Florida Senate - 2005 SENATOR AMENDMENT
Bill No. CS for CS for SB 1912
Barcode 861332
CHAMBER ACTION
Senate House
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05/04/2005 11:08 AM .
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11 Senator Argenziano moved the following amendment:
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13 Senate Amendment (with title amendment)
14 On page 39, between lines 20 and 21,
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16 insert:
17 Section 34. Paragraph (c) of subsection (6) of section
18 627.351, Florida Statutes, is amended to read:
19 627.351 Insurance risk apportionment plans.--
20 (6) CITIZENS PROPERTY INSURANCE CORPORATION.--
21 (c) The plan of operation of the corporation:
22 1. Must provide for adoption of residential property
23 and casualty insurance policy forms and commercial residential
24 and nonresidential property insurance forms, which forms must
25 be approved by the office prior to use. The corporation shall
26 adopt the following policy forms:
27 a. Standard personal lines policy forms that are
28 comprehensive multiperil policies providing full coverage of a
29 residential property equivalent to the coverage provided in
30 the private insurance market under an HO-3, HO-4, or HO-6
31 policy.
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Florida Senate - 2005 SENATOR AMENDMENT
Bill No. CS for CS for SB 1912
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1 b. Basic personal lines policy forms that are policies
2 similar to an HO-8 policy or a dwelling fire policy that
3 provide coverage meeting the requirements of the secondary
4 mortgage market, but which coverage is more limited than the
5 coverage under a standard policy.
6 c. Commercial lines residential policy forms that are
7 generally similar to the basic perils of full coverage
8 obtainable for commercial residential structures in the
9 admitted voluntary market.
10 d. Personal lines and commercial lines residential
11 property insurance forms that cover the peril of wind only.
12 The forms are applicable only to residential properties
13 located in areas eligible for coverage under the high-risk
14 account referred to in sub-subparagraph (b)2.a.
15 e. Commercial lines nonresidential property insurance
16 forms that cover the peril of wind only. The forms are
17 applicable only to nonresidential properties located in areas
18 eligible for coverage under the high-risk account referred to
19 in sub-subparagraph (b)2.a.
20 2.a. Must provide that the corporation adopt a program
21 in which the corporation and authorized insurers enter into
22 quota share primary insurance agreements for hurricane
23 coverage, as defined in s. 627.4025(2)(a), for eligible risks,
24 and adopt property insurance forms for eligible risks which
25 cover the peril of wind only. As used in this subsection, the
26 term:
27 (I) "Quota share primary insurance" means an
28 arrangement in which the primary hurricane coverage of an
29 eligible risk is provided in specified percentages by the
30 corporation and an authorized insurer. The corporation and
31 authorized insurer are each solely responsible for a specified
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Florida Senate - 2005 SENATOR AMENDMENT
Bill No. CS for CS for SB 1912
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1 percentage of hurricane coverage of an eligible risk as set
2 forth in a quota share primary insurance agreement between the
3 corporation and an authorized insurer and the insurance
4 contract. The responsibility of the corporation or authorized
5 insurer to pay its specified percentage of hurricane losses of
6 an eligible risk, as set forth in the quota share primary
7 insurance agreement, may not be altered by the inability of
8 the other party to the agreement to pay its specified
9 percentage of hurricane losses. Eligible risks that are
10 provided hurricane coverage through a quota share primary
11 insurance arrangement must be provided policy forms that set
12 forth the obligations of the corporation and authorized
13 insurer under the arrangement, clearly specify the percentages
14 of quota share primary insurance provided by the corporation
15 and authorized insurer, and conspicuously and clearly state
16 that neither the authorized insurer nor the corporation may be
17 held responsible beyond its specified percentage of coverage
18 of hurricane losses.
19 (II) "Eligible risks" means personal lines residential
20 and commercial lines residential risks that meet the
21 underwriting criteria of the corporation and are located in
22 areas that were eligible for coverage by the Florida Windstorm
23 Underwriting Association on January 1, 2002.
24 b. The corporation may enter into quota share primary
25 insurance agreements with authorized insurers at corporation
26 coverage levels of 90 percent and 50 percent.
27 c. If the corporation determines that additional
28 coverage levels are necessary to maximize participation in
29 quota share primary insurance agreements by authorized
30 insurers, the corporation may establish additional coverage
31 levels. However, the corporation's quota share primary
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Florida Senate - 2005 SENATOR AMENDMENT
Bill No. CS for CS for SB 1912
Barcode 861332
1 insurance coverage level may not exceed 90 percent.
2 d. Any quota share primary insurance agreement entered
3 into between an authorized insurer and the corporation must
4 provide for a uniform specified percentage of coverage of
5 hurricane losses, by county or territory as set forth by the
6 corporation board, for all eligible risks of the authorized
7 insurer covered under the quota share primary insurance
8 agreement.
9 e. Any quota share primary insurance agreement entered
10 into between an authorized insurer and the corporation is
11 subject to review and approval by the office. However, such
12 agreement shall be authorized only as to insurance contracts
13 entered into between an authorized insurer and an insured who
14 is already insured by the corporation for wind coverage.
15 f. For all eligible risks covered under quota share
16 primary insurance agreements, the exposure and coverage levels
17 for both the corporation and authorized insurers shall be
18 reported by the corporation to the Florida Hurricane
19 Catastrophe Fund. For all policies of eligible risks covered
20 under quota share primary insurance agreements, the
21 corporation and the authorized insurer shall maintain complete
22 and accurate records for the purpose of exposure and loss
23 reimbursement audits as required by Florida Hurricane
24 Catastrophe Fund rules. The corporation and the authorized
25 insurer shall each maintain duplicate copies of policy
26 declaration pages and supporting claims documents.
27 g. The corporation board shall establish in its plan
28 of operation standards for quota share agreements which ensure
29 that there is no discriminatory application among insurers as
30 to the terms of quota share agreements, pricing of quota share
31 agreements, incentive provisions if any, and consideration
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Florida Senate - 2005 SENATOR AMENDMENT
Bill No. CS for CS for SB 1912
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1 paid for servicing policies or adjusting claims.
2 h. The quota share primary insurance agreement between
3 the corporation and an authorized insurer must set forth the
4 specific terms under which coverage is provided, including,
5 but not limited to, the sale and servicing of policies issued
6 under the agreement by the insurance agent of the authorized
7 insurer producing the business, the reporting of information
8 concerning eligible risks, the payment of premium to the
9 corporation, and arrangements for the adjustment and payment
10 of hurricane claims incurred on eligible risks by the claims
11 adjuster and personnel of the authorized insurer. Entering
12 into a quota sharing insurance agreement between the
13 corporation and an authorized insurer shall be voluntary and
14 at the discretion of the authorized insurer.
15 3. May provide that the corporation may employ or
16 otherwise contract with individuals or other entities to
17 provide administrative or professional services that may be
18 appropriate to effectuate the plan. The corporation shall have
19 the power to borrow funds, by issuing bonds or by incurring
20 other indebtedness, and shall have other powers reasonably
21 necessary to effectuate the requirements of this subsection.
22 The corporation may, but is not required to, seek judicial
23 validation of its bonds or other indebtedness under chapter
24 75. The corporation may issue bonds or incur other
25 indebtedness, or have bonds issued on its behalf by a unit of
26 local government pursuant to subparagraph (g)2., in the
27 absence of a hurricane or other weather-related event, upon a
28 determination by the corporation, subject to approval by the
29 office, that such action would enable it to efficiently meet
30 the financial obligations of the corporation and that such
31 financings are reasonably necessary to effectuate the
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1 requirements of this subsection. The corporation is authorized
2 to take all actions needed to facilitate tax-free status for
3 any such bonds or indebtedness, including formation of trusts
4 or other affiliated entities. The corporation shall have the
5 authority to pledge assessments, projected recoveries from the
6 Florida Hurricane Catastrophe Fund, other reinsurance
7 recoverables, market equalization and other surcharges, and
8 other funds available to the corporation as security for bonds
9 or other indebtedness. In recognition of s. 10, Art. I of the
10 State Constitution, prohibiting the impairment of obligations
11 of contracts, it is the intent of the Legislature that no
12 action be taken whose purpose is to impair any bond indenture
13 or financing agreement or any revenue source committed by
14 contract to such bond or other indebtedness.
15 4. Must require that the corporation operate subject
16 to the supervision and approval of a board of governors
17 consisting of 7 individuals who are residents of this state,
18 from different geographical areas of this state, appointed by
19 the Chief Financial Officer. The Chief Financial Officer shall
20 designate one of the appointees as chair. All board members
21 serve at the pleasure of the Chief Financial Officer. All
22 board members, including the chair, must be appointed to serve
23 for 3-year terms beginning annually on a date designated by
24 the plan. Any board vacancy shall be filled for the unexpired
25 term by the Chief Financial Officer. The Chief Financial
26 Officer shall appoint a technical advisory group to provide
27 information and advice to the board of governors in connection
28 with the board's duties under this subsection. The executive
29 director and senior managers of the corporation shall be
30 engaged by the Chief Financial Officer and serve at the
31 pleasure of the Chief Financial Officer. The executive
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Florida Senate - 2005 SENATOR AMENDMENT
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1 director is responsible for employing other staff as the
2 corporation may require, subject to review and concurrence by
3 the office of the Chief Financial Officer.
4 5. Must provide a procedure for determining the
5 eligibility of a risk for coverage, as follows:
6 a. Subject to the provisions of s. 627.3517, with
7 respect to personal lines residential risks, if the risk is
8 offered coverage from an authorized insurer at the insurer's
9 approved rate under either a standard policy including wind
10 coverage or, if consistent with the insurer's underwriting
11 rules as filed with the office, a basic policy including wind
12 coverage, the risk is not eligible for any policy issued by
13 the corporation. If the risk is not able to obtain any such
14 offer, the risk is eligible for either a standard policy
15 including wind coverage or a basic policy including wind
16 coverage issued by the corporation; however, if the risk could
17 not be insured under a standard policy including wind coverage
18 regardless of market conditions, the risk shall be eligible
19 for a basic policy including wind coverage unless rejected
20 under subparagraph 8. The corporation shall determine the type
21 of policy to be provided on the basis of objective standards
22 specified in the underwriting manual and based on generally
23 accepted underwriting practices.
24 (I) If the risk accepts an offer of coverage through
25 the market assistance plan or an offer of coverage through a
26 mechanism established by the corporation before a policy is
27 issued to the risk by the corporation or during the first 30
28 days of coverage by the corporation, and the producing agent
29 who submitted the application to the plan or to the
30 corporation is not currently appointed by the insurer, the
31 insurer shall:
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Bill No. CS for CS for SB 1912
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1 (A) Pay to the producing agent of record of the
2 policy, for the first year, an amount that is the greater of
3 the insurer's usual and customary commission for the type of
4 policy written or a fee equal to the usual and customary
5 commission of the corporation; or
6 (B) Offer to allow the producing agent of record of
7 the policy to continue servicing the policy for a period of
8 not less than 1 year and offer to pay the agent the greater of
9 the insurer's or the corporation's usual and customary
10 commission for the type of policy written.
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12 If the producing agent is unwilling or unable to accept
13 appointment, the new insurer shall pay the agent in accordance
14 with sub-sub-sub-subparagraph (A).
15 (II) When the corporation enters into a contractual
16 agreement for a take-out plan, the producing agent of record
17 of the corporation policy is entitled to retain any unearned
18 commission on the policy, and the insurer shall:
19 (A) Pay to the producing agent of record of the
20 corporation policy, for the first year, an amount that is the
21 greater of the insurer's usual and customary commission for
22 the type of policy written or a fee equal to the usual and
23 customary commission of the corporation; or
24 (B) Offer to allow the producing agent of record of
25 the corporation policy to continue servicing the policy for a
26 period of not less than 1 year and offer to pay the agent the
27 greater of the insurer's or the corporation's usual and
28 customary commission for the type of policy written.
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30 If the producing agent is unwilling or unable to accept
31 appointment, the new insurer shall pay the agent in accordance
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Bill No. CS for CS for SB 1912
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1 with sub-sub-sub-subparagraph (A).
2 b. With respect to commercial lines residential risks,
3 if the risk is offered coverage under a policy including wind
4 coverage from an authorized insurer at its approved rate, the
5 risk is not eligible for any policy issued by the corporation.
6 If the risk is not able to obtain any such offer, the risk is
7 eligible for a policy including wind coverage issued by the
8 corporation.
9 (I) If the risk accepts an offer of coverage through
10 the market assistance plan or an offer of coverage through a
11 mechanism established by the corporation before a policy is
12 issued to the risk by the corporation or during the first 30
13 days of coverage by the corporation, and the producing agent
14 who submitted the application to the plan or the corporation
15 is not currently appointed by the insurer, the insurer shall:
16 (A) Pay to the producing agent of record of the
17 policy, for the first year, an amount that is the greater of
18 the insurer's usual and customary commission for the type of
19 policy written or a fee equal to the usual and customary
20 commission of the corporation; or
21 (B) Offer to allow the producing agent of record of
22 the policy to continue servicing the policy for a period of
23 not less than 1 year and offer to pay the agent the greater of
24 the insurer's or the corporation's usual and customary
25 commission for the type of policy written.
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27 If the producing agent is unwilling or unable to accept
28 appointment, the new insurer shall pay the agent in accordance
29 with sub-sub-sub-subparagraph (A).
30 (II) When the corporation enters into a contractual
31 agreement for a take-out plan, the producing agent of record
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1 of the corporation policy is entitled to retain any unearned
2 commission on the policy, and the insurer shall:
3 (A) Pay to the producing agent of record of the
4 corporation policy, for the first year, an amount that is the
5 greater of the insurer's usual and customary commission for
6 the type of policy written or a fee equal to the usual and
7 customary commission of the corporation; or
8 (B) Offer to allow the producing agent of record of
9 the corporation policy to continue servicing the policy for a
10 period of not less than 1 year and offer to pay the agent the
11 greater of the insurer's or the corporation's usual and
12 customary commission for the type of policy written.
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14 If the producing agent is unwilling or unable to accept
15 appointment, the new insurer shall pay the agent in accordance
16 with sub-sub-sub-subparagraph (A).
17 6. Must include rules for classifications of risks and
18 rates therefor.
19 7. Must provide that if premium and investment income
20 for an account attributable to a particular calendar year are
21 in excess of projected losses and expenses for the account
22 attributable to that year, such excess shall be held in
23 surplus in the account. Such surplus shall be available to
24 defray deficits in that account as to future years and shall
25 be used for that purpose prior to assessing assessable
26 insurers and assessable insureds as to any calendar year.
27 8. Must provide objective criteria and procedures to
28 be uniformly applied for all applicants in determining whether
29 an individual risk is so hazardous as to be uninsurable. In
30 making this determination and in establishing the criteria and
31 procedures, the following shall be considered:
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1 a. Whether the likelihood of a loss for the individual
2 risk is substantially higher than for other risks of the same
3 class; and
4 b. Whether the uncertainty associated with the
5 individual risk is such that an appropriate premium cannot be
6 determined.
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8 The acceptance or rejection of a risk by the corporation shall
9 be construed as the private placement of insurance, and the
10 provisions of chapter 120 shall not apply.
11 9. Must provide that the corporation shall make its
12 best efforts to procure catastrophe reinsurance at reasonable
13 rates, as determined by the board of governors.
14 10. Must provide that in the event of regular deficit
15 assessments under sub-subparagraph (b)3.a. or sub-subparagraph
16 (b)3.b., in the personal lines account, the commercial lines
17 residential account, or the high-risk account, the corporation
18 shall levy upon corporation policyholders in its next rate
19 filing, or by a separate rate filing solely for this purpose,
20 a market equalization surcharge arising from a regular
21 assessment in such account in a percentage equal to the total
22 amount of such regular assessments divided by the aggregate
23 statewide direct written premium for subject lines of business
24 for the prior calendar year. Market equalization surcharges
25 under this subparagraph are not considered premium and are not
26 subject to commissions, fees, or premium taxes; however,
27 failure to pay a market equalization surcharge shall be
28 treated as failure to pay premium.
29 11. The policies issued by the corporation must
30 provide that, if the corporation or the market assistance plan
31 obtains an offer from an authorized insurer to cover the risk
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1 at its approved rates, the risk is no longer eligible for
2 renewal through the corporation.
3 12. Corporation policies and applications must include
4 a notice that the corporation policy could, under this
5 section, be replaced with a policy issued by an authorized
6 insurer that does not provide coverage identical to the
7 coverage provided by the corporation. The notice shall also
8 specify that acceptance of corporation coverage creates a
9 conclusive presumption that the applicant or policyholder is
10 aware of this potential.
11 13. May establish, subject to approval by the office,
12 different eligibility requirements and operational procedures
13 for any line or type of coverage for any specified county or
14 area if the board determines that such changes to the
15 eligibility requirements and operational procedures are
16 justified due to the voluntary market being sufficiently
17 stable and competitive in such area or for such line or type
18 of coverage and that consumers who, in good faith, are unable
19 to obtain insurance through the voluntary market through
20 ordinary methods would continue to have access to coverage
21 from the corporation. When coverage is sought in connection
22 with a real property transfer, such requirements and
23 procedures shall not provide for an effective date of coverage
24 later than the date of the closing of the transfer as
25 established by the transferor, the transferee, and, if
26 applicable, the lender.
27 14. Must provide that, with respect to the high-risk
28 account, any assessable insurer with a surplus as to
29 policyholders of $25 million or less writing 25 percent or
30 more of its total countrywide property insurance premiums in
31 this state may petition the office, within the first 90 days
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1 of each calendar year, to qualify as a limited apportionment
2 company. In no event shall a limited apportionment company be
3 required to participate in the portion of any assessment,
4 within the high-risk account, pursuant to sub-subparagraph
5 (b)3.a. or sub-subparagraph (b)3.b. in the aggregate which
6 exceeds $50 million after payment of available high-risk
7 account funds in any calendar year. However, a limited
8 apportionment company shall collect from its policyholders any
9 emergency assessment imposed under sub-subparagraph (b)3.d.
10 The plan shall provide that, if the office determines that any
11 regular assessment will result in an impairment of the surplus
12 of a limited apportionment company, the office may direct that
13 all or part of such assessment be deferred as provided in
14 subparagraph (g)4. However, there shall be no limitation or
15 deferment of an emergency assessment to be collected from
16 policyholders under sub-subparagraph (b)3.d.
17 15. Must provide that the corporation appoint as its
18 licensed agents only those agents who also hold an appointment
19 as defined in s. 626.015(3) with an insurer who at the time of
20 the agent's initial or renewal appointment by the corporation
21 is authorized to write and is actually writing personal lines
22 residential property coverage, commercial residential property
23 coverage, or commercial nonresidential property coverage
24 within the state. Prior to initial or renewal appointment by
25 the corporation, each agent must successfully complete an
26 education and training program prescribed by the corporation
27 and must enter into an appointment agreement with the
28 corporation.
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30 (Redesignate subsequent sections.)
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1 ================ T I T L E A M E N D M E N T ===============
2 And the title is amended as follows:
3 On page 4, line 6, after the semicolon,
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5 insert:
6 amending s. 627.351, F.S.; providing for the
7 plan of operation of the Citizens Property
8 Insurance Corporation to require that insurance
9 agents hold a specified appointment status with
10 certain insurers to be eligible for
11 reappointment by the corporation; requiring
12 that an agent must meet certain educational
13 requirements and enter into an agreement with
14 the corporation prior to appointment by the
15 corporation;
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