale and servicing of policies issued under
114 the agreement by the insurance agent of the authorized insurer
115 producing the business, the reporting of information concerning
116 eligible risks, the payment of premium to the corporation, and
117 arrangements for the adjustment and payment of hurricane claims
118 incurred on eligible risks by the claims adjuster and personnel
119 of the authorized insurer. Entering into a quota sharing
120 insurance agreement between the corporation and an authorized
121 insurer shall be voluntary and at the discretion of the
122 authorized insurer.
123 3. May provide that the corporation may employ or otherwise
124 contract with individuals or other entities to provide
125 administrative or professional services that may be appropriate
126 to effectuate the plan. The corporation shall have the power to
127 borrow funds, by issuing bonds or by incurring other
128 indebtedness, and shall have other powers reasonably necessary
129 to effectuate the requirements of this subsection, including,
130 without limitation, the power to issue bonds and incur other
131 indebtedness in order to refinance outstanding bonds or other
132 indebtedness. The corporation may, but is not required to, seek
133 judicial validation of its bonds or other indebtedness under
134 chapter 75. The corporation may issue bonds or incur other
135 indebtedness, or have bonds issued on its behalf by a unit of
136 local government pursuant to subparagraph (p)2., in the absence
137 of a hurricane or other weather-related event, upon a
138 determination by the corporation, subject to approval by the
139 office, that such action would enable it to efficiently meet the
140 financial obligations of the corporation and that such
141 financings are reasonably necessary to effectuate the
142 requirements of this subsection. The corporation is authorized
143 to take all actions needed to facilitate tax-free status for any
144 such bonds or indebtedness, including formation of trusts or
145 other affiliated entities. The corporation shall have the
146 authority to pledge assessments, projected recoveries from the
147 Florida Hurricane Catastrophe Fund, other reinsurance
148 recoverables, market equalization and other surcharges, and
149 other funds available to the corporation as security for bonds
150 or other indebtedness. In recognition of s. 10, Art. I of the
151 State Constitution, prohibiting the impairment of obligations of
152 contracts, it is the intent of the Legislature that no action be
153 taken whose purpose is to impair any bond indenture or financing
154 agreement or any revenue source committed by contract to such
155 bond or other indebtedness.
156 4.a. Must require that the corporation operate subject to
157 the supervision and approval of a board of governors consisting
158 of eight individuals who are residents of this state, from
159 different geographical areas of this state. The Governor, the
160 Chief Financial Officer, the President of the Senate, and the
161 Speaker of the House of Representatives shall each appoint two
162 members of the board. At least one of the two members appointed
163 by each appointing officer must have demonstrated expertise in
164 insurance. The Chief Financial Officer shall designate one of
165 the appointees as chair. All board members serve at the pleasure
166 of the appointing officer. All members of the board of governors
167 are subject to removal at will by the officers who appointed
168 them. All board members, including the chair, must be appointed
169 to serve for 3-year terms beginning annually on a date
170 designated by the plan. However, for the first term beginning on
171 or after July 1, 2009, each appointing officer shall appoint one
172 member of the board for a 2-year term and one member for a 3
173 year term. Any board vacancy shall be filled for the unexpired
174 term by the appointing officer. The Chief Financial Officer
175 shall appoint a technical advisory group to provide information
176 and advice to the board of governors in connection with the
177 board’s duties under this subsection. The executive director and
178 senior managers of the corporation shall be engaged by the board
179 and serve at the pleasure of the board. Any executive director
180 appointed on or after July 1, 2006, is subject to confirmation
181 by the Senate. The executive director is responsible for
182 employing other staff as the corporation may require, subject to
183 review and concurrence by the board.
184 b. The board shall create a Market Accountability Advisory
185 Committee to assist the corporation in developing awareness of
186 its rates and its customer and agent service levels in
187 relationship to the voluntary market insurers writing similar
188 coverage. The members of the advisory committee shall consist of
189 the following 11 persons, one of whom must be elected chair by
190 the members of the committee: four representatives, one
191 appointed by the Florida Association of Insurance Agents, one by
192 the Florida Association of Insurance and Financial Advisors, one
193 by the Professional Insurance Agents of Florida, and one by the
194 Latin American Association of Insurance Agencies; three
195 representatives appointed by the insurers with the three highest
196 voluntary market share of residential property insurance
197 business in the state; one representative from the Office of
198 Insurance Regulation; one consumer appointed by the board who is
199 insured by the corporation at the time of appointment to the
200 committee; one representative appointed by the Florida
201 Association of Realtors; and one representative appointed by the
202 Florida Bankers Association. All members must serve for 3-year
203 terms and may serve for consecutive terms. The committee shall
204 report to the corporation at each board meeting on insurance
205 market issues which may include rates and rate competition with
206 the voluntary market; service, including policy issuance, claims
207 processing, and general responsiveness to policyholders,
208 applicants, and agents; and matters relating to depopulation.
209 5. Must provide a procedure for determining the eligibility
210 of a risk for coverage, as follows:
211 a. Subject to the provisions of s. 627.3517, with respect
212 to personal lines residential risks, if the risk is offered
213 coverage from an authorized insurer at the insurer’s approved
214 rate under either a standard policy including wind coverage or,
215 if consistent with the insurer’s underwriting rules as filed
216 with the office, a basic policy including wind coverage, for a
217 new application to the corporation for coverage, the risk is not
218 eligible for any policy issued by the corporation unless the
219 premium for coverage from the authorized insurer is more than 15
220 percent greater than the premium for comparable coverage from
221 the corporation. If the risk is not able to obtain any such
222 offer, the risk is eligible for either a standard policy
223 including wind coverage or a basic policy including wind
224 coverage issued by the corporation; however, if the risk could
225 not be insured under a standard policy including wind coverage
226 regardless of market conditions, the risk shall be eligible for
227 a basic policy including wind coverage unless rejected under
228 subparagraph 8. However, with regard to a policyholder of the
229 corporation or a policyholder removed from the corporation
230 through an assumption agreement until the end of the assumption
231 period, the policyholder remains eligible for coverage from the
232 corporation regardless of any offer of coverage from an
233 authorized insurer or surplus lines insurer. The corporation
234 shall determine the type of policy to be provided on the basis
235 of objective standards specified in the underwriting manual and
236 based on generally accepted underwriting practices.
237 (I) If the risk accepts an offer of coverage through the
238 market assistance plan or an offer of coverage through a
239 mechanism established by the corporation before a policy is
240 issued to the risk by the corporation or during the first 30
241 days of coverage by the corporation, and the producing agent who
242 submitted the application to the plan or to the corporation is
243 not currently appointed by the insurer, the insurer shall:
244 (A) Pay to the producing agent of record of the policy, for
245 the first year, an amount that is the greater of the insurer’s
246 usual and customary commission for the type of policy written or
247 a fee equal to the usual and customary commission of the
248 corporation; or
249 (B) Offer to allow the producing agent of record of the
250 policy to continue servicing the policy for a period of not less
251 than 1 year and offer to pay the agent the greater of the
252 insurer’s or the corporation’s usual and customary commission
253 for the type of policy written.
254
255 If the producing agent is unwilling or unable to accept
256 appointment, the new insurer shall pay the agent in accordance
257 with sub-sub-sub-subparagraph (A).
258 (II) When the corporation enters into a contractual
259 agreement for a take-out plan, the producing agent of record of
260 the corporation policy is entitled to retain any unearned
261 commission on the policy, and the insurer shall:
262 (A) Pay to the producing agent of record of the corporation
263 policy, for the first year, an amount that is the greater of the
264 insurer’s usual and customary commission for the type of policy
265 written or a fee equal to the usual and customary commission of
266 the corporation; or
267 (B) Offer to allow the producing agent of record of the
268 corporation policy to continue servicing the policy for a period
269 of not less than 1 year and offer to pay the agent the greater
270 of the insurer’s or the corporation’s usual and customary
271 commission for the type of policy written.
272
273 If the producing agent is unwilling or unable to accept
274 appointment, the new insurer shall pay the agent in accordance
275 with sub-sub-sub-subparagraph (A).
276 b. With respect to commercial lines residential risks, for
277 a new application to the corporation for coverage, if the risk
278 is offered coverage under a policy including wind coverage from
279 an authorized insurer at its approved rate, the risk is not
280 eligible for any policy issued by the corporation unless the
281 premium for coverage from the authorized insurer is more than 15
282 percent greater than the premium for comparable coverage from
283 the corporation. If the risk is not able to obtain any such
284 offer, the risk is eligible for a policy including wind coverage
285 issued by the corporation. However, with regard to a
286 policyholder of the corporation or a policyholder removed from
287 the corporation through an assumption agreement until the end of
288 the assumption period, the policyholder remains eligible for
289 coverage from the corporation regardless of any offer of
290 coverage from an authorized insurer or surplus lines insurer.
291 (I) If the risk accepts an offer of coverage through the
292 market assistance plan or an offer of coverage through a
293 mechanism established by the corporation before a policy is
294 issued to the risk by the corporation or during the first 30
295 days of coverage by the corporation, and the producing agent who
296 submitted the application to the plan or the corporation is not
297 currently appointed by the insurer, the insurer shall:
298 (A) Pay to the producing agent of record of the policy, for
299 the first year, an amount that is the greater of the insurer’s
300 usual and customary commission for the type of policy written or
301 a fee equal to the usual and customary commission of the
302 corporation; or
303 (B) Offer to allow the producing agent of record of the
304 policy to continue servicing the policy for a period of not less
305 than 1 year and offer to pay the agent the greater of the
306 insurer’s or the corporation’s usual and customary commission
307 for the type of policy written.
308
309 If the producing agent is unwilling or unable to accept
310 appointment, the new insurer shall pay the agent in accordance
311 with sub-sub-sub-subparagraph (A).
312 (II) When the corporation enters into a contractual
313 agreement for a take-out plan, the producing agent of record of
314 the corporation policy is entitled to retain any unearned
315 commission on the policy, and the insurer shall:
316 (A) Pay to the producing agent of record of the corporation
317 policy, for the first year, an amount that is the greater of the
318 insurer’s usual and customary commission for the type of policy
319 written or a fee equal to the usual and customary commission of
320 the corporation; or
321 (B) Offer to allow the producing agent of record of the
322 corporation policy to continue servicing the policy for a period
323 of not less than 1 year and offer to pay the agent the greater
324 of the insurer’s or the corporation’s usual and customary
325 commission for the type of policy written.
326
327 If the producing agent is unwilling or unable to accept
328 appointment, the new insurer shall pay the agent in accordance
329 with sub-sub-sub-subparagraph (A).
330 c. For purposes of determining comparable coverage under
331 sub-subparagraphs a. and b., the comparison shall be based on
332 those forms and coverages that are reasonably comparable. The
333 corporation may rely on a determination of comparable coverage
334 and premium made by the producing agent who submits the
335 application to the corporation, made in the agent’s capacity as
336 the corporation’s agent. A comparison may be made solely of the
337 premium with respect to the main building or structure only on
338 the following basis: the same coverage A or other building
339 limits; the same percentage hurricane deductible that applies on
340 an annual basis or that applies to each hurricane for commercial
341 residential property; the same percentage of ordinance and law
342 coverage, if the same limit is offered by both the corporation
343 and the authorized insurer; the same mitigation credits, to the
344 extent the same types of credits are offered both by the
345 corporation and the authorized insurer; the same method for loss
346 payment, such as replacement cost or actual cash value, if the
347 same method is offered both by the corporation and the
348 authorized insurer in accordance with underwriting rules; and
349 any other form or coverage that is reasonably comparable as
350 determined by the board. If an application is submitted to the
351 corporation for wind-only coverage in the high-risk account, the
352 premium for the corporation’s wind-only policy plus the premium
353 for the ex-wind policy that is offered by an authorized insurer
354 to the applicant shall be compared to the premium for multiperil
355 coverage offered by an authorized insurer, subject to the
356 standards for comparison specified in this subparagraph. If the
357 corporation or the applicant requests from the authorized
358 insurer a breakdown of the premium of the offer by types of
359 coverage so that a comparison may be made by the corporation or
360 its agent and the authorized insurer refuses or is unable to
361 provide such information, the corporation may treat the offer as
362 not being an offer of coverage from an authorized insurer at the
363 insurer’s approved rate.
364 6. Must include rules for classifications of risks and
365 rates therefor.
366 7. Must provide that if premium and investment income for
367 an account attributable to a particular calendar year are in
368 excess of projected losses and expenses for the account
369 attributable to that year, such excess shall be held in surplus
370 in the account. Such surplus shall be available to defray
371 deficits in that account as to future years and shall be used
372 for that purpose prior to assessing assessable insurers and
373 assessable insureds as to any calendar year.
374 8. Must provide objective criteria and procedures to be
375 uniformly applied for all applicants in determining whether an
376 individual risk is so hazardous as to be uninsurable. In making
377 this determination and in establishing the criteria and
378 procedures, the following shall be considered:
379 a. Whether the likelihood of a loss for the individual risk
380 is substantially higher than for other risks of the same class;
381 and
382 b. Whether the uncertainty associated with the individual
383 risk is such that an appropriate premium cannot be determined.
384
385 The acceptance or rejection of a risk by the corporation shall
386 be construed as the private placement of insurance, and the
387 provisions of chapter 120 shall not apply.
388 9. Must provide that the corporation shall make its best
389 efforts to procure catastrophe reinsurance at reasonable rates,
390 to cover its projected 100-year probable maximum loss as
391 determined by the board of governors.
392 10. The policies issued by the corporation must provide
393 that, if the corporation or the market assistance plan obtains
394 an offer from an authorized insurer to cover the risk at its
395 approved rates, the risk is no longer eligible for renewal
396 through the corporation, except as otherwise provided in this
397 subsection.
398 11. Corporation policies and applications must include a
399 notice that the corporation policy could, under this section, be
400 replaced with a policy issued by an authorized insurer that does
401 not provide coverage identical to the coverage provided by the
402 corporation. The notice shall also specify that acceptance of
403 corporation coverage creates a conclusive presumption that the
404 applicant or policyholder is aware of this potential.
405 12. May establish, subject to approval by the office,
406 different eligibility requirements and operational procedures
407 for any line or type of coverage for any specified county or
408 area if the board determines that such changes to the
409 eligibility requirements and operational procedures are
410 justified due to the voluntary market being sufficiently stable
411 and competitive in such area or for such line or type of
412 coverage and that consumers who, in good faith, are unable to
413 obtain insurance through the voluntary market through ordinary
414 methods would continue to have access to coverage from the
415 corporation. When coverage is sought in connection with a real
416 property transfer, such requirements and procedures shall not
417 provide for an effective date of coverage later than the date of
418 the closing of the transfer as established by the transferor,
419 the transferee, and, if applicable, the lender.
420 13. Must provide that, with respect to the high-risk
421 account, any assessable insurer with a surplus as to
422 policyholders of $25 million or less writing 25 percent or more
423 of its total countrywide property insurance premiums in this
424 state may petition the office, within the first 90 days of each
425 calendar year, to qualify as a limited apportionment company. A
426 regular assessment levied by the corporation on a limited
427 apportionment company for a deficit incurred by the corporation
428 for the high-risk account in 2006 or thereafter may be paid to
429 the corporation on a monthly basis as the assessments are
430 collected by the limited apportionment company from its insureds
431 pursuant to s. 627.3512, but the regular assessment must be paid
432 in full within 12 months after being levied by the corporation.
433 A limited apportionment company shall collect from its
434 policyholders any emergency assessment imposed under sub
435 subparagraph (b)3.d. The plan shall provide that, if the office
436 determines that any regular assessment will result in an
437 impairment of the surplus of a limited apportionment company,
438 the office may direct that all or part of such assessment be
439 deferred as provided in subparagraph (p)4. However, there shall
440 be no limitation or deferment of an emergency assessment to be
441 collected from policyholders under sub-subparagraph (b)3.d.
442 14. Must provide that the corporation appoint as its
443 licensed agents only those agents who also hold an appointment
444 as defined in s. 626.015(3) with an insurer who at the time of
445 the agent’s initial appointment by the corporation is authorized
446 to write and is actually writing personal lines residential
447 property coverage, commercial residential property coverage, or
448 commercial nonresidential property coverage within the state.
449 15. Must provide, by July 1, 2007, a premium payment plan
450 option to its policyholders which allows at a minimum for
451 quarterly and semiannual payment of premiums. A monthly payment
452 plan may, but is not required to, be offered.
453 16. Must limit coverage on mobile homes or manufactured
454 homes built prior to 1994 to actual cash value of the dwelling
455 rather than replacement costs of the dwelling.
456 17. May provide such limits of coverage as the board
457 determines, consistent with the requirements of this subsection.
458 18. May require commercial property to meet specified
459 hurricane mitigation construction features as a condition of
460 eligibility for coverage.
461
462 ====== D I R E C T O R Y C L A U S E A M E N D M E N T ======
463 And the directory clause is amended as follows:
464 Delete lines 978 - 979
465 and insert:
466
467 Section 6. Paragraphs (a), (c), (m), and (x) of subsection
468 (6) of section 627.351, Florida Statutes, are amended to read:
469
470 ================= T I T L E A M E N D M E N T ================
471 And the title is amended as follows:
472 Delete line 59
473 and insert:
474
475 purchaser of the property; providing for members of the board of
476 governors of Citizens Property Insurance Corporation to serve
477 staggered terms; requiring Citizens