HB 1937

CS

CHAMBER ACTION

1	The State Administration Appropriations Committee recommends the
2	following:
3
4	Council/Committee Substitute
5	Remove the entire bill and insert:
6	A bill to be entitled
7	An act relating to property insurance; amending s.
8	627.062, F.S.; limiting an insurer's recoupment of
9	reimbursement premium; providing limitations; amending s.
10	627.0628, F.S.; limiting use of certain methodologies in
11	determining hurricane loss factors for reimbursement
12	premium rates in certain rate filings; creating s.
13	627.06281, F.S.; requiring certain insurers and
14	organizations to develop, maintain, and update a public
15	hurricane loss projection model; providing reporting
16	requirements for insurers; protecting trade secret
17	information; amending s. 627.0629, F.S.; tightening a
18	limitation on rate filings based on computer models under
19	certain circumstances; amending s. 627.351, F.S.;
20	providing additional legislative intent relating to the
21	Citizens Property Insurance Corporation; specifying a
22	limitation on dwelling limits for personal lines policies;
23	revising appointment authority for members of the board of
24	governors of the corporation; requiring creation of a
25	Market Accountability Advisory Committee to assist the
26	corporation for certain purposes; providing for
27	appointment of committee members; providing for terms;
28	requiring reports to the corporation; revising
29	requirements for the plan of operation of the corporation;
30	requiring the corporation to pay bonuses to carriers
31	removing policies by assumption; providing for calculation
32	of the bonus amount; providing eligibility for carriers to
33	receive bonuses; deleting limitations on certain person
34	lines residential wind-only policies; deleting an obsolete
35	reporting requirement; specifying nonapplication of
36	certain policy requirements in counties lacking reasonable
37	degrees of competition for certain policies under certain
38	circumstances; authorizing the commission to adopt rules;
39	deleting an obsolete rate methodology panel reporting
40	requirement provision; amending s. 627.411, F.S.; revising
41	grounds for office disapproval of certain forms; amending
42	s. 627.7015, F.S.; revising purpose and scope provisions
43	relating to an alternative procedure for resolution of
44	disputed property insurance claims; providing an
45	additional criterion for excusing an insured from being
46	required to submit to certain loss appraisal processes;
47	amending s. 627.706, F.S.; revising definitions relating
48	to sinkholes; creating s. 627.7065, F.S.; providing
49	legislative findings; requiring the Department of
50	Financial Services and the Office of the Insurance
51	Consumer Advocate to consult with the Florida Geological
52	Survey and the Department of Environmental Protection to
53	implement a statewide automated database of sinkholes and
54	related activity; providing requirements for the form and
55	content of the database; authorizing the Department of
56	Financial Services to require insurers to provide certain
57	information; providing for management of the database;
58	requiring the department to investigate sinkhole activity
59	reports and include findings and investigations in the
60	database; requiring the Department of Environmental
61	Protection to report on the database to the Governor,
62	Legislature, and Chief Financial Officer; authorizing the
63	Department of Financial services to adopt implementing
64	rules; requiring the Auditor General to perform an
65	operational audit of the Citizens Property Insurance
66	Corporation; specifying audit requirements; requiring a
67	report; requiring the board of governors of the Citizens
68	Property Insurance Corporation to submit a report to the
69	Legislature relating to property and casualty insurance;
70	specifying report requirements; providing for contingent
71	effect; providing effective dates.
72
73	Be It Enacted by the Legislature of the State of Florida:
74
75	Section 1.  Subsection (5) of section 627.062, Florida
76	Statutes, is amended to read:
77	627.062  Rate standards.--
78	(5)  With respect to a rate filing involving coverage of
79	the type for which the insurer is required to pay a
80	reimbursement premium to the Florida Hurricane Catastrophe Fund,
81	the insurer may fully recoup in its property insurance premiums
82	any reimbursement premiums paid to the Florida Hurricane
83	Catastrophe Fund, together with reasonable costs of other
84	reinsurance, but may not recoup reinsurance costs that duplicate
85	coverage provided by the Florida Hurricane Catastrophe Fund. An
86	insurer may not recoup more than one year of reimbursement
87	premium at a time. Any under-recoupment from the prior year may
88	be added to the following year's reimbursement premium and any
89	over-recoupment shall be subtracted from the following year's
90	reimbursement premium.
91	Section 2.  Paragraph (c) of subsection (1) and paragraph
92	(c) of subsection (3) of section 627.0628, Florida Statutes, are
93	amended to read:
94	627.0628  Florida Commission on Hurricane Loss Projection
95	Methodology.--
96	(1)  LEGISLATIVE FINDINGS AND INTENT.--
97	(c)  It is the intent of the Legislature to create the
98	Florida Commission on Hurricane Loss Projection Methodology as a
99	panel of experts to provide the most actuarially sophisticated
100	guidelines and standards for projection of hurricane losses
101	possible, given the current state of actuarial science. It is
102	the further intent of the Legislature that such standards and
103	guidelines must be used by the State Board of Administration in
104	developing reimbursement premium rates for the Florida Hurricane
105	Catastrophe Fund, and, subject to paragraph (3)(c), may be used
106	by insurers in rate filings under s. 627.062 unless the way in
107	which such standards and guidelines were applied by the insurer
108	was erroneous, as shown by a preponderance of the evidence.
109	(3)  ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--
110	(c)  With respect to a rate filing under s. 627.062, an
111	insurer may employ actuarial methods, principles, standards,
112	models, or output ranges found by the commission to be accurate
113	or reliable to determine hurricane loss factors for use in a
114	rate filing under s. 627.062. Such, which findings and factors
115	are admissible and relevant in consideration of a rate filing by
116	the office or in any arbitration or administrative or judicial
117	review only if the office and the consumer advocate appointed
118	pursuant to s. 627.0613 have access to all of the assumptions
119	and factors that were used in developing the actuarial methods,
120	principles, standards, models, or output ranges and are not
121	precluded from disclosing such information in a rate proceeding.
122	Section 3.  Section 627.06281, Florida Statutes, is created
123	to read:
124	627.06281  Public hurricane loss projection model;
125	reporting of data by insurers.--Within 30 days after a written
126	request for loss data and associated exposure data by the office
127	or a type I center within the State University System
128	established to study mitigation, residential property insurers
129	and licensed rating and advisory organizations that compile
130	residential property insurance loss data shall provide loss data
131	and associated exposure data for residential property insurance
132	policies to the office or to a type I center within the State
133	University System established to study mitigation, as directed
134	by the office, for the purposes of developing, maintaining, and
135	updating a public model for hurricane loss projections. The loss
136	data and associated exposure data provided shall be in writing.
137	Any loss data and associated exposure data provided pursuant to
138	this section that constitutes a trade secret as defined in s.
139	812.081, and as provided in s. 815.04(3), shall be subject to
140	the provisions of s. 815.045.
141	Section 4.  Subsection (7) of section 627.0629, Florida
142	Statutes, is amended to read:
143	627.0629  Residential property insurance; rate filings.--
144	(7)  Any rate filing that is based in whole or part on data
145	from a computer model may not exceed 15 25 percent unless there
146	is a public hearing.
147	Section 5.  Paragraphs (a), (c), and (d) of subsection (6)
148	of section 627.351, Florida Statutes, are amended to read:
149	627.351  Insurance risk apportionment plans.--
150	(6)  CITIZENS PROPERTY INSURANCE CORPORATION.--
151	(a)1.  The Legislature finds that actual and threatened
152	catastrophic losses to property in this state from hurricanes
153	have caused insurers to be unwilling or unable to provide
154	property insurance coverage to the extent sought and needed. It
155	is in the public interest and a public purpose to assist in
156	assuring that property in the state is insured so as to
157	facilitate the remediation, reconstruction, and replacement of
158	damaged or destroyed property in order to reduce or avoid the
159	negative effects otherwise resulting to the public health,
160	safety, and welfare; to the economy of the state; and to the
161	revenues of the state and local governments needed to provide
162	for the public welfare. It is necessary, therefore, to provide
163	property insurance to applicants who are in good faith entitled
164	to procure insurance through the voluntary market but are unable
165	to do so. The Legislature intends by this subsection that
166	property insurance be provided and that it continues, as long as
167	necessary, through an entity organized to achieve efficiencies
168	and economies, while providing service to policyholders,
169	applicants, and agents that is no less than the quality
170	generally provided in the voluntary market, all toward the
171	achievement of the foregoing public purposes. Because it is
172	essential for the corporation to have the maximum financial
173	resources to pay claims following a catastrophic hurricane, it
174	is the intent of the Legislature that the income of the
175	corporation be exempt from federal income taxation and that
176	interest on the debt obligations issued by the corporation be
177	exempt from federal income taxation.
178	2.  The Residential Property and Casualty Joint
179	Underwriting Association originally created by this statute
180	shall be known, as of July 1, 2002, as the Citizens Property
181	Insurance Corporation. The corporation shall provide insurance
182	for residential and commercial property, for applicants who are
183	in good faith entitled, but are unable, to procure insurance
184	through the voluntary market. The corporation shall operate
185	pursuant to a plan of operation approved by order of the office.
186	The plan is subject to continuous review by the office. The
187	office may, by order, withdraw approval of all or part of a plan
188	if the office determines that conditions have changed since
189	approval was granted and that the purposes of the plan require
190	changes in the plan. For the purposes of this subsection,
191	residential coverage includes both personal lines residential
192	coverage, which consists of the type of coverage provided by
193	homeowner's, mobile home owner's, dwelling, tenant's,
194	condominium unit owner's, and similar policies, and commercial
195	lines residential coverage, which consists of the type of
196	coverage provided by condominium association, apartment
197	building, and similar policies.
198	3.  It is the intent of the Legislature that policyholders,
199	applicants, and agents of the corporation receive service and
200	treatment of the highest possible level but never less than that
201	generally provided in the voluntary market. It also is intended
202	that the corporation be held to service standards no less than
203	those applied to insurers in the voluntary market by the office
204	with respect to responsiveness, timeliness, customer courtesy,
205	and overall dealings with policyholders, applicants, or agents
206	of the corporation.
207	(c)  The plan of operation of the corporation:
208	1.  Must provide for adoption of residential property and
209	casualty insurance policy forms and commercial residential and
210	nonresidential property insurance forms, which forms must be
211	approved by the office prior to use. The corporation shall adopt
212	the following policy forms:
213	a.  Standard personal lines policy forms that are
214	comprehensive multiperil policies providing full coverage of a
215	residential property equivalent to the coverage provided in the
216	private insurance market under an HO-3, HO-4, or HO-6 policy.
217	b.  Basic personal lines policy forms that are policies
218	similar to an HO-8 policy or a dwelling fire policy that provide
219	coverage meeting the requirements of the secondary mortgage
220	market, but which coverage is more limited than the coverage
221	under a standard policy.
222	c.  Commercial lines residential policy forms that are
223	generally similar to the basic perils of full coverage
224	obtainable for commercial residential structures in the admitted
225	voluntary market.
226	d.  Personal lines and commercial lines residential
227	property insurance forms that cover the peril of wind only. The
228	forms are applicable only to residential properties located in
229	areas eligible for coverage under the high-risk account referred
230	to in sub-subparagraph (b)2.a.
231	e.  Commercial lines nonresidential property insurance
232	forms that cover the peril of wind only. The forms are
233	applicable only to nonresidential properties located in areas
234	eligible for coverage under the high-risk account referred to in
235	sub-subparagraph (b)2.a.
236
237	The dwelling limits for any personal lines policy in both the
238	personal lines account and the high-risk account may not exceed
239	$1 million.
240	2.a.  Must provide that the corporation adopt a program in
241	which the corporation and authorized insurers enter into quota
242	share primary insurance agreements for hurricane coverage, as
243	defined in s. 627.4025(2)(a), for eligible risks, and adopt
244	property insurance forms for eligible risks which cover the
245	peril of wind only. As used in this subsection, the term:
246	(I)  "Quota share primary insurance" means an arrangement
247	in which the primary hurricane coverage of an eligible risk is
248	provided in specified percentages by the corporation and an
249	authorized insurer. The corporation and authorized insurer are
250	each solely responsible for a specified percentage of hurricane
251	coverage of an eligible risk as set forth in a quota share
252	primary insurance agreement between the corporation and an
253	authorized insurer and the insurance contract. The
254	responsibility of the corporation or authorized insurer to pay
255	its specified percentage of hurricane losses of an eligible
256	risk, as set forth in the quota share primary insurance
257	agreement, may not be altered by the inability of the other
258	party to the agreement to pay its specified percentage of
259	hurricane losses. Eligible risks that are provided hurricane
260	coverage through a quota share primary insurance arrangement
261	must be provided policy forms that set forth the obligations of
262	the corporation and authorized insurer under the arrangement,
263	clearly specify the percentages of quota share primary insurance
264	provided by the corporation and authorized insurer, and
265	conspicuously and clearly state that neither the authorized
266	insurer nor the corporation may be held responsible beyond its
267	specified percentage of coverage of hurricane losses.
268	(II)  "Eligible risks" means personal lines residential and
269	commercial lines residential risks that meet the underwriting
270	criteria of the corporation and are located in areas that were
271	eligible for coverage by the Florida Windstorm Underwriting
272	Association on January 1, 2002.
273	b.  The corporation may enter into quota share primary
274	insurance agreements with authorized insurers at corporation
275	coverage levels of 90 percent and 50 percent.
276	c.  If the corporation determines that additional coverage
277	levels are necessary to maximize participation in quota share
278	primary insurance agreements by authorized insurers, the
279	corporation may establish additional coverage levels. However,
280	the corporation's quota share primary insurance coverage level
281	may not exceed 90 percent.
282	d.  Any quota share primary insurance agreement entered
283	into between an authorized insurer and the corporation must
284	provide for a uniform specified percentage of coverage of
285	hurricane losses, by county or territory as set forth by the
286	corporation board, for all eligible risks of the authorized
287	insurer covered under the quota share primary insurance
288	agreement.
289	e.  Any quota share primary insurance agreement entered
290	into between an authorized insurer and the corporation is
291	subject to review and approval by the office. However, such
292	agreement shall be authorized only as to insurance contracts
293	entered into between an authorized insurer and an insured who is
294	already insured by the corporation for wind coverage.
295	f.  For all eligible risks covered under quota share
296	primary insurance agreements, the exposure and coverage levels
297	for both the corporation and authorized insurers shall be
298	reported by the corporation to the Florida Hurricane Catastrophe
299	Fund. For all policies of eligible risks covered under quota
300	share primary insurance agreements, the corporation and the
301	authorized insurer shall maintain complete and accurate records
302	for the purpose of exposure and loss reimbursement audits as
303	required by Florida Hurricane Catastrophe Fund rules. The
304	corporation and the authorized insurer shall each maintain
305	duplicate copies of policy declaration pages and supporting
306	claims documents.
307	g.  The corporation board shall establish in its plan of
308	operation standards for quota share agreements which ensure that
309	there is no discriminatory application among insurers as to the
310	terms of quota share agreements, pricing of quota share
311	agreements, incentive provisions if any, and consideration paid
312	for servicing policies or adjusting claims.
313	h.  The quota share primary insurance agreement between the
314	corporation and an authorized insurer must set forth the
315	specific terms under which coverage is provided, including, but
316	not limited to, the sale and servicing of policies issued under
317	the agreement by the insurance agent of the authorized insurer
318	producing the business, the reporting of information concerning
319	eligible risks, the payment of premium to the corporation, and
320	arrangements for the adjustment and payment of hurricane claims
321	incurred on eligible risks by the claims adjuster and personnel
322	of the authorized insurer. Entering into a quota sharing
323	insurance agreement between the corporation and an authorized
324	insurer shall be voluntary and at the discretion of the
325	authorized insurer.
326	3.  May provide that the corporation may employ or
327	otherwise contract with individuals or other entities to provide
328	administrative or professional services that may be appropriate
329	to effectuate the plan. The corporation shall have the power to
330	borrow funds, by issuing bonds or by incurring other
331	indebtedness, and shall have other powers reasonably necessary
332	to effectuate the requirements of this subsection. The
333	corporation may, but is not required to, seek judicial
334	validation of its bonds or other indebtedness under chapter 75.
335	The corporation may issue bonds or incur other indebtedness, or
336	have bonds issued on its behalf by a unit of local government
337	pursuant to subparagraph (g)2., in the absence of a hurricane or
338	other weather-related event, upon a determination by the
339	corporation, subject to approval by the office, that such action
340	would enable it to efficiently meet the financial obligations of
341	the corporation and that such financings are reasonably
342	necessary to effectuate the requirements of this subsection. The
343	corporation is authorized to take all actions needed to
344	facilitate tax-free status for any such bonds or indebtedness,
345	including formation of trusts or other affiliated entities. The
346	corporation shall have the authority to pledge assessments,
347	projected recoveries from the Florida Hurricane Catastrophe
348	Fund, other reinsurance recoverables, market equalization and
349	other surcharges, and other funds available to the corporation
350	as security for bonds or other indebtedness. In recognition of
351	s. 10, Art. I of the State Constitution, prohibiting the
352	impairment of obligations of contracts, it is the intent of the
353	Legislature that no action be taken whose purpose is to impair
354	any bond indenture or financing agreement or any revenue source
355	committed by contract to such bond or other indebtedness.
356	4.a.  Must require that the corporation operate subject to
357	the supervision and approval of a board of governors consisting
358	of 8 7 individuals who are residents of this state, from
359	different geographical areas of this state, appointed by the
360	Chief Financial Officer. The Governor, the Chief Financial
361	Officer, the President of the Senate, and the Speaker of the
362	House of Representatives shall each appoint two members of the
363	board, effective August 1, 2005. The Chief Financial Officer
364	shall designate one of the appointees as chair. All board
365	members serve at the pleasure of the appointing officer Chief
366	Financial Officer. All board members, including the chair, must
367	be appointed to serve for 3-year terms beginning annually on a
368	date designated by the plan. Any board vacancy shall be filled
369	for the unexpired term by the appointing officer Chief Financial
370	Officer. The Chief Financial Officer shall appoint a technical
371	advisory group to provide information and advice to the board of
372	governors in connection with the board's duties under this
373	subsection. The executive director and senior managers of the
374	corporation shall be engaged by the board, as recommended by the
375	Chief Financial Officer and serve at the pleasure of the board
376	Chief Financial Officer. The executive director is responsible
377	for employing other staff as the corporation may require,
378	subject to review and concurrence by the board and office of the
379	Chief Financial Officer.
380	b.  The board shall create a Market Accountability Advisory
381	Committee to assist the corporation in developing awareness of
382	its rates and its customer and agent service levels in
383	relationship to the voluntary market insurers writing similar
384	coverage. The members of the advisory committee shall consist of
385	the following ten persons, one of whom must be elected chair by
386	the members of the committee: one representative appointed by
387	each of the three largest property and casualty insurance agents
388	independent trade associations in this state; three
389	representatives appointed by the insurers with the three highest
390	voluntary market share of residential property insurance
391	business in the state; one representative from the Office of
392	Insurance Regulation; one consumer appointed by the board who is
393	insured by the corporation at the time of appointment to the
394	committee; one representative appointed by the Florida
395	Association of Realtors; and one representative appointed by the
396	Florida Bankers Association. All members must serve for 3-year
397	terms and may serve for consecutive terms. The committee shall
398	report to the corporation at each board meeting on insurance
399	market issues which may include rates and rate competition with
400	the voluntary market; service, including policy issuance, claims
401	processing, and general responsiveness to policyholders,
402	applicants, and agents; and matters relating to depopulation.
403	5.  Must provide a procedure for determining the
404	eligibility of a risk for coverage, as follows:
405	a.  Subject to the provisions of s. 627.3517, with respect
406	to personal lines residential risks, if the risk is offered
407	coverage from an authorized insurer at the insurer's approved
408	rate under either a standard policy including wind coverage or,
409	if consistent with the insurer's underwriting rules as filed
410	with the office, a basic policy including wind coverage, the
411	risk is not eligible for any policy issued by the corporation.
412	If the risk is not able to obtain any such offer, the risk is
413	eligible for either a standard policy including wind coverage or
414	a basic policy including wind coverage issued by the
415	corporation; however, if the risk could not be insured under a
416	standard policy including wind coverage regardless of market
417	conditions, the risk shall be eligible for a basic policy
418	including wind coverage unless rejected under subparagraph 8.
419	The corporation shall determine the type of policy to be
420	provided on the basis of objective standards specified in the
421	underwriting manual and based on generally accepted underwriting
422	practices.
423	(I)  If the risk accepts an offer of coverage through the
424	market assistance plan or an offer of coverage through a
425	mechanism established by the corporation before a policy is
426	issued to the risk by the corporation or during the first 30
427	days of coverage by the corporation, and the producing agent who
428	submitted the application to the plan or to the corporation is
429	not currently appointed by the insurer, the insurer shall:
430	(A)  Pay to the producing agent of record of the policy,
431	for the first year, an amount that is the greater of the
432	insurer's usual and customary commission for the type of policy
433	written or a fee equal to the usual and customary commission of
434	the corporation; or
435	(B)  Offer to allow the producing agent of record of the
436	policy to continue servicing the policy for a period of not less
437	than 1 year and offer to pay the agent the greater of the
438	insurer's or the corporation's usual and customary commission
439	for the type of policy written.
440
441	If the producing agent is unwilling or unable to accept
442	appointment, the new insurer shall pay the agent in accordance
443	with sub-sub-sub-subparagraph (A).
444	(II)  When the corporation enters into a contractual
445	agreement for a take-out plan, the producing agent of record of
446	the corporation policy is entitled to retain any unearned
447	commission on the policy, and the insurer shall:
448	(A)  Pay to the producing agent of record of the
449	corporation policy, for the first year, an amount that is the
450	greater of the insurer's usual and customary commission for the
451	type of policy written or a fee equal to the usual and customary
452	commission of the corporation; or
453	(B)  Offer to allow the producing agent of record of the
454	corporation policy to continue servicing the policy for a period
455	of not less than 1 year and offer to pay the agent the greater
456	of the insurer's or the corporation's usual and customary
457	commission for the type of policy written.
458
459	If the producing agent is unwilling or unable to accept
460	appointment, the new insurer shall pay the agent in accordance
461	with sub-sub-sub-subparagraph (A).
462	b.  With respect to commercial lines residential risks, if
463	the risk is offered coverage under a policy including wind
464	coverage from an authorized insurer at its approved rate, the
465	risk is not eligible for any policy issued by the corporation.
466	If the risk is not able to obtain any such offer, the risk is
467	eligible for a policy including wind coverage issued by the
468	corporation.
469	(I)  If the risk accepts an offer of coverage through the
470	market assistance plan or an offer of coverage through a
471	mechanism established by the corporation before a policy is
472	issued to the risk by the corporation or during the first 30
473	days of coverage by the corporation, and the producing agent who
474	submitted the application to the plan or the corporation is not
475	currently appointed by the insurer, the insurer shall:
476	(A)  Pay to the producing agent of record of the policy,
477	for the first year, an amount that is the greater of the
478	insurer's usual and customary commission for the type of policy
479	written or a fee equal to the usual and customary commission of
480	the corporation; or
481	(B)  Offer to allow the producing agent of record of the
482	policy to continue servicing the policy for a period of not less
483	than 1 year and offer to pay the agent the greater of the
484	insurer's or the corporation's usual and customary commission
485	for the type of policy written.
486
487	If the producing agent is unwilling or unable to accept
488	appointment, the new insurer shall pay the agent in accordance
489	with sub-sub-sub-subparagraph (A).
490	(II)  When the corporation enters into a contractual
491	agreement for a take-out plan, the producing agent of record of
492	the corporation policy is entitled to retain any unearned
493	commission on the policy, and the insurer shall:
494	(A)  Pay to the producing agent of record of the
495	corporation policy, for the first year, an amount that is the
496	greater of the insurer's usual and customary commission for the
497	type of policy written or a fee equal to the usual and customary
498	commission of the corporation; or
499	(B)  Offer to allow the producing agent of record of the
500	corporation policy to continue servicing the policy for a period
501	of not less than 1 year and offer to pay the agent the greater
502	of the insurer's or the corporation's usual and customary
503	commission for the type of policy written.
504
505	If the producing agent is unwilling or unable to accept
506	appointment, the new insurer shall pay the agent in accordance
507	with sub-sub-sub-subparagraph (A).
508	6.  Must include rules for classifications of risks and
509	rates therefor.
510	7.  Must provide that if premium and investment income for
511	an account attributable to a particular calendar year are in
512	excess of projected losses and expenses for the account
513	attributable to that year, such excess shall be held in surplus
514	in the account. Such surplus shall be available to defray
515	deficits in that account as to future years and shall be used
516	for that purpose prior to assessing assessable insurers and
517	assessable insureds as to any calendar year.
518	8.  Must provide objective criteria and procedures to be
519	uniformly applied for all applicants in determining whether an
520	individual risk is so hazardous as to be uninsurable. In making
521	this determination and in establishing the criteria and
522	procedures, the following shall be considered:
523	a.  Whether the likelihood of a loss for the individual
524	risk is substantially higher than for other risks of the same
525	class; and
526	b.  Whether the uncertainty associated with the individual
527	risk is such that an appropriate premium cannot be determined.
528
529	The acceptance or rejection of a risk by the corporation shall
530	be construed as the private placement of insurance, and the
531	provisions of chapter 120 shall not apply.
532	9.  Must provide that the corporation shall make its best
533	efforts to procure catastrophe reinsurance at reasonable rates,
534	to cover its projected 100-year probable maximum loss as
535	determined by the board of governors.
536	10.  Must provide that in the event of regular deficit
537	assessments under sub-subparagraph (b)3.a. or sub-subparagraph
538	(b)3.b., in the personal lines account, the commercial lines
539	residential account, or the high-risk account, the corporation
540	shall levy upon corporation policyholders in its next rate
541	filing, or by a separate rate filing solely for this purpose, a
542	market equalization surcharge arising from a regular assessment
543	in such account in a percentage equal to the total amount of
544	such regular assessments divided by the aggregate statewide
545	direct written premium for subject lines of business for the
546	prior calendar year. Market equalization surcharges under this
547	subparagraph are not considered premium and are not subject to
548	commissions, fees, or premium taxes; however, failure to pay a
549	market equalization surcharge shall be treated as failure to pay
550	premium.
551	11.  The policies issued by the corporation must provide
552	that, if the corporation or the market assistance plan obtains
553	an offer from an authorized insurer to cover the risk at its
554	approved rates, the risk is no longer eligible for renewal
555	through the corporation.
556	12.  Corporation policies and applications must include a
557	notice that the corporation policy could, under this section, be
558	replaced with a policy issued by an authorized insurer that does
559	not provide coverage identical to the coverage provided by the
560	corporation. The notice shall also specify that acceptance of
561	corporation coverage creates a conclusive presumption that the
562	applicant or policyholder is aware of this potential.
563	13.  May establish, subject to approval by the office,
564	different eligibility requirements and operational procedures
565	for any line or type of coverage for any specified county or
566	area if the board determines that such changes to the
567	eligibility requirements and operational procedures are
568	justified due to the voluntary market being sufficiently stable
569	and competitive in such area or for such line or type of
570	coverage and that consumers who, in good faith, are unable to
571	obtain insurance through the voluntary market through ordinary
572	methods would continue to have access to coverage from the
573	corporation. When coverage is sought in connection with a real
574	property transfer, such requirements and procedures shall not
575	provide for an effective date of coverage later than the date of
576	the closing of the transfer as established by the transferor,
577	the transferee, and, if applicable, the lender.
578	14.  Must provide that, with respect to the high-risk
579	account, any assessable insurer with a surplus as to
580	policyholders of $25 million or less writing 25 percent or more
581	of its total countrywide property insurance premiums in this
582	state may petition the office, within the first 90 days of each
583	calendar year, to qualify as a limited apportionment company. In
584	no event shall a limited apportionment company be required to
585	participate in the portion of any assessment, within the high-
586	risk account, pursuant to sub-subparagraph (b)3.a. or sub-
587	subparagraph (b)3.b. in the aggregate which exceeds $50 million
588	after payment of available high-risk account funds in any
589	calendar year. However, a limited apportionment company shall
590	collect from its policyholders any emergency assessment imposed
591	under sub-subparagraph (b)3.d. The plan shall provide that, if
592	the office determines that any regular assessment will result in
593	an impairment of the surplus of a limited apportionment company,
594	the office may direct that all or part of such assessment be
595	deferred as provided in subparagraph (g)4. However, there shall
596	be no limitation or deferment of an emergency assessment to be
597	collected from policyholders under sub-subparagraph (b)3.d.
598	15.  Must provide that the corporation appoint as its
599	licensed agents only those agents who also hold an appointment
600	as defined in s. 626.015(3) with an insurer who at the time of
601	the agent's initial appointment by the corporation is authorized
602	to write and is actually writing personal lines residential
603	property coverage, commercial residential property coverage, or
604	commercial nonresidential property coverage within the state.
605	16.  Must provide that for each carrier removing policies
606	by assumption from the personal lines account of the corporation
607	that carrier shall receive a minimum per policy bonus equal to
608	12.5 percent of written premium for a minimum of 10,000 policies
609	removed with wind coverage in coastal counties, 15 percent of
610	written premium for a minimum of 30,000 policies removed with
611	wind coverage in coastal counties, and 17.5 percent of written
612	premium for a minimum of 50,000 policies removed with wind
613	coverage in coastal counties. In order to be eligible for such
614	per-policy bonus, the carrier must offer to issue and renew the
615	carrier's policy for a period of 3 years subsequent to the
616	expiration of the assumed policy. The carrier shall nonetheless
617	be eligible for such per-policy bonus if the policy is
618	voluntarily terminated by the insured at any time subsequent to
619	the insured's initial acceptance of coverage from the carrier.
620	Cancellation of a policy for nonpayment of premium by the
621	insured shall be deemed a voluntary termination by the insured.
622	Failure of the insured to accept the carrier's offer of renewal,
623	if such renewal is in accordance with the corporation's plan of
624	operations, shall be deemed a voluntary termination by the
625	insured.
626	(d)1.  It is the intent of the Legislature that the rates
627	for coverage provided by the corporation be actuarially sound
628	and not competitive with approved rates charged in the admitted
629	voluntary market, so that the corporation functions as a
630	residual market mechanism to provide insurance only when the
631	insurance cannot be procured in the voluntary market. Rates
632	shall include an appropriate catastrophe loading factor that
633	reflects the actual catastrophic exposure of the corporation.
634	2.  For each county, the average rates of the corporation
635	for each line of business for personal lines residential
636	policies excluding rates for wind-only policies shall be no
637	lower than the average rates charged by the insurer that had the
638	highest average rate in that county among the 20 insurers with
639	the greatest total direct written premium in the state for that
640	line of business in the preceding year, except that with respect
641	to mobile home coverages, the average rates of the corporation
642	shall be no lower than the average rates charged by the insurer
643	that had the highest average rate in that county among the 5
644	insurers with the greatest total written premium for mobile home
645	owner's policies in the state in the preceding year.
646	3.  Rates for personal lines residential wind-only policies
647	must be actuarially sound and not competitive with approved
648	rates charged by authorized insurers. However, for personal
649	lines residential wind-only policies issued or renewed between
650	July 1, 2002, and June 30, 2003, the maximum premium increase
651	must be no greater than 10 percent of the Florida Windstorm
652	Underwriting Association premium for that policy in effect on
653	June 30, 2002, as adjusted for coverage changes and seasonal
654	occupancy surcharges. For personal lines residential wind-only
655	policies issued or renewed between July 1, 2003, and June 30,
656	2004, the corporation shall use its existing filed and approved
657	wind-only rating and classification plans, provided, however,
658	that the maximum premium increase must be no greater than 20
659	percent of the premium for that policy in effect on June 30,
660	2003, as adjusted for coverage changes and seasonal occupancy
661	surcharges. Corporation rate manuals shall include a rate
662	surcharge for seasonal occupancy. To ensure that personal lines
663	residential wind-only rates effective on or after July 1, 2004,
664	are not competitive with approved rates charged by authorized
665	insurers, the corporation, in conjunction with the office, shall
666	develop a wind-only ratemaking methodology, which methodology
667	shall be contained in each a rate filing made by the corporation
668	with the office by January 1, 2004. If the office thereafter
669	determines that the wind-only rates or rating factors filed by
670	the corporation fail to comply with the wind-only ratemaking
671	methodology provided for in this subsection, it shall so notify
672	the corporation and require the corporation to amend its rates
673	or rating factors to come into compliance within 90 days of
674	notice from the office. The office shall report to the Speaker
675	of the House of Representatives and the President of the Senate
676	on the provisions of the wind-only ratemaking methodology by
677	January 31, 2004.
678	4.  The provisions of subparagraph 2. do not apply to
679	coverage provided by the corporation in any county for which the
680	office determines that a reasonable degree of competition does
681	not exist for personal lines residential policies. The
682	provisions of subparagraph 3. do not apply to coverage provided
683	by the corporation in any county for which the office determines
684	that a reasonable degree of competition does not exist for
685	personal lines residential policies in the area of that county
686	which is eligible for wind-only coverage. In such counties, the
687	rates for personal lines residential coverage shall be
688	actuarially sound and not excessive, inadequate, or unfairly
689	discriminatory and are subject to the other provisions of the
690	paragraph and s. 627.062. The commission may adopt rules
691	establishing the criteria for determining whether a reasonable
692	degree of competition exists for personal lines residential
693	policies. Beginning October 1, 2005, and each 6 months
694	thereafter, the office shall determine and identify those
695	counties for which a reasonable degree of competition does not
696	exist for purposes of subparagraphs 2. and 3., respectively.
697	5.4.  Rates for commercial lines coverage shall not be
698	subject to the requirements of subparagraph 2., but shall be
699	subject to all other requirements of this paragraph and s.
700	627.062.
701	6.5.  Nothing in this paragraph shall require or allow the
702	corporation to adopt a rate that is inadequate under s. 627.062.
703	7.6.  The corporation shall certify to the office at least
704	twice annually that its personal lines rates comply with the
705	requirements of this paragraph subparagraphs 1. and 2. If any
706	adjustment in the rates or rating factors of the corporation is
707	necessary to ensure such compliance, the corporation shall make
708	and implement such adjustments and file its revised rates and
709	rating factors with the office. If the office thereafter
710	determines that the revised rates and rating factors fail to
711	comply with the provisions of this paragraph subparagraphs 1.
712	and 2., it shall notify the corporation and require the
713	corporation to amend its rates or rating factors in conjunction
714	with its next rate filing. The office must notify the
715	corporation by electronic means of any rate filing it approves
716	for any insurer among the insurers referred to in subparagraph
717	2.
718	8.7.  In addition to the rates otherwise determined
719	pursuant to this paragraph, the corporation shall impose and
720	collect an amount equal to the premium tax provided for in s.
721	624.509 to augment the financial resources of the corporation.
722	9.8.a.  To assist the corporation in developing additional
723	ratemaking methods to assure compliance with this paragraph
724	subparagraphs 1. and 4., the corporation shall appoint a rate
725	methodology panel consisting of one person recommended by the
726	Florida Association of Insurance Agents, one person recommended
727	by the Professional Insurance Agents of Florida, one person
728	recommended by the Florida Association of Insurance and
729	Financial Advisors, one person recommended by the insurer with
730	the highest voluntary market share of residential property
731	insurance business in the state, one person recommended by the
732	insurer with the second-highest voluntary market share of
733	residential property insurance business in the state, one person
734	recommended by an insurer writing commercial residential
735	property insurance in this state, one person recommended by the
736	Office of Insurance Regulation, and one board member designated
737	by the board chairman, who shall serve as chairman of the panel.
738	b.  By January 1, 2004, the rate methodology panel shall
739	provide a report to the corporation of its findings and
740	recommendations for the use of additional ratemaking methods and
741	procedures, including the use of a rate equalization surcharge
742	in an amount sufficient to assure that the total cost of
743	coverage for policyholders or applicants to the corporation is
744	sufficient to comply with subparagraph 1.
745	c.  Within 30 days after such report, the corporation shall
746	present to the President of the Senate, the Speaker of the House
747	of Representatives, the minority party leaders of each house of
748	the Legislature, and the chairs of the standing committees of
749	each house of the Legislature having jurisdiction of insurance
750	issues, a plan for implementing the additional ratemaking
751	methods and an outline of any legislation needed to facilitate
752	use of the new methods.
753	d.  The plan must include a provision that producer
754	commissions paid by the corporation shall not be calculated in
755	such a manner as to include any rate equalization surcharge.
756	However, without regard to the plan to be developed or its
757	implementation, producer commissions paid by the corporation for
758	each account, other than the quota share primary program, shall
759	remain fixed as to percentage, effective rate, calculation, and
760	payment method until January 1, 2004.
761	10.9.  By January 1, 2004, The corporation shall develop a
762	notice to policyholders or applicants that the rates of Citizens
763	Property Insurance Corporation are intended to be higher than
764	the rates of any admitted carrier except when the provisions of
765	subparagraph 4. apply and providing other information the
766	corporation deems necessary to assist consumers in finding other
767	voluntary admitted insurers willing to insure their property.
768	Section 6.  Subsection (1) of section 627.411, Florida
769	Statutes, is amended to read:
770	627.411  Grounds for disapproval.--
771	(1)  The office shall disapprove any form filed under s.
772	627.410, or withdraw any previous approval thereof, only if the
773	form:
774	(a)  Is in any respect in violation of, or does not comply
775	with, this code.
776	(b)  Contains or incorporates by reference, where such
777	incorporation is otherwise permissible, any inconsistent,
778	ambiguous, or misleading clauses, or exceptions and conditions
779	which deceptively affect the risk purported to be assumed in the
780	general coverage of the contract.
781	(c)  Has any title, heading, or other indication of its
782	provisions which is misleading.
783	(d)  Is printed or otherwise reproduced in such manner as
784	to render any material provision of the form substantially
785	illegible.
786	(e)  Contains provisions that are unfair or inequitable or
787	contrary to the public policy of this state or that encourage
788	misrepresentation.
789	(f)(e)  Is for health insurance, and:
790	1.  Provides benefits that are unreasonable in relation to
791	the premium charged.;
792	2.  Contains provisions that are unfair or inequitable or
793	contrary to the public policy of this state or that encourage
794	misrepresentation;
795	2.3.  Contains provisions that apply rating practices that
796	result in unfair discrimination pursuant to s. 626.9541(1)(g)2.
797	(g)(f)  Excludes coverage for human immunodeficiency virus
798	infection or acquired immune deficiency syndrome or contains
799	limitations in the benefits payable, or in the terms or
800	conditions of such contract, for human immunodeficiency virus
801	infection or acquired immune deficiency syndrome which are
802	different than those which apply to any other sickness or
803	medical condition.
804	Section 7.  Subsections (1) and (7) of section 627.7015,
805	Florida Statutes, are amended to read:
806	627.7015  Alternative procedure for resolution of disputed
807	property insurance claims.--
808	(1)  PURPOSE AND SCOPE.--This section sets forth a
809	nonadversarial alternative dispute resolution procedure for a
810	mediated claim resolution conference prompted by the need for
811	effective, fair, and timely handling of property insurance
812	claims. There is a particular need for an informal,
813	nonthreatening forum for helping parties who elect this
814	procedure to resolve their claims disputes because most
815	homeowner's and commercial residential insurance policies
816	obligate insureds to participate in a potentially expensive and
817	time-consuming adversarial appraisal process prior to
818	litigation. The procedure set forth in this section is designed
819	to bring the parties together for a mediated claims settlement
820	conference without any of the trappings or drawbacks of an
821	adversarial process. Before resorting to these procedures,
822	insureds and insurers are encouraged to resolve claims as
823	quickly and fairly as possible. This section is available with
824	respect to claims under personal lines and commercial
825	residential policies for all claimants and insurers prior to
826	commencing the appraisal process, or commencing litigation. If
827	requested by the insured, participation by legal counsel shall
828	be permitted. Mediation under this section is also available to
829	litigants referred to the department by a county court or
830	circuit court. This section does not apply to commercial
831	coverages, to private passenger motor vehicle insurance
832	coverages, or to disputes relating to liability coverages in
833	policies of property insurance.
834	(7)  If the insurer fails to comply with subsection (2) by
835	failing to notify a first-party claimant of its right to
836	participate in the mediation program under this section or if
837	the insurer requests the mediation, and the mediation results
838	are rejected by either party, the insured shall not be required
839	to submit to or participate in any contractual loss appraisal
840	process of the property loss damage as a precondition to legal
841	action for breach of contract against the insurer for its
842	failure to pay the policyholder's claims covered by the policy.
843	Section 8.  Section 627.706, Florida Statutes, is amended
844	to read:
845	627.706  Sinkhole insurance; definitions.--
846	(1)  Every insurer authorized to transact property
847	insurance in this state shall make available coverage for
848	insurable sinkhole losses on any structure, including contents
849	of personal property contained therein, to the extent provided
850	in the form to which the sinkhole coverage attaches.
851	(2)  As used in this section and s. 627.7065, and as used
852	in connection with any policy providing coverage for sinkhole
853	losses:
854	(a)  "Sinkhole" means a landform created by subsidence of
855	soil, sediment, or rock as underlying strata are dissolved by
856	ground water. A sinkhole may form by collapse into subterranean
857	voids created by dissolution of limestone or dolostone or by
858	subsidence as these strata are dissolved.
859	(b)  "Sinkhole loss" means structural damage to a the
860	building caused by sinkhole activity. Contents coverage shall
861	apply only if there is structural damage to the building caused
862	by sinkhole activity. Building coverage shall apply only to the
863	reasonable costs to stabilize the land and building if necessary
864	and to repair the damage to the foundation, subject to the
865	coverage and terms of the policy.
866	(c)(3)  "Sinkhole activity loss" means actual physical
867	damage to the covered property covered arising out of or caused
868	by sudden settlement or collapse of the earth supporting such
869	property only when such settlement or collapse results from
870	movement or raveling of soils, sediments, or rock materials from
871	the surface into subterranean voids created by the effect action
872	of water on a limestone or similar rock formation.
873	(3)(4)  Every insurer authorized to transact property
874	insurance in this state shall make a proper filing with the
875	office for the purpose of extending the appropriate forms of
876	property insurance to include coverage for insurable sinkhole
877	losses.
878	Section 9.  Section 627.7065, Florida Statutes, is created
879	to read:
880	627.7065  Database of information relating to sinkholes;
881	the Department of Financial Services and the Department of
882	Environmental Protection.--
883	(1)  The Legislature finds that there has been a dramatic
884	increase in the number of sinkholes and insurance claims for
885	sinkhole damage in the state during the past 10 years.
886	Accordingly, the Legislature recognizes the need to track
887	current and past sinkhole activity and to make the information
888	available for prevention and remediation activities. The
889	Legislature further finds that the Florida Geological Survey of
890	the Department of Environmental Protection has created a partial
891	database of some sinkholes identified in Florida, although the
892	database is not reflective of all sinkholes or insurance claims
893	for sinkhole damage. The Legislature determines that creating a
894	complete electronic database of sinkhole activity serves an
895	important purpose in protecting the public and in studying
896	property claims activities in the insurance industry.
897	(2)  The Department of Financial Services, including the
898	employee of the Division of Consumer Services designated as the
899	primary contact for consumers on issues relating to sinkholes,
900	and the Office of the Insurance Consumer Advocate shall consult
901	with the Florida Geological Survey and the Department of
902	Environmental Protection to implement a statewide automated
903	database of sinkholes and related activity identified in the
904	state.
905	(3)  Representatives of the Department of Financial
906	Services, with the agreement of the Department of Environmental
907	Protection, shall determine the form and content of the
908	database. The content may include standards for reporting and
909	investigating sinkholes for inclusion in the database and
910	requirements for insurers to report to the departments the
911	receipt of claims involving sinkhole loss and other similar
912	activities. The Department of Financial Services may require
913	insurers to report present and past data of sinkhole claims. The
914	database also may include information of damage due to ground
915	settling and other subsidence activity.
916	(4)  The Department of Financial Services may manage the
917	database or may contract for its management and maintenance. The
918	Department of Environmental Protection shall investigate reports
919	of sinkhole activity and include its findings and investigations
920	in the database.
921	(5)  The Department of Environmental Protection, in
922	consultation with the Department of Financial Services, shall
923	present a report of activities relating to the sinkhole
924	database, including recommendations regarding the database and
925	similar matters, to the Governor, the Speaker of the House of
926	Representatives, the President of the Senate, and the Chief
927	Financial Officer by December 31, 2005. The report may consider
928	the need for the Legislature to create an entity to study the
929	increase in sinkhole activity in the state and other similar
930	issues relating to sinkhole damage, including recommendations
931	and costs for staffing the entity. The report may include other
932	information, as appropriate.
933	(6)  The Department of Financial Services, in consultation
934	with the Department of Environmental Protection, may adopt rules
935	to implement the provisions of this section.
936	Section 10.  The Auditor General shall perform an
937	operational audit, as defined in s. 11.45(1), Florida Statutes,
938	of Citizens Property Insurance Corporation created under s.
939	627.351(6), Florida Statutes. The scope of the audit shall also
940	include:
941	(1)  An analysis of the corporation's infrastructure,
942	customer service, claims handling, accessibility of policyholder
943	information to the agent of record, take-out programs, take-out
944	bonuses, and financing arrangements.
945	(2)  An evaluation of costs associated with the
946	administration and servicing of the policies issued by the
947	corporation to determine alternatives by which costs can be
948	reduced, customer service improved, and claims handling
949	improved.
950
951	The audit shall contain policy alternatives for the Legislature
952	to consider. The Auditor General shall submit a report to the
953	Governor, the President of the Senate, and the Speaker of the
954	House of Representatives no later than February 1, 2006.
955	Section 11.  The board of governors of Citizens Property
956	Insurance Corporation created by section 627.351(6), Florida
957	Statutes, shall, by February 1, 2006, submit a report to the
958	President of the Senate, the Speaker of the House of
959	Representatives, the minority party leaders of the Senate and
960	the House of Representatives, and the chairs of the standing
961	committees of the Senate and the House of Representatives having
962	jurisdiction over matters relating to property and casualty
963	insurance. The report shall include the board's findings and
964	recommendations on the following issues:
965	(1)  The number of policies and the aggregate premium of
966	Citizens Property Insurance Corporation, before and after
967	enactment of this act, and projections for future policy and
968	premium growth.
969	(2)  Increases or decreases in availability of residential
970	property coverage in the voluntary market and the effectiveness
971	of this act in improving the availability of residential
972	property coverage in the voluntary market in the state.
973	(3)  The board's efforts to depopulate the corporation and
974	the willingness of insurers in the voluntary market to avail
975	themselves of depopulation incentives.
976	(4)  Further actions that could be taken by the Legislature
977	to improve availability of residential property coverage in the
978	voluntary and residual markets.
979	(5)  Actions that the board has taken to restructure the
980	corporation and recommendations for legislative action to
981	restructure the corporation, including, but not limited to,
982	actions relating to claims handling and customer service.
983	(6)  Projected surpluses or deficits and possible means of
984	providing funding to ensure the continued solvency of the
985	corporation.
986	(7)  The corporation's efforts to procure catastrophe
987	reinsurance to cover its projected 100-year probable maximum
988	loss with specification as to what best efforts were made by the
989	corporation to procure such reinsurance.
990	(8)  Such other issues as the board determines are worthy
991	of the Legislature's consideration.
992	Section 12.  (1)  Section 2 of this act shall take effect
993	on the same date that House Bill 1939 or similar legislation
994	takes effect, if such legislation is adopted in the same
995	legislative session or an extension thereof and becomes a law.
996	(2)  Section 3 of this act shall take effect on the same
997	date that House Bill 1939 or similar legislation takes effect,
998	if such legislation is adopted in the same legislative session
999	or an extension thereof and becomes a law.
1000	Section 13.  Except as otherwise provided herein, this act
1001	shall take effect July 1, 2005.

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