CODING: Words stricken are deletions; words underlined are additions.

House Bill 1815

Florida House of Representatives - 1997 HB 1815 By the Committee on Financial Services and Representatives Safley, Lippman, Maygarden, Flanagan, Bainter, Lawson, Rayson, Ball and Dennis 1 A bill to be entitled 2 An act relating to property insurance; amending 3 s. 215.555, F.S.; specifying appropriations of 4 certain moneys in the Florida Hurricane 5 Catastrophe Fund for certain purposes; amending 6 s. 624.4071, F.S.; providing that policyholders 7 of special purpose homeowner insurance 8 companies are subject to emergency assessments; 9 amending s. 626.752, F.S.; deleting the role of 10 the market assistance plan in the removal of 11 policies from the Residential Property and 12 Casualty Joint Underwriting Association; 13 amending s. 627.0628, F.S.; providing for a 14 rebuttable presumption of correctness of 15 certain findings and facts; amending s. 16 627.0629, F.S.; authorizing insurers to 17 implement certain discounts or differentials 18 under certain circumstances; establishing a 19 program to be administered by the Florida 20 Windstorm Underwriting Association for the 21 purpose of providing grants to certain 22 homeowners for certain purposes; requiring the 23 Department of Community Affairs to establish 24 certain standards for certain purposes; 25 providing requirements; requiring the Florida 26 Windstorm Underwriting Association to identify 27 areas of the state for certain purposes; 28 amending s. 627.351, F.S.; providing standards 29 for membership in the Florida Windstorm 30 Underwriting Association; providing exclusions 31 from membership; providing definitions; 1 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 requiring retention of profits; providing for 2 participation in regular assessments by member 3 insurers; prohibiting credits, exemptions, 4 limitations, deferment, or other relief from 5 participation in emergency assessments 6 collected from policyholders; conforming 7 references; creating a limitation upon an 8 assessment; providing for participation in 9 emergency assessments; providing for the 10 financing of bond or other indebtedness; 11 providing for a market equalization surcharge; 12 authorizing local governments to issue bonds 13 and pay for fund reimbursement; authorizing 14 limited apportionment for companies writing a 15 specified percentage of the total countrywide 16 property insurance premiums in this state; 17 providing for rates of the association; 18 limiting liability of association members under 19 certain circumstances; requiring underwriting 20 criteria; providing standards for eligibility 21 of new and covered risks; providing for 22 establishment of operational procedures; 23 providing for a notice to be placed in the 24 association policy; authorizing the 25 establishment of a partnership, a trust, and a 26 limited liability company; providing for 27 certain powers; providing legislative intent; 28 providing for the protection of creditors; 29 providing for membership in the Residential 30 Property and Casualty Joint Underwriting 31 Association; providing definitions; providing 2 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 for the payment of regular assessments; 2 requiring participation in emergency 3 assessments collected from policyholders 4 without credit, limitation, deferment, or 5 exemption; creating a limitation upon an 6 assessment; providing technical corrections; 7 providing for agent commissions; providing for 8 a market equalization surcharge; providing for 9 rates; authorizing local governments to issue 10 bonds; limiting credits, limitations, 11 exemptions, or deferments from regular 12 assessments to period of time; authorizing the 13 sale of revenue bonds; amending s. 627.3511, 14 F.S.; providing for the cancellation of 15 policies; providing terms for the payment for 16 the removal of policies; providing definitions; 17 providing for exemptions and credits from 18 regular assessments but not emergency 19 assessments for a limited period of time; 20 providing terms for replacement of policies; 21 making technical corrections; providing for 22 release of moneys from escrow accounts; 23 expanding the condominium association take-out 24 plan to all commercial residential policies; 25 providing terms for the assumption of policies; 26 providing for the calculation of regular and 27 emergency assessments for certain insurers; 28 amending s. 627.3512, F.S.; providing for 29 recoupment of residual market deficit 30 assessments under certain circumstances; 31 creating s. 627.3513, F.S.; providing standards 3 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 and procedures for underwriting associations to 2 issue bonds; creating s. 627.3516, F.S.; 3 providing for a residual property insurance 4 market coordinating council; providing for 5 duties and membership; amending s. 627.4025, 6 F.S.; revising a definition of residential 7 coverage; amending s. 627.701, F.S.; providing 8 for certain offers up to a specified 9 deductible; authorizing alternative deductibles 10 for certain property; conforming cross 11 references; providing an effective date. 12 13 Be It Enacted by the Legislature of the State of Florida: 14 Section 1. Paragraph (c) of subsection (7) of section 15 215.555, Florida Statutes, 1996 Supplement, is amended to 16 read: 17 215.555 Florida Hurricane Catastrophe Fund.-- 18 (7) ADDITIONAL POWERS AND DUTIES.-- 19 (c)1. Each fiscal year, the Legislature shall 20 appropriate from the investment income of the Florida 21 Hurricane Catastrophe Fund an amount no less than $10 million 22 and no more than 35 percent of the investment income from the 23 prior fiscal year for the purpose of providing funding for 24 local governments, state agencies, public and private 25 educational institutions, and nonprofit organizations to 26 support programs intended to improve hurricane preparedness, 27 reduce potential losses in the event of a hurricane, provide 28 research into means to reduce such losses, educate or inform 29 the public as to means to reduce hurricane losses, assist the 30 public in determining the appropriateness of particular 31 upgrades to structures or in the financing of such upgrades, 4 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 or protect local infrastructure from potential damage from a 2 hurricane. It is the intent of the Legislature that these 3 moneys be appropriated in such a manner as to maximize 4 potential reductions in hurricane damage while minimizing 5 costs. Moneys shall first be available for appropriation under 6 this paragraph in fiscal year 1997-1998. Moneys in excess of 7 the $10 million specified in this paragraph shall not be 8 available for appropriation under this paragraph if the State 9 Board of Administration finds that an appropriation of 10 investment income from the fund would jeopardize the actuarial 11 soundness of the fund. 12 2. Moneys made available under this paragraph shall be 13 appropriated as follows: 14 a.(I) Eighty-five percent of the moneys appropriated 15 under this paragraph in any fiscal year shall be allocated to 16 the Department of Community Affairs for programs to improve 17 the wind resistance of residences, including loan subsidies, 18 grants, and demonstration projects; cooperative programs with 19 local governments, the Federal Government, and the Insurance 20 Institute for Property Loss Reduction; and other efforts to 21 prevent or reduce losses or reduce the cost of rebuilding 22 after a disaster. 23 (II) Eligibility for loan subsidies and other forms of 24 direct assistance to property owners is limited to 25 policyholders of the Florida Windstorm Underwriting 26 Association. Actions taken by a property owner pursuant to 27 such loan subsidies and direct assistance qualify the property 28 owner for premium discounts as filed by the association 29 approved by the Department of Insurance and do not constitute 30 changes, additions, or improvements to homestead property 31 within the meaning of chapter 193. No more than 25 percent of 5 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 the total value of such loan subsidies and direct assistance 2 shall be awarded on the basis of the income of the recipient. 3 At least 10 percent of the total value of such loan subsidies 4 and direct assistance shall be used for mobile homes, 5 including programs to inspect and improve tie-downs. 6 (III) The Department of Community Affairs shall 7 develop the program in consultation with an advisory council 8 consisting of: representatives of the Department of 9 Insurance, the Residential Property and Casualty Joint 10 Underwriting Association, the Florida Windstorm Underwriting 11 Association, mortgage lenders, home builders, building 12 officials, insurance companies, the Insurance Institute for 13 Property Loss Reduction, Federation of Mobile Home Owners, a 14 code development agency, and the Federal Emergency Management 15 Agency; the Insurance Consumer Advocate; and the Chief 16 Operating Officer of the Florida Hurricane Catastrophe Fund. 17 (IV) Moneys appropriated under this sub-subparagraph 18 are intended to supplement other funding sources of the 19 Department of Community Affairs and may not supplant other 20 sources of funding for the Department of Community Affairs. 21 b. Five percent of the moneys appropriated under this 22 subparagraph in any fiscal year shall be allocated to the 23 Office of the Insurance Consumer Advocate of the Department of 24 Insurance for the purpose of consumer education, information, 25 and outreach to encourage consumers to take actions that will 26 reduce their property insurance costs, including a statewide 27 media public awareness campaign utilizing television and radio 28 which must be matched by at least an equal amount of in-kind 29 services, with a goal of three times the funds being matched 30 by in-kind services. Moneys appropriated under this 31 sub-subparagraph are intended to supplement other funding 6 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 sources of the Insurance Consumer Advocate and may not 2 supplant other funding for the Office of the Insurance 3 Consumer Advocate. The Insurance Consumer Advocate shall 4 consult with the Department of Community Affairs prior to 5 expending funds under this sub-subparagraph. 6 c. Ten percent of the moneys appropriated under this 7 paragraph in any fiscal year shall be allocated to the State 8 University System to support programs of research and 9 development, including demonstration projects, with regard to 10 hurricane loss reduction devices and techniques for residences 11 and mobile homes and the calculation of potential loss 12 reduction for use in insurers' rate filings. Research and 13 development programs under this sub-subparagraph must be 14 matched by at least an equal amount of funds or in-kind 15 services from entities other than the State University System. 16 The State University System shall consult with the Department 17 of Community Affairs prior to expending funds under this 18 sub-subparagraph. 19 20 On January 1, 1999, and annually thereafter, the Department of 21 Community Affairs shall provide a full report and accounting 22 of activities under this paragraph and an evaluation of such 23 activities to the Speaker of the House of Representatives and 24 the President of the Senate and Majority and Minority Leaders 25 of the House of Representatives and the Senate. 26 Section 2. Subsection (2) of section 624.4071, Florida 27 Statutes, 1996 Supplement, is amended to read: 28 624.4071 Special purpose homeowner insurance 29 company.-- 30 (2) A special purpose homeowner insurance company must 31 have a parent company, and both companies must meet the 7 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 requirements of this subsection in order for the subsidiary to 2 qualify for and maintain a certificate of authority under this 3 section. 4 (a) The parent company must be an admitted insurer in 5 at least one state in the United States and must have over $50 6 million in capital and surplus. 7 (b) The parent company must have and maintain at least 8 51 percent of the equity and at least 51 percent of the 9 control of the special purpose homeowner insurance company. 10 (c) An insurer not authorized to transact business in 11 this state, but that otherwise meets the requirements of this 12 section, may apply as a special purpose homeowner insurance 13 company. 14 (d) The special purpose homeowner insurance company 15 must: 16 1. Have and maintain at least $10 million in surplus 17 and otherwise satisfy the requirements of s. 624.4095. 18 2. Be a member of the Florida Insurance Guaranty 19 Association and the Florida Hurricane Catastrophe Fund, and be 20 subject to any of their required assessments and premium 21 charges. However, a special purpose homeowner insurance 22 company may not be a member of the Florida Windstorm 23 Underwriting Association or the Florida Residential Property 24 and Casualty Joint Underwriting Association, and neither the 25 company nor its policyholders are subject to any assessments 26 by these associations except for emergency assessments 27 collected from policyholders pursuant to s. 28 627.351(2)(b)2.d.(III), and s. 627.351(6)(b)3.d. For the sole 29 purpose of levying and collecting emergency assessments and 30 determining the statewide written premium for property 31 insurance, special purpose homeowner insurance companies shall 8 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 be considered member insurers of the Florida Windstorm 2 Underwriting Association and the Florida Residential Property 3 and Casualty Joint Underwriting Association. 4 3. Offer coverage for all perils, including windstorm, 5 in providing residential coverage as defined in s. 627.4025. A 6 special purpose homeowner insurance company's rates must be 7 filed with the department. After a period of 1 year from the 8 date a company receives a certificate of authority, the 9 company's rates are subject to department approval under s. 10 627.062. 11 Section 3. Subsection (5) of section 626.752, Florida 12 Statutes, is amended to read: 13 626.752 Exchange of business.-- 14 (5) Within 15 days after the last day of each month, 15 any insurer accepting business under this section shall report 16 to the department the name, address, telephone number, and 17 social security number of each agent from which the insurer 18 received more than 24 personal lines risks during the calendar 19 year, except for risks being removed from the Residential 20 Property and Casualty Joint Underwriting Association and 21 placed with that insurer through the market assistance plan by 22 a brokering agent. Once the insurer has reported pursuant to 23 this subsection an agent's name to the department, additional 24 reports on the same agent shall not be required. However, the 25 fee set forth in s. 624.501 shall be paid for the agent by the 26 insurer for each year until the insurer notifies the 27 department that the insurer is no longer accepting business 28 from the agent pursuant to this section. The insurer may 29 require that the agent reimburse the insurer for the fee. 30 31 9 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 Section 4. Paragraph (c) of subsection (3) of section 2 627.0628, Florida Statutes, 1996 Supplement, is amended to 3 read: 4 627.0628 Florida Commission on Hurricane Loss 5 Projection Methodology.-- 6 (3) ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.-- 7 (c) With respect to a rate filing under s. 627.062, an 8 insurer may employ actuarial methods, principles, standards, 9 models, or output ranges found by the commission to be 10 accurate or reliable to determine hurricane loss factors for 11 use in a rate filing under s. 627.062, which findings and 12 factors are admissible and relevant in consideration of a rate 13 filing by the department or in any arbitration or 14 administrative or judicial review. 15 Section 5. Subsections (8), (9), (10), and (11) are 16 added to section 627.0629, Florida Statutes, 1996 Supplement, 17 to read: 18 627.0629 Residential property insurance; rate 19 filings.-- 20 (8) An insurer may implement appropriate discounts or 21 other rate differentials of up to 10 percent of the annual 22 premium to mobile home owners who provide to the insurer 23 evidence of a current inspection of tie-downs for the mobile 24 home, certifying that the tie-downs have been properly 25 installed and are in good condition. 26 (9) EVALUATION OF RESIDENTIAL PROPERTY STRUCTURAL 27 SOUNDNESS.-- 28 (a) It is the intent of the Legislature to provide a 29 program whereby homeowners may obtain an evaluation of the 30 wind resistance of their homes with respect to preventing 31 damage from hurricanes, together with a recommendation of 10 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 reasonable steps that may be taken to upgrade their homes to 2 better withstand hurricane force winds. 3 (b) The Legislature hereby authorizes the 4 establishment of a program to be administered by the Florida 5 Windstorm Underwriting Association. 6 (c) The program shall provide grants to homeowners, 7 for the purpose of providing homeowner applicants with funds 8 to conduct an evaluation of the integrity of their homes with 9 respect to withstanding hurricane force winds, recommendations 10 to retrofit the homes to better withstand damage from such 11 winds, and the estimated cost to make the recommended 12 retrofits. 13 (d) The Department of Community Affairs shall 14 establish by rule standards to govern the quality of the 15 evaluation, the quality of the recommendations for 16 retrofitting, the eligibility of the persons conducting the 17 evaluation, and the selection of applicants under the program. 18 In establishing the rule, the department shall consult with 19 the advisory committee to minimize the possibility of fraud or 20 abuse in the evaluation and retrofitting process, and to 21 ensure that funds spent by homeowners acting on the 22 recommendations achieve positive results. 23 (e) The Florida Windstorm Underwriting Association 24 shall identify areas of this state with the greatest wind risk 25 to residential properties and recommend annually to the 26 department priority target areas for such evaluations and 27 inclusion with the associated residential construction 28 mitigation program. 29 (10) A property insurance rate filing that includes 30 any adjustments related to the Florida Hurricane Catastrophe 31 Fund must include a complete calculation of the insurer's 11 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 catastrophe load, and may not be limited solely to recovery of 2 moneys paid to the fund. 3 (11) For the purposes of all filings that include a 4 catastrophe load, including filings of the Residential 5 Property and Casualty Joint Underwriting Association and the 6 Florida Windstorm Underwriting Association, a 100-year or 1 7 percent probability probable maximum loss shall be considered 8 the standard in determining the insurer's catastrophic needs. 9 Section 6. Subsections (2) and (6) of section 627.351, 10 Florida Statutes, 1996 Supplement, are amended to read: 11 627.351 Insurance risk apportionment plans.-- 12 (2) WINDSTORM INSURANCE RISK APPORTIONMENT.-- 13 (a) Agreements may be made among property insurers 14 with respect to the equitable apportionment among them of 15 insurance which may be afforded applicants who are in good 16 faith entitled to, but are unable to procure, such insurance 17 through ordinary methods; and such insurers may agree among 18 themselves on the use of reasonable rate modifications for 19 such insurance. Such agreements and rate modifications shall 20 be subject to the applicable provisions of this chapter. 21 (b) The department shall require all insurers holding 22 a certificate of authority licensed to transact property 23 insurance on a direct basis in this state, other than joint 24 underwriting associations and other entities formed pursuant 25 to this section, to provide windstorm coverage to applicants 26 from areas determined to be eligible pursuant to paragraph (c) 27 who in good faith are entitled to, but are unable to procure, 28 such coverage through ordinary means; or it shall adopt a 29 reasonable plan or plans for the equitable apportionment or 30 sharing among such insurers of windstorm coverage, which may 31 include formation of an association for this purpose. As used 12 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 in this subsection, the term "property insurance" means 2 insurance on real or personal property, as defined in s. 3 624.604, including insurance for fire, industrial fire, allied 4 lines, farmowners multi-peril, homeowners' multi-peril, 5 commercial multi-peril, and mobile homes, and including 6 liability coverages on all such insurance, but excluding 7 inland marine as defined in s. 624.607(3) and excluding 8 vehicle insurance as defined in s. 624.605(1)(a) other than 9 insurance on mobile homes used as permanent dwellings. The 10 department commissioner shall adopt promulgate rules that 11 which provide a formula for the recovery and repayment of any 12 deferred assessments. 13 1. For the purpose of this section, properties 14 eligible for such windstorm coverage are defined as dwellings, 15 buildings, and other structures, including mobile homes which 16 are used as dwellings and which are tied down in compliance 17 with mobile home tie-down requirements prescribed by the 18 Department of Highway Safety and Motor Vehicles pursuant to s. 19 320.8325, and the contents of all such properties. An 20 applicant or policyholder is eligible for coverage only if an 21 offer of coverage cannot be obtained by or for the applicant 22 or policyholder from an admitted insurer at approved rates. 23 2.a.(I) All insurers required to be members of such 24 association plan shall participate in its writings, expenses, 25 profits, and losses. Surplus of the association shall be 26 retained for the payment of claims and shall not be 27 distributed to the member insurers. Such gross participation 28 by member insurers shall be in the proportion that the net 29 direct premiums of each member insurer written for on property 30 insurance in this state during the preceding calendar year 31 bear to the aggregate net direct premiums for property 13 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 insurance of all member insurers, as reduced by any credits 2 for voluntary writings, members of the plan written on 3 property in this state during the preceding calendar year. For 4 the purposes of this subsection, the term "net direct 5 premiums" means direct written premiums for property 6 insurance, reduced by premium for liability coverage and for 7 the following if included in allied lines: rain and hail on 8 growing crops; livestock; association direct premiums booked; 9 National Flood Insurance Program direct premiums; and similar 10 deductions specifically authorized by the plan of operation 11 and approved by the department. A member's participation shall 12 begin on the first day of the calendar year following the year 13 in which it is issued a certificate of authority to transact 14 property insurance in the state and shall terminate at the end 15 of the calendar year during which it no longer holds a 16 certificate of authority to transact property insurance in the 17 state. The commissioner, after review of annual statements, 18 other reports, and any other statistics that the commissioner 19 which he deems necessary, shall certify to the association 20 plan the aggregate net direct premiums written for on property 21 insurance in this state by all member insurers members. 22 (II) The plan of operation shall provide for a board 23 of directors consisting of the Insurance Consumer Advocate 24 appointed under s. 627.0613, two consumer representatives 25 appointed by the Insurance Commissioner, and 12 additional 26 members appointed as specified in the plan of operation. One 27 of the 12 additional members shall that one additional 28 domestic member of the board of directors be elected by the 29 domestic companies of this state on the basis of cumulative 30 weighted voting based on the net direct written premiums of 31 domestic companies in this state. Nothing in the 1997 14 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 amendments to this paragraph terminates the existing board or 2 the terms of any members of the board. 3 (III) The Any such plan of operation shall provide a 4 formula whereby a company voluntarily providing windstorm 5 coverage in affected areas will be relieved wholly or 6 partially from apportionment of a regular assessment pursuant 7 to sub-sub-subparagraph d.(I) or sub-sub-subparagraph d.(II). 8 (IV) A company which is a member of a group of 9 companies under common management may elect to have its 10 credits applied on a group basis, and any company or group may 11 elect to have its credits applied to any other company or 12 group. 13 (V) There shall be no credits or relief from 14 apportionment to a company for emergency assessments collected 15 from its policyholders under sub-sub-subparagraph d.(III). 16 (VI) The plan of operation may also provide for the 17 award of credits, for a period not to exceed 3 years, from a 18 regular assessment pursuant to sub-sub-subparagraph d.(I) or 19 sub-sub-subparagraph d.(II) as an incentive for taking 20 policies out of the Residential Property and Casualty Joint 21 Underwriting Association, provided at least 60 percent of the 22 policies removed from the Residential Property and Casualty 23 Joint Underwriting Association by the insurer cover properties 24 located in Dade, Broward, or Palm Beach Counties. With the 25 approval of the department, the board may extend such credits 26 for an additional year if the insurer guarantees an additional 27 year of renewability for all policies removed from the 28 Residential Property and Casualty Joint Underwriting 29 Association, or for 2 additional years if the insurer 30 guarantees 2 additional years of renewability for all policies 31 15 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 removed from the Residential Property and Casualty Joint 2 Underwriting Association. 3 b. Assessments to pay deficits in the association plan 4 under this subparagraph shall be included as an appropriate 5 factor in the making of rates as provided in s. 627.3512. 6 c. The Legislature finds that the potential for 7 unlimited deficit assessments under this subparagraph may 8 induce insurers to attempt to reduce their writings in the 9 voluntary market, and that such actions would worsen the 10 availability problems that the association plan was created to 11 remedy. It is the intent of the Legislature that insurers 12 remain fully responsible for paying regular assessments and 13 collecting emergency assessments for covering any deficits of 14 the association plan; however, it is also the intent of the 15 Legislature to provide a means by which assessment liabilities 16 may be amortized over a period of years. 17 d.(I) When the deficit incurred in a particular 18 calendar year is 10 percent or less of the aggregate statewide 19 direct written premium for property insurance for the prior 20 calendar year for all member insurers, the association shall 21 levy an assessment on member insurers in an amount equal to 22 the deficit. 23 (II)(I) When the deficit incurred in a particular 24 calendar year exceeds 10 percent of the aggregate statewide 25 direct written premium for property insurance for the prior 26 calendar year as defined in s. 624.404 for all member insurers 27 licensed to transact property insurance on a direct basis in 28 this state, the association shall levy an assessment on member 29 such insurers in an amount equal to the greater of 10 percent 30 of the deficit or 10 percent of the aggregate statewide direct 31 written premium for property insurance for the prior calendar 16 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 year for member insurers. Any remaining deficit shall be 2 recovered through emergency assessments under 3 sub-sub-subparagraph (III)(II). 4 (III)(II) Upon a determination by the board of 5 directors governors that a deficit exceeds the amount that 6 will be recovered through regular assessments on member of 7 insurers, pursuant to sub-sub-subparagraph (I) or 8 sub-sub-subparagraph (II), the board shall levy, after 9 verification by the department, emergency assessments to be 10 collected by member insurers and by, including joint 11 underwriting associations created pursuant to this section 12 which write property insurance, upon issuance or renewal of 13 property insurance policies other than National Flood 14 Insurance policies in the year or years following levy of the 15 regular assessments. The amount of the emergency assessment 16 collected in a particular year shall be a uniform percentage 17 of that year's direct written premium for property insurance 18 for all member insurers and underwriting associations, 19 excluding National Flood Insurance policy premiums as defined 20 in s. 624.404, as annually determined by the board and 21 verified by the department. The department shall verify the 22 arithmetic calculations involved in the board's determination 23 within 30 days after receipt of the information on which the 24 determination was based. Notwithstanding any other provision 25 of law, each member insurer and each underwriting association 26 created pursuant to this section shall collect emergency 27 assessments from its policyholders without such obligation 28 being affected by any credit, limitation, exemption, or 29 deferment. The emergency assessments so collected shall be 30 transferred directly to the association on a periodic basis as 31 determined by the association. The aggregate amount of 17 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 emergency assessments levied under this sub-sub-subparagraph 2 sub-subparagraph in any calendar year may not exceed the 3 greater of 10 percent of the amount needed to cover the 4 original deficit, plus interest, fees, commissions, required 5 reserves, and other costs associated with financing of the 6 original deficit, or 10 percent of the aggregate statewide 7 direct written premium for property insurance written by 8 member insurers and underwriting associations subject lines of 9 business for the prior year, plus interest, fees, commissions, 10 required reserves, and other costs associated with financing 11 the original deficit. The board may pledge the proceeds of the 12 emergency assessments under this sub-sub-subparagraph 13 sub-subparagraph as the source of revenue for bonds, to retire 14 any other debt incurred as a result of the deficit or events 15 giving rise to the deficit, or in any other way that the board 16 determines will efficiently recover the deficit. The emergency 17 assessments under this sub-sub-subparagraph shall continue as 18 long as any bonds issued or other indebtedness incurred with 19 respect to a deficit for which the assessment was imposed 20 remain outstanding, unless adequate provision has been made 21 for the payment of such bonds or other indebtedness pursuant 22 to the document governing such bonds or other indebtedness. 23 Emergency assessments collected under this 24 sub-sub-subparagraph subparagraph are not part of an insurer's 25 rates, are not premium, and are not subject to premium tax, 26 fees, or commissions; however, failure to pay the emergency 27 assessment shall be treated as failure to pay premium. 28 (IV)(III) Each member insurer's share of the total 29 regular assessments assessment under sub-sub-subparagraph (I) 30 or sub-sub-subparagraph (II) this sub-subparagraph shall be in 31 the proportion that the insurer's net direct written premium 18 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 for property insurance in this state, as defined in s. 624.404 2 for the year preceding the assessment bears to the aggregate 3 statewide net direct written premium for property insurance of 4 all member insurers, as reduced by any credits for voluntary 5 writings as defined in s. 624.404 for that year. 6 (V)(IV) If regular deficit assessments are made under 7 sub-sub-subparagraph (I) or sub-sub-subparagraph (II), or by 8 the Residential Property and Casualty Joint Underwriting 9 Association under sub-subparagraph (6)(b)3.a. or 10 sub-subparagraph (6)(b)3.b., the association shall levy upon 11 the association's policyholders, as part of its next rate 12 filing, or by a separate rate filing solely for this purpose, 13 a market equalization surcharge in a percentage equal to the 14 total amount of such regular assessments divided by the 15 aggregate statewide direct written premium for property 16 insurance for member insurers for the prior calendar year. 17 Market equalization surcharges under this sub-sub-subparagraph 18 are not considered premium and are not subject to commissions, 19 fees, or premium taxes; however, failure to pay a market 20 equalization surcharge shall be treated as failure to pay 21 premium. 22 e. The governing body of any unit of local government, 23 any residents of which are insured under the plan, may issue 24 bonds as defined in s. 125.013 or s. 166.101 from time to time 25 to fund an assistance program, in conjunction with the 26 association plan, for the purpose of defraying deficits of the 27 association plan. In order to avoid needless and 28 indiscriminate proliferation, duplication, and fragmentation 29 of such assistance programs, any unit of local government, any 30 residents of which are insured by the association, may provide 31 for the payment of losses, regardless of whether or not the 19 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 losses occurred within or outside of the territorial 2 jurisdiction of the local government. Revenue bonds may not be 3 issued until validated pursuant to chapter 75, unless a state 4 of emergency is declared by executive order or proclamation of 5 the Governor pursuant to s. 252.36 making such findings as are 6 necessary to determine that it is in the best interests of, 7 and necessary for, the protection of the public health, 8 safety, and general welfare of residents of this state and the 9 protection and preservation of the economic stability of 10 insurers operating in this state, and declaring it an 11 essential public purpose to permit certain municipalities or 12 counties to issue bonds as will provide relief to claimants 13 and policyholders of the association plan and insurers 14 responsible for apportionment of plan losses. Any such The 15 unit of local government may shall enter into such contracts 16 with the association and with any other entity created 17 pursuant to this subsection plan as are necessary to carry out 18 this paragraph. Any bonds issued under this sub-subparagraph 19 shall be payable from and secured by moneys received by the 20 association plan from assessments under this subparagraph, and 21 assigned and pledged to or on behalf of the unit of local 22 government for the benefit of the holders of such bonds. The 23 funds, credit, property, and taxing power of the state or of 24 the unit of local government shall not be pledged for the 25 payment of such bonds. If any of the bonds remain unsold 60 26 days after issuance, the department shall require all insurers 27 subject to assessment to purchase the bonds, which shall be 28 treated as admitted assets; each insurer shall be required to 29 purchase that percentage of the unsold portion of the bond 30 issue that equals the insurer's relative share of assessment 31 liability under this subsection. An insurer shall not be 20 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 required to purchase the bonds to the extent that the 2 department determines that the purchase would endanger or 3 impair the solvency of the insurer. The authority granted by 4 this sub-subparagraph is additional to any bonding authority 5 granted by subparagraph 6. 6 3. The plan shall also provide that any member with a 7 surplus as to policyholders of $20 million or less writing 25 8 percent or more of its total countrywide property insurance 9 premiums in this state may petition the department, within 90 10 days of the effective date of chapter 76-96, Laws of Florida, 11 and thereafter within the first 90 days of each calendar year, 12 to qualify as a limited apportionment company. The 13 apportionment of such a member company in any calendar year 14 for which it is qualified shall not exceed its gross 15 participation, which shall not be affected by the formula for 16 voluntary writings. In no event shall a limited apportionment 17 company be required to participate in any apportionment of 18 losses pursuant to sub-sub-subparagraph 2.d.(I) or 19 sub-sub-subparagraph 2.d.(II) in the aggregate which exceeds 20 $50 million after payment of available plan funds in any 21 calendar year. However, a limited apportionment company shall 22 collect from its policyholders any emergency assessment 23 imposed under sub-sub-subparagraph 2.d.(III). The plan shall 24 provide that, if the department determines that any regular 25 assessment will result in an impairment of the surplus of a 26 limited apportionment company, the department may direct that 27 all or part of such assessment be deferred. However, there 28 shall be no limitation or deferment of an emergency assessment 29 to be collected from policyholders under sub-sub-subparagraph 30 2.d.(III). 31 21 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 4. The plan shall provide for the deferment, in whole 2 or in part, of a regular the assessment of a member insurer 3 under sub-sub-subparagraph 2.d.(I) or sub-sub-subparagraph 4 2.d.(II), but not for an emergency assessment collected from 5 policyholders under sub-sub-subparagraph 2.d.(III), if, in the 6 opinion of the commissioner, payment of such regular the 7 assessment would endanger or impair the solvency of the member 8 insurer. In the event a regular an assessment against a member 9 insurer is deferred in whole or in part, the amount by which 10 such assessment is deferred may be assessed against the other 11 member insurers in a manner consistent with the basis for 12 assessments set forth in sub-sub-subparagraph 2.d.(I) or 13 sub-sub-subparagraph 2.d.(II) subparagraph 2. 14 5.a. The plan of operation may include deductibles and 15 rules for classification of risks and rate modifications 16 consistent with the objective of providing and maintaining 17 funds sufficient to pay catastrophe losses. 18 b. The association may require arbitration of a rate 19 filing under s. 627.062(6). It is the intent of the 20 Legislature that the rates for coverage provided by the 21 association be actuarially sound and not competitive with 22 approved rates charged in the admitted voluntary market such 23 that the association functions as a residual market mechanism 24 to provide insurance only when the insurance cannot be 25 procured in the voluntary market. As an interim measure, with 26 respect to personal lines residential coverage, the 27 association shall adopt rating plans that provide, for each 28 county, that the typical rates of the association for each 29 line of business are no lower than the typical rates charged 30 by the insurer that had the highest average rate in that 31 county among the 20 insurers with the greatest total direct 22 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 written premium in the state for that line of business in the 2 preceding year, except, with respect to mobile home coverages, 3 the typical rates of the association shall be no lower than 4 the typical rates charged by the insurer that had the highest 5 average rate in that county among the 5 insurers with the 6 greatest total written premium for mobile home owner's 7 policies in the state in the preceding year. An insurer's 8 typical rate is the premium the insurer charges for a 9 specified coverage on a residential property the insured value 10 of which is equal to the median residential property value in 11 that county. If the county encompasses more than one rating 12 territory, the average typical rate in the county shall be 13 weighted to reflect the population of the rating territories. 14 It is the intent of the Legislature that such interim rating 15 plans be phased in, with average rates reflecting at least 16 half of the difference between the then-current association 17 rate and the full interim rate taking effect with policies 18 issued or renewed on or after January 1, 1999, and with full 19 interim rates taking effect with policies issued or renewed on 20 or after January 1, 2000. Nothing in this subparagraph 21 requires the association to adopt inadequate rates or to 22 reduce rates approved under s. 627.062. 23 c. The association plan shall provide for windstorm 24 coverage on residential properties in limits up to $10 million 25 for commercial lines residential risks and up to $1 million 26 for personal lines residential risks. If coverage with the 27 association is sought for a residential risk valued in excess 28 of these limits, coverage shall be available to the risk up to 29 the replacement cost or actual cash value of the property, at 30 the option of the insured, if coverage for the risk cannot be 31 located in the authorized market. The association must accept 23 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 a commercial lines residential risk with limits above $10 2 million or a personal lines residential risk with limits above 3 $1 million if coverage is not available in the authorized 4 market. The association may write coverage above the limits 5 specified in this subparagraph with or without facultative or 6 other reinsurance coverage, as the association determines 7 appropriate. 8 d. The plan of operation must provide objective 9 criteria and procedures, approved by the department, to be 10 uniformly applied for all applicants in determining whether an 11 individual risk is so hazardous as to be uninsurable. In 12 making this determination and in establishing the criteria and 13 procedures, the following shall be considered: 14 (I) Whether the likelihood of a loss for the 15 individual risk is substantially higher than for other risks 16 of the same class; and 17 (II) Whether the uncertainty associated with the 18 individual risk is such that an appropriate premium cannot be 19 determined. 20 21 The acceptance or rejection of a risk by the association 22 pursuant to such criteria and procedures must be construed as 23 the private placement of insurance, and the provisions of 24 chapter 120 do not apply. 25 e. The policies issued by the association must provide 26 that if the association obtains an offer from an authorized 27 insurer to cover the risk at its approved rates under either a 28 standard policy including wind coverage or, if consistent with 29 the insurer's underwriting rules as filed with the department, 30 a basic policy including wind coverage, the risk is no longer 31 eligible for coverage through the association. Upon 24 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 termination of eligibility, the association shall provide 2 written notice to the policyholder and agent of record stating 3 that the association policy must be canceled as of 60 days 4 after the date of the notice because of the offer of coverage 5 from an authorized insurer. Other provisions of the insurance 6 code relating to cancellation and notice of cancellation do 7 not apply to actions under this sub-subparagraph. 8 f. Association policies and applications must include 9 a notice that the association policy could, under this 10 section, be replaced with a policy issued by an authorized 11 insurer that does not provide coverage identical to the 12 coverage provided by the association. The notice shall also 13 specify that acceptance of association coverage creates a 14 conclusive presumption that the applicant or policyholder is 15 aware of this potential. 16 6.a. The plan of operation may authorize the formation 17 of a private nonprofit corporation, a private nonprofit 18 unincorporated association, a partnership, a trust, a limited 19 liability company, or a nonprofit mutual company which may be 20 empowered, among other things, to borrow money by issuing 21 bonds or by incurring other indebtedness and to accumulate 22 reserves or funds to be used for the payment of insured 23 catastrophe losses. The plan may authorize all actions 24 necessary to facilitate the issuance of bonds, including the 25 pledging of assessments or other revenues. 26 b. Any The entity created under this subsection 27 subparagraph, or any entity formed for the purposes of this 28 subsection, may sue and be sued subparagraph 2., may borrow 29 money; issue bonds, notes, or debt instruments; pledge or sell 30 assessments, market equalization surcharges and other 31 surcharges, rights, premiums, contractual rights, projected 25 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 recoveries from the Florida Hurricane Catastrophe Fund, other 2 reinsurance recoverables, and other assets as security for 3 such bonds, notes, or debt instruments; enter into any 4 contracts or agreements necessary or proper to accomplish such 5 borrowings; and take other actions necessary to carry out the 6 purposes of this subsection. The association may issue bonds 7 or incur other indebtedness, or have bonds issued on its 8 behalf by a unit of local government pursuant to subparagraph 9 (g)2., in the absence of a hurricane or other weather-related 10 event, upon a determination by the association subject to 11 approval by the department that such action would enable it to 12 efficiently meet the financial obligations of the association 13 and that such financings are reasonably necessary to 14 effectuate the requirements of this subsection. Any such The 15 entity may accumulate reserves and retain surpluses as of the 16 end of any association year to provide for the payment of 17 losses incurred by the association during that year or any 18 future year. The association plan shall incorporate and 19 continue the plan of operation and articles of agreement in 20 effect on the effective date of chapter 76-96, Laws of 21 Florida, to the extent that it is not inconsistent with 22 chapter 76-96, and as subsequently modified consistent with 23 chapter 76-96. The board of directors and officers currently 24 serving shall continue to serve until their successors are 25 duly qualified as provided under the plan. The assets and 26 obligations of the plan in effect immediately prior to the 27 effective date of chapter 76-96 shall be construed to be the 28 assets and obligations of the successor plan created herein. 29 c. In recognition of s. 10, Art. I of the State 30 Constitution, prohibiting the impairment of obligations of 31 contracts, it is the intent of the Legislature that no action 26 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 be taken whose purpose is to impair any bond indenture or 2 financing agreement or any revenue source committed by 3 contract to such bond or other indebtedness issued or incurred 4 by the association or any other entity created under this 5 subsection. 6 7. On such coverage, an agent's remuneration shall be 7 that amount of money payable to him by the terms of his 8 contract with the company with which the business is placed. 9 However, no commission will be paid on that portion of the 10 premium which is in excess of the standard premium of that 11 company. 12 8. Subject to approval by the department, the 13 association may establish different eligibility requirements 14 and operational procedures for any line or type of coverage 15 for any specified eligible area or portion of an eligible area 16 if the board determines that such changes to the eligibility 17 requirements and operational procedures are justified due to 18 the voluntary market being sufficiently stable and competitive 19 in such area or for such line or type of coverage and that 20 consumers who, in good faith, are unable to obtain insurance 21 through the voluntary market through ordinary methods would 22 continue to have access to coverage from the association. When 23 coverage is sought in connection with a real property 24 transfer, such requirements and procedures shall not provide 25 for an effective date of coverage later than the date of the 26 closing of the transfer as established by the transferor, the 27 transferee, and, if applicable, the lender. 28 9. Notwithstanding any other provision of law: 29 a. The pledge or sale of, the lien upon, and the 30 security interest in any rights, revenues, or other assets of 31 the association created or purported to be created pursuant to 27 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 any financing documents to secure any bonds or other 2 indebtedness of the association shall be and remain valid and 3 enforceable, notwithstanding the commencement of and during 4 the continuation of, and after, any rehabilitation, 5 insolvency, liquidation, bankruptcy, receivership, 6 conservatorship, reorganization, or similar proceeding against 7 the association under the laws of this state or any other 8 applicable laws. 9 b. No such proceeding shall relieve the association of 10 its obligation, or otherwise affect its ability to perform its 11 obligation, to continue to collect, or levy and collect, 12 assessments, market equalization or other surcharges, 13 projected recoveries from the Florida Hurricane Catastrophe 14 Fund, reinsurance recoverables, or any other rights, revenues, 15 or other assets of the association pledged. 16 c. Each such pledge or sale of, lien upon, and 17 security interest in, including the priority of such pledge, 18 lien, or security interest, any such assessments, emergency 19 assessments, market equalization or renewal surcharges, 20 projected recoveries from the Florida Hurricane Catastrophe 21 Fund, reinsurance recoverables, or other rights, revenues, or 22 other assets which are collected, or levied and collected, 23 after the commencement of and during the pendency of or after 24 any such proceeding shall continue unaffected by such 25 proceeding. 26 d. As used in this subsection, the term "financing 27 documents" means any agreement, instrument, or other document 28 now existing or hereafter created evidencing any bonds or 29 other indebtedness of the association or pursuant to which any 30 such bonds or other indebtedness has been or may be issued and 31 pursuant to which any rights, revenues, or other assets of the 28 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 association are pledged or sold to secure the repayment of 2 such bonds or indebtedness, together with the payment of 3 interest on such bonds or such indebtedness, or the payment of 4 any other obligation of the association related to such bonds 5 or indebtedness. 6 e. Any such pledge or sale of assessments, revenues, 7 contract rights or other rights or assets of the association 8 shall constitute a lien and security interest, or sale, as the 9 case may be, that is immediately effective and attaches to 10 such assessments, revenues, contract, or other rights or 11 assets, whether or not imposed or collected at the time the 12 pledge or sale is made. Any such pledge or sale is effective, 13 valid, binding, and enforceable against the association or 14 other entity making such pledge or sale, and valid and binding 15 against and superior to any competing claims or obligations 16 owed to any other person or entity, including policyholders in 17 this state, asserting rights in any such assessments, 18 revenues, contract, or other rights or assets to the extent 19 set forth in and in accordance with the terms of the pledge or 20 sale contained in the applicable financing documents, whether 21 or not any such person or entity has notice of such pledge or 22 sale and without the need for any physical delivery, 23 recordation, filing, or other action. 24 f. There shall be no liability on the part of, and no 25 cause of action of any nature shall arise against, any member 26 insurer or its agents or employees, agents or employees of the 27 association, members of the board of directors of the 28 association, or the department or its representatives, for any 29 action taken by them in the performance of their duties or 30 responsibilities under this subsection. Such immunity does not 31 29 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 apply to actions for breach of any contract or agreement 2 pertaining to insurance, or any willful tort. 3 (c) The provisions of paragraph (b) are applicable 4 only with respect to: 5 1. Those areas that were eligible for coverage under 6 this subsection on April 9, 1993; or 7 2. Any county or area as to which the department, 8 after public hearing, finds that the following criteria exist: 9 a. Due to the lack of windstorm insurance coverage in 10 the county or area so affected, economic growth and 11 development is being deterred or otherwise stifled in such 12 county or area, mortgages are in default, and financial 13 institutions are unable to make loans; 14 b. The county or area so affected has adopted and is 15 enforcing the structural requirements of the State Minimum 16 Building Codes, as defined in s. 553.73, for new construction 17 and has included adequate minimum floor elevation requirements 18 for structures in areas subject to inundation; and 19 c. Extending windstorm insurance coverage to such 20 county or area is consistent with and will implement and 21 further the policies and objectives set forth in applicable 22 state laws, rules, and regulations governing coastal 23 management, coastal construction, comprehensive planning, 24 beach and shore preservation, barrier island preservation, 25 coastal zone protection, and the Coastal Zone Protection Act 26 of 1985. 27 28 Any time after the department has determined that the criteria 29 referred to in this subparagraph do not exist with respect to 30 any county or area of the state, it may, after a subsequent 31 30 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 public hearing, declare that such county or area is no longer 2 eligible for windstorm coverage through the plan. 3 (d) For the purpose of evaluating whether the criteria 4 of paragraph (c) are met, such criteria shall be applied as 5 the situation would exist if policies had not been written by 6 the Florida Residential Property and Casualty Joint 7 Underwriting Association and property insurance for such 8 policyholders was not available. 9 (e) Notwithstanding the provisions of subparagraph 10 (c)2. or paragraph (d), eligibility shall not be extended to 11 any area that was not eligible on March 1, 1997, except that 12 the department may act with respect to any petition on which a 13 hearing was held prior to March 1, 1997. This paragraph is 14 repealed on October 1, 1998. 15 (6) RESIDENTIAL PROPERTY AND CASUALTY JOINT 16 UNDERWRITING ASSOCIATION.-- 17 (a) There is created a joint underwriting association 18 for equitable apportionment or sharing among insurers of 19 property and casualty insurance covering residential property, 20 for applicants who are in good faith entitled, but are unable, 21 to procure insurance through the voluntary market. The 22 association shall operate pursuant to a plan of operation 23 approved by order of the department. The plan is subject to 24 continuous review by the department. The department may, by 25 order, withdraw approval of all or part of a plan if the 26 department determines that conditions have changed since 27 approval was granted and that the purposes of the plan require 28 changes in the plan. For the purposes of this subsection, 29 residential coverage includes both personal lines residential 30 coverage, which consists of the type of coverage provided by 31 homeowner's, mobile home owner's, dwelling, tenant's, 31 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 condominium unit owner's, and similar policies, and commercial 2 lines residential coverage, which consists of the type of 3 coverage provided by condominium association, apartment 4 building, and similar policies. 5 (b)1. All insurers authorized to write subject lines 6 of business such insurance in this state, other than 7 underwriting associations or other entities created under this 8 section, must participate in and be members of the Residential 9 Property and Casualty Joint Underwriting Association. A 10 member's participation shall begin on the first day of the 11 calendar year following the year in which the member was 12 issued a certificate of authority to transact insurance for 13 subject lines of business in this state and shall terminate 1 14 year after the end of the first calendar year during which the 15 member no longer holds a certificate of authority to transact 16 insurance for subject lines of business in this state. 17 2. All revenues, assets, liabilities, losses, and 18 expenses of the association shall be divided into two separate 19 accounts, one of which is for personal lines residential 20 coverages and the other of which is for commercial lines 21 residential coverages. Revenues, assets, liabilities, losses, 22 and expenses not attributable to particular coverages shall be 23 prorated between the accounts. 24 3. With respect to a deficit in an account: 25 a. When the deficit incurred in a particular calendar 26 year is not greater than 10 percent of the aggregate statewide 27 direct written premium for the subject lines of business for 28 the prior calendar year for all member insurers, the entire 29 deficit shall be recovered through assessments of member 30 insurers under paragraph (g). 31 32 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 b. When the deficit incurred in a particular calendar 2 year exceeds 10 percent of the aggregate statewide direct 3 written premium for the subject lines of business for the 4 prior calendar year for all member insurers, the association 5 shall levy an assessment on member insurers in an amount equal 6 to the greater of 10 percent of the deficit or 10 percent of 7 the aggregate statewide direct written premium for the subject 8 lines of business for the prior calendar year for all member 9 insurers. Any remaining deficit shall be recovered through 10 emergency assessments under sub-subparagraph d. 11 c. Each member insurer's share of the total assessment 12 under sub-subparagraph a. or sub-subparagraph b. shall be in 13 the proportion that the member insurer's direct written 14 premium for the subject lines of business for the year 15 preceding the assessment bears to the aggregate statewide 16 direct written premium for the subject lines of business for 17 that year for all member insurers. 18 d. Upon a determination by the board of governors that 19 a deficit in an account exceeds the amount that will be 20 recovered through regular assessments on member of insurers 21 under sub-subparagraph a. or sub-subparagraph b., the board 22 shall levy, after verification by the department, emergency 23 assessments to be collected by member insurers and by, 24 including joint underwriting associations created under this 25 section which write subject lines of business, upon issuance 26 or renewal of policies for subject lines of business, 27 excluding National Flood Insurance policies, in the year or 28 years following levy of the regular assessments. The amount 29 of the emergency assessment collected in a particular year 30 shall be a uniform percentage of that year's direct written 31 premium for subject lines of business for all member insurers 33 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 and underwriting associations, excluding National Flood 2 Insurance Program policy premiums, as annually determined by 3 the board and verified by the department. The department shall 4 verify the arithmetic calculations involved in the board's 5 determination within 30 days after receipt of the information 6 on which the determination was based. Notwithstanding any 7 other provision of law, each member insurer and each 8 underwriting association created under this section which 9 writes subject lines of business shall collect emergency 10 assessments from its policyholders without such obligation 11 being affected by any credit, limitation, exemption, or 12 deferment. The emergency assessments so collected shall be 13 transferred directly to the association on a periodic basis as 14 determined by the association. The aggregate amount of 15 emergency assessments levied under this sub-subparagraph in 16 any calendar year may not exceed the greater of 10 percent of 17 the amount needed to cover the original deficit, plus 18 interest, fees, commissions, required reserves, and other 19 costs associated with financing of the original deficit, or 10 20 percent of the aggregate statewide direct written premium for 21 subject lines of business written by member insurers and 22 underwriting associations for the prior year, plus interest, 23 fees, commissions, required reserves, and other costs 24 associated with financing the original deficit. 25 e. The board may pledge the proceeds of assessments, 26 projected recoveries revenues from the Florida Hurricane 27 Catastrophe Fund, other insurance and reinsurance 28 recoverables, market equalization surcharges and other 29 surcharges, and other funds available to the association as 30 the source of revenue for and to secure bonds issued under 31 paragraph (g), bonds or other indebtedness issued under 34 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 subparagraph (c)3., or lines of credit or of other financing 2 mechanisms issued or created under this subsection 3 subparagraph (c)10., or to retire any other debt incurred as a 4 result of deficits the deficit or events giving rise to 5 deficits the deficit, or in any other way that the board 6 determines will efficiently recover such deficits the deficit. 7 The purpose of the lines of credit or other financing 8 mechanisms is to provide additional resources to assist the 9 association in covering claims and expenses attributable to a 10 catastrophe. As used in this subsection, the term 11 "assessments" includes regular assessments under 12 sub-subparagraph a., sub-subparagraph b., or subparagraph 13 (g)1. and emergency assessments under this sub-subparagraph d. 14 Emergency assessments collected under sub-subparagraph d. this 15 subparagraph are not part of an insurer's rates, are not 16 premium, and are not subject to premium tax, fees, or 17 commissions; however, failure to pay the emergency assessment 18 shall be treated as failure to pay premium. The emergency 19 assessments under sub-subparagraph d. shall continue as long 20 as any bonds issued or other indebtedness incurred with 21 respect to a deficit for which the assessment was imposed 22 remain outstanding, unless adequate provision has been made 23 for the payment of such bonds or other indebtedness pursuant 24 to the documents governing such bonds or other indebtedness. 25 f.e. As used in this subsection subparagraph, the term 26 "subject lines of business" means, with respect to the 27 personal lines account, any personal lines policy defined in 28 s. 627.4025, and means, with respect to the commercial lines 29 account, all commercial property and commercial fire 30 insurance. 31 (c) The plan of operation of the association: 35 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 1. May provide for one or more designated insurers, 2 able and willing to provide policy and claims service, to act 3 on behalf of the association to provide such service. Each 4 licensed agent shall be entitled to indicate the order of 5 preference regarding who will service the business placed by 6 the agent. The association shall adhere to each agent's 7 preferences unless after consideration of other factors in 8 assigning agents, including, but not limited to, servicing 9 capacity and fee arrangements, the association has reason to 10 believe it is in the best interest of the association to make 11 a different assignment. 12 2. Must provide for adoption of residential property 13 and casualty insurance policy forms, which forms must be 14 approved by the department prior to use. The association 15 shall adopt the following policy forms: 16 a. Standard personal lines policy forms including wind 17 coverage, which are multiperil policies providing what is 18 generally considered to be full coverage of a residential 19 property similar to the coverage provided under an HO-2, HO-3, 20 HO-4, or HO-6 policy. 21 b. Standard personal lines policy forms without wind 22 coverage, which are the same as the policies described in 23 sub-subparagraph a. except that they do not include wind 24 coverage. 25 c. Basic personal lines policy forms including wind 26 coverage, which are policies similar to an HO-8 policy or a 27 dwelling fire policy that provide coverage meeting the 28 requirements of the secondary mortgage market, but which 29 coverage is more limited than the coverage under a standard 30 policy. 31 36 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 d. Basic personal lines policy forms without wind 2 coverage, which are the same as the policies described in 3 sub-subparagraph c. except that they do not include wind 4 coverage. 5 e. Commercial lines residential policy forms including 6 wind coverage that are generally similar to the basic perils 7 of full coverage obtainable for commercial residential 8 structures in the admitted voluntary market. 9 f. Commercial lines residential policy forms without 10 wind coverage, which are the same as the policies described in 11 sub-subparagraph e. except that they do not include wind 12 coverage. 13 3. May provide that the association may employ or 14 otherwise contract with individuals or other entities to 15 provide administrative or professional services that may be 16 appropriate to effectuate the plan. The association shall 17 have the power to borrow funds, by issuing bonds or by 18 incurring other indebtedness, and shall have other powers 19 reasonably necessary to effectuate the requirements of this 20 subsection. The association may issue bonds or incur other 21 indebtedness, or have bonds issued on its behalf by a unit of 22 local government pursuant to subparagraph (g)2., in the 23 absence of a hurricane or other weather-related event, upon a 24 determination by the association, subject to approval by the 25 department, that such action would enable it to efficiently 26 meet the financial obligations of the association and that 27 such financings are reasonably necessary to effectuate the 28 requirements of this subsection. The association is 29 authorized to take all actions needed to facilitate tax-free 30 status for any such bonds or indebtedness, including formation 31 of trusts or other affiliated entities. The association shall 37 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 have the authority to pledge assessments, projected recoveries 2 from the Florida Hurricane Catastrophe Fund, other reinsurance 3 recoverables, market equalization and other surcharges, and 4 other funds available to the association as security for bonds 5 or other indebtedness. In recognition of s. 10, Art. I of the 6 State Constitution, prohibiting the impairment of obligations 7 of contracts, it is the intent of the Legislature that no 8 action be taken whose purpose is to impair any bond indenture 9 or financing agreement or any revenue source committed by 10 contract to such bond or other indebtedness. 11 4. Must require that the association operate subject 12 to the supervision and approval of a board of governors 13 consisting of 13 individuals, including 1 who is elected as 14 chairman. The board shall consist of: 15 a. The insurance consumer advocate appointed under s. 16 627.0613. 17 b. Five members designated by the insurance industry. 18 c. Five consumer representatives appointed by the 19 Insurance Commissioner. Two of the consumer representatives 20 must, at the time of appointment, be holders of policies 21 issued by the association, who are selected with consideration 22 given to reflecting the geographic balance of association 23 policyholders. Two of the consumer members must be individuals 24 who are minority persons as defined in s. 288.703(3). One of 25 the consumer members shall have expertise in the field of 26 mortgage lending. 27 d. Two representatives of the insurance industry 28 appointed by the Insurance Commissioner. Of the two insurance 29 industry representatives appointed by the Insurance 30 Commissioner, at least one must be an individual who is a 31 minority person as defined in s. 288.703(3). 38 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 2 Any board member may be disapproved or removed and replaced by 3 the commissioner at any time for cause. All board members, 4 including the chairman, must be appointed to serve for 3-year 5 terms beginning annually on a date designated by the plan. 6 5. Must provide a procedure for determining the 7 eligibility of a risk for coverage, as follows: 8 a. With respect to personal lines residential risks, 9 the procedures shall require that the authorized insurer that 10 last provided coverage of the risk shall first be given an 11 opportunity to insure the risk at its approved rate. Upon 12 rejection by such insurer, the risk shall be submitted to the 13 market assistance plan. if the risk market assistance plan is 14 offered coverage able to obtain an offer from an authorized 15 insurer to insure the risk at the insurer's its approved rate 16 under either a standard policy including wind coverage or, if 17 consistent with the insurer's underwriting rules as filed with 18 the department, a basic policy including wind coverage, the 19 risk is not eligible for any policy issued by the association 20 in the event that the risk accepts the offer of coverage, if 21 the producing agent who submitted the application to the plan 22 is not currently appointed by the insurer, the insurer shall 23 either appoint the agent to service the risk or, if the 24 insurer places the coverage through a new agent, require the 25 new agent who then writes the policy to pay not less than 50 26 percent of his first year's commission to the producing agent 27 who submitted the application to the plan, except that if the 28 new agent is an employee or exclusive agent of the insurer, 29 the new agent shall pay a policy fee of $50 to the producing 30 agent in lieu of splitting the commission. If the risk accepts 31 an offer of coverage through the market assistance plan or an 39 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 offer of coverage through a mechanism established by the 2 association before a policy is issued to the risk by the 3 association or during the first 30 days of coverage by the 4 association, and the producing agent who submitted the 5 application to the plan or to the association is not currently 6 appointed by the insurer, the insurer shall either appoint the 7 agent to service the risk or, if the insurer places the 8 coverage through a new agent, require the new agent who then 9 writes the policy to pay not less than 50 percent of the first 10 year's commission to the producing agent who submitted the 11 application to the plan or the association, except that if the 12 new agent is an employee or exclusive agent of the insurer, 13 the new agent shall pay a policy fee of $50 to the producing 14 agent in lieu of splitting the commission. If the risk market 15 assistance plan is not able to obtain any such offer, the risk 16 is eligible for either a standard policy including wind 17 coverage or a basic policy including wind coverage issued by 18 the association; however, if the risk could not be insured 19 under a standard policy including wind coverage regardless of 20 market conditions, the risk shall be eligible for a basic 21 policy including wind coverage unless rejected under 22 subparagraph 8. The association shall determine the type of 23 policy to be provided on the basis of objective standards 24 specified in the underwriting manual and based on generally 25 accepted underwriting practices. 26 b. With respect to commercial lines residential risks, 27 the procedures shall require that the authorized insurer that 28 last provided coverage of the risk shall first be given an 29 opportunity to insure the risk at its approved rate. Upon 30 rejection by such insurer, the risk shall be submitted to the 31 market assistance plan. if the risk market assistance plan is 40 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 offered coverage able to obtain an offer to insure the risk 2 under a policy including wind coverage from an authorized 3 insurer at its approved rate or from a surplus lines insurer 4 at no more than 25 percent above the association rate, the 5 risk is not eligible for any policy issued by the association. 6 If the risk accepts an offer of coverage through the market 7 assistance plan or an offer of coverage through a mechanism 8 established by the association before a policy is issued to 9 the risk by the association, and the producing agent who 10 submitted the application to the plan or the association is 11 not currently appointed by the insurer, the insurer shall 12 either appoint the agent to service the risk or, if the 13 insurer places the coverage through a new agent, require the 14 new agent who then writes the policy to pay not less than 50 15 percent of the first year's commission to the producing agent 16 who submitted the application to the plan, except that if the 17 new agent is an employee or exclusive agent of the insurer, 18 the new agent shall pay a policy fee of $50 to the producing 19 agent in lieu of splitting the commission.; however, an offer 20 from a surplus lines insurer does not disqualify a condominium 21 association, cooperative, or homeowners' association from 22 eligibility for coverage by the association in the event that 23 the risk accepts the offer of coverage, if the producing agent 24 who submitted the application to the plan is not currently 25 appointed by the insurer, the insurer shall either appoint the 26 agent to service the risk or, if the insurer places the 27 coverage through a new agent, require the new agent who then 28 writes the policy to pay not less than 50 percent of his first 29 year's commission to the producing agent who submitted the 30 application to the plan, except that if the new agent is an 31 employee or exclusive agent of the insurer, the new agent 41 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 shall pay a policy fee of $50 to the producing agent in lieu 2 of splitting the commission. If the risk market assistance 3 plan is not able to obtain any such offer, the risk is 4 eligible for a policy including wind coverage issued by the 5 association. After December 31, 1996, an offer from a surplus 6 lines insurer does not disqualify an applicant from obtaining 7 coverage from the association. 8 c. This subparagraph does not require the association 9 to provide wind coverage or hurricane coverage in any area in 10 which such coverage is available through the Florida Windstorm 11 Underwriting Association. 12 6. Must include rules for classifications of risks and 13 rates therefor. 14 7. Must provide that if premium and investment income 15 attributable to a particular plan year are in excess of 16 projected losses and expenses of the plan attributable to that 17 year, such excess shall be held in surplus. Such surplus shall 18 be available to defray deficits as to future years and shall 19 be used for that purpose prior to assessing member insurers as 20 to any plan year. 21 8. Must provide objective criteria and procedures to 22 be uniformly applied for all applicants in determining whether 23 an individual risk is so hazardous as to be uninsurable. In 24 making this determination and in establishing the criteria and 25 procedures, the following shall be considered: 26 a. Whether the likelihood of a loss for the individual 27 risk is substantially higher than for other risks of the same 28 class; and 29 b. Whether the uncertainty associated with the 30 individual risk is such that an appropriate premium cannot be 31 determined. 42 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 2 The acceptance or rejection of a risk by the association shall 3 be construed as the private placement of insurance, and the 4 provisions of chapter 120 shall not apply. 5 9. Must provide that the association shall make its 6 best efforts to procure catastrophe reinsurance at reasonable 7 rates, as determined by the board of governors. 8 10. Must provide that in the event of regular deficit 9 assessments under sub-subparagraph (b)3.a. or sub-subparagraph 10 (b)3.b., or by the Florida Windstorm Underwriting Association 11 under sub-sub-subparagraph (2)(b)2.d.(I) or 12 sub-sub-subparagraph (2)(b)2.d.(II), the association shall 13 levy upon association policyholders in its next rate filing, 14 or by a separate rate filing solely for this purpose, a market 15 equalization surcharge in a percentage equal to the total 16 amount of such regular assessments divided by the aggregate 17 statewide direct written premium for subject lines of business 18 for member insurers for the prior calendar year equal to the 19 percentage assessment attributable to such deficit. Such 20 surcharges, together with projected recoveries from the 21 Florida Hurricane Catastrophe Fund, other reinsurance 22 recoverables, assessment proceeds, and any other funds 23 available to the association, may be used to fund lines of 24 credit and other financing mechanisms to the extent available 25 from public or private sources. The purpose of the lines of 26 credit or other financing mechanism is to provide additional 27 resources to assist the association in covering claims and 28 expenses attributable to a catastrophe. Market equalization 29 surcharges under this subparagraph are not considered premium 30 and are not subject to commissions, fees, or premium taxes; 31 43 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 however, failure to pay a market equalization surcharge shall 2 be treated as failure to pay premium. 3 11. The policies issued by the association must 4 provide that for personal lines residential risks, if the 5 association or the market assistance plan obtains an offer 6 from an authorized insurer to cover the risk at its approved 7 rates under either a standard policy including wind coverage 8 or a basic policy including wind coverage, the risk is no 9 longer eligible for coverage through the association. However, 10 if the risk is located in an area in which Florida Windstorm 11 Underwriting Association coverage is available, such an offer 12 of a standard or basic policy terminates eligibility 13 regardless of whether or not the offer includes wind coverage. 14 Upon termination of eligibility, the association shall provide 15 written notice to the policyholder and agent of record stating 16 that the association policy shall be canceled as of 60 30 days 17 after the date of the notice because of the offer of coverage 18 from an authorized insurer. Other provisions of the insurance 19 code relating to cancellation and notice of cancellation do 20 not apply to actions under this subparagraph. 21 12. Association policies and applications must include 22 a notice that the association policy could, under this section 23 or s. 627.3511, be replaced with a policy issued by an 24 admitted insurer that does not provide coverage identical to 25 the coverage provided by the association. The notice shall 26 also specify that acceptance of association coverage creates a 27 conclusive presumption that the applicant or policyholder is 28 aware of this potential. 29 13. May establish, subject to approval by the 30 department, different eligibility requirements and operational 31 procedures for any line or type of coverage for any specified 44 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 county or area if the board determines that such changes to 2 the eligibility requirements and operational procedures are 3 justified due to the voluntary market being sufficiently 4 stable and competitive in such area or for such line or type 5 of coverage and that consumers who, in good faith, are unable 6 to obtain insurance through the voluntary market through 7 ordinary methods would continue to have access to coverage 8 from the association. When coverage is sought in connection 9 with a real property transfer, such requirements and 10 procedures shall not provide for an effective date of coverage 11 later than the date of the closing of the transfer as 12 established by the transferor, the transferee, and, if 13 applicable, the lender. 14 (d)1. It is the intent of the Legislature that the 15 rates for coverage provided by the association be actuarially 16 sound and not competitive with approved rates charged in the 17 admitted voluntary market, so that the association functions 18 as a residual market mechanism to provide insurance only when 19 the insurance cannot be procured in the voluntary market. 20 Beginning with the rate filing taking effect January 1, 1998, 21 to the extent that such data is available, the rates of the 22 plan shall be based on the association's actual loss 23 experience and expenses. Rates shall include an appropriate 24 catastrophe loading factor that reflects the actual 25 catastrophic exposure of the association and recognizes that 26 the association has little or no capital or surplus; and the 27 association shall carefully review each rate filing to assure 28 that provider compensation is not excessive. As an interim 29 measure, the association shall adopt rating plans that 30 provide, 31 45 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 2. For each county, that the average rates of the 2 association for each line of business for personal lines 3 residential policies shall be no lower than are the same as 4 the average rates charged by the insurer that had the highest 5 average rate in that county among the 20 insurers with the 6 greatest total direct written premium in the state for that 7 line of business in the preceding year, except that with 8 respect to mobile home coverages, the average rates of the 9 association shall be no lower than the same as the average 10 rates charged by the insurer that had the highest average rate 11 in that county among the 5 8 insurers with the greatest total 12 written premium for mobile home owner's policies in the state 13 in the preceding year. It is the intent of the Legislature 14 that such interim rating plans be phased in, with average 15 rates reflecting at least half of the difference between the 16 then-current association rate and the full interim rate taking 17 effect with policies issued or renewed on or after January 1, 18 1996, and with the full interim rates taking effect with 19 policies issued or renewed on or after January 1, 1997. 20 3. Rates for commercial residential coverage shall not 21 be subject to the requirements of subparagraph 2., but shall 22 be subject to all other requirements of this paragraph and s. 23 627.062. Nothing in this subparagraph requires the association 24 to reduce rates approved under s. 627.062 and in effect on 25 December 31, 1995. 26 4. Nothing in this paragraph subparagraph shall 27 require or allow the association to adopt a rate that is 28 inadequate under s. 627.062 or to reduce rates approved under 29 s. 627.062. 30 5.2. The association may require arbitration of a 31 filing pursuant to s. 627.062(6). Rate filings of the 46 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 association under this paragraph shall be made on a use and 2 file basis under s. 627.062(2)(a)2. The association shall make 3 a rate filing under s. 627.062 at least once a year, but no 4 more often than quarterly. 5 (e) Coverage through the association is hereby 6 activated effective upon approval of the plan, and shall 7 remain activated until coverage is deactivated pursuant to 8 paragraph (f). Thereafter, coverage through the association 9 shall be reactivated by order of the department only under one 10 of the following circumstances: 11 1. If the market assistance plan receives a minimum of 12 100 applications for coverage within a 3-month period, or 200 13 applications for coverage within a 1-year period or less for 14 residential coverage, unless the market assistance plan 15 provides a quotation from admitted carriers at their filed 16 rates for at least 90 percent of such applicants. Any market 17 assistance plan application that is rejected because an 18 individual risk is so hazardous as to be uninsurable using the 19 criteria specified in subparagraph (c)8. shall not be included 20 in the minimum percentage calculation provided herein. In the 21 event that there is a legal or administrative challenge to a 22 determination by the department that the conditions of this 23 subparagraph have been met for eligibility for coverage in the 24 association, any eligible risk may obtain coverage during the 25 pendency of such challenge. 26 2. In response to a state of emergency declared by the 27 Governor under s. 252.36, the department may activate coverage 28 by order for the period of the emergency upon a finding by the 29 department that the emergency significantly affects the 30 availability of residential property insurance. 31 47 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 (f) The activities of the association shall be 2 reviewed at least annually by the board and, upon 3 recommendation by the board or petition of any interested 4 party, coverage shall be deactivated if the department finds 5 that the conditions giving rise to its activation no longer 6 exist. 7 (g)1. The board shall certify to the department its 8 needs for annual assessments as to a particular calendar year, 9 and any startup or interim assessments that it deems to be 10 necessary to sustain operations as to a particular year 11 pending the receipt of annual assessments. Upon verification, 12 the department shall approve such certification, and the board 13 shall levy such annual, startup, or interim assessments. Such 14 assessments shall be prorated as provided in paragraph (b). 15 The board shall take all reasonable and prudent steps 16 necessary to collect the amount of assessment due from each 17 participating member insurer, including, if prudent, filing 18 suit to collect such assessment. If the board is unable to 19 collect an assessment from any member insurer, the uncollected 20 assessments shall be levied as an additional assessment 21 against the participating member insurers and any 22 participating member insurer required to pay an additional 23 assessment as a result of such failure to pay shall have a 24 cause of action against such nonpaying member insurer. 25 Assessments shall be included as an appropriate factor in the 26 making of rates. 27 2. The governing body of any unit of local government, 28 any residents of which are insured by the association, may 29 issue bonds as defined in s. 125.013 or s. 166.101 from time 30 to time to fund an assistance program, in conjunction with the 31 association, for the purpose of defraying deficits of the 48 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 association. In order to avoid needless and indiscriminate 2 proliferation, duplication, and fragmentation of such 3 assistance programs, any unit of local government, any 4 residents of which are insured by the association, may provide 5 for the payment of losses, regardless of whether or not the 6 losses occurred within or outside of the territorial 7 jurisdiction of the local government. Revenue bonds may not be 8 issued until validated pursuant to chapter 75, unless a state 9 of emergency is declared by executive order or proclamation of 10 the Governor pursuant to s. 252.36 making such findings as are 11 necessary to determine that it is in the best interests of, 12 and necessary for, the protection of the public health, 13 safety, and general welfare of residents of this state and the 14 protection and preservation of the economic stability of 15 insurers operating in this state, and declaring it an 16 essential public purpose to permit certain municipalities or 17 counties to issue such bonds as will permit relief to 18 claimants and policyholders of the joint underwriting 19 association and insurers responsible for apportionment of 20 association losses. Any such The unit of local government may 21 shall enter into such contracts with the association and with 22 any other entity created pursuant to this subsection as are 23 necessary to carry out this paragraph. Any bonds issued under 24 this subparagraph sub-subparagraph shall be payable from and 25 secured by moneys received by the association from emergency 26 assessments under sub-subparagraph (b)3.d., and assigned and 27 pledged to or on behalf of the unit of local government for 28 the benefit of the holders of such bonds. The funds, credit, 29 property, and taxing power of the state or of the unit of 30 local government shall not be pledged for the payment of such 31 bonds. If any of the bonds remain unsold 60 days after 49 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 issuance, the department shall require all insurers subject to 2 assessment to purchase the bonds, which shall be treated as 3 admitted assets; each insurer shall be required to purchase 4 that percentage of the unsold portion of the bond issue that 5 equals the insurer's relative share of assessment liability 6 under this subsection. An insurer shall not be required to 7 purchase the bonds to the extent that the department 8 determines that the purchase would endanger or impair the 9 solvency of the insurer. 10 3.a. In addition to any credits, bonuses, or 11 exemptions provided under s. 627.3511, the board shall adopt a 12 program for the reduction of both new and renewal writings in 13 the association. The board may consider any prudent and not 14 unfairly discriminatory approach to reducing association 15 writings, but must adopt at least a credit against assessment 16 liability or other liability that provides an incentive for 17 insurers to take risks out of the association and to keep 18 risks out of the association by maintaining or increasing 19 voluntary writings in counties in which association risks are 20 highly concentrated and a program to provide a formula under 21 which an insurer voluntarily taking risks out of the 22 association by maintaining or increasing voluntary writings 23 will be relieved wholly or partially from assessments under 24 sub-subparagraphs (b)3.a. and b. subparagraph (b)3. 25 b. Any credit or exemption from regular assessments 26 adopted under this subparagraph shall last no longer than the 27 3 years following the cancellation or expiration of the policy 28 by the association. With the approval of the department, the 29 board may extend such credits for an additional year if the 30 insurer guarantees an additional year of renewability for all 31 policies removed from the association, or for two additional 50 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 years if the insurer guarantees two additional years of 2 renewability for all policies so removed. 3 c. There shall be no credit, limitation, exemption, or 4 deferment from emergency assessments to be collected from 5 policyholders pursuant to sub-subparagraph (b)3.d. 6 d. In order for a plan to qualify for any bonus, 7 exemption, or other incentive under this subparagraph, at 8 least 40 percent of the policies removed from the association 9 under the plan must cover risks located in Dade, Broward, and 10 Palm Beach Counties, or at least 30 percent of the policies 11 removed from the association under the plan must cover risks 12 located in Dade, Broward, and Palm Beach Counties and an 13 additional 50 percent of the policies removed from the 14 association under the plan must cover risks located in other 15 coastal counties. 16 4. The plan shall provide for the deferment, in whole 17 or in part, of the assessment of a member an insurer, other 18 than an emergency assessment collected from policyholders 19 pursuant to sub-subparagraph (b)3.d., if the department finds 20 that payment of the assessment would endanger or impair the 21 solvency of the insurer. In the event an assessment against a 22 member an insurer is deferred in whole or in part, the amount 23 by which such assessment is deferred may be assessed against 24 the other member insurers in a manner consistent with the 25 basis for assessments set forth in paragraph (b). 26 (h) Nothing in this subsection shall be construed to 27 preclude the issuance of residential property insurance 28 coverage pursuant to part VIII of chapter 626. 29 (i) There shall be no liability on the part of, and no 30 cause of action of any nature shall arise against, any member 31 insurer or its agents or employees, agents or employees of the 51 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 association the Residential Property and Casualty Joint 2 Underwriting Association or its agents or employees, members 3 of the board of governors, or the department or its 4 representatives for any action taken by them in the 5 performance of their duties or responsibilities under this 6 subsection. Such immunity does not apply to actions for breach 7 of any contract or agreement pertaining to insurance or to 8 issuance or payment of debt, or any other willful tort. 9 (j) The Residential Property and Casualty Joint 10 Underwriting Association is not a state agency, board, or 11 commission. However, for the purposes of s. 199.183(1), the 12 Residential Property and Casualty Joint Underwriting 13 Association shall be considered a political subdivision of the 14 state and shall be exempt from the corporate income tax. 15 (k) Upon a determination by the board of governors 16 that the conditions giving rise to the establishment and 17 activation of the association no longer exist, and upon the 18 consent thereto by order of the department, the association is 19 dissolved. Upon dissolution, the assets of the association 20 shall be applied first to pay all debts, liabilities, and 21 obligations of the association, including the establishment of 22 reasonable reserves for any contingent liabilities or 23 obligations, and all remaining assets of the association shall 24 become property of the state and deposited in the Florida 25 Hurricane Catastrophe Fund. 26 (l) All obligations, rights, assets, and liabilities 27 of the Florida Property and Casualty Joint Underwriting 28 Association created by subsection (5), which obligations, 29 rights, assets, or liabilities relate to the provision of 30 commercial lines residential property insurance coverage as 31 described in this section are hereby transferred to the 52 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 Residential Property and Casualty Joint Underwriting 2 Association. The Residential Property and Casualty Joint 3 Underwriting Association is not required to issue endorsements 4 or certificates of assumption to insureds during the remaining 5 term of in-force transferred policies. 6 (m) Notwithstanding any other provision of law: 7 1. The pledge or sale of, the lien upon, and the 8 security interest in any rights, revenues, or other assets of 9 the association created or purported to be created pursuant to 10 any financing documents to secure any bonds or other 11 indebtedness of the association shall be and remain valid and 12 enforceable, notwithstanding the commencement of and during 13 the continuation of, and after, any rehabilitation, 14 insolvency, liquidation, bankruptcy, receivership, 15 conservatorship, reorganization, or similar proceeding against 16 the association under the laws of this state. 17 2. No such proceeding shall relieve the association of 18 its obligation, or otherwise affect its ability to perform its 19 obligation, to continue to collect, or levy and collect, 20 assessments under sub-subparagraph (b)3.a., sub-subparagraph 21 (b)3.b., or subparagraph (g)1., emergency assessments under 22 sub-subparagraph (b)3.d., market equalization or other renewal 23 surcharges under subparagraph (c)10. (g)10., or any other 24 rights, revenues, or other assets of the association pledged 25 pursuant to any financing documents. 26 3. Each such pledge or sale of, lien upon, and 27 security interest in, including the priority of such pledge, 28 lien, or security interest, any such assessments, emergency 29 assessments, market equalization or other renewal surcharges, 30 or other rights, revenues, or other assets which are 31 collected, or levied and collected, after the commencement of 53 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 and during the pendency of, or after, any such proceeding 2 shall continue unaffected by such proceeding. As used in this 3 subsection paragraph, the term "financing documents" means any 4 agreement or agreements, instrument or instruments, or other 5 document or documents now existing or hereafter created 6 evidencing any bonds or other indebtedness of the association 7 or pursuant to which any such bonds or other indebtedness has 8 been or may be issued and pursuant to which any rights, 9 revenues, or other assets of the association are pledged or 10 sold to secure the repayment of such bonds or indebtedness, 11 together with the payment of interest on such bonds or such 12 indebtedness, or the payment of any other obligation of the 13 association related to such bonds or indebtedness. 14 4. Any such pledge or sale of assessments, revenues, 15 contract rights, or other rights or assets of the association 16 shall constitute a lien and security interest, or sale, as the 17 case may be, that is immediately effective and attaches to 18 such assessments, revenues, or contract rights or other rights 19 or assets, whether or not imposed or collected at the time the 20 pledge or sale is made. Any such pledge or sale is effective, 21 valid, binding, and enforceable against the association or 22 other entity making such pledge or sale, and valid and binding 23 against and superior to any competing claims or obligations 24 owed to any other person or entity, including policyholders in 25 this state, asserting rights in any such assessments, 26 revenues, or contract rights or other rights or assets to the 27 extent set forth in and in accordance with the terms of the 28 pledge or sale contained in the applicable financing 29 documents, whether or not any such person or entity has notice 30 of such pledge or sale and without the need for any physical 31 delivery, recordation, filing, or other action. 54 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 (n)1. The following records of the Residential 2 Property and Casualty Joint Underwriting Association are 3 confidential and exempt from the provisions of s. 119.07(1) 4 and s. 24(a), Art. I of the State Constitution: 5 a. Underwriting files, except that a policyholder or 6 an applicant shall have access to his or her own underwriting 7 files. 8 b. Claims files, until termination of all litigation 9 and settlement of all claims arising out of the same incident, 10 although portions of the claims files may remain exempt, as 11 otherwise provided by law. Confidential and exempt claims file 12 records may be released to other governmental agencies upon 13 written request and demonstration of need; such records held 14 by the receiving agency remain confidential and exempt as 15 provided for herein. 16 c. Records obtained or generated by an internal 17 auditor pursuant to a routine audit, until the audit is 18 completed, or if the audit is conducted as part of an 19 investigation, until the investigation is closed or ceases to 20 be active. An investigation is considered "active" while the 21 investigation is being conducted with a reasonable, good faith 22 belief that it could lead to the filing of administrative, 23 civil, or criminal proceedings. 24 d. Matters reasonably encompassed in privileged 25 attorney-client communications. 26 e. Proprietary information licensed to the association 27 under contract and the contract provides for the 28 confidentiality of such proprietary information. 29 f. All information relating to the medical condition 30 or medical status of an association employee which is not 31 relevant to the employee's capacity to perform his or her 55 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 duties, except as otherwise provided in this paragraph. 2 Information which is exempt shall include, but is not limited 3 to, information relating to workers' compensation, insurance 4 benefits, and retirement or disability benefits. 5 g. Upon an employee's entrance into the employee 6 assistance program, a program to assist any employee who has a 7 behavioral or medical disorder, substance abuse problem, or 8 emotional difficulty which affects the employee's job 9 performance, all records relative to that participation shall 10 be confidential and exempt from the provisions of s. 119.07(1) 11 and s. 24(a), Art. I of the State Constitution, except as 12 otherwise provided in s. 112.0455(11). 13 h. Information relating to negotiations for financing, 14 reinsurance, depopulation, or contractual services, until the 15 conclusion of the negotiations. 16 i. Minutes of closed meetings regarding underwriting 17 files, and minutes of closed meetings regarding an open claims 18 file until termination of all litigation and settlement of all 19 claims with regard to that claim, except that information 20 otherwise confidential or exempt by law will be redacted. 21 22 When an authorized insurer is considering underwriting a risk 23 insured by the association, relevant underwriting files and 24 confidential claims files may be released to the insurer 25 provided the insurer agrees in writing, notarized and under 26 oath, to maintain the confidentiality of such files. When a 27 file is transferred to an insurer that file is no longer a 28 public record because it is not held by an agency subject to 29 the provisions of the public records law. Underwriting files 30 and confidential claims files may also be released to staff of 31 and the board of governors of the market assistance plan 56 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 established pursuant to s. 627.3515, who must retain the 2 confidentiality of such files, except such files may be 3 released to authorized insurers that are considering assuming 4 the risks to which the files apply, provided the insurer 5 agrees in writing, notarized and under oath, to maintain the 6 confidentiality of such files. Finally, the association or 7 the board or staff of the market assistance plan may make the 8 following information obtained from underwriting files and 9 confidential claims files available to licensed general lines 10 insurance agents: name, address, and telephone number of the 11 residential property owner or insured; location of the risk; 12 rating information; loss history; and policy type. The 13 receiving licensed general lines insurance agent must retain 14 the confidentiality of the information received. 15 2. Portions of meetings of the Residential Property 16 and Casualty Joint Underwriting Association are exempt from 17 the provisions of s. 286.011 and s. 24(b), Art. I of the State 18 Constitution wherein confidential underwriting files or 19 confidential open claims files are discussed. All portions of 20 association meetings which are closed to the public shall be 21 recorded by a court reporter. The court reporter shall record 22 the times of commencement and termination of the meeting, all 23 discussion and proceedings, the names of all persons present 24 at any time, and the names of all persons speaking. No 25 portion of any closed meeting shall be off the record. 26 Subject to the provisions hereof and s. 119.07(2)(a), the 27 court reporter's notes of any closed meeting shall be retained 28 by the association for a minimum of 5 years. A copy of the 29 transcript, less any exempt matters, of any closed meeting 30 wherein claims are discussed shall become public as to 31 individual claims after settlement of the said claim. 57 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 Section 7. Section 627.3511, Florida Statutes, 1996 2 Supplement, is amended to read: 3 627.3511 Depopulation of Residential Property and 4 Casualty Joint Underwriting Association.-- 5 (1) LEGISLATIVE FINDINGS AND INTENT.--The Legislature 6 finds and declares that the Residential Property and Casualty 7 Joint Underwriting Association has written an amount of 8 policies beyond legislative expectations and has become, by 9 virtue of its size, a significant impediment to the 10 restoration of a stable and competitive residential property 11 insurance market in this state; that the public policy of this 12 state requires the maintenance of a residual market for 13 residential property insurance; and that extraordinary 14 measures, beyond implementation of eligibility criteria and 15 noncompetitive rates, are required to reduce the number of 16 policies written by the Residential Property and Casualty 17 Joint Underwriting Association to a reasonable level. It is 18 the intent of the Legislature to provide a variety of 19 financial incentives to encourage the replacement of the 20 highest possible number of Residential Property and Casualty 21 Joint Underwriting Association policies with policies written 22 by admitted insurers at approved rates. 23 (2) TAKE-OUT BONUS.--The Residential Property and 24 Casualty Joint Underwriting Association shall pay the sum of 25 up to $100 to an insurer for each risk that the insurer 26 removes from the association, either by issuance of a policy 27 upon expiration or cancellation of the association policy or 28 by assumption of the association's obligations with respect to 29 an in-force policy. Such payment is subject to approval of 30 the association board. In order to qualify for the bonus 31 under this subsection, the take-out plan must include a 58 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 minimum of 25,000 policies. Within 30 days after approval by 2 the board, the department may reject the insurer's take-out 3 plan and disqualify the insurer from the bonus, based on the 4 following criteria: 5 (a) The capacity of the insurer to absorb the policies 6 proposed to be taken out of the association and the 7 concentration of risks of those policies. 8 (b) Whether the geographic and risk characteristics of 9 policies in the proposed take-out plan serve to reduce the 10 exposure of the association sufficient to justify the bonus. 11 (c) Whether coverage for risks to be taken out 12 otherwise exists in the admitted voluntary market. 13 (d) The degree to which the take-out bonus is 14 promoting new capital being allocated by the insurer to 15 Florida residential property coverage. 16 (3) EXEMPTION FROM DEFICIT ASSESSMENTS.-- 17 (a) The calculation of an insurer's assessment 18 liability under s. 627.351(6)(b)3.a. or b. shall, for an 19 insurer that in any calendar year removes 50,000 or more risks 20 from the Residential Property and Casualty Joint Underwriting 21 Association, either by issuance of a policy upon expiration or 22 cancellation of the association policy or by assumption of the 23 association's obligations with respect to in-force policies, 24 exclude such removed policies for the succeeding 3 years, as 25 follows: 26 1. In the first year following removal of the risks, 27 the risks are excluded from the calculation to the extent of 28 100 percent. 29 2. In the second year following removal of the risks, 30 the risks are excluded from the calculation to the extent of 31 75 percent. 59 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 3. In the third year following removal of the risks, 2 the risks are excluded from the calculation to the extent of 3 50 percent. 4 5 If the removal of risks is accomplished through assumption of 6 obligations with respect to in-force policies, the association 7 shall pay to the assuming insurer all unearned premium with 8 respect to such policies less any policy acquisition costs 9 agreed to by the association and assuming insurer. The term 10 "policy acquisition costs" is defined as costs of issuance of 11 the policy by the association which includes agent 12 commissions, servicing company fees, and premium tax. This 13 paragraph does not apply to an insurer that, at any time 14 within 5 years before removing the risks, had a market share 15 in excess of 0.1 percent of the statewide aggregate gross 16 direct written premium for any line of property insurance, or 17 to an affiliate of such an insurer. This paragraph does not 18 apply unless either at least 40 percent of the risks removed 19 from the association are located in Dade, Broward, and Palm 20 Beach Counties, or at least 30 percent of the risks removed 21 from the association are located in such counties and an 22 additional 50 percent of the risks removed from the 23 association are located in other coastal counties. 24 (b) An insurer that first wrote personal lines 25 residential property coverage in this state on or after July 26 1, 1994, is exempt from regular deficit assessments imposed 27 pursuant to s. 627.351(6)(b)3.a. and b., but not emergency 28 assessments collected from policyholders pursuant to s. 29 627.351(6)(b)3.d., of the Residential Property and Casualty 30 Joint Underwriting Association until the earlier of the 31 following: 60 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 1. The end of the calendar year in which it first 2 wrote 0.5 percent or more of the statewide aggregate direct 3 written premium for any line of residential property coverage; 4 or 5 2. December 31, 1997, or December 31 of the third year 6 in which it wrote such coverage in this state, whichever is 7 later. 8 (c) Other than an insurer that is exempt under 9 paragraph (b), an insurer that in any calendar year increases 10 its total structure exposure subject to wind coverage by 25 11 percent or more over its exposure for the preceding calendar 12 year is, with respect to that year, exempt from deficit 13 assessments imposed pursuant to s. 627.351(6)(b)3.a. and b., 14 but not emergency assessments collected from policyholders 15 pursuant to s. 627.351(6)(b)3.d., of the Residential Property 16 and Casualty Joint Underwriting Association attributable to 17 such increase in exposure. 18 (d) Any exemption or credit from regular assessments 19 authorized by this section shall last no longer than 3 years 20 following the cancellation or expiration of the policy by the 21 association. With the approval of the department, the board 22 may extend such credits for an additional year if the insurer 23 guarantees an additional year of renewability for all policies 24 removed from the association, or for 2 additional years if the 25 insurer guarantees 2 additional years of renewability for all 26 policies so removed. 27 (4) AGENT BONUS.--When the Residential Property and 28 Casualty Joint Underwriting Association enters into a 29 contractual agreement for a take-out plan that provides a 30 bonus to the insurer, the producing agent of record of the 31 61 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 association policy is entitled to retain any unearned 2 commission on such policy, and the insurer shall either: 3 (a) Pay to the producing agent of record of the 4 association policy an amount equal to the insurer's usual and 5 customary commission for the type of policy written if the 6 term of the association policy was in excess of 6 months, or 7 one-half of such usual and customary commission if the term of 8 the association policy was 6 months or less; or 9 (b) Offer to allow the producing agent of record of 10 the association policy to continue servicing the policy for a 11 period of not less than 1 year and offer to pay the agent the 12 insurer's usual and customary commission for the type of 13 policy written. 14 15 The insurer need not take any further action if the offer is 16 rejected. This subsection does not apply to any reciprocal 17 interinsurance exchange, nonprofit federation, or any 18 subsidiary or affiliate of such organization. This subsection 19 does not apply if the agent is also the agent of record on the 20 new coverage. The requirement of this subsection that the 21 producing agent of record is entitled to retain the unearned 22 commission on an association policy does not apply to a policy 23 for which coverage has been provided in the association for 30 24 days or less or for which a cancellation notice has been 25 issued pursuant to s. 627.351(6)(c)11. during the first 30 26 days of coverage. 27 (5) APPLICABILITY.-- 28 (a) The take-out bonus provided by subsection (2) and 29 the exemption from assessment provided by paragraph (3)(a) 30 apply only if the Residential Property and Casualty Joint 31 Underwriting association policy is replaced by either a 62 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 standard policy including wind coverage or, if consistent with 2 the insurer's underwriting rules as filed with the department, 3 a basic policy including wind coverage; however, with respect 4 to risks located in areas where coverage through the Florida 5 Windstorm Underwriting Association is available, the 6 replacement policy need not provide wind coverage. The insurer 7 must renew the replacement policy at approved rates on 8 substantially similar terms for two additional 1-year terms, 9 unless canceled by the insurer for a lawful reason other than 10 reduction of hurricane exposure. If an insurer assumes the 11 association's obligations for a policy, it must issue a 12 replacement policy for a 1-year term upon expiration of the 13 association policy and must renew the replacement policy at 14 approved rates on substantially similar terms for two 15 additional 1-year terms, unless canceled by the insurer for a 16 lawful reason other than reduction of hurricane exposure. For 17 each replacement policy canceled or nonrenewed by the insurer 18 for any reason during the 3-year coverage period required by 19 this paragraph, the insurer must remove from the association 20 one additional policy covering a risk similar to the risk 21 covered by the canceled or nonrenewed policy. In addition to 22 these requirements, the association must place the bonus 23 moneys in escrow for a period of 3 years; such moneys may be 24 released from escrow only to pay claims. A take-out bonus 25 provided by subsection (2) or subsection (6) shall not be 26 considered premium income for purposes of taxes and 27 assessments under the Florida Insurance Code and shall remain 28 the property of the Residential Property and Casualty Joint 29 Underwriting Association, subject to the prior security 30 interest of the insurer under the escrow agreement until it is 31 released from escrow, and after it is released from escrow it 63 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 shall be considered an asset of the insurer and credited to 2 the insurer's capital and surplus. 3 (b) An insurer or agent may not qualify for a bonus or 4 exemption from assessment under this section after the number 5 of risks covered by the Residential Property and Casualty 6 Joint Underwriting Association is less than 250,000. 7 (c) It is the intent of the Legislature that an 8 insurer eligible for the exemption under paragraph (3)(a) 9 establish a preference in appointment of agents for those 10 agents who lose a substantial amount of business as a result 11 of risks being removed from the association. 12 (6) COMMERCIAL RESIDENTIAL CONDOMINIUM ASSOCIATION 13 TAKE-OUT PLANS.-- 14 (a) The Residential Property and Casualty Joint 15 Underwriting Association shall pay a bonus to an insurer for 16 each commercial residential condominium association policy 17 that the insurer removes from the association pursuant to an 18 approved take-out plan, either by issuance of a new policy 19 upon expiration of the association policy or by assumption of 20 the association's obligations with respect to an in-force 21 policy. The association board shall determine the amount of 22 the bonus based on such factors as the coverage provided, 23 relative hurricane risk, the length of time that the property 24 has been covered by the association, and the criteria 25 specified in paragraphs (b) and (c). The amount of the bonus 26 with respect to a particular policy may not exceed 25 percent 27 of the association's 1-year premium for the policy. Such 28 payment is subject to approval of the association board. In 29 order to qualify for the bonus under this subsection, the 30 take-out plan must include policies reflecting at least $100 31 million in structure exposure. 64 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 (b) In order for a plan to qualify for approval: 2 1. At least 40 percent of the policies removed from 3 the association under the plan must be located in Dade, 4 Broward, and Palm Beach Counties, or at least 30 percent of 5 the policies removed from the association under the plan must 6 be located in such counties and an additional 50 percent of 7 the policies removed from the association must be located in 8 other coastal counties. 9 2. The insurer must renew the replacement policy at 10 approved rates on substantially similar terms for two 11 additional 1-year terms, unless canceled or nonrenewed by the 12 insurer for a lawful reason other than reduction of hurricane 13 exposure. If an insurer assumes the association's obligations 14 for a policy, it must issue a replacement policy for a 1-year 15 term upon expiration of the association policy and must renew 16 the replacement policy at approved rates on substantially 17 similar terms for two additional 1-year terms, unless canceled 18 by the insurer for a lawful reason other than reduction of 19 hurricane exposure. For each replacement policy canceled or 20 nonrenewed by the insurer for any reason during the 3-year 21 coverage period required by this subparagraph, the insurer 22 must remove from the association one additional policy 23 covering a risk similar to the risk covered by the canceled or 24 nonrenewed policy. 25 (c) A take-out plan is deemed approved unless the 26 department, within 120 days after the board votes to recommend 27 the plan, disapproves the plan based on: 28 1. The capacity of the insurer to absorb the policies 29 proposed to be taken out of the association and the 30 concentration of risks of those policies. 31 65 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 2. Whether the geographic and risk characteristics of 2 policies in the proposed take-out plan serve to reduce the 3 exposure of the association sufficiently to justify the bonus. 4 3. Whether coverage for risks to be taken out 5 otherwise exists in the admitted voluntary market. 6 4. The degree to which the take-out bonus is promoting 7 new capital being allocated by the insurer to residential 8 property coverage in this state. 9 (d) The calculation of an insurer's regular assessment 10 liability under s. 627.351(b)3.a. and b., but not emergency 11 assessments collected from policyholders pursuant to s. 12 627.351(6)(b)3.d., s. 627.351 shall, with respect to 13 commercial residential condominium association policies 14 removed from the association under an approved take-out plan, 15 exclude such removed policies for the succeeding 3 years, as 16 follows: 17 1. In the first year following removal of the 18 policies, the policies are excluded from the calculation to 19 the extent of 100 percent. 20 2. In the second year following removal of the 21 policies, the policies are excluded from the calculation to 22 the extent of 75 percent. 23 3. In the third year following removal of the 24 policies, the policies are excluded from the calculation to 25 the extent of 50 percent. 26 (e) An insurer that first wrote commercial residential 27 condominium association property coverage in this state on or 28 after June 1, 1996, is exempt from regular assessments under 29 s. 627.351(6)(b)3.a. and b., but not emergency assessments 30 collected from policyholders pursuant to s. 627.351(6)(b)3.d., 31 66 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 s. 627.351 with respect to commercial residential condominium 2 association policies until the earlier of: 3 1. The end of the calendar year in which such insurer 4 first wrote 0.5 percent or more of the statewide aggregate 5 direct written premium for commercial residential condominium 6 association property coverage; or 7 2. December 31 of the third year in which such insurer 8 wrote commercial residential condominium association property 9 coverage in this state. 10 (f) An insurer that is not otherwise exempt from 11 regular assessments under s. 627.351(6)(b)3.a. and b. s. 12 627.351 with respect to commercial residential condominium 13 association policies is, for any calendar year in which such 14 insurer increased its total commercial residential condominium 15 association hurricane exposure by 25 percent or more over its 16 exposure for the preceding calendar year, exempt from regular 17 assessments under s. 627.351(6)(b)3.a. and b., but not 18 emergency assessments collected from policyholders pursuant to 19 s. 627.351(6)(b)3.d., s. 627.351 attributable to such 20 increased exposure. 21 (7) A minority business, which is at least 51 percent 22 owned by minority persons as described in s. 288.703(3), 23 desiring to operate or become licensed as a property and 24 casualty insurer may exempt apply up to $50 of the escrow 25 requirements of the take-out bonus, as described in this 26 section, toward the minimum capital requirements as set forth 27 in s. 624.407(1)(a). Such minority business, which has 28 applied for a certificate of authority to engage in business 29 as a property and casualty insurer, may simultaneously file 30 the business' proposed take-out plan, as described in this 31 section, to the Residential Property and Casualty Joint 67 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 Underwriting Association. The Insurance Commissioner may 2 request that the association approve such take-out plan 3 subject to the granting of a certificate of authority by the 4 department. 5 Section 8. Section 627.3512, Florida Statutes, is 6 amended to read: 7 627.3512 Recoupment of residual market deficit 8 assessments.-- 9 (1) An insurer or insurer group A rate filing under s. 10 627.062, s. 627.0651, or s. 627.072 may include amounts 11 sufficient to recoup any assessments that have been paid 12 during or after 1995 by the insurer or insurer group to defray 13 deficits of an insurance risk apportionment plan a joint 14 underwriting association or assigned risk plan under ss. 15 627.311 and 627.351, net of any earnings returned to the 16 insurer or insurer group by the association or plan for any 17 year after 1993. The recoupment shall be made by applying a 18 separate assessment factor on policies of the same line or 19 type as were considered by the residual markets in determining 20 the assessment liability of the insurer or insurer group. An 21 insurer or insurer group may shall calculate a separate 22 assessment factor for personal lines and commercial lines. The 23 rate filing shall include a separate assessment factor shall 24 provide which provides for full recoupment of the assessments 25 over a period of 1 year, unless the insurer or insurer group, 26 at its option, elects to recoup the assessments over a longer 27 period. The assessment factor in the filing expires upon 28 collection of the full amount allowed to be recouped. Amounts 29 recouped under this section are not subject to premium taxes, 30 fees, or commissions. 31 68 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 (2) The assessment factor must not be more than 3 2 percentage points above the ratio of the deficit assessment to 3 the Florida direct written premium for policies for the lines 4 or types of business as to which the assessment was 5 calculated, as written in the year the deficit assessment was 6 paid. If an insurer or insurer group fails to collect the 7 full amount of the deficit assessment, the insurer or insurer 8 group must carry forward the amount of the deficit and adjust 9 the deficit assessment to be recouped in a subsequent year by 10 that amount. 11 (3) The insurer or insurer group shall file with the 12 department a statement setting forth the amount of the 13 assessment factor and an explanation of how the factor will be 14 applied, at least 15 days prior to the factor being applied to 15 any policies. The statement shall include documentation of 16 the assessment paid by the insurer or insurer group and the 17 arithmetic calculations supporting the assessment factor. The 18 department shall complete its review within 15 days after 19 receipt of the filing and shall limit its review to 20 verification of the arithmetic calculations. The insurer or 21 insurer group may use the assessment factor at any time after 22 the expiration of the 15-day period unless the department has 23 notified the insurer or insurer group in writing that the 24 arithmetic calculations are incorrect. 25 (4) The department may adopt rules to implement this 26 section. 27 Section 9. Section 627.3513, Florida Statutes, is 28 created to read: 29 627.3513 Standards for sale of bonds by underwriting 30 associations.-- 31 69 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 (1)(a) The purpose of this section is to provide 2 standards for the sale of bonds pursuant to s. 627.351(2) and 3 (6). 4 (b) "Association" or "associations," for purposes of 5 this section, means the Florida Windstorm Underwriting 6 Association and the Residential Property and Casualty Joint 7 Underwriting Association as established pursuant to s. 8 627.351(2) and (6), and any corporation or other entity 9 established pursuant to those subsections. 10 (2) The plan of operation of each association shall 11 provide for the selection of financial services providers and 12 underwriters. Such provisions shall include the method for 13 publicizing or otherwise providing reasonable notice to 14 potential financial services providers, underwriters, and 15 other interested parties, which may include expedited 16 procedures and methods for emergency situations. The 17 associations shall not engage the services of any person or 18 firm as a securities broker or bond underwriter that is not 19 eligible to be engaged by the state under the provisions of s. 20 215.684. The associations shall make all selections of 21 financial service providers and managing underwriters at a 22 noticed public meeting. 23 (3) The plan of operation of each association shall 24 provide for any managing underwriter or financial advisor to 25 provide to the association a disclosure statement containing 26 at least the following information: 27 (a) An itemized list setting forth the nature and 28 estimated amounts of expenses to be incurred by the managing 29 underwriter in connection with the issuance of such bonds. 30 Notwithstanding the foregoing, any such list may include an 31 item for miscellaneous expenses, provided such item includes 70 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 only minor items of expense which cannot be easily categorized 2 elsewhere in the statement. 3 (b) The names, addresses, and estimated amounts of 4 compensation of any finders connected with the issuance of the 5 bonds. 6 (c) The amount of underwriting spread expected to be 7 realized and the amount of fees and expenses expected to be 8 paid to the financial adviser. 9 (d) Any management fee charged by the managing 10 underwriter. 11 (e) Any other fee, bonus, or compensation estimated to 12 be paid by the managing underwriter in connection with the 13 bond issue to any person not regularly employed or retained by 14 it. 15 (f) The name and address of each financial advisor or 16 managing underwriter, if any, connected with the bond issue. 17 (g) Any other disclosure which the association may 18 require. 19 (4)(a) No underwriter, commercial bank, investment 20 banker, or financial consultant or adviser shall pay any 21 finder any bonus, fee, or gratuity in connection with the sale 22 of bonds issued by the association unless full disclosure is 23 made in writing to the association prior to or concurrently 24 with the submission of a purchase proposal for bonds by the 25 underwriter, commercial bank, investment banker, or financial 26 consultant or adviser, providing the name and address of any 27 finder and the amount of bonus, fee, or gratuity paid to such 28 finder. A violation of this subsection shall not affect the 29 validity of the bond issue. 30 (b) As used in this subsection, the term "finder" 31 means a person who is neither regularly employed by, nor a 71 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 partner or officer of, an underwriter, bank, banker, or 2 financial consultant or adviser and who enters into an 3 understanding with either the issuer or the managing 4 underwriter, or both, for any paid or promised compensation or 5 valuable consideration, directly or indirectly, expressed or 6 implied, to act solely as an intermediary between such issuer 7 and managing underwriter for the purpose of influencing any 8 transaction in the purpose of such bonds. 9 (5) This section is not intended to restrict or 10 prohibit the employment of professional services relating to 11 bonds issued under s. 627.351(2) or (6) or the issuance of 12 bonds by the associations. 13 (6) The failure of the association to comply with one 14 or more provisions of this section shall not affect the 15 validity of the bond issue, however, the failure of either 16 association to comply in good faith both with this section and 17 with the plan as amended shall be a violation of its plan of 18 operation and a violation of the Insurance Code. 19 Section 10. Section 627.3516, Florida Statutes, is 20 created to read: 21 627.3516 Residual property insurance market 22 coordinating council.--The property insurance residual market 23 entities under s. 627.351(2) and (6) shall create a 5-member 24 coordinating council to assure that each entity is informed of 25 the activities and plans of the other entity. The insurance 26 consumer advocate shall chair the coordinating council, and 27 shall appoint to the council one representative of insurance 28 interests and one representative of non-insurance interests 29 from the board under s. 627.351(2), and one representative of 30 insurance interests and one representative of non-insurance 31 interests from the board under s. 627.351(6). The 72 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 coordinating council shall also submit to the presiding 2 officers of the Legislature no later than January 1, 1998, its 3 recommendations for the merger of the two entities. 4 Section 11. Subsection (1) of section 627.4025, 5 Florida Statutes, 1996 Supplement, is amended to read: 6 627.4025 Residential coverage and hurricane coverage 7 defined.-- 8 (1) Residential coverage includes both personal lines 9 residential coverage, which consists of the type of coverage 10 provided by homeowner's, mobile home owner's, dwelling, 11 tenant's, condominium unit owner's, cooperative unit owner's, 12 and similar policies, and commercial lines residential 13 coverage, which consists of the type of coverage provided by 14 condominium association, cooperative association, apartment 15 building, and similar policies, including policies covering 16 the common elements of a homeowners' association. Residential 17 coverage for personal lines and commercial lines as set forth 18 in this section includes policies that provide coverage for 19 particular perils such as windstorm and hurricane or coverage 20 for insurer insolvency or deductibles. 21 Section 12. Subsection (7) of section 627.701, Florida 22 Statutes, 1996 Supplement, is amended, and subsection (8) is 23 added to said section, to read: 24 627.701 Liability of insureds; coinsurance; 25 deductibles.-- 26 (3)(a) A policy of residential property insurance 27 shall include a deductible amount applicable to hurricane or 28 wind losses no lower than $500 and no higher than 2 percent of 29 the policy dwelling limits with respect to personal lines 30 residential risks, and no higher than 3 percent of the policy 31 limits with respect to commercial lines residential risks; 73 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 however, if a risk was covered on August 24, 1992, under a 2 policy having a higher deductible than the deductibles allowed 3 by this paragraph, a policy covering such risk may include a 4 deductible no higher than the deductible in effect on August 5 24, 1992. Notwithstanding the other provisions of this 6 paragraph, a personal lines residential policy covering a risk 7 valued at $50,000 or less may include a deductible amount 8 attributable to hurricane or wind losses no lower than $250, 9 and a personal lines residential policy covering a risk valued 10 at $100,000 or more may include a deductible amount 11 attributable to hurricane or wind losses no higher than 5 12 percent of the policy limits unless subject to a higher 13 deductible on August 24, 1992; however, no maximum deductible 14 is required with respect to a personal lines residential 15 policy covering a risk valued at more than $500,000. An 16 insurer may require a higher deductible, provided such 17 deductible is the same as or similar to a deductible program 18 lawfully in effect on June 14, 1995. In addition to the 19 deductible amounts authorized by this paragraph, an insurer 20 may also offer policies with a copayment provision under 21 which, after exhaustion of the deductible, the policyholder is 22 responsible for 10 percent of the next $10,000 of insured 23 hurricane or wind losses. 24 (b)1. Except as otherwise provided in this paragraph, 25 prior to issuing a personal lines residential property 26 insurance policy on or after April 1, 1996, or prior to the 27 first renewal of a residential property insurance policy on or 28 after April 1, 1996, the insurer must offer alternative 29 deductible amounts applicable to hurricane or wind losses 30 equal to $500 and 2 percent of the policy dwelling limits, 31 unless the 2 percent deductible is less than $500. The written 74 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 notice of the offer shall specify the hurricane or wind 2 deductible to be applied in the event that the applicant or 3 policyholder fails to affirmatively choose a hurricane 4 deductible. The insurer must provide such policyholder with 5 notice of the availability of the deductible amounts specified 6 in this paragraph in a form specified by the department in 7 conjunction with each renewal of the policy. The failure to 8 provide such notice constitutes a violation of this code but 9 does not affect the coverage provided under the policy. 10 2. This paragraph does not apply with respect to a 11 deductible program lawfully in effect on June 14, 1995, or to 12 any similar deductible program, if the deductible program 13 requires a minimum deductible amount of no less than 2 percent 14 of the policy limits. 15 3. With respect to a policy covering a risk with 16 dwelling limits of at least $100,000, but less than $250,000, 17 the insurer may, in lieu of offering a policy with a $500 18 hurricane or wind deductible as required by subparagraph 1., 19 offer a policy that the insurer guarantees it will not 20 nonrenew for reasons of reducing hurricane loss for one 21 renewal period and that contains up to a the 2 percent 22 hurricane or wind deductible as required by subparagraph 1. 23 4. With respect to a policy covering a risk with 24 dwelling limits of $250,000 or more, the insurer need not 25 offer the $500 hurricane or wind deductible as required by 26 subparagraph 1., but must, except as otherwise provided in 27 this subsection, offer the 2 percent hurricane or wind 28 deductible as required by subparagraph 1. 29 (c) In order to provide for the transition from wind 30 deductibles to hurricane deductibles as required by this 31 subsection, an insurer is required to provide wind deductibles 75 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 meeting the requirements of this subsection until the 2 effective date of the insurer's first rate filing made after 3 January 1, 1997, and is thereafter required to provide 4 hurricane deductibles meeting the requirements of this 5 subsection. 6 (7)(a) The Legislature finds that property insurance 7 coverage has become unaffordable for a significant number of 8 mobile home owners, as evidenced by reports that up to 100,000 9 mobile home owners have terminated their insurance coverage 10 because they cannot afford to pay approved rates charged in 11 the voluntary or residual markets. The Legislature further 12 finds that additional flexibility in available coverages will 13 enable mobile home owners to obtain affordable insurance and 14 increase capacity. 15 (b) Notwithstanding the provisions of subsection (3), 16 with respect to mobile home policies: 17 1. The deductible for hurricane coverage may not 18 exceed 10 percent of the property value if the property is not 19 subject to any liens and may not exceed 5 percent of the 20 property value if the property is subject to any liens. 21 2. The insurer need not make the offers required by 22 paragraph (3)(b) (3)(a). 23 (8) Notwithstanding the other provisions of this 24 section or of other law, but only as to hurricane coverage as 25 defined in s. 627.4025: 26 (a) No insurer shall be required to offer deductible 27 amounts of less than 2 percent of the policy dwelling limits 28 as to personal lines residential property insurance coverage, 29 however, upon written request of the insured or applicant, the 30 insurer shall make available a $500 deductible as to hurricane 31 coverage on the insured's primary residence if the insured 76 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 produces documentation from the insured's home mortgage lender 2 that demonstrates that he or she is qualified as a low-income 3 applicant pursuant to the Federal Home Mortgage Disclosure Act 4 and Federal Community Reinvestment Act as to financing then 5 applicable to the insured's primary residence. All forms by 6 which the offers authorized in this paragraph are made or 7 required to be made shall be on forms that are adopted or 8 approved by the department. 9 (b) As to commercial lines residential property, 10 insurers may offer deductibles in amounts not exceeding 5 11 percent if, at the time of such offer and at each renewal, the 12 insurer also offers to the policyholder deductible amounts of 13 3 percent and 4 percent. All forms by which the offers 14 authorized in this paragraph are made or required to be made 15 shall be on forms that are adopted or approved by the 16 department. 17 Section 13. This act shall take effect upon becoming a 18 law. 19 20 21 22 23 24 25 26 27 28 29 30 31 77 CODING: Words stricken are deletions; words underlined are additions. Florida House of Representatives - 1997 HB 1815 614-102C-97 1 ***************************************** 2 LEGISLATIVE SUMMARY 3 Substantially revises provisions of the Insurance Code 4 relating to windstorm insurance coverage and the Florida Windstorm Underwriting Association and the Residential 5 Property and Casualty Joint Underwriting Association. Specifies appropriations from the Florida Hurricane 6 Catastrophe Fund. Revises provisions relating to membership in the associations, emergency assessments, 7 financing of indebtedness, rates, and retention of profits. Provides underwriting criteria and standards 8 for eligibility of new and covered risks. Provides for the protection of creditors and immunity from liability. 9 Provides for a market equalization surcharge. Authorizes local governments to issue bonds. Provides for the 10 cancellation and replacement of policies. Provides exemptions and credits from regular assessments, but not 11 emergency assessments. Deletes the condominium association take-out plan and provides take-out plans for 12 commercial residential policies. Makes policyholders of special purpose homeowner insurance companies subject to 13 emergency assessments. Deletes the role of the market assistance plan in the removal of policies from the 14 Residential Property and Casualty Joint Underwriting Association. Provides limited immunity to certain 15 persons in the automobile joint underwriting association. See bill for details. 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 78