House Bill 2013
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Florida House of Representatives - 2000 HB 2013
By Representatives Garcia, Lacasa and Rayson
1 A bill to be entitled
2 An act relating to windstorm property insurance
3 coverage; amending s. 627.0628, F.S.; limiting
4 an insurer's use of certain methods of
5 determining hurricane loss factors under
6 certain circumstances; amending s. 627.351,
7 F.S.; revising membership of the board of
8 directors of the windstorm insurance risk
9 apportionment association's plan of operation;
10 deleting authorization for the association to
11 require arbitration of certain rate filings;
12 prohibiting the association from accepting
13 applications for coverage for certain risks in
14 certain deauthorized areas; providing for
15 assignments to insurers by the association of
16 personal lines residential policies in such
17 deauthorized areas; providing procedures,
18 requirements, limitations, and penalties;
19 providing application; providing criteria;
20 authorizing insurers to petition the Department
21 of Insurance for a variance under certain
22 circumstances; requiring the department to
23 adopt rules; authorizing the department to
24 require the association to revise or amend the
25 association's plan of operation or bylaws for
26 certain purposes; authorizing the department to
27 require the revision or amendment of the market
28 assistance plan's plan of operation or bylaws
29 for certain purposes; repealing s. 627.062(6),
30 F.S., relating to arbitration of certain rate
31 filings; providing an effective date.
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1 Be It Enacted by the Legislature of the State of Florida:
2
3 Section 1. Paragraph (c) of subsection (3) of section
4 627.0628, Florida Statutes, is amended to read:
5 627.0628 Florida Commission on Hurricane Loss
6 Projection Methodology.--
7 (3) ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--
8 (c) With respect to a rate filing under s. 627.062, an
9 insurer may employ actuarial methods, principles, standards,
10 models, or output ranges found by the commission to be
11 accurate or reliable to determine hurricane loss factors for
12 use in a rate filing under s. 627.062, which findings and
13 factors are admissible and relevant in consideration of a rate
14 filing by the department or in any arbitration or
15 administrative or judicial review. Notwithstanding the
16 provisions of subsection (1), an insurer may not use the
17 provisions of this paragraph until such time as the commission
18 finds that a publicly owned model developed by the State
19 University System is accurate and reliable to determine
20 hurricane loss factors for use in a rate filing under s.
21 627.062.
22 Section 2. Paragraph (b) of subsection (2) and
23 paragraph (d) of subsection (6) of section 627.351, Florida
24 Statutes, are amended, and paragraph (f) is added to said
25 subsection (2), to read:
26 627.351 Insurance risk apportionment plans.--
27 (2) WINDSTORM INSURANCE RISK APPORTIONMENT.--
28 (b) The department shall require all insurers holding
29 a certificate of authority to transact property insurance on a
30 direct basis in this state, other than joint underwriting
31 associations and other entities formed pursuant to this
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1 section, to provide windstorm coverage to applicants from
2 areas determined to be eligible pursuant to paragraph (c) who
3 in good faith are entitled to, but are unable to procure, such
4 coverage through ordinary means; or it shall adopt a
5 reasonable plan or plans for the equitable apportionment or
6 sharing among such insurers of windstorm coverage, which may
7 include formation of an association for this purpose. As used
8 in this subsection, the term "property insurance" means
9 insurance on real or personal property, as defined in s.
10 624.604, including insurance for fire, industrial fire, allied
11 lines, farmowners multiperil, homeowners' multiperil,
12 commercial multiperil, and mobile homes, and including
13 liability coverages on all such insurance, but excluding
14 inland marine as defined in s. 624.607(3) and excluding
15 vehicle insurance as defined in s. 624.605(1)(a) other than
16 insurance on mobile homes used as permanent dwellings. The
17 department shall adopt rules that provide a formula for the
18 recovery and repayment of any deferred assessments.
19 1. For the purpose of this section, properties
20 eligible for such windstorm coverage are defined as dwellings,
21 buildings, and other structures, including mobile homes which
22 are used as dwellings and which are tied down in compliance
23 with mobile home tie-down requirements prescribed by the
24 Department of Highway Safety and Motor Vehicles pursuant to s.
25 320.8325, and the contents of all such properties. An
26 applicant or policyholder is eligible for coverage only if an
27 offer of coverage cannot be obtained by or for the applicant
28 or policyholder from an admitted insurer at approved rates.
29 2.a.(I) All insurers required to be members of such
30 association shall participate in its writings, expenses, and
31 losses. Surplus of the association shall be retained for the
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1 payment of claims and shall not be distributed to the member
2 insurers. Such participation by member insurers shall be in
3 the proportion that the net direct premiums of each member
4 insurer written for property insurance in this state during
5 the preceding calendar year bear to the aggregate net direct
6 premiums for property insurance of all member insurers, as
7 reduced by any credits for voluntary writings, in this state
8 during the preceding calendar year. For the purposes of this
9 subsection, the term "net direct premiums" means direct
10 written premiums for property insurance, reduced by premium
11 for liability coverage and for the following if included in
12 allied lines: rain and hail on growing crops; livestock;
13 association direct premiums booked; National Flood Insurance
14 Program direct premiums; and similar deductions specifically
15 authorized by the plan of operation and approved by the
16 department. A member's participation shall begin on the first
17 day of the calendar year following the year in which it is
18 issued a certificate of authority to transact property
19 insurance in the state and shall terminate 1 year after the
20 end of the calendar year during which it no longer holds a
21 certificate of authority to transact property insurance in the
22 state. The commissioner, after review of annual statements,
23 other reports, and any other statistics that the commissioner
24 deems necessary, shall certify to the association the
25 aggregate direct premiums written for property insurance in
26 this state by all member insurers.
27 (II) The plan of operation shall provide for a board
28 of directors consisting of the Insurance Consumer Advocate
29 appointed under s. 627.0613, 1 representative of a financial
30 institution engaging in residential mortgage lending within
31 the association's eligible areas, 1 representative of realtors
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1 engaged in the sale of residential property within the
2 association's eligible areas, 1 representative with expertise
3 in State Minimum Building Codes and coastal construction, 1
4 association policyholder, 1 representative who is a licensed
5 property and casualty insurance agent, 1 consumer
6 representative appointed by the Insurance Commissioner, 1
7 consumer representative appointed by the Governor, and 7 12
8 additional members appointed as specified in the plan of
9 operation. One of the 7 12 additional members shall be elected
10 by the domestic companies of this state on the basis of
11 cumulative weighted voting based on the net direct premiums of
12 domestic companies in this state. Nothing in the 1997
13 amendments to this paragraph terminates the existing board or
14 the terms of any members of the board.
15 (III) The plan of operation shall provide a formula
16 whereby a company voluntarily providing windstorm coverage in
17 affected areas will be relieved wholly or partially from
18 apportionment of a regular assessment pursuant to
19 sub-sub-subparagraph d.(I) or sub-sub-subparagraph d.(II).
20 (IV) A company which is a member of a group of
21 companies under common management may elect to have its
22 credits applied on a group basis, and any company or group may
23 elect to have its credits applied to any other company or
24 group.
25 (V) There shall be no credits or relief from
26 apportionment to a company for emergency assessments collected
27 from its policyholders under sub-sub-subparagraph d.(III).
28 (VI) The plan of operation may also provide for the
29 award of credits, for a period not to exceed 3 years, from a
30 regular assessment pursuant to sub-sub-subparagraph d.(I) or
31 sub-sub-subparagraph d.(II) as an incentive for taking
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1 policies out of the Residential Property and Casualty Joint
2 Underwriting Association. In order to qualify for the
3 exemption under this sub-sub-subparagraph, the take-out plan
4 must provide that at least 40 percent of the policies removed
5 from the Residential Property and Casualty Joint Underwriting
6 Association cover risks located in Dade, Broward, and Palm
7 Beach Counties or at least 30 percent of the policies so
8 removed cover risks located in Dade, Broward, and Palm Beach
9 Counties and an additional 50 percent of the policies so
10 removed cover risks located in other coastal counties, and
11 must also provide that no more than 15 percent of the policies
12 so removed may exclude windstorm coverage. With the approval
13 of the department, the association may waive these geographic
14 criteria for a take-out plan that removes at least the lesser
15 of 100,000 Residential Property and Casualty Joint
16 Underwriting Association policies or 15 percent of the total
17 number of Residential Property and Casualty Joint Underwriting
18 Association policies, provided the governing board of the
19 Residential Property and Casualty Joint Underwriting
20 Association certifies that the take-out plan will materially
21 reduce the Residential Property and Casualty Joint
22 Underwriting Association's 100-year probable maximum loss from
23 hurricanes. With the approval of the department, the board
24 may extend such credits for an additional year if the insurer
25 guarantees an additional year of renewability for all policies
26 removed from the Residential Property and Casualty Joint
27 Underwriting Association, or for 2 additional years if the
28 insurer guarantees 2 additional years of renewability for all
29 policies removed from the Residential Property and Casualty
30 Joint Underwriting Association.
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1 b. Assessments to pay deficits in the association
2 under this subparagraph shall be included as an appropriate
3 factor in the making of rates as provided in s. 627.3512.
4 c. The Legislature finds that the potential for
5 unlimited deficit assessments under this subparagraph may
6 induce insurers to attempt to reduce their writings in the
7 voluntary market, and that such actions would worsen the
8 availability problems that the association was created to
9 remedy. It is the intent of the Legislature that insurers
10 remain fully responsible for paying regular assessments and
11 collecting emergency assessments for any deficits of the
12 association; however, it is also the intent of the Legislature
13 to provide a means by which assessment liabilities may be
14 amortized over a period of years.
15 d.(I) When the deficit incurred in a particular
16 calendar year is 10 percent or less of the aggregate statewide
17 direct written premium for property insurance for the prior
18 calendar year for all member insurers, the association shall
19 levy an assessment on member insurers in an amount equal to
20 the deficit.
21 (II) When the deficit incurred in a particular
22 calendar year exceeds 10 percent of the aggregate statewide
23 direct written premium for property insurance for the prior
24 calendar year for all member insurers, the association shall
25 levy an assessment on member insurers in an amount equal to
26 the greater of 10 percent of the deficit or 10 percent of the
27 aggregate statewide direct written premium for property
28 insurance for the prior calendar year for member insurers. Any
29 remaining deficit shall be recovered through emergency
30 assessments under sub-sub-subparagraph (III).
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1 (III) Upon a determination by the board of directors
2 that a deficit exceeds the amount that will be recovered
3 through regular assessments on member insurers, pursuant to
4 sub-sub-subparagraph (I) or sub-sub-subparagraph (II), the
5 board shall levy, after verification by the department,
6 emergency assessments to be collected by member insurers and
7 by underwriting associations created pursuant to this section
8 which write property insurance, upon issuance or renewal of
9 property insurance policies other than National Flood
10 Insurance policies in the year or years following levy of the
11 regular assessments. The amount of the emergency assessment
12 collected in a particular year shall be a uniform percentage
13 of that year's direct written premium for property insurance
14 for all member insurers and underwriting associations,
15 excluding National Flood Insurance policy premiums, as
16 annually determined by the board and verified by the
17 department. The department shall verify the arithmetic
18 calculations involved in the board's determination within 30
19 days after receipt of the information on which the
20 determination was based. Notwithstanding any other provision
21 of law, each member insurer and each underwriting association
22 created pursuant to this section shall collect emergency
23 assessments from its policyholders without such obligation
24 being affected by any credit, limitation, exemption, or
25 deferment. The emergency assessments so collected shall be
26 transferred directly to the association on a periodic basis as
27 determined by the association. The aggregate amount of
28 emergency assessments levied under this sub-sub-subparagraph
29 in any calendar year may not exceed the greater of 10 percent
30 of the amount needed to cover the original deficit, plus
31 interest, fees, commissions, required reserves, and other
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1 costs associated with financing of the original deficit, or 10
2 percent of the aggregate statewide direct written premium for
3 property insurance written by member insurers and underwriting
4 associations for the prior year, plus interest, fees,
5 commissions, required reserves, and other costs associated
6 with financing the original deficit. The board may pledge the
7 proceeds of the emergency assessments under this
8 sub-sub-subparagraph as the source of revenue for bonds, to
9 retire any other debt incurred as a result of the deficit or
10 events giving rise to the deficit, or in any other way that
11 the board determines will efficiently recover the deficit. The
12 emergency assessments under this sub-sub-subparagraph shall
13 continue as long as any bonds issued or other indebtedness
14 incurred with respect to a deficit for which the assessment
15 was imposed remain outstanding, unless adequate provision has
16 been made for the payment of such bonds or other indebtedness
17 pursuant to the document governing such bonds or other
18 indebtedness. Emergency assessments collected under this
19 sub-sub-subparagraph are not part of an insurer's rates, are
20 not premium, and are not subject to premium tax, fees, or
21 commissions; however, failure to pay the emergency assessment
22 shall be treated as failure to pay premium.
23 (IV) Each member insurer's share of the total regular
24 assessments under sub-sub-subparagraph (I) or
25 sub-sub-subparagraph (II) shall be in the proportion that the
26 insurer's net direct premium for property insurance in this
27 state, for the year preceding the assessment bears to the
28 aggregate statewide net direct premium for property insurance
29 of all member insurers, as reduced by any credits for
30 voluntary writings for that year.
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1 (V) If regular deficit assessments are made under
2 sub-sub-subparagraph (I) or sub-sub-subparagraph (II), or by
3 the Residential Property and Casualty Joint Underwriting
4 Association under sub-subparagraph (6)(b)3.a. or
5 sub-subparagraph (6)(b)3.b., the association shall levy upon
6 the association's policyholders, as part of its next rate
7 filing, or by a separate rate filing solely for this purpose,
8 a market equalization surcharge in a percentage equal to the
9 total amount of such regular assessments divided by the
10 aggregate statewide direct written premium for property
11 insurance for member insurers for the prior calendar year.
12 Market equalization surcharges under this sub-sub-subparagraph
13 are not considered premium and are not subject to commissions,
14 fees, or premium taxes; however, failure to pay a market
15 equalization surcharge shall be treated as failure to pay
16 premium.
17 e. The governing body of any unit of local government,
18 any residents of which are insured under the plan, may issue
19 bonds as defined in s. 125.013 or s. 166.101 to fund an
20 assistance program, in conjunction with the association, for
21 the purpose of defraying deficits of the association. In order
22 to avoid needless and indiscriminate proliferation,
23 duplication, and fragmentation of such assistance programs,
24 any unit of local government, any residents of which are
25 insured by the association, may provide for the payment of
26 losses, regardless of whether or not the losses occurred
27 within or outside of the territorial jurisdiction of the local
28 government. Revenue bonds may not be issued until validated
29 pursuant to chapter 75, unless a state of emergency is
30 declared by executive order or proclamation of the Governor
31 pursuant to s. 252.36 making such findings as are necessary to
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1 determine that it is in the best interests of, and necessary
2 for, the protection of the public health, safety, and general
3 welfare of residents of this state and the protection and
4 preservation of the economic stability of insurers operating
5 in this state, and declaring it an essential public purpose to
6 permit certain municipalities or counties to issue bonds as
7 will provide relief to claimants and policyholders of the
8 association and insurers responsible for apportionment of plan
9 losses. Any such unit of local government may enter into such
10 contracts with the association and with any other entity
11 created pursuant to this subsection as are necessary to carry
12 out this paragraph. Any bonds issued under this
13 sub-subparagraph shall be payable from and secured by moneys
14 received by the association from assessments under this
15 subparagraph, and assigned and pledged to or on behalf of the
16 unit of local government for the benefit of the holders of
17 such bonds. The funds, credit, property, and taxing power of
18 the state or of the unit of local government shall not be
19 pledged for the payment of such bonds. If any of the bonds
20 remain unsold 60 days after issuance, the department shall
21 require all insurers subject to assessment to purchase the
22 bonds, which shall be treated as admitted assets; each insurer
23 shall be required to purchase that percentage of the unsold
24 portion of the bond issue that equals the insurer's relative
25 share of assessment liability under this subsection. An
26 insurer shall not be required to purchase the bonds to the
27 extent that the department determines that the purchase would
28 endanger or impair the solvency of the insurer. The authority
29 granted by this sub-subparagraph is additional to any bonding
30 authority granted by subparagraph 6.
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1 3. The plan shall also provide that any member with a
2 surplus as to policyholders of $20 million or less writing 25
3 percent or more of its total countrywide property insurance
4 premiums in this state may petition the department, within the
5 first 90 days of each calendar year, to qualify as a limited
6 apportionment company. The apportionment of such a member
7 company in any calendar year for which it is qualified shall
8 not exceed its gross participation, which shall not be
9 affected by the formula for voluntary writings. In no event
10 shall a limited apportionment company be required to
11 participate in any apportionment of losses pursuant to
12 sub-sub-subparagraph 2.d.(I) or sub-sub-subparagraph 2.d.(II)
13 in the aggregate which exceeds $50 million after payment of
14 available plan funds in any calendar year. However, a limited
15 apportionment company shall collect from its policyholders any
16 emergency assessment imposed under sub-sub-subparagraph
17 2.d.(III). The plan shall provide that, if the department
18 determines that any regular assessment will result in an
19 impairment of the surplus of a limited apportionment company,
20 the department may direct that all or part of such assessment
21 be deferred. However, there shall be no limitation or
22 deferment of an emergency assessment to be collected from
23 policyholders under sub-sub-subparagraph 2.d.(III).
24 4. The plan shall provide for the deferment, in whole
25 or in part, of a regular assessment of a member insurer under
26 sub-sub-subparagraph 2.d.(I) or sub-sub-subparagraph 2.d.(II),
27 but not for an emergency assessment collected from
28 policyholders under sub-sub-subparagraph 2.d.(III), if, in the
29 opinion of the commissioner, payment of such regular
30 assessment would endanger or impair the solvency of the member
31 insurer. In the event a regular assessment against a member
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1 insurer is deferred in whole or in part, the amount by which
2 such assessment is deferred may be assessed against the other
3 member insurers in a manner consistent with the basis for
4 assessments set forth in sub-sub-subparagraph 2.d.(I) or
5 sub-sub-subparagraph 2.d.(II).
6 5.a. The plan of operation may include deductibles and
7 rules for classification of risks and rate modifications
8 consistent with the objective of providing and maintaining
9 funds sufficient to pay catastrophe losses.
10 b. The association may require arbitration of a rate
11 filing under s. 627.062(6). It is the intent of the
12 Legislature that the rates for coverage provided by the
13 association be actuarially sound and not competitive with
14 approved rates charged in the admitted voluntary market such
15 that the association functions as a residual market mechanism
16 to provide insurance only when the insurance cannot be
17 procured in the voluntary market. The plan of operation shall
18 provide a mechanism to assure that, beginning no later than
19 January 1, 1999, the rates charged by the association for each
20 line of business are reflective of approved rates in the
21 voluntary market for hurricane coverage for each line of
22 business in the various areas eligible for association
23 coverage.
24 c. The association shall provide for windstorm
25 coverage on residential properties in limits up to $10 million
26 for commercial lines residential risks and up to $1 million
27 for personal lines residential risks. If coverage with the
28 association is sought for a residential risk valued in excess
29 of these limits, coverage shall be available to the risk up to
30 the replacement cost or actual cash value of the property, at
31 the option of the insured, if coverage for the risk cannot be
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1 located in the authorized market. The association must accept
2 a commercial lines residential risk with limits above $10
3 million or a personal lines residential risk with limits above
4 $1 million if coverage is not available in the authorized
5 market. The association may write coverage above the limits
6 specified in this subparagraph with or without facultative or
7 other reinsurance coverage, as the association determines
8 appropriate.
9 d. The plan of operation must provide objective
10 criteria and procedures, approved by the department, to be
11 uniformly applied for all applicants in determining whether an
12 individual risk is so hazardous as to be uninsurable. In
13 making this determination and in establishing the criteria and
14 procedures, the following shall be considered:
15 (I) Whether the likelihood of a loss for the
16 individual risk is substantially higher than for other risks
17 of the same class; and
18 (II) Whether the uncertainty associated with the
19 individual risk is such that an appropriate premium cannot be
20 determined.
21
22 The acceptance or rejection of a risk by the association
23 pursuant to such criteria and procedures must be construed as
24 the private placement of insurance, and the provisions of
25 chapter 120 do not apply.
26 e. The policies issued by the association must provide
27 that if the association obtains an offer from an authorized
28 insurer to cover the risk at its approved rates under either a
29 standard policy including wind coverage or, if consistent with
30 the insurer's underwriting rules as filed with the department,
31 a basic policy including wind coverage, the risk is no longer
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1 eligible for coverage through the association. Upon
2 termination of eligibility, the association shall provide
3 written notice to the policyholder and agent of record stating
4 that the association policy must be canceled as of 60 days
5 after the date of the notice because of the offer of coverage
6 from an authorized insurer. Other provisions of the insurance
7 code relating to cancellation and notice of cancellation do
8 not apply to actions under this sub-subparagraph.
9 f. Association policies and applications must include
10 a notice that the association policy could, under this
11 section, be replaced with a policy issued by an authorized
12 insurer that does not provide coverage identical to the
13 coverage provided by the association. The notice shall also
14 specify that acceptance of association coverage creates a
15 conclusive presumption that the applicant or policyholder is
16 aware of this potential.
17 6.a. The plan of operation may authorize the formation
18 of a private nonprofit corporation, a private nonprofit
19 unincorporated association, a partnership, a trust, a limited
20 liability company, or a nonprofit mutual company which may be
21 empowered, among other things, to borrow money by issuing
22 bonds or by incurring other indebtedness and to accumulate
23 reserves or funds to be used for the payment of insured
24 catastrophe losses. The plan may authorize all actions
25 necessary to facilitate the issuance of bonds, including the
26 pledging of assessments or other revenues.
27 b. Any entity created under this subsection, or any
28 entity formed for the purposes of this subsection, may sue and
29 be sued, may borrow money; issue bonds, notes, or debt
30 instruments; pledge or sell assessments, market equalization
31 surcharges and other surcharges, rights, premiums, contractual
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1 rights, projected recoveries from the Florida Hurricane
2 Catastrophe Fund, other reinsurance recoverables, and other
3 assets as security for such bonds, notes, or debt instruments;
4 enter into any contracts or agreements necessary or proper to
5 accomplish such borrowings; and take other actions necessary
6 to carry out the purposes of this subsection. The association
7 may issue bonds or incur other indebtedness, or have bonds
8 issued on its behalf by a unit of local government pursuant to
9 subparagraph (g)2., in the absence of a hurricane or other
10 weather-related event, upon a determination by the association
11 subject to approval by the department that such action would
12 enable it to efficiently meet the financial obligations of the
13 association and that such financings are reasonably necessary
14 to effectuate the requirements of this subsection. Any such
15 entity may accumulate reserves and retain surpluses as of the
16 end of any association year to provide for the payment of
17 losses incurred by the association during that year or any
18 future year. The association shall incorporate and continue
19 the plan of operation and articles of agreement in effect on
20 the effective date of chapter 76-96, Laws of Florida, to the
21 extent that it is not inconsistent with chapter 76-96, and as
22 subsequently modified consistent with chapter 76-96. The board
23 of directors and officers currently serving shall continue to
24 serve until their successors are duly qualified as provided
25 under the plan. The assets and obligations of the plan in
26 effect immediately prior to the effective date of chapter
27 76-96 shall be construed to be the assets and obligations of
28 the successor plan created herein.
29 c. In recognition of s. 10, Art. I of the State
30 Constitution, prohibiting the impairment of obligations of
31 contracts, it is the intent of the Legislature that no action
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1 be taken whose purpose is to impair any bond indenture or
2 financing agreement or any revenue source committed by
3 contract to such bond or other indebtedness issued or incurred
4 by the association or any other entity created under this
5 subsection.
6 7. On such coverage, an agent's remuneration shall be
7 that amount of money payable to the agent by the terms of his
8 or her contract with the company with which the business is
9 placed. However, no commission will be paid on that portion of
10 the premium which is in excess of the standard premium of that
11 company.
12 8. Subject to approval by the department, the
13 association may establish different eligibility requirements
14 and operational procedures for any line or type of coverage
15 for any specified eligible area or portion of an eligible area
16 if the board determines that such changes to the eligibility
17 requirements and operational procedures are justified due to
18 the voluntary market being sufficiently stable and competitive
19 in such area or for such line or type of coverage and that
20 consumers who, in good faith, are unable to obtain insurance
21 through the voluntary market through ordinary methods would
22 continue to have access to coverage from the association. When
23 coverage is sought in connection with a real property
24 transfer, such requirements and procedures shall not provide
25 for an effective date of coverage later than the date of the
26 closing of the transfer as established by the transferor, the
27 transferee, and, if applicable, the lender.
28 9. Notwithstanding any other provision of law:
29 a. The pledge or sale of, the lien upon, and the
30 security interest in any rights, revenues, or other assets of
31 the association created or purported to be created pursuant to
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1 any financing documents to secure any bonds or other
2 indebtedness of the association shall be and remain valid and
3 enforceable, notwithstanding the commencement of and during
4 the continuation of, and after, any rehabilitation,
5 insolvency, liquidation, bankruptcy, receivership,
6 conservatorship, reorganization, or similar proceeding against
7 the association under the laws of this state or any other
8 applicable laws.
9 b. No such proceeding shall relieve the association of
10 its obligation, or otherwise affect its ability to perform its
11 obligation, to continue to collect, or levy and collect,
12 assessments, market equalization or other surcharges,
13 projected recoveries from the Florida Hurricane Catastrophe
14 Fund, reinsurance recoverables, or any other rights, revenues,
15 or other assets of the association pledged.
16 c. Each such pledge or sale of, lien upon, and
17 security interest in, including the priority of such pledge,
18 lien, or security interest, any such assessments, emergency
19 assessments, market equalization or renewal surcharges,
20 projected recoveries from the Florida Hurricane Catastrophe
21 Fund, reinsurance recoverables, or other rights, revenues, or
22 other assets which are collected, or levied and collected,
23 after the commencement of and during the pendency of or after
24 any such proceeding shall continue unaffected by such
25 proceeding.
26 d. As used in this subsection, the term "financing
27 documents" means any agreement, instrument, or other document
28 now existing or hereafter created evidencing any bonds or
29 other indebtedness of the association or pursuant to which any
30 such bonds or other indebtedness has been or may be issued and
31 pursuant to which any rights, revenues, or other assets of the
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1 association are pledged or sold to secure the repayment of
2 such bonds or indebtedness, together with the payment of
3 interest on such bonds or such indebtedness, or the payment of
4 any other obligation of the association related to such bonds
5 or indebtedness.
6 e. Any such pledge or sale of assessments, revenues,
7 contract rights or other rights or assets of the association
8 shall constitute a lien and security interest, or sale, as the
9 case may be, that is immediately effective and attaches to
10 such assessments, revenues, contract, or other rights or
11 assets, whether or not imposed or collected at the time the
12 pledge or sale is made. Any such pledge or sale is effective,
13 valid, binding, and enforceable against the association or
14 other entity making such pledge or sale, and valid and binding
15 against and superior to any competing claims or obligations
16 owed to any other person or entity, including policyholders in
17 this state, asserting rights in any such assessments,
18 revenues, contract, or other rights or assets to the extent
19 set forth in and in accordance with the terms of the pledge or
20 sale contained in the applicable financing documents, whether
21 or not any such person or entity has notice of such pledge or
22 sale and without the need for any physical delivery,
23 recordation, filing, or other action.
24 f. There shall be no liability on the part of, and no
25 cause of action of any nature shall arise against, any member
26 insurer or its agents or employees, agents or employees of the
27 association, members of the board of directors of the
28 association, or the department or its representatives, for any
29 action taken by them in the performance of their duties or
30 responsibilities under this subsection. Such immunity does not
31
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1 apply to actions for breach of any contract or agreement
2 pertaining to insurance, or any willful tort.
3 (f)1. After December 31, 2000, the association may not
4 accept an application for coverage for a risk located in the
5 deauthorized area. For purposes of this paragraph,
6 "deauthorized area" means the area between I-95 and U.S. 1 in
7 Miami-Dade, Broward, and Palm Beach Counties.
8 2. Until January 1, 2001, the association shall afford
9 to all authorized insurers an opportunity to voluntarily
10 remove policies located in the deauthorized area from the
11 association. Each policy shall be written for at least three
12 full annual policy terms, using rates and forms approved by
13 the department.
14 3.a. Beginning January 1, 2001, every authorized
15 insurer writing personal lines residential coverage in this
16 state must accept assignments of personal lines residential
17 policies located in the deauthorized area from the
18 association, as provided in this paragraph.
19 b. No later than January 1, 2001, the association
20 shall identify the personal lines residential policies in the
21 deauthorized area that will be assigned to each insurer. The
22 association shall provide each insurer access to information
23 concerning each policy assigned to the insurer. The selection
24 and subsequent assignment shall be coordinated by the
25 association among the various insurers by allocating the
26 distribution of the assigned policies among such insurers in
27 such a manner as to limit adverse solvency consequences, avoid
28 excess concentration of policies in any one area with respect
29 to the insurer's personal lines residential coverage book of
30 business, take into account the characteristics of risks
31 underwritten in the voluntary market by the assigned insurer,
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1 attempt to match assigned risks as closely as possible to the
2 insurer's expertise, and take into account variations in the
3 market value of the assigned risks.
4 c. The assignments shall be made to each insurer such
5 that each insurer's share of the policies assigned is
6 approximately equal to that insurer's proportional share of
7 personal lines residential insurance policies written in this
8 state. Insurers that voluntarily remove policies from the
9 deauthorized area may receive a reduction in the number of
10 assignments such insurers would otherwise receive from the
11 association.
12 d. If more than one insurer within an insurer group is
13 authorized to write personal lines residential coverage in
14 this state, insurers in the group receiving the assignments
15 may cede the assignments among authorized members of the group
16 as approved by the department.
17 e. Each insurer to which policies are assigned must
18 renew each policy for at least 3 years, unless canceled by the
19 insurer for a lawful reason other than reduction of hurricane
20 exposure or unless nonrenewed by the policyholder. Nothing in
21 this paragraph shall preclude an insurer from offering an
22 assigned policyholder coverage for nonwind perils. If such
23 offer is accepted, the insurer may satisfy its assignment
24 obligations with regard to that risk by writing all perils
25 coverage at such insurer's approved rates and on its approved
26 forms. For each assigned policy canceled or nonrenewed by the
27 insurer for any reason during the coverage period required by
28 this paragraph, the insurer shall accept from the association,
29 if available, one additional policy covering a risk similar to
30 the risk covered by the canceled or nonrenewed policy.
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1 f. Assignment of a policy shall not affect the
2 producing agent's entitlement to unearned commission. If the
3 policy is assigned to an insurer with which the producing
4 agent has a contract, the producing agent shall retain the
5 business. If the policy is assigned to an insurer that is
6 using the services of a managing general agent, the producing
7 agent is entitled to act as the brokering agent. If the agent
8 is not appointed or offered an appointment with the assuming
9 insurer or not brokering the business with a managing general
10 agent being used by the assuming insurer, the agent shall
11 receive an assignment fee of $50, payable by the association.
12 g. If an insurer believes the assignment of risks
13 would result in the insurer's insolvency or impair the
14 insurer's capital and surplus under the respective definitions
15 provided in s. 631.011(9), (10), and (11) and reasonable means
16 to avoid the insolvency or impairment are not available, the
17 insurer may petition the department for revision, in whole or
18 in part, of the selection and assignment of such risks. The
19 insurer shall bear the burden of proving such resulting
20 insolvency or impairment of capital or surplus.
21 4. If an insurer fails to accept the residential
22 policies selected by the association, the failure shall be
23 treated as a willful violation of the Florida Insurance Code.
24 Each policy refused or rejected by an insurer shall constitute
25 a separate violation.
26 5. The department may adopt rules to implement the
27 provisions of this paragraph.
28 6. The department may require the revision or
29 amendment of the association's plan of operation or bylaws as
30 necessary to implement this paragraph or to accomplish the
31 purposes of this paragraph.
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1 7. The department may require the revision or
2 amendment of the plan of operation or bylaws of the market
3 assistance plan, established under s. 627.3515, if any, as
4 necessary to implement this paragraph or to accomplish the
5 purposes of this paragraph.
6 (6) RESIDENTIAL PROPERTY AND CASUALTY JOINT
7 UNDERWRITING ASSOCIATION.--
8 (d)1. It is the intent of the Legislature that the
9 rates for coverage provided by the association be actuarially
10 sound and not competitive with approved rates charged in the
11 admitted voluntary market, so that the association functions
12 as a residual market mechanism to provide insurance only when
13 the insurance cannot be procured in the voluntary market.
14 Rates shall include an appropriate catastrophe loading factor
15 that reflects the actual catastrophic exposure of the
16 association and recognizes that the association has little or
17 no capital or surplus; and the association shall carefully
18 review each rate filing to assure that provider compensation
19 is not excessive.
20 2. For each county, the average rates of the
21 association for each line of business for personal lines
22 residential policies shall be no lower than the average rates
23 charged by the insurer that had the highest average rate in
24 that county among the 20 insurers with the greatest total
25 direct written premium in the state for that line of business
26 in the preceding year, except that with respect to mobile home
27 coverages, the average rates of the association shall be no
28 lower than the average rates charged by the insurer that had
29 the highest average rate in that county among the 5 insurers
30 with the greatest total written premium for mobile home
31 owner's policies in the state in the preceding year.
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1 3. Rates for commercial residential coverage shall not
2 be subject to the requirements of subparagraph 2., but shall
3 be subject to all other requirements of this paragraph and s.
4 627.062.
5 4. Nothing in this paragraph shall require or allow
6 the association to adopt a rate that is inadequate under s.
7 627.062 or to reduce rates approved under s. 627.062.
8 5. The association may require arbitration of a filing
9 pursuant to s. 627.062(6). Rate filings of the association
10 under this paragraph shall be made on a use and file basis
11 under s. 627.062(2)(a)2. The association shall make a rate
12 filing at least once a year, but no more often than quarterly.
13 Section 3. Subsection (6) of section 627.062, Florida
14 Statutes, is repealed.
15 Section 4. This act shall take effect upon becoming a
16 law.
17
18 *****************************************
19 HOUSE SUMMARY
20
Limits an insurer's use of otherwise acceptable actuarial
21 methods, principles, standards, models or output ranges
to determine hurricane loss factors until a publicly
22 owned model developed by the state university system is
found to accurately and reliably determine such factors
23 for rate filings. Revises membership of the board of
directors of the windstorm insurance risk apportionment
24 association's plan of operation. Deletes authorization
for the association to require arbitration of rate
25 filings. Declares Miami-Dade and Broward and Palm Beach
Counties to be a deauthorized area and prohibits the
26 association from accepting applications for coverage for
risks located in the deauthorized area. Provides for
27 assignments to insurers by the association of personal
lines residential policies in the deauthorized area. See
28 bill for details.
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