CODING: Words stricken are deletions; words underlined are additions.
HOUSE AMENDMENT
hbd-32 Bill No. HB 3665
Amendment No. (for drafter's use only)
CHAMBER ACTION
Senate House
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11 Representative(s) Lippman offered the following:
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13 Amendment (with title amendment)
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17 Section 1. Section 627.0628, Florida Statutes, is
18 amended to read:
19 627.0628 Florida Commission on Hurricane Loss
20 Projection Methodology.--
21 (1) LEGISLATIVE FINDINGS AND INTENT.--
22 (a) Reliable projections of hurricane losses are
23 necessary in order to assure that rates for residential
24 property insurance meet the statutory requirement that rates
25 be neither excessive nor inadequate. The ability to
26 accurately project hurricane losses has been enhanced greatly
27 in recent years through the use of computer modeling. It is
28 the public policy of this state to encourage the use of the
29 most sophisticated actuarial methods to assure that consumers
30 are charged lawful rates for residential property insurance
31 coverage.
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HOUSE AMENDMENT
hbd-32 Bill No. HB 3665
Amendment No. (for drafter's use only)
1 (b) The Legislature recognizes the need for expert
2 advice to the department concerning the evaluation of computer
3 models and other recently developed or improved actuarial
4 methodologies for projecting hurricane losses, in order to
5 enhance the department's ability to resolve conflicts among
6 actuarial professionals, and in order to provide both
7 immediate and continuing improvement in the sophistication of
8 actuarial methods used to set rates charged to consumers.
9 (c) It is the intent of the Legislature to create the
10 Florida Commission on Hurricane Loss Projection Methodology as
11 a panel of advisory experts to make recommendations to the
12 department concerning the components necessary to construct
13 provide the most actuarially sophisticated computer models and
14 actuarial methodologies possible guidelines and standards for
15 projection of potential hurricane losses possible, given the
16 current state of actuarial science. It is the further intent
17 of the Legislature that such components may standards and
18 guidelines must be used by the State Board of Administration
19 in developing reimbursement premium rates for the Florida
20 Hurricane Catastrophe Fund, and may be used by an insurer
21 insurers in a rate filing filings under s. 627.062, subject to
22 the following:
23 1. If the filing is a "file and use" filing and the
24 department has issued a notice of intent to disapprove the
25 filing, the insurer must demonstrate by clear and convincing
26 evidence that the results produced by the computer model or
27 actuarial methodology are accurate, reliable, and applied by
28 the insurer in a reasonable manner.
29 2. If the filing is a "use and file" filing and the
30 department finds preliminarily that the rate might be
31 excessive, inadequate, or unfairly discriminatory, the
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HOUSE AMENDMENT
hbd-32 Bill No. HB 3665
Amendment No. (for drafter's use only)
1 insurer, with respect to the proceedings initiated by the
2 department to disapprove the rate, if the insurer contests the
3 finding, must demonstrate by clear and convincing evidence
4 that the results produced by the computer model or actuarial
5 methodology are accurate, reliable, and applied by the insurer
6 in a reasonable manner. unless the way in which such standards
7 and guidelines were applied by the insurer was erroneous, as
8 shown by a preponderance of the evidence.
9 (d) It is the intent of the Legislature that such
10 models and methodologies standards and guidelines be employed
11 as soon as possible, and that they be subject to continuing
12 review thereafter.
13 (2) COMMISSION CREATED.--
14 (a) There is created the Florida Commission on
15 Hurricane Loss Projection Methodology, which is assigned to
16 the State Board of Administration. The commission shall be
17 administratively housed within the State Board of
18 Administration, but it shall independently exercise the
19 advisory responsibilities powers and duties specified in this
20 section.
21 (b) The commission shall consist of the following 11
22 members:
23 1. The insurance consumer advocate.
24 2. The Chief Operating Officer of the Florida
25 Hurricane Catastrophe Fund.
26 3. The Executive Director of the Residential Property
27 and Casualty Joint Underwriting Association.
28 4. The Director of the Division of Emergency
29 Management of the Department of Community Affairs.
30 5. The actuary member of the Florida Hurricane
31 Catastrophe Fund Advisory Council.
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HOUSE AMENDMENT
hbd-32 Bill No. HB 3665
Amendment No. (for drafter's use only)
1 6. Six members appointed by the Insurance
2 Commissioner, as follows:
3 a. An employee of the Department of Insurance who is
4 an actuary responsible for property insurance rate filings.
5 b. An actuary who is employed full time by a property
6 and casualty insurer which was responsible for at least 1
7 percent of the aggregate statewide direct written premium for
8 homeowner's insurance in the calendar year preceding the
9 member's appointment to the commission.
10 c. An expert in insurance finance who is a full time
11 member of the faculty of the State University System and who
12 has a background in actuarial science.
13 d. An expert in statistics who is a full time member
14 of the faculty of the State University System and who has a
15 background in insurance.
16 e. An expert in computer system design who is a full
17 time member of the faculty of the State University System.
18 f. An expert in meteorology who is a full time member
19 of the faculty of the State University System and who
20 specializes in hurricanes.
21 (c) Members designated under subparagraphs (b)1.-5.
22 shall serve on the commission as long as they maintain the
23 respective offices designated in subparagraphs (b)1.-5.
24 Members appointed by the Insurance Commissioner under
25 subparagraph (b)6. shall serve on the commission until the end
26 of the term of office of the Insurance Commissioner who
27 appointed them, unless earlier removed by the Insurance
28 Commissioner for cause. Vacancies on the commission shall be
29 filled in the same manner as the original appointment.
30 (d) The State Board of Administration shall annually
31 appoint one of the members of the commission to serve as
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HOUSE AMENDMENT
hbd-32 Bill No. HB 3665
Amendment No. (for drafter's use only)
1 chair.
2 (e) Members of the commission shall serve without
3 compensation, but shall be reimbursed for per diem and travel
4 expenses pursuant to s. 112.061.
5 (f) The State Board of Administration shall, as a cost
6 of administration of the Florida Hurricane Catastrophe Fund,
7 provide for travel, expenses, and staff support for the
8 commission.
9 (g) There shall be no liability on the part of, and no
10 cause of action of any nature shall arise against, any member
11 of the commission, any member of the State Board of
12 Administration, or any employee of the State Board of
13 Administration for any action taken in the performance of
14 their duties under this section. In addition, the commission
15 may, in writing, waive any potential cause of action for
16 negligence of a consultant, contractor, or contract employee
17 engaged to assist the commission.
18 (3) ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--
19 (a) In developing its recommendations to the
20 department, the commission shall consider any actuarial
21 methods, principles, standards, models, or output ranges that
22 have the potential for improving the accuracy of or
23 reliability of the hurricane loss projections used in
24 residential property insurance rate filings. The commission
25 shall, from time to time, provide information to the
26 department concerning adopt findings as to the accuracy or
27 reliability of particular methods, principles, standards,
28 models, or output ranges. It is not the role of the commission
29 to validate the use of any particular method, principle,
30 standard, model, or output range.
31 (b) In establishing reimbursement premiums for the
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HOUSE AMENDMENT
hbd-32 Bill No. HB 3665
Amendment No. (for drafter's use only)
1 Florida Hurricane Catastrophe Fund, the State Board of
2 Administration may must, to the extent feasible, employ
3 actuarial methods, principles, standards, models, or output
4 ranges provided found by the commission to be accurate or
5 reliable.
6 (c) With respect to a rate filing under s. 627.062, an
7 insurer may employ actuarial methods, principles, standards,
8 models, or output ranges provided found by the commission to
9 be accurate or reliable to determine hurricane loss factors
10 for use in a rate filing under s. 627.062, which findings and
11 factors are admissible and relevant in consideration of a rate
12 filing by the department or in any arbitration or
13 administrative or judicial review, subject to a determination
14 by the department, based on clear and convincing evidence,
15 that the methods, principles, standards, models, or output
16 ranges used by the insurer are, with respect to the specific
17 filing, including any characteristics of the area or risks
18 applicable to the filing, accurate and reliable and that they
19 are applied in a reasonable manner. The burden of proof shall
20 lie with the insurer.
21 (d) The commission shall provide information to the
22 department concerning the accuracy and reliability of
23 particular adopt initial actuarial methods, principles,
24 standards, models, or output ranges, including information
25 regarding any computer models or output ranges derived from
26 computer models, no later than December 31, 1998 1995. The
27 commission shall furnish adopt revisions to such information
28 provided to the department actuarial methods, principles,
29 standards, models, or output ranges at least annually
30 thereafter. As soon as possible, but no later than July 1,
31 1996, the commission shall adopt revised actuarial methods,
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HOUSE AMENDMENT
hbd-32 Bill No. HB 3665
Amendment No. (for drafter's use only)
1 principles, standards, models, or output ranges which include
2 specification of acceptable computer models or output ranges
3 derived from computer models.
4 Section 2. Subsections (11) and (12) are added to
5 section 627.0629, Florida Statutes, to read:
6 627.0629 Residential property insurance; rate
7 filings.--
8 (11) The Department of Insurance shall contract with
9 one or more institutions of higher learning which are a part
10 of the State University System for the development of a model
11 or improved actuarial methodologies to be used by insurers as
12 the standard in assessing hurricane risk and to project
13 hurricane losses, to be used in the development of rates for
14 residential property insurance located in this state. In
15 developing the model or methodologies, the Department of
16 Insurance may, without a bidding process, negotiate and enter
17 into a contract or contracts with one or more institutions of
18 higher learning located in this state and, as necessary or
19 appropriate, with individual professionals or consultants
20 working in relation with such institutions, if any. The model
21 or methodologies shall include items or factors that should be
22 considered in light of local or regional conditions that may
23 affect the accuracy and reliability of the model when used in
24 specific rate filings. Any model or methodologies so developed
25 may be used by insurers in rate filings, and shall be used by
26 the Florida Hurricane Catastrophe Fund established under s.
27 215.555 in determining its reimbursement premiums, but shall
28 be subject to further review by the department on a
29 case-by-case basis. The model or methodologies shall be
30 nonproprietary and available for use in this state by insurers
31 in developing rates with respect to assessing hurricane risk
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HOUSE AMENDMENT
hbd-32 Bill No. HB 3665
Amendment No. (for drafter's use only)
1 and hurricane losses.
2 (12) When considering the reimbursement capacity of
3 the Florida Hurricane Catastrophe Fund, a rate filing for
4 residential property insurance shall include the effect of
5 premiums to be received by the fund during the policy period
6 for which the rates are to be in effect.
7 Section 3. There is appropriated for Fiscal Year
8 1998-1999 the sum of $2 million from the Insurance
9 Commissioner's Regulatory Trust Fund to the Department of
10 Insurance for the purpose of funding the contract or contracts
11 authorized under section 2.
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14 ================ T I T L E A M E N D M E N T ===============
15 And the title is amended as follows:
16 On page 1, line 2,
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19 amending s. 627.0628, F.S.; providing that the
20 recommendations of the Florida Commission on
21 Hurricane Loss Methodology are advisory to the
22 Department of Insurance; clarifying the nature
23 of such recommendations; establishing the
24 burden of proof and level of evidence necessary
25 regarding the use of models and methodologies
26 in certain rate filings; providing duties of
27 the department; requiring submission of the
28 commission's recommendations by a specified
29 date; amending s. 627.0629, F.S.; authorizing
30 the department to develop and adopt certain
31 actuarial methodologies for certain purposes;
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HOUSE AMENDMENT
hbd-32 Bill No. HB 3665
Amendment No. (for drafter's use only)
1 authorizing the department to enter into
2 contracts for such development; providing
3 criteria; requiring that certain rate filings
4 include the effect of premiums to be received
5 by the Florida Hurricane Catastrophe Fund;
6 providing an appropriation;
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