HB 1451

1
A bill to be entitled
2An act relating to local government revenue bonds for
3hurricane recovery; amending s. 631.54, F.S.; revising a
4definition; amending s. 631.57, F.S.; providing
5requirements and limitations for the Florida Insurance
6Guaranty Association, Inc., relating to emergency
7assessments for covered claims payable from revenue bonds
8issued by counties or municipalities; authorizing the
9association to contract with counties and municipalities
10to issue revenue bonds for certain purposes; requiring the
11Department of Financial Services to levy emergency
12assessments on certain insurers for bond repayment
13purposes; providing requirements for the department in
14levying and administering such assessments; providing
15requirements for use of bond proceeds; requiring the
16association to issue an annual report relating to use of
17bond proceeds and payment of claims; providing insurer
18rate filing requirements relating to emergency
19assessments; providing requirements for terms and
20liability of assessments; specifying assessments as not
21premium and not subject to tax, fees, or commissions;
22providing for insurer liability for emergency assessments;
23creating s. 631.695, F.S.; providing legislative findings
24and purposes; providing for issuance of revenue bonds
25through counties and municipalities to fund assistance
26programs for paying covered claims for hurricane damage;
27providing procedures, requirements, and limitations for
28counties, municipalities, and the Florida Insurance
29Guaranty Association, Inc., relating to issuance and
30validation of such bonds; providing for payments on and
31retirement of such bonds from certain emergency
32assessments; prohibiting pledging the funds, credit,
33property, and taxing power of the state, counties, and
34municipalities for payment of bonds; specifying authorized
35uses of bond proceeds; limiting the term of bonds;
36specifying a state covenant to protect bondholders from
37adverse actions relating to such bonds; specifying
38exemptions for bonds, notes, and other obligations of
39counties and municipalities from certain taxes or
40assessments on property and revenues; authorizing counties
41and municipalities to create a legal entity to exercise
42certain powers; prohibiting repeal of certain provisions
43relating to certain bonds under certain circumstances;
44providing severability; providing an effective date.
45
46Be It Enacted by the Legislature of the State of Florida:
47
48     Section 1.  Subsection (3) of section 631.54, Florida
49Statutes, is amended to read:
50     631.54  Definitions.--As used in this part:
51     (3)  "Covered claim" means an unpaid claim, including one
52of unearned premiums, which arises out of, and is within the
53coverage, and not in excess of, the applicable limits of an
54insurance policy to which this part applies, issued by an
55insurer, if such insurer becomes an insolvent insurer and the
56claimant or insured is a resident of this state at the time of
57the insured event or the property from which the claim arises is
58permanently located in this state. For entities other than an
59individual, the residence of a claimant, insured, or
60policyholder is the state in which the entity's principal place
61of business is located at the time of the insured event.
62"Covered claim" shall not include:
63     (a)  Any amount due any reinsurer, insurer, insurance pool,
64or underwriting association, sought directly or indirectly
65through a third party, as subrogation, contribution,
66indemnification, or otherwise; or
67     (b)  Any claim that would otherwise be a covered claim
68under this part that has been rejected by any other state
69guaranty fund on the grounds that an insured's net worth is
70greater than that allowed under that state's guaranty law.
71Member insurers shall have no right of subrogation,
72contribution, indemnification, or otherwise, sought directly or
73indirectly through a third party, against the insured of any
74insolvent member.
75     Section 2.  Paragraph (a) of subsection (1) and paragraph
76(d) of subsection (2) of section 631.57, Florida Statutes, are
77amended, and paragraph (e) is added to subsection (3) of said
78section, to read:
79     631.57  Powers and duties of the association.--
80     (1)  The association shall:
81     (a)1.  Be obligated to the extent of the covered claims
82existing:
83     a.  Prior to adjudication of insolvency and arising within
8430 days after the determination of insolvency;
85     b.  Before the policy expiration date if less than 30 days
86after the determination; or
87     c.  Before the insured replaces the policy or causes its
88cancellation, if she or he does so within 30 days of the
89determination.
90     2.a.  The obligation under subparagraph 1. shall include
91only that amount of each covered claim which is in excess of
92$100 and is less than $300,000, except with respect to policies
93covering condominium associations or homeowners' associations,
94which associations have a responsibility to provide insurance
95coverage on residential units within the association, the
96obligation shall include that amount of each covered property
97insurance claim which is less than $100,000 multiplied by the
98number of condominium units or other residential units; however,
99as to homeowners' associations, this sub-subparagraph
100subparagraph applies only to claims for damage or loss to
101residential units and structures attached to residential units.
102     b.  Notwithstanding sub-subparagraph a., the association
103has no obligation to pay covered claims that are to be paid from
104the proceeds of bonds issued under s. 631.695. However, the
105association shall cause emergency assessments to be made under
106paragraph (3)(e) for such covered claims, and such emergency
107assessments shall be assigned and pledged under paragraph (3)(e)
108to or on behalf of the issuer of such bonds for the benefit of
109the holders of such bonds. The association shall administer any
110such covered claims and present valid covered claims for payment
111in accordance with the provisions of the assistance program in
112connection with which such bonds have been issued.
113     3.  In no event shall the association be obligated to a
114policyholder or claimant in an amount in excess of the
115obligation of the insolvent insurer under the policy from which
116the claim arises.
117     (2)  The association may:
118     (d)  Negotiate and become a party to such contracts as are
119necessary to carry out the purpose of this part. Additionally,
120the association may enter into such contracts with a
121municipality or county or such legal entity created pursuant to
122s. 163.01(7)(g) as are necessary in order for the municipality
123or county or such legal entity to issue bonds under s. 631.695.
124In connection with the issuance of any such bonds and the
125entering into of any such necessary contracts, the association
126may agree to such terms and conditions as the association deems
127necessary and proper.
128     (3)
129     (e)1.a.  In addition to assessments otherwise authorized in
130paragraph (a) and to the extent necessary to secure the funds
131for the account specified in s. 631.55(2)(c), or to retire
132indebtedness, including, without limitation, the principal,
133redemption premium, if any, and interest on, and related costs
134of issuance of, bonds issued under s. 631.695, and the funding
135of any reserves and other payments required under the bond
136resolution or trust indenture pursuant to which such bonds have
137been issued, the department, upon certification of the board of
138directors, shall levy emergency assessments upon insurers
139holding a certificate of authority as set forth in this
140paragraph. The emergency assessments payable under this
141paragraph by any insurer shall not exceed in any single year
142more than 2 percent of that insurer's direct written premiums,
143net of refunds, in this state during the preceding calendar year
144for the kinds of insurance within the account specified in s.
145631.55(2)(c).
146     b.  Any emergency assessments authorized under this
147paragraph shall be levied by the department upon insurers
148referred to in sub-subparagraph a., upon certification as to the
149need for such assessments by the board of directors, in each
150year that bonds issued under s. 631.695 are outstanding, in such
151amounts up to such 2-percent limit as required in order to
152provide for the full and timely payment of the principal,
153redemption premium, if any, and interest on, and related costs
154of issuance of bonds issued under s. 631.695. The emergency
155assessments provided for in this paragraph are assigned and
156pledged to the municipality, county, or legal entity issuing
157bonds under s. 631.695 for the benefit of the holders of such
158bonds in order to enable such municipality, county, or legal
159entity to provide for the payment of the principal, redemption
160premium, if any, and interest on such bonds, the cost of
161issuance of such bonds, and the funding of any reserves and
162other payments required under the bond resolution or trust
163indenture pursuant to which such bonds have been issued, without
164the necessity of any further action by the association, the
165department, or any other party. To the extent bonds are issued
166under s. 631.695, the proceeds of emergency assessments levied
167under this paragraph shall be remitted directly to and
168administered by the trustee or custodian appointed for such
169bonds.
170     c.  Emergency assessments under this paragraph may be
171payable in a single payment or, at the option of the
172association, payable in 12 monthly installments with the first
173installment due and payable at the end of the month after an
174emergency assessment is levied and subsequent installments being
175due not later than the end of each succeeding month.
176     d.  The association shall issue an annual report on the
177status of the use of the bond proceeds as related to
178insolvencies caused by hurricanes. The report must contain the
179number and amount of claims paid. The association shall also
180include an analysis of the revenue generated from the additional
181assessment levied under this paragraph. The association shall
182submit a copy of the report to the President of the Senate, the
183Speaker of the House of Representatives, and the Chief Financial
184Officer within 90 days after the end of each calendar year in
185which bonds were outstanding.
186     2.  In order to ensure that insurers paying emergency
187assessments levied under this paragraph continue to charge rates
188that are not inadequate or excessive, within 90 days after being
189notified of such assessments, each insurer that is to be
190assessed pursuant to this paragraph shall make a rate filing for
191coverage included within the account specified in s.
192631.55(2)(c) and for which rates are required to be filed under
193s. 627.062. If the filing reflects a rate change that, as a
194percentage, is equal to the difference between the rate of such
195assessment and the rate of the previous year's assessment under
196this paragraph, the filing shall consist of a certification so
197stating and shall be deemed approved when made. Any rate change
198of a different percentage shall be subject to the standards and
199procedures of s. 627.062.
200     3.  An annual assessment under this paragraph shall
201continue until the bonds issued with respect to which the
202assessment was imposed are outstanding, including any bonds the
203proceeds of which were used to refund bonds issued pursuant to
204s. 631.695, unless adequate provision has been made for the
205payment of the bonds under the documents authorizing the
206issuance of such bonds.
207     4.  Emergency assessments under this paragraph are not
208premium and are not subject to the premium tax, any fees, or any
209commissions. An insurer is liable for all emergency assessments
210that the insurer collects and must treat the failure of an
211insured to pay an emergency assessment as a failure to pay the
212premium. An insurer is not liable for uncollectible emergency
213assessments.
214     Section 3.  Section 631.695, Florida Statutes, is created
215to read:
216     631.695  Revenue bond issuance through counties or
217municipalities.--
218     (1)  The Legislature finds:
219     (a)  The potential for widespread and massive damage to
220persons and property caused by hurricanes making landfall in
221this state can generate insurance claims of such a number as to
222render numerous insurers operating within this state insolvent
223and therefore unable to satisfy covered claims.
224     (b)  The inability of insureds within this state to receive
225payment of covered claims or to receive such payment on a timely
226basis creates financial and other hardships for such insureds
227and places undue burdens on the state, the affected units of
228local government, and the community at large.
229     (c)  In addition, the failure of insurers to pay covered
230claims or to pay such claims on a timely basis due to the
231insolvency of such insurers can undermine the public's
232confidence in insurers operating within this state, thereby
233adversely affecting the stability of the insurance industry in
234this state.
235     (d)  The state has previously taken action to address these
236problems by adopting the Florida Insurance Guaranty Association
237Act, which, among other things, provides a mechanism for the
238payment of covered claims under certain insurance policies to
239avoid excessive delay in payment and to avoid financial loss to
240claimants or policyholders because of the insolvency of an
241insurer.
242     (e)  In the wake of the unprecedented destruction caused by
243various hurricanes that have made landfall in this state, the
244resultant covered claims, and the number of insurers rendered
245insolvent thereby, it is evident that alternative programs must
246be developed to allow the Florida Insurance Guaranty
247Association, Inc., to more expeditiously and effectively provide
248for the payment of covered claims.
249     (f)  It is therefore determined to be in the best interests
250of, and necessary for, the protection of the public health,
251safety, and general welfare of the residents of this state, and
252for the protection and preservation of the economic stability of
253insurers operating in this state, and it is declared to be an
254essential public purpose, to permit certain municipalities and
255counties to take such actions as will provide relief to
256claimants and policyholders having covered claims against
257insolvent insurers operating in this state by expediting the
258handling and payment of covered claims.
259     (g)  To achieve the foregoing purposes, it is proper to
260authorize municipalities and counties of this state
261substantially affected by the landfall of a category 1 or
262greater hurricane to issue bonds to assist the Florida Insurance
263Guaranty Association, Inc., in expediting the handling and
264payment of covered claims of insolvent insurers.
265     (h)  In order to avoid the needless and indiscriminate
266proliferation, duplication, and fragmentation of such assistance
267programs, it is in the best interests of the residents of this
268state to authorize municipalities and counties severely affected
269by a category 1 or greater hurricane to provide for the payment
270of covered claims beyond their territorial limits in the
271implementation of such programs.
272     (i)  It is a paramount public purpose for municipalities
273and counties substantially affected by the landfall of a
274category 1 or greater hurricane to be able to issue bonds for
275the purposes described in this section. Such issuance shall
276provide assistance to citizens located within said
277municipalities and counties, as well as to other residents of
278this state.
279     (2)  The governing body of any municipality or county the
280residents of which have been substantially affected by a
281category 1 or greater hurricane may issue bonds to fund an
282assistance program in conjunction with, and with the consent of,
283the Florida Insurance Guaranty Association, Inc., for the
284purpose of paying claimants' or policyholders' covered claims as
285defined in s. 631.54 arising through the insolvency of an
286insurer, which insolvency is determined by the Florida Insurance
287Guaranty Association, Inc., to have been a result of a category
2881 or greater hurricane, regardless of whether such claimants or
289policyholders are residents of such municipality or county or
290the property to which such claim relates is located within or
291outside the territorial jurisdiction of such municipality or
292county. The power of a municipality or county to issue bonds as
293described in this section is in addition to any powers granted
294by law and may not be abrogated or restricted by any provisions
295in such municipality's or county's charter. A municipality or
296county issuing bonds for this purpose shall enter into such
297contracts with the Florida Insurance Guaranty Association, Inc.,
298or any entity acting on behalf of the Florida Insurance Guaranty
299Association, Inc., as are necessary to implement the assistance
300program. Any bonds issued by a municipality or county or
301combination thereof under this subsection shall be payable from
302and secured by moneys received by or on behalf of the
303municipality or county from emergency assessments levied under
304s. 631.57(3)(e) and assigned and pledged to or on behalf of the
305municipality or county for the benefit of the holders of such
306bonds in connection with such assistance program. The funds,
307credit, property, and taxing power of the state or any
308municipality or county shall not be pledged for the payment of
309such bonds.
310     (3)  Bonds may be validated by such municipality or county
311pursuant to chapter 75. The proceeds of such bonds may be used
312to pay covered claims of insolvent insurers; to refinance or
313replace previously existing borrowings or financial
314arrangements; to pay interest on bonds; to fund reserves for the
315bonds; to pay expenses incident to the issuance or sale of any
316bond issued under this section, including costs of validating,
317printing, and delivering the bonds, costs of printing the
318official statement, costs of publishing notices of sale of the
319bonds, costs of obtaining credit enhancement or liquidity
320support, and related administrative expenses; or for such other
321purposes related to the financial obligations of the fund as the
322association may determine. The term of the bonds may not exceed
32330 years.
324     (4)  The state covenants with holders of bonds of the
325assistance program that the state will not take any action which
326will have a material adverse affect on such holders and will not
327repeal or abrogate the power of the board of directors of the
328association to direct the Office of Insurance Regulation to levy
329the assessments and to collect the proceeds of the revenues
330pledged to the payment of such bonds as long as any such bonds
331remain outstanding unless adequate provision has been made for
332the payment of such bonds pursuant to the documents authorizing
333the issuance of such bonds.
334     (5)  The accomplishment of the authorized purposes of such
335municipality or county under this section is in all respects for
336the benefit of the people of the state, for the increase of
337their commerce and prosperity, and for the improvement of their
338health and living conditions. Such municipality or county, in
339performing essential governmental functions in accomplishing its
340purposes, is not required to pay any taxes or assessments of any
341kind whatsoever upon any property acquired or used by the county
342or municipality for such purposes or upon any revenues at any
343time received by the county or municipality. The bonds, notes,
344and other obligations of such municipality or county, and the
345transfer of and income from such bonds, notes, and other
346obligations, including any profits made on the sale of such
347bonds, notes, and other obligations, are exempt from taxation of
348any kind by the state or by any political subdivision or other
349agency or instrumentality of the state. The exemption granted in
350this subsection is not applicable to any tax imposed by chapter
351220 on interest, income, or profits on debt obligations owned by
352corporations.
353     (6)  Two or more municipalities or counties the residents
354of which have been substantially affected by a category 1 or
355greater hurricane may create a legal entity pursuant to s.
356163.01(7)(g) to exercise the powers described in this section as
357well as those powers granted in s. 163.01(7)(g). Reference in
358this section to a municipality or county includes such legal
359entity.
360     Section 4.  No provision of s. 631.57 or s. 166.111,
361Florida Statutes, shall be repealed until such time as the
362principal, redemption premium, if any, and interest on all bonds
363issued under s. 166.111, Florida Statutes, payable and secured
364from assessments levied under s. 631.57(3)(e), Florida Statutes,
365have been paid in full or adequate provision for such payment
366has been made in accordance with the bond resolution or trust
367indenture pursuant to which such bonds were issued.
368     Section 5.  If any provision of this act or the application
369thereof to any person or circumstance is held invalid, the
370invalidity shall not affect other provisions or applications of
371the act which can be given effect without the invalid provision
372or application, and to this end the provisions of this act are
373declared severable.
374     Section 6.  This act shall take effect upon becoming a law.


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