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House Bill 1815e1

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