Senate Bill sb2488
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Florida Senate - 2004 SB 2488
By Senator Alexander
17-1638-04
1 A bill to be entitled
2 An act relating to the Florida Hurricane
3 Catastrophe Fund; amending s. 215.555, F.S.;
4 redefining and defining terms; providing for
5 the State Board of Administration to specify
6 interest due on delinquent remittances;
7 revising conditions of, amounts of, and
8 procedures relating to reimbursement contracts;
9 revising maximum rates of, and procedures
10 relating to, emergency assessments; revising
11 provisions relating to reinsurance; deleting
12 expired provisions; providing an effective
13 date.
14
15 Be It Enacted by the Legislature of the State of Florida:
16
17 Section 1. Paragraphs (c), (d), (e), and (k) of
18 subsection (2) and subsections (3), (4), (6), (7), and (16) of
19 section 215.555, Florida Statutes, are amended, and paragraph
20 (n) is added to subsection (2) of that section, to read:
21 215.555 Florida Hurricane Catastrophe Fund.--
22 (2) DEFINITIONS.--As used in this section:
23 (c) "Covered policy" means any insurance policy
24 covering residential property in this state, including, but
25 not limited to, any homeowner's, mobile home owner's, farm
26 owner's, condominium association, condominium unit owner's,
27 tenant's, or apartment building policy, or any other policy
28 covering a residential structure or its contents issued by any
29 authorized insurer, including the Citizens Property Insurance
30 Corporation and any joint underwriting association or similar
31 entity created pursuant to law. The term "covered policy"
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1 includes any collateral protection insurance policy covering
2 personal residences which protects both the borrower's and the
3 lender's financial interests, in an amount at least equal to
4 the coverage for the dwelling in place under the lapsed
5 homeowner's policy, if such policy can be accurately reported
6 as required in subsection (5). Additionally, covered policies
7 include policies covering the peril of wind removed from the
8 Florida Residential Property and Casualty Joint Underwriting
9 Association or from the Citizens Property Insurance
10 Corporation, created pursuant to s. 627.351(6), or from the
11 Florida Windstorm Underwriting Association, created pursuant
12 to s. 627.351(2), by an authorized insurer under the terms and
13 conditions of an executed assumption agreement between the
14 authorized insurer and such association or Citizens Property
15 Insurance Corporation. Each assumption agreement between the
16 association and such authorized insurer or Citizens Property
17 Insurance Corporation must be approved by the Florida
18 Department of Insurance or the Office of Insurance Regulation
19 prior to the effective date of the assumption, and the
20 Department of Insurance or the Office of Insurance Regulation
21 must provide written notification to the board within 15
22 working days after such approval. "Covered policy" does not
23 include any policy that excludes wind coverage or hurricane
24 coverage or any reinsurance agreement and does not include any
25 policy otherwise meeting this definition which is issued by a
26 surplus lines insurer or a reinsurer. All commercial
27 residential excess policies and all deductible buy-back
28 policies that, based on sound actuarial principles, require
29 individual ratemaking shall be excluded by rule if the
30 actuarial soundness of the fund is not jeopardized. For this
31 purpose, the term "excess policy" means a policy that provides
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1 insurance protection for large commercial property risks and
2 that provides a layer of coverage above a primary layer
3 insured by another insurer.
4 (d) "Losses" means direct incurred losses under
5 covered policies, which shall include losses for additional
6 living expenses not to exceed 40 20 percent of the insured
7 value of a mobile homes or personal residential structure or
8 its structures and 40 percent of the insured value of contents
9 covered under a tenant's policy or a condominium unit owner's
10 policy and shall exclude loss adjustment expenses. "Losses"
11 does not include losses for fair rental value, loss of use,
12 associated with personal and commercial residential exposures
13 or business interruption losses associated with commercial
14 residential exposures.
15 (e) "Retention" means the amount of losses below which
16 an insurer is not entitled to reimbursement from the fund. An
17 insurer's retention shall be calculated as follows:
18 1. The board shall calculate and report to each
19 insurer the retention multiples for that year. For the
20 contract year beginning June 1, 2004 1995, the retention
21 multiple shall be equal to $3 billion divided by the total
22 estimated reimbursement premium for the contract year; for
23 subsequent years, the retention multiple shall be equal to $3
24 billion, adjusted based upon the reported exposure from the
25 prior contract year to reflect the percentage growth in
26 exposure to the fund for covered policies since 2003 1998,
27 divided by the total estimated reimbursement premium for the
28 contract year. Total reimbursement premium for purposes of the
29 calculation under this subparagraph shall be estimated using
30 the assumption that all insurers have selected the 90-percent
31 coverage level.
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1 2. The retention multiple as determined under
2 subparagraph 1. shall be adjusted to reflect the coverage
3 level elected by the insurer. For insurers electing the
4 90-percent coverage level, the adjusted retention multiple is
5 100 percent of the amount determined under subparagraph 1.
6 For insurers electing the 75-percent coverage level, the
7 retention multiple is 120 percent of the amount determined
8 under subparagraph 1. For insurers electing the 45-percent
9 coverage level, the adjusted retention multiple is 200 percent
10 of the amount determined under subparagraph 1.
11 3. An insurer shall determine its provisional
12 retention by multiplying its provisional reimbursement premium
13 by the applicable adjusted retention multiple and shall
14 determine its actual retention by multiplying its actual
15 reimbursement premium by the applicable adjusted retention
16 multiple.
17 (k) "Pledged revenues" means all or any portion of
18 revenues to be derived from reimbursement premiums under
19 subsection (5) or from emergency assessments under paragraph
20 (6)(b) subparagraph (6)(a)3., as determined by the board.
21 (n) "Corporation" means the Florida Hurricane
22 Catastrophe Fund Finance Corporation created in paragraph
23 (6)(d).
24 (3) FLORIDA HURRICANE CATASTROPHE FUND CREATED.--There
25 is created the Florida Hurricane Catastrophe Fund to be
26 administered by the State Board of Administration. Moneys in
27 the fund may not be expended, loaned, or appropriated except
28 to pay obligations of the fund arising out of reimbursement
29 contracts entered into under subsection (4), payment of debt
30 service on revenue bonds issued under subsection (6), costs of
31 the mitigation program under subsection (7), costs of
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1 procuring reinsurance, and costs of administration of the
2 fund. The board shall invest the moneys in the fund pursuant
3 to ss. 215.44-215.52. Except as otherwise provided in this
4 section, earnings from all investments shall be retained in
5 the fund. The board may employ or contract with such staff and
6 professionals as the board deems necessary for the
7 administration of the fund. The board may adopt such rules as
8 are reasonable and necessary to implement this section and
9 shall specify interest due on any delinquent remittances,
10 which interest may not exceed the fund's rate of return plus 5
11 percent. Such rules must conform to the Legislature's specific
12 intent in establishing the fund as expressed in subsection
13 (1), must enhance the fund's potential ability to respond to
14 claims for covered events, must contain general provisions so
15 that the rules can be applied with reasonable flexibility so
16 as to accommodate insurers in situations of an unusual nature
17 or where undue hardship may result, except that such
18 flexibility may not in any way impair, override, supersede, or
19 constrain the public purpose of the fund, and must be
20 consistent with sound insurance practices. The board may, by
21 rule, provide for the exemption from subsections (4) and (5)
22 of insurers writing covered policies with less than $10
23 million $500,000 in aggregate exposure for covered policies,
24 which exposure results in a de minimis reimbursement premium,
25 if the exemption does not affect the actuarial soundness of
26 the fund.
27 (4) REIMBURSEMENT CONTRACTS.--
28 (a) The board shall enter into a contract with each
29 insurer writing covered policies in this state to provide to
30 the insurer the reimbursement described in paragraphs (b) and
31 (d), in exchange for the reimbursement premium paid into the
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1 fund under subsection (5). As a condition of doing business in
2 this state, each such insurer shall enter into such a
3 contract.
4 (b)1. The contract shall contain a promise by the
5 board to reimburse the insurer for 45 percent, 75 percent, or
6 90 percent of its losses from each covered event in excess of
7 the insurer's retention, plus 5 percent of the reimbursed
8 losses to cover loss adjustment expenses.
9 2. The insurer must elect one of the percentage
10 coverage levels specified in this paragraph and may, upon
11 renewal of a reimbursement contract, elect a lower percentage
12 coverage level if no revenue bonds issued under subsection (6)
13 after a covered event are outstanding, or elect a higher
14 percentage coverage level, regardless of whether or not
15 revenue bonds are outstanding. All members of an insurer group
16 must elect the same percentage coverage level. Any joint
17 underwriting association, risk apportionment plan, or other
18 entity created under s. 627.351 must elect the 90-percent
19 coverage level.
20 3. The contract shall provide that reimbursement
21 amounts shall not be reduced by reinsurance paid or payable to
22 the insurer from other sources; however, recoveries from such
23 other sources, taken together with reimbursements under the
24 contract, may not exceed 100 percent of the insurer's losses
25 from covered events. If such recoveries and reimbursements
26 exceed 100 percent of the insurer's losses from covered
27 events, and if there is no agreement between the insurer and
28 the reinsurer to the contrary, any amount in excess of 100
29 percent of the insurer's losses shall be returned to the fund.
30 (c)1. The contract shall also provide that the
31 obligation of the board with respect to all contracts covering
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1 a particular contract year shall not exceed the actual
2 claims-paying capacity of the fund up to a limit of $15 $11
3 billion for that contract year adjusted based upon the
4 reported exposure from the prior contract year to reflect the
5 percentage growth in exposure to the fund for covered policies
6 since 2003, unless the board determines that there is
7 sufficient estimated claims-paying capacity to provide $11
8 billion of capacity for the current contract year and an
9 additional $11 billion of capacity for subsequent contract
10 years. Upon such determination being made, the estimated
11 claims-paying capacity for the current contract year shall be
12 determined by adding to the $11 billion limit one-half of the
13 fund's estimated claims-paying capacity in excess of $22
14 billion.
15 2. In May before the start of the upcoming contract
16 year and in October during the contract year, the board shall
17 publish in the Florida Administrative Weekly a statement of
18 the fund's estimated borrowing capacity and the projected
19 balance of the fund as of December 31. After the end of each
20 calendar year, the board shall notify insurers of the
21 estimated borrowing capacity and the balance of the fund as of
22 December 31 to provide insurers with data necessary to assist
23 them in determining their retention and projected payout from
24 the fund for loss reimbursement purposes. In conjunction with
25 the development of the premium formula, as provided for in
26 subsection (5), the board shall publish factors or multiples
27 that assist insurers in determining their retention and
28 projected payout for the next contract year. For all
29 regulatory and reinsurance purposes, an insurer may calculate
30 its projected payout from the fund as its share of the total
31 fund premium for the current contract year multiplied by the
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1 sum of the projected balance of the fund as of December 31 and
2 the estimated borrowing capacity for that contract year as
3 reported under this paragraph. The contract shall require the
4 board to annually notify insurers of the fund's estimated
5 borrowing capacity for the next contract year, the projected
6 year-end balance of the fund, and the insurer's estimated
7 share of total reimbursement premium to be paid to the fund.
8 For all regulatory and reinsurance purposes, an insurer may
9 calculate its projected payout from the fund as its share of
10 the total fund premium for the current contract year
11 multiplied by the sum of the projected year-end fund balance
12 and the estimated borrowing capacity for that contract year as
13 reported under this paragraph. In May and October of each
14 year, the board shall publish in the Florida Administrative
15 Weekly a statement of the fund's estimated borrowing capacity
16 and the projected year-end balance of the fund for the current
17 contract year.
18 (d)1. For purposes of determining potential liability
19 and to aid in the sound administration of the fund, the
20 contract shall require each insurer to report such insurer's
21 losses from each covered event on an interim basis, as
22 directed by the board. The contract shall require the insurer
23 to report to the board no later than December 31 of each year,
24 and quarterly thereafter, its reimbursable losses from covered
25 events for the year. The contract shall require the board to
26 determine and pay, as soon as practicable after receiving
27 these reports of reimbursable losses, the initial amount of
28 reimbursement due and adjustments to this amount based on
29 later loss information. The adjustments to reimbursement
30 amounts shall require the board to pay, or the insurer to
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1 return, amounts reflecting the most recent calculation of
2 losses.
3 2. In determining reimbursements pursuant to this
4 subsection, the contract shall provide that the board shall:
5 a. First reimburse insurers writing covered policies,
6 which insurers are in full compliance with this section and
7 have petitioned the Office of Insurance Regulation and
8 qualified as limited apportionment companies under s.
9 627.351(2)(b)3. The amount of such reimbursement shall be the
10 lesser of $10 million or an amount equal to 10 times the
11 insurer's reimbursement premium for the current year. The
12 amount of reimbursement paid under this sub-subparagraph may
13 not exceed the full amount of reimbursement promised in the
14 reimbursement contract. This sub-subparagraph does not apply
15 with respect to any contract year in which the year-end
16 projected cash balance of the fund, exclusive of any bonding
17 capacity of the fund, exceeds $2 billion. Only one member of
18 any insurer group may receive reimbursement under this
19 sub-subparagraph.
20 b. Next pay to each insurer such insurer's projected
21 payout, which is the amount of reimbursement it is owed, up to
22 an amount equal to the insurer's share of the actual premium
23 paid for that contract year, multiplied by the actual
24 claims-paying capacity available for that contract year;
25 provided, entities created pursuant to s. 627.351 shall be
26 further reimbursed in accordance with sub-subparagraph c.
27 c. Thereafter, establish, based on reimbursable
28 losses, the prorated reimbursement level at the highest level
29 for which any remaining fund balance or bond proceeds are
30 sufficient to reimburse entities created pursuant to s.
31 627.351 based on reimbursable for losses exceeding the amounts
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1 payable pursuant to sub-subparagraph b. for the current
2 contract year.
3 (e)1. Except as provided in subparagraphs 2. and 3.,
4 the contract shall provide that if an insurer demonstrates to
5 the board that it is likely to qualify for reimbursement under
6 the contract, and demonstrates to the board that the immediate
7 receipt of moneys from the board is likely to prevent the
8 insurer from becoming insolvent, the board shall advance the
9 insurer, at market interest rates, the amounts necessary to
10 maintain the solvency of the insurer, up to 50 percent of the
11 board's estimate of the reimbursement due the insurer. The
12 insurer's reimbursement shall be reduced by an amount equal to
13 the amount of the advance and interest thereon.
14 2. With respect only to an entity created under s.
15 627.351, the contract shall also provide that the board may,
16 upon application by such entity, advance to such entity, at
17 market interest rates, up to 90 percent of the lesser of:
18 a. The board's estimate of the amount of reimbursement
19 due to such entity; or
20 b. The entity's share of the actual reimbursement
21 premium paid for that contract year, multiplied by the
22 currently available liquid assets of the fund. In order for
23 the entity to qualify for an advance under this subparagraph,
24 the entity must demonstrate to the board that the advance is
25 essential to allow the entity to pay claims for a covered
26 event and the board must determine that the fund's assets are
27 sufficient and are sufficiently liquid to allow the board to
28 make an advance to the entity and still fulfill the board's
29 reimbursement obligations to other insurers. The entity's
30 final reimbursement for any contract year in which an advance
31 has been made under this subparagraph must be reduced by an
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1 amount equal to the amount of the advance and any interest on
2 such advance. In order to determine what amounts, if any, are
3 due the entity, the board may require the entity to report its
4 exposure and its losses at any time to determine retention
5 levels and reimbursements payable.
6 3. The contract shall also provide specifically and
7 solely with respect to any limited apportionment company under
8 s. 627.351(2)(b)3. that the board may, upon application by
9 such company, advance to such company the amount of the
10 estimated reimbursement payable to such company as calculated
11 pursuant to paragraph (d), at market interest rates, if the
12 board determines that the fund's assets are sufficient and are
13 sufficiently liquid to permit the board to make an advance to
14 such company and at the same time fulfill its reimbursement
15 obligations to the insurers that are participants in the fund.
16 Such company's final reimbursement for any contract year in
17 which an advance pursuant to this subparagraph has been made
18 shall be reduced by an amount equal to the amount of the
19 advance and interest thereon. In order to determine what
20 amounts, if any, are due to such company, the board may
21 require such company to report its exposure and its losses at
22 such times as may be required to determine retention levels
23 and loss reimbursements payable.
24 (f) In order to ensure that insurers have properly
25 reported the insured values on which the reimbursement premium
26 is based and to ensure that insurers have properly reported
27 the losses for which reimbursements have been made, the board
28 shall inspect, examine, and audit the records of each
29 insurer's covered policies at such times as the board deems
30 appropriate and in such manner as is consistent with generally
31 accepted auditing standards. The costs of the audits shall be
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1 borne by the board. However, in order to remove any incentive
2 for an insurer to delay preparations for an audit, the board
3 shall be reimbursed by the insurer for any audit expenses
4 incurred in addition to the usual and customary costs of the
5 audit, which additional expenses were incurred as a result of
6 an insurer's failure, despite proper notice, to be prepared
7 for the audit or as a result of an insurer's failure to
8 provide requested information while the audit is in progress.
9 If the board finds any insurer's records or other necessary
10 information to be inadequate or inadequately posted, recorded,
11 or maintained, the board may employ experts to reconstruct,
12 rewrite, record, post, or maintain such records or
13 information, at the expense of the insurer being audited, if
14 such insurer has failed to maintain, complete, or correct such
15 records or deficiencies after the board has given the insurer
16 notice and a reasonable opportunity to do so. Any information
17 contained in an audit report, which information is described
18 in s. 215.557, is confidential and exempt from the provisions
19 of s. 119.07(1) and s. 24(a), Art. I of the State
20 Constitution, as provided in s. 215.557. Nothing in this
21 paragraph expands the exemption in s. 215.557.
22 (g) The contract shall provide that in the event of
23 the insolvency of an insurer, the fund shall pay directly to
24 the Florida Insurance Guaranty Association for the benefit of
25 Florida policyholders of the insurer the net amount of all
26 reimbursement moneys owed to the insurer. As used in this
27 paragraph, the term "net amount of all reimbursement moneys"
28 means that amount which remains after reimbursement for:
29 1. Preliminary or duplicate payments owed to private
30 reinsurers or other inuring reinsurance payments to private
31 reinsurers that satisfy statutory or contractual obligations
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1 of the insolvent insurer attributable to covered events to
2 such reinsurers; or
3 2. Funds owed to a bank or other financial institution
4 to cover obligations of the insolvent insurer under a credit
5 agreement that assists the insolvent insurer in paying claims
6 attributable to covered events.
7
8 Such private reinsurers, banks, or other financial
9 institutions shall be reimbursed or otherwise paid prior to
10 payment to the Florida Insurance Guaranty Association,
11 notwithstanding any law to the contrary. The guaranty
12 association shall pay all claims up to the maximum amount
13 permitted by chapter 631; thereafter, any remaining moneys
14 shall be paid pro rata to claims not fully satisfied. This
15 paragraph does not apply to a joint underwriting association,
16 risk apportionment plan, or other entity created under s.
17 627.351.
18 (6) REVENUE BONDS.--
19 (a) General provisions.--
20 1. Upon the occurrence of a hurricane and a
21 determination that the moneys in the fund are or will be
22 insufficient to pay reimbursement at the levels promised in
23 the reimbursement contracts, the board may take the necessary
24 steps under paragraph (c) (b) or paragraph (d) (c) for the
25 issuance of revenue bonds for the benefit of the fund. The
26 proceeds of such revenue bonds may be used to make
27 reimbursement payments under reimbursement contracts; to
28 refinance or replace previously existing borrowings or
29 financial arrangements; to pay interest on bonds; to fund
30 reserves for the bonds; to pay expenses incident to the
31 issuance or sale of any bond issued under this section,
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1 including costs of validating, printing, and delivering the
2 bonds, costs of printing the official statement, costs of
3 publishing notices of sale of the bonds, and related
4 administrative expenses; or for such other purposes related to
5 the financial obligations of the fund as the board may
6 determine. The term of the bonds may not exceed 30 years. The
7 board may pledge or authorize the corporation to pledge all or
8 a portion of all revenues under subsection (5) and under
9 paragraph (b) subparagraph 3. to secure such revenue bonds and
10 the board may execute such agreements between the board and
11 the issuer of any revenue bonds and providers of other
12 financing arrangements under paragraph (7)(b) as the board
13 deems necessary to evidence, secure, preserve, and protect
14 such pledge. If reimbursement premiums received under
15 subsection (5) or earnings on such premiums are used to pay
16 debt service on revenue bonds, such premiums and earnings
17 shall be used only after the use of the moneys derived from
18 assessments under paragraph (b) subparagraph 3. The funds,
19 credit, property, or taxing power of the state or political
20 subdivisions of the state shall not be pledged for the payment
21 of such bonds. The board may also enter into agreements under
22 paragraph (c) (b) or paragraph (d) (c) for the purpose of
23 issuing revenue bonds in the absence of a hurricane upon a
24 determination that such action would maximize the ability of
25 the fund to meet future obligations.
26 2. The Legislature finds and declares that the
27 issuance of bonds under this subsection is for the public
28 purpose of paying the proceeds of the bonds to insurers,
29 thereby enabling insurers to pay the claims of policyholders
30 to assure that policyholders are able to pay the cost of
31 construction, reconstruction, repair, restoration, and other
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1 costs associated with damage to property of policyholders of
2 covered policies after the occurrence of a hurricane. Revenue
3 bonds may not be issued under this subsection until validated
4 under chapter 75. The validation of at least the first
5 obligations incurred pursuant to this subsection shall be
6 appealed to the Supreme Court, to be handled on an expedited
7 basis.
8 (b) Emergency assessments.--
9 1.3. If the board determines that the amount of
10 revenue produced under subsection (5) is insufficient to fund
11 the obligations, costs, and expenses of the fund and the
12 corporation, including repayment of revenue bonds and that
13 portion of the debt service coverage not met by the
14 reimbursement premiums, the board shall direct the Office of
15 Insurance Regulation to levy an emergency assessment. Such
16 assessment shall be on each insurer writing property and
17 casualty business in this state, referred to in this
18 subsection as assessable insurers, and upon those insureds
19 procuring one or more lines of property and casualty business
20 in this state pursuant to part VIII of chapter 626, referred
21 to in this subsection as assessable insureds.
22 2. Pursuant to the emergency assessment, each such
23 assessable insurer shall pay to the corporation by July 1 of
24 each year an amount set by the board not exceeding 4 2 percent
25 of its gross direct written premium for the prior year from
26 all property and casualty business in this state except for
27 workers' compensation and medical malpractice, except that, if
28 the Governor has declared a state of emergency under s. 252.36
29 due to the occurrence of a covered event, the amount of the
30 assessment for the contract year may be increased to an amount
31 not exceeding 6 4 percent of such premium.
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1 3.a. Pursuant to the emergency assessment, each such
2 assessable insured shall pay an amount set by the board not
3 exceeding 4 percent of the gross written premium each year for
4 all property and casualty business procured in this state
5 except workers' compensation and medical malpractice, except
6 that, if the Governor has declared a state of emergency under
7 s. 252.36 due to the occurrence of a covered event, the amount
8 of the assessment for the contract year may be increased to an
9 amount not exceeding 6 percent of such premium.
10 b. The emergency assessment on each such assessable
11 insured shall be collected by the surplus lines agent at the
12 time such agent collects the surplus lines tax required by s.
13 626.932 and remitted by the agent to the Florida Surplus Lines
14 Service Office created pursuant to s. 626.921 at the time the
15 agent pays the surplus lines tax to the Florida Surplus Lines
16 Service Office. The emergency assessment on each assessable
17 insured procuring coverage and filing under s. 626.938 shall
18 be remitted by the insured to the Florida Surplus Lines
19 Service Office at the time the insured pays the surplus lines
20 tax to the Florida Surplus Lines Service Office. The emergency
21 assessments collected shall be transferred to the corporation
22 or to the fund pursuant to subparagraph 6. on a periodic basis
23 as determined by the board. The Florida Surplus Lines Service
24 Office shall verify the proper application by surplus lines
25 agents of the emergency assessments and shall assist the board
26 in ensuring the accurate, timely collection and payment of
27 assessments by surplus lines agents as required by the board.
28 The Florida Surplus Lines Service Office shall determine
29 annually the aggregate written premium on property and
30 casualty business, except workers' compensation and medical
31 malpractice, procured by assessable insureds and shall report
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1 such information to the board in a form and at a time
2 specified by the board to ensure that the fund and the
3 corporation can meet their financing obligations.
4 4. Any assessment authority not used for the contract
5 year may be used for a subsequent contract year. If, for a
6 subsequent contract year, the board determines that the amount
7 of revenue produced under subsection (5) is insufficient to
8 fund the obligations, costs, and expenses of the fund and the
9 corporation, including repayment of revenue bonds and that
10 portion of the debt service coverage not met by the
11 reimbursement premiums for that contract year, the board shall
12 direct the Office of Insurance Regulation to levy an emergency
13 assessment up to an amount not exceeding the amount of unused
14 assessment authority from a previous contract year or years,
15 plus an additional 4 2 percent if the Governor has declared a
16 state of emergency under s. 252.36 due to the occurrence of a
17 covered event. Any assessment authority not used for the
18 contract year may be used for a subsequent contract year. As
19 used in this subsection, the term "property and casualty
20 business" includes all lines of business identified on Form 2,
21 Exhibit of Premiums and Losses, in the annual statement
22 required of authorized insurers by s. 624.424 and any rules
23 adopted under such section, except for those lines identified
24 as accident and health insurance, workers' compensation,
25 medical malpractice, and policies written in conjunction with
26 the National Flood Insurance Program. In addition, the term
27 "property and casualty business" means all lines of business
28 procured pursuant to part VIII of chapter 626, except those
29 lines identified as accident and health, workers'
30 compensation, and medical malpractice. The annual assessments
31 under this subparagraph shall continue as long as the revenue
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1 bonds issued with respect to which the assessment was imposed
2 are outstanding, unless adequate provision has been made for
3 the payment of such bonds pursuant to the documents
4 authorizing issuance of the bonds. An assessable insurer or
5 assessable insured shall not at any time be subject to
6 aggregate annual assessments under this subparagraph of more
7 than 4 2 percent of premium, except that in the case of a
8 declared emergency, an assessable insurer or assessable
9 insured shall not at any time be subject to aggregate annual
10 assessments under this subparagraph of more than 10 6 percent
11 of premium; provided, no more than 6 4 percent may be assessed
12 for obligations arising due to losses in any one contract
13 year.
14 5. Any rate filing or portion of a rate filing
15 reflecting a rate change attributable entirely to the
16 assessment levied under this paragraph subparagraph shall be
17 deemed approved when made, subject to the authority of the
18 Office of Insurance Regulation to require actuarial
19 justification as to the adequacy of any rate at any time. If
20 the rate filing reflects only a rate change attributable to
21 the assessment under this paragraph, the filing may consist of
22 a certification so stating.
23 6. The assessments otherwise payable to the
24 corporation pursuant to this paragraph subparagraph shall be
25 paid instead to the fund unless and until the Office of
26 Insurance Regulation and the Florida Surplus Lines Service
27 Office have has received from the corporation and the fund a
28 notice, which shall be conclusive and upon which they the
29 Office of Insurance Regulation may rely without further
30 inquiry, that the corporation has issued bonds and the fund
31 has no agreements in effect with local governments pursuant to
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1 paragraph (c) (b). On or after the date of such notice and
2 until such date as the corporation has no bonds outstanding,
3 the fund shall have no right, title, or interest in or to the
4 assessments, except as provided in the fund's agreements with
5 the corporation.
6 7. Emergency assessments are not premium and are not
7 subject to premium or surplus lines tax, fees, or commissions;
8 however, the failure by an assessable insured to pay an
9 emergency assessment shall be treated as a failure to pay
10 premium.
11 (c)(b) Revenue bond issuance through counties or
12 municipalities.--
13 1. If the board elects to enter into agreements with
14 local governments for the issuance of revenue bonds for the
15 benefit of the fund, the board shall enter into such contracts
16 with one or more local governments, including agreements
17 providing for the pledge of revenues, as are necessary to
18 effect such issuance. The governing body of a county or
19 municipality is authorized to issue bonds as defined in s.
20 125.013 or s. 166.101 from time to time to fund an assistance
21 program, in conjunction with the Florida Hurricane Catastrophe
22 Fund, for the purposes set forth in this section or for the
23 purpose of paying the costs of construction, reconstruction,
24 repair, restoration, and other costs associated with damage to
25 properties of policyholders of covered policies due to the
26 occurrence of a hurricane by assuring that policyholders
27 located in this state are able to recover claims under
28 property insurance policies after a covered event.
29 2. In order to avoid needless and indiscriminate
30 proliferation, duplication, and fragmentation of such
31 assistance programs, any local government may provide for the
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1 payment of fund reimbursements, regardless of whether or not
2 the losses for which reimbursement is made occurred within or
3 outside of the territorial jurisdiction of the local
4 government.
5 3. The state hereby covenants with holders of bonds
6 issued under this paragraph that the state will not repeal or
7 abrogate the power of the board to direct the Office of
8 Insurance Regulation to levy the assessments and to collect
9 the proceeds of the revenues pledged to the payment of such
10 bonds as long as any such bonds remain outstanding unless
11 adequate provision has been made for the payment of such bonds
12 pursuant to the documents authorizing the issuance of such
13 bonds.
14 4. There shall be no liability on the part of, and no
15 cause of action shall arise against any members or employees
16 of the governing body of a local government for any actions
17 taken by them in the performance of their duties under this
18 paragraph.
19 (d)(c) Florida Hurricane Catastrophe Fund Finance
20 Corporation.--
21 1. In addition to the findings and declarations in
22 subsection (1), the Legislature also finds and declares that:
23 a. The public benefits corporation created under this
24 paragraph will provide a mechanism necessary for the
25 cost-effective and efficient issuance of bonds. This mechanism
26 will eliminate unnecessary costs in the bond issuance process,
27 thereby increasing the amounts available to pay reimbursement
28 for losses to property sustained as a result of hurricane
29 damage.
30 b. The purpose of such bonds is to fund reimbursements
31 through the Florida Hurricane Catastrophe Fund to pay for the
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1 costs of construction, reconstruction, repair, restoration,
2 and other costs associated with damage to properties of
3 policyholders of covered policies due to the occurrence of a
4 hurricane.
5 c. The efficacy of the financing mechanism will be
6 enhanced by the corporation's ownership of the assessments, by
7 the insulation of the assessments from possible bankruptcy
8 proceedings, and by covenants of the state with the
9 corporation's bondholders.
10 2.a. There is created a public benefits corporation,
11 which is an instrumentality of the state, to be known as the
12 Florida Hurricane Catastrophe Fund Finance Corporation.
13 b. The corporation shall operate under a five-member
14 board of directors consisting of the Governor or a designee,
15 the Chief Financial Officer or a designee, the Attorney
16 General or a designee, the director of the Division of Bond
17 Finance of the State Board of Administration, and the senior
18 employee of the State Board of Administration responsible for
19 operations of the Florida Hurricane Catastrophe Fund.
20 c. The corporation has all of the powers of
21 corporations under chapter 607 and under chapter 617, subject
22 only to the provisions of this subsection.
23 d. The corporation may issue bonds and engage in such
24 other financial transactions as are necessary to provide
25 sufficient funds to achieve the purposes of this section.
26 e. The corporation may invest in any of the
27 investments authorized under s. 215.47.
28 f. There shall be no liability on the part of, and no
29 cause of action shall arise against, any board members or
30 employees of the corporation for any actions taken by them in
31 the performance of their duties under this paragraph.
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1 3.a. In actions under chapter 75 to validate any bonds
2 issued by the corporation, the notice required by s. 75.06
3 shall be published only in Leon County and in two newspapers
4 of general circulation in the state, and the complaint and
5 order of the court shall be served only on the State Attorney
6 of the Second Judicial Circuit.
7 b. The state hereby covenants with holders of bonds of
8 the corporation that the state will not repeal or abrogate the
9 power of the board to direct the Office of Insurance
10 Regulation to levy the assessments and to collect the proceeds
11 of the revenues pledged to the payment of such bonds as long
12 as any such bonds remain outstanding unless adequate provision
13 has been made for the payment of such bonds pursuant to the
14 documents authorizing the issuance of such bonds.
15 4. The bonds of the corporation are not a debt of the
16 state or of any political subdivision, and neither the state
17 nor any political subdivision is liable on such bonds. The
18 corporation does not have the power to pledge the credit, the
19 revenues, or the taxing power of the state or of any political
20 subdivision. The credit, revenues, or taxing power of the
21 state or of any political subdivision shall not be deemed to
22 be pledged to the payment of any bonds of the corporation.
23 5.a. The property, revenues, and other assets of the
24 corporation; the transactions and operations of the
25 corporation and the income from such transactions and
26 operations; and all bonds issued under this paragraph and
27 interest on such bonds are exempt from taxation by the state
28 and any political subdivision, including the intangibles tax
29 under chapter 199 and the income tax under chapter 220. This
30 exemption does not apply to any tax imposed by chapter 220 on
31 interest, income, or profits on debt obligations owned by
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1 corporations other than the Florida Hurricane Catastrophe Fund
2 Finance Corporation.
3 b. All bonds of the corporation shall be and
4 constitute legal investments without limitation for all public
5 bodies of this state; for all banks, trust companies, savings
6 banks, savings associations, savings and loan associations,
7 and investment companies; for all administrators, executors,
8 trustees, and other fiduciaries; for all insurance companies
9 and associations and other persons carrying on an insurance
10 business; and for all other persons who are now or may
11 hereafter be authorized to invest in bonds or other
12 obligations of the state and shall be and constitute eligible
13 securities to be deposited as collateral for the security of
14 any state, county, municipal, or other public funds. This
15 sub-subparagraph shall be considered as additional and
16 supplemental authority and shall not be limited without
17 specific reference to this sub-subparagraph.
18 6. The corporation and its corporate existence shall
19 continue until terminated by law; however, no such law shall
20 take effect as long as the corporation has bonds outstanding
21 unless adequate provision has been made for the payment of
22 such bonds pursuant to the documents authorizing the issuance
23 of such bonds. Upon termination of the existence of the
24 corporation, all of its rights and properties in excess of its
25 obligations shall pass to and be vested in the state.
26 (e)(d) Protection of bondholders.--
27 1. As long as the corporation has any bonds
28 outstanding, neither the fund nor the corporation shall have
29 the authority to file a voluntary petition under chapter 9 of
30 the federal Bankruptcy Code or such corresponding chapter or
31 sections as may be in effect, from time to time, and neither
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1 any public officer nor any organization, entity, or other
2 person shall authorize the fund or the corporation to be or
3 become a debtor under chapter 9 of the federal Bankruptcy Code
4 or such corresponding chapter or sections as may be in effect,
5 from time to time, during any such period.
6 2. The state hereby covenants with holders of bonds of
7 the corporation that the state will not limit or alter the
8 denial of authority under this paragraph or the rights under
9 this section vested in the fund or the corporation to fulfill
10 the terms of any agreements made with such bondholders or in
11 any way impair the rights and remedies of such bondholders as
12 long as any such bonds remain outstanding unless adequate
13 provision has been made for the payment of such bonds pursuant
14 to the documents authorizing the issuance of such bonds.
15 3. Notwithstanding any other provision of law, any
16 pledge of or other security interest in revenue, money,
17 accounts, contract rights, general intangibles, or other
18 personal property made or created by the fund or the
19 corporation shall be valid, binding, and perfected from the
20 time such pledge is made or other security interest attaches
21 without any physical delivery of the collateral or further act
22 and the lien of any such pledge or other security interest
23 shall be valid, binding, and perfected against all parties
24 having claims of any kind in tort, contract, or otherwise
25 against the fund or the corporation irrespective of whether or
26 not such parties have notice of such claims. No instrument by
27 which such a pledge or security interest is created nor any
28 financing statement need be recorded or filed.
29 (7) ADDITIONAL POWERS AND DUTIES.--
30 (a) The board may procure reinsurance from reinsurers
31 acceptable to the Office of Insurance Regulation approved
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1 under s. 624.610 for the purpose of maximizing the capacity of
2 the fund.
3 (b) In addition to borrowing under subsection (6), the
4 board may also borrow from, or enter into other financing
5 arrangements with, any market sources at prevailing interest
6 rates.
7 (c) Each fiscal year, the Legislature shall
8 appropriate from the investment income of the Florida
9 Hurricane Catastrophe Fund an amount no less than $10 million
10 and no more than 35 percent of the investment income based
11 upon the most recent fiscal year-end audited financial
12 statements from the prior fiscal year for the purpose of
13 providing funding for local governments, state agencies,
14 public and private educational institutions, and nonprofit
15 organizations to support programs intended to improve
16 hurricane preparedness, reduce potential losses in the event
17 of a hurricane, provide research into means to reduce such
18 losses, educate or inform the public as to means to reduce
19 hurricane losses, assist the public in determining the
20 appropriateness of particular upgrades to structures or in the
21 financing of such upgrades, or protect local infrastructure
22 from potential damage from a hurricane. Moneys shall first be
23 available for appropriation under this paragraph in fiscal
24 year 1997-1998. Moneys in excess of the $10 million specified
25 in this paragraph shall not be available for appropriation
26 under this paragraph if the State Board of Administration
27 finds that an appropriation of investment income from the fund
28 would jeopardize the actuarial soundness of the fund.
29 (d) The board may allow insurers to comply with
30 reporting requirements and reporting format requirements by
31 using alternative methods of reporting if the proper
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1 administration of the fund is not thereby impaired and if the
2 alternative methods produce data which is consistent with the
3 purposes of this section.
4 (e) In order to assure the equitable operation of the
5 fund, the board may impose a reasonable fee on an insurer to
6 recover costs involved in reprocessing inaccurate, incomplete,
7 or untimely exposure data submitted by the insurer.
8 (16) For the 2002-2003 fiscal year only, the State
9 Board of Administration shall disburse funds, by nonoperating
10 transfer, from the Florida Hurricane Catastrophe Fund to the
11 Ecosystem Management and Restoration Trust Fund of the
12 Department of Environmental Protection in an amount equal to
13 8.47 percent of the appropriation made from the Ecosystem
14 Management and Restoration Trust Fund for "Grants and Aids to
15 Local Governments and Non-State Entities - Fixed Capital
16 Outlay, Statewide Restoration Projects" in the 2002-2003
17 General Appropriations Act. This subsection expires July 1,
18 2003.
19 Section 2. This act shall take effect July 1, 2004.
20
21 *****************************************
22 SENATE SUMMARY
23 Revises a variety of provisions relating to the Florida
Hurricane Catastrophe Fund. Redefines terms and defines
24 the term "corporation." Provides for interest on
delinquent remittances. Increases the maximum payable
25 under reimbursement contracts. Requires certain
information to be given insurers. Revises proceedings
26 relating to emergency assessments, including amounts
assessed and method of collection. (See bill for
27 details.)
28
29
30
31
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