Senate Bill sb2664
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Florida Senate - 2006 SB 2664
By Senator Smith
14-1495B-06 See HB 1209
1 A bill to be entitled
2 An act relating to the Florida Hurricane
3 Catastrophe Fund; amending s. 215.555, F.S.;
4 revising findings and purposes; revising
5 definitions; changing the name of the fund to
6 the Florida Hurricane Insurance Fund; revising
7 requirements for reimbursement contracts;
8 providing requirements, procedures, and
9 methodologies for policyholders to pay premiums
10 to insurers, insurers to remit premiums to the
11 fund, insurers to reimburse policyholders for
12 hurricane losses, and the state to reimburse
13 insurers from the fund for payments to
14 policyholders; deleting a required annual
15 appropriation from the investment income of the
16 Florida Hurricane Catastrophe Fund for certain
17 purposes; providing coverage limitations;
18 providing exceptions; providing for discounted
19 premiums to certain insurers under certain
20 circumstances; deleting conflicting provisions;
21 revising reimbursement premium provisions to
22 conform; renaming the Florida Hurricane
23 Catastrophe Fund Finance Corporation as the
24 Florida Hurricane Insurance Fund Finance
25 Corporation; making conforming changes;
26 amending ss. 215.556, 215.559, 624.424,
27 624.5091, 627.062, 627.0628, 627.0629, 627.351,
28 627.701, and 627.7077, F.S., to conform;
29 amending s. 109(3), ch. 2000-141, Laws of
30 Florida; deleting a limitation subjecting
31 certain portions of coastal counties to certain
1
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 debris requirements adopted by the Florida
2 Building Commission; providing an effective
3 date.
4
5 Be It Enacted by the Legislature of the State of Florida:
6
7 Section 1. Section 215.555, Florida Statutes, is
8 amended to read:
9 215.555 Florida Hurricane Insurance Catastrophe
10 Fund.--
11 (1) FINDINGS AND PURPOSE.--The Legislature finds and
12 declares as follows:
13 (a) There is a compelling state interest in
14 maintaining a viable and orderly private sector market for
15 property insurance in this state. To the extent that the
16 private sector is unable to maintain a viable and orderly
17 market for property insurance in this state, state actions to
18 maintain such a viable and orderly market are valid and
19 necessary exercises of the police power.
20 (b) As a result of unprecedented levels of
21 catastrophic insured losses in recent years, and especially as
22 a result of Hurricane Andrew and the 2004 and 2005 hurricane
23 seasons, numerous insurers have determined that in order to
24 protect their solvency, it is necessary for them to reduce
25 their exposure to hurricane losses. Also as a result of these
26 events, world reinsurance capacity has significantly
27 contracted, increasing the pressure on insurers to reduce
28 their catastrophic exposures.
29 (c) Mortgages require reliable property insurance, and
30 the unavailability of reliable property insurance would
31 therefore make most real estate transactions impossible. In
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 addition, the public health, safety, and welfare demand that
2 structures damaged or destroyed in a catastrophe be repaired
3 or reconstructed as soon as possible. Therefore, the inability
4 of the private sector insurance and reinsurance markets to
5 maintain sufficient capacity to enable residents of this state
6 to obtain property insurance coverage in the private sector
7 endangers the economy of the state and endangers the public
8 health, safety, and welfare. Accordingly, state action to
9 correct for this inability of the private sector constitutes a
10 valid and necessary public and governmental purpose.
11 (d) The insolvencies and financial impairments
12 resulting from Hurricane Andrew and the 2004 and 2005
13 hurricane seasons demonstrate that many property insurers are
14 unable or unwilling to maintain reserves, surplus, and
15 reinsurance sufficient to enable the insurers to pay all
16 claims in full in the event of a catastrophe. State action is
17 therefore necessary to protect the public from an insurer's
18 unwillingness or inability to maintain sufficient reserves,
19 surplus, and reinsurance.
20 (e) A state program to provide a stable and ongoing
21 source of coverage reimbursement to insurers for a substantial
22 portion of their catastrophic hurricane losses for citizens of
23 this state will create additional insurance capacity
24 sufficient to ameliorate the current dangers to the state's
25 economy and to the public health, safety, and welfare.
26 (f) It is essential to the functioning of a state
27 program to increase insurance capacity that revenues received
28 be exempt from federal taxation. It is therefore the intent of
29 the Legislature that this program be structured as a state
30 trust fund under the direction and control of the State Board
31 of Administration and operate exclusively for the purpose of
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 protecting and advancing the state's interest in maintaining
2 insurance capacity in this state.
3 (g) Hurricane Andrew, which caused insured and
4 uninsured losses in excess of $20 billion, and the 2004
5 hurricane season, which caused insured losses in excess of $42
6 billion, will likely not be the last major windstorm to strike
7 Florida. Recognizing that a future wind catastrophe could
8 cause damages in excess of $60 billion, especially if a major
9 urban area or series of urban areas were hit, it is the intent
10 of the Legislature to balance equitably its concerns about
11 mitigation of hurricane impact, insurance affordability and
12 availability, and the risk of insurer and joint underwriting
13 association insolvency, as well as assessment and bonding
14 limitations.
15 (2) DEFINITIONS.--As used in this section:
16 (a)(m) "Actual claims-paying capacity" means the sum
17 of the balance of the fund as of December 31 of a contract
18 year, plus any reinsurance purchased by the fund, plus the
19 amount the board is able to raise through the issuance of
20 revenue bonds under subsection (6).
21 (b)(a) "Actuarially indicated" means, with respect to
22 premiums paid to by insurers for reimbursement provided by the
23 fund, an amount determined according to principles of
24 actuarial science to be adequate, but not excessive, in the
25 aggregate, to pay current and future obligations and expenses
26 of the fund, including additional amounts if needed to pay
27 debt service on revenue bonds issued under this section and to
28 provide required debt service coverage in excess of the
29 amounts required to pay actual debt service on revenue bonds
30 issued under subsection (6), and determined according to
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 principles of actuarial science to reflect each insurer's
2 relative exposure to hurricane losses.
3 (c)(g) "Bond" means any bond, debenture, note, or
4 other evidence of financial indebtedness issued under this
5 section.
6 (d)(n) "Corporation" means the Florida Hurricane
7 Insurance Catastrophe Fund Finance Corporation created in
8 paragraph (6)(d).
9 (e)(b) "Covered event" means any one storm declared to
10 be a hurricane by the National Hurricane Center, which storm
11 causes insured losses in this state.
12 (f)(c) "Covered policy" means any hurricane insurance
13 policy covering residential property in this state, including,
14 but not limited to, any homeowner's, mobile home owner's, farm
15 owner's, condominium association, condominium unit owner's,
16 tenant's, or apartment building policy, or any other policy
17 covering a residential structure or its contents issued by any
18 authorized insurer, including the Citizens Property Insurance
19 Corporation and any joint underwriting association or similar
20 entity created pursuant to law. The term "covered policy"
21 includes any collateral protection insurance policy covering
22 personal residences which protects both the borrower's and the
23 lender's financial interests, in an amount at least equal to
24 the coverage for the dwelling in place under the lapsed
25 homeowner's policy, if such policy can be accurately reported
26 as required in subsection (5). Additionally, covered policies
27 include policies covering the peril of wind removed from the
28 Florida Residential Property and Casualty Joint Underwriting
29 Association or from the Citizens Property Insurance
30 Corporation, created pursuant to s. 627.351(6), or from the
31 Florida Windstorm Underwriting Association, created pursuant
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 to s. 627.351(2), by an authorized insurer under the terms and
2 conditions of an executed assumption agreement between the
3 authorized insurer and such association or Citizens Property
4 Insurance Corporation. Each assumption agreement between the
5 association and such authorized insurer or Citizens Property
6 Insurance Corporation must be approved by the Office of
7 Insurance Regulation prior to the effective date of the
8 assumption, and the Office of Insurance Regulation must
9 provide written notification to the board within 15 working
10 days after such approval. "Covered policy" does not include
11 any policy that excludes wind coverage or hurricane coverage
12 or any reinsurance agreement and does not include any policy
13 otherwise meeting this definition which is issued by a surplus
14 lines insurer or a reinsurer. All commercial residential
15 excess policies and all deductible buy-back policies that,
16 based on sound actuarial principles, require individual
17 ratemaking shall be excluded by rule if the actuarial
18 soundness of the fund is not jeopardized. For this purpose,
19 the term "excess policy" means a policy that provides
20 insurance protection for large commercial property risks and
21 that provides a layer of coverage above a primary layer
22 insured by another insurer.
23 (g)(h) "Debt service" means the amount required in any
24 fiscal year to pay the principal of, redemption premium, if
25 any, and interest on revenue bonds and any amounts required by
26 the terms of documents authorizing, securing, or providing
27 liquidity for revenue bonds necessary to maintain in effect
28 any such liquidity or security arrangements.
29 (h)(i) "Debt service coverage" means the amount, if
30 any, required by the documents under which revenue bonds are
31 issued, which amount is to be received in any fiscal year in
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Florida Senate - 2006 SB 2664
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1 excess of the amount required to pay debt service for such
2 fiscal year.
3 (i)(l) "Estimated claims-paying capacity" means the
4 sum of the projected year-end balance of the fund as of
5 December 31 of a contract year, plus any reinsurance purchased
6 by the fund, plus the board's estimate of the board's
7 borrowing capacity.
8 (j) "Local government" means a unit of general purpose
9 local government as defined in s. 218.31(2).
10 (k)(d) "Losses" means direct incurred losses under
11 covered policies, which shall include losses for additional
12 living expenses not to exceed 40 percent of the insured value
13 of a residential structure or its contents and shall exclude
14 loss adjustment expenses. "Losses" does not include losses for
15 fair rental value, loss of use, or business interruption
16 losses.
17 (l)(k) "Pledged revenues" means all or any portion of
18 revenues to be derived from reimbursement premiums under
19 subsection (5) or from emergency assessments under paragraph
20 (6)(b), as determined by the board.
21 (e) "Retention" means the amount of losses below which
22 an insurer is not entitled to reimbursement from the fund. An
23 insurer's retention shall be calculated as follows:
24 1. The board shall calculate and report to each
25 insurer the retention multiples for that year. For the
26 contract year beginning June 1, 2005, the retention multiple
27 shall be equal to $4.5 billion divided by the total estimated
28 reimbursement premium for the contract year; for subsequent
29 years, the retention multiple shall be equal to $4.5 billion,
30 adjusted based upon the reported exposure from the prior
31 contract year to reflect the percentage growth in exposure to
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 the fund for covered policies since 2004, divided by the total
2 estimated reimbursement premium for the contract year. Total
3 reimbursement premium for purposes of the calculation under
4 this subparagraph shall be estimated using the assumption that
5 all insurers have selected the 90-percent coverage level.
6 2. The retention multiple as determined under
7 subparagraph 1. shall be adjusted to reflect the coverage
8 level elected by the insurer. For insurers electing the
9 90-percent coverage level, the adjusted retention multiple is
10 100 percent of the amount determined under subparagraph 1. For
11 insurers electing the 75-percent coverage level, the retention
12 multiple is 120 percent of the amount determined under
13 subparagraph 1. For insurers electing the 45-percent coverage
14 level, the adjusted retention multiple is 200 percent of the
15 amount determined under subparagraph 1.
16 3. An insurer shall determine its provisional
17 retention by multiplying its provisional reimbursement premium
18 by the applicable adjusted retention multiple and shall
19 determine its actual retention by multiplying its actual
20 reimbursement premium by the applicable adjusted retention
21 multiple.
22 4. For insurers who experience multiple covered events
23 causing loss during the contract year, beginning June 1, 2005,
24 each insurer's full retention shall be applied to each of the
25 covered events causing the two largest losses for that
26 insurer. For each other covered event resulting in losses, the
27 insurer's retention shall be reduced to one-third of the full
28 retention. The reimbursement contract shall provide for the
29 reimbursement of losses for each covered event based on the
30 full retention with adjustments made to reflect the reduced
31 retentions after January 1 of the contract year provided the
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 insurer reports its losses as specified in the reimbursement
2 contract.
3 (m)(f) "Workers' compensation" includes both workers'
4 compensation and excess workers' compensation insurance.
5 (3) FLORIDA HURRICANE INSURANCE CATASTROPHE FUND
6 CREATED.--There is created the Florida Hurricane Insurance
7 Catastrophe Fund to be administered by the State Board of
8 Administration. Moneys in the fund may not be expended,
9 loaned, or appropriated except to pay obligations of the fund
10 arising out of reimbursement contracts entered into under
11 subsection (4), payment of debt service on revenue bonds
12 issued under subsection (6), costs of the mitigation program
13 under subsection (7), costs of procuring reinsurance, and
14 costs of administration of the fund. The board shall invest
15 the moneys in the fund pursuant to ss. 215.44-215.52. Except
16 as otherwise provided in this section, earnings from all
17 investments shall be retained in the fund. The board may
18 employ or contract with such staff and professionals as the
19 board deems necessary for the administration of the fund. The
20 board may adopt such rules as are reasonable and necessary to
21 implement this section and shall specify interest due on any
22 delinquent remittances, which interest may not exceed the
23 fund's rate of return plus 5 percent. Such rules must conform
24 to the Legislature's specific intent in establishing the fund
25 as expressed in subsection (1), must enhance the fund's
26 potential ability to respond to claims for covered events,
27 must contain general provisions so that the rules can be
28 applied with reasonable flexibility so as to accommodate
29 insurers in situations of an unusual nature or where undue
30 hardship may result, except that such flexibility may not in
31 any way impair, override, supersede, or constrain the public
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 purpose of the fund, and must be consistent with sound
2 insurance practices. The board may, by rule, provide for the
3 exemption from subsections (4) and (5) of insurers writing
4 covered policies with less than $10 million in aggregate
5 exposure for covered policies if the exemption does not affect
6 the actuarial soundness of the fund.
7 (4) REIMBURSEMENT CONTRACTS.--
8 (a) The board shall enter into a contract with each
9 insurer writing hurricane-covered covered policies in this
10 state to provide to the insurer the reimbursement described in
11 paragraphs (b) and (d), in exchange for the reimbursement
12 premium paid into the fund under subsection (5). As a
13 condition of doing business in this state, each such insurer
14 shall enter into such a contract.
15 (b)1. The contract shall contain a promise by the
16 board to reimburse the insurer for losses as provided in this
17 paragraph as a result of a covered event 45 percent, 75
18 percent, or 90 percent of its losses from each covered event
19 in excess of the insurer's retention, plus 5 percent of the
20 reimbursed losses to cover loss adjustment expenses.
21 2. The insurer shall provide hurricane coverage for
22 any policyholder selecting this coverage. The insurer shall
23 collect premiums from policyholders as determined by the state
24 and remit premium collections to the state to be deposited in
25 the Florida Hurricane Insurance Fund must elect one of the
26 percentage coverage levels specified in this paragraph and
27 may, upon renewal of a reimbursement contract, elect a lower
28 percentage coverage level if no revenue bonds issued under
29 subsection (6) after a covered event are outstanding, or elect
30 a higher percentage coverage level, regardless of whether or
31 not revenue bonds are outstanding. All members of an insurer
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 group must elect the same percentage coverage level. Any joint
2 underwriting association, risk apportionment plan, or other
3 entity created under s. 627.351 must elect the 90-percent
4 coverage level.
5 3. The contract shall provide that reimbursement
6 coverage for any hurricane loss must be paid to the insurer. A
7 policyholder shall submit all claims to the insurer for
8 payment for all related losses.
9 4. A policyholder shall pay hurricane peril premiums
10 to the insurer, and the insurer shall remit collected premiums
11 to the state.
12 5. An insurer shall contract with the state to provide
13 hurricane peril coverage to policyholders and provide coverage
14 directly to policyholders for losses as a result of a covered
15 event. The state shall reimburse the insurer from the Florida
16 Hurricane Insurance Fund for all reimbursements made by the
17 insurer to policyholders as a result of a covered event.
18 6. Premiums paid by a policyholder must provide,
19 through the fund, a maximum coverage of $500,000.
20 7. A policyholder may select hurricane deductibles of
21 1, 2, 5, or 10 percent.
22 8. An insurer may choose to provide additional
23 coverage beyond the fund's coverage of $500,000 for its
24 policyholders.
25 9. An insurer shall provide claims adjustment and
26 reimbursement for losses directly to its policyholders. Once
27 reimbursement amounts have been determined for policyholders,
28 an insurer shall submit a request for reimbursement through
29 the fund for payments made to policyholders for hurricane
30 loss.
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 10. The $500,000 maximum coverage shall be adjusted
2 every 5 years based on the home rate index.
3 11. Discounted premiums shall be provided by the fund
4 for an insurer who encourages its policyholders to engage in
5 loss mitigation following damage to or loss of property
6 amounts shall not be reduced by reinsurance paid or payable to
7 the insurer from other sources.
8 (c)1. The contract shall also provide that the
9 obligation of the board with respect to all contracts covering
10 a particular contract year shall not exceed the actual
11 claims-paying capacity of the fund up to a limit of $15
12 billion for that contract year adjusted based upon the
13 reported exposure from the prior contract year to reflect the
14 percentage growth in exposure to the fund for covered policies
15 since 2003, provided the dollar growth in the limit may not
16 increase in any year by an amount greater than the dollar
17 growth of the cash balance which occurred over the prior
18 calendar year.
19 2. In May before the start of the upcoming contract
20 year and in October during the contract year, the board shall
21 publish in the Florida Administrative Weekly a statement of
22 the fund's estimated borrowing capacity and the projected
23 balance of the fund as of December 31. After the end of each
24 calendar year, the board shall notify insurers of the
25 estimated borrowing capacity and the balance of the fund as of
26 December 31 to provide insurers with data necessary to assist
27 them in determining their actuarially sound premiums retention
28 and projected payout from the fund for loss reimbursement
29 purposes. In conjunction with the development of the premium
30 formula, as provided for in subsection (5), the board shall
31 publish factors or multiples that assist insurers in
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 determining their retention and projected payout for the next
2 contract year. For all regulatory and reinsurance purposes, an
3 insurer may calculate its projected payout from the fund as
4 its share of the total fund premium for the current contract
5 year multiplied by the sum of the projected balance of the
6 fund as of December 31 and the estimated borrowing capacity
7 for that contract year as reported under this subparagraph.
8 (d)1. For purposes of determining potential liability
9 and to aid in the sound administration of the fund, the
10 contract shall require each insurer to report such insurer's
11 losses from each covered event on an interim basis, as
12 directed by the board. The contract shall require the insurer
13 to report to the board no later than December 31 of each year,
14 and quarterly thereafter, its reimbursable losses from covered
15 events for the year. The contract shall require the board to
16 determine and pay, as soon as practicable after receiving
17 these reports of reimbursable losses, the initial amount of
18 reimbursement due and adjustments to this amount based on
19 later loss information. The adjustments to reimbursement
20 amounts shall require the board to pay, or the insurer to
21 return, amounts reflecting the most recent calculation of
22 losses.
23 2. In determining reimbursements pursuant to this
24 subsection, the contract shall provide that the board shall:
25 a. First reimburse insurers within 90 days after
26 reporting policyholder-paid losses as a result of a covered
27 event writing covered policies, which insurers are in full
28 compliance with this section and have petitioned the Office of
29 Insurance Regulation and qualified as limited apportionment
30 companies under s. 627.351(2)(b)3. The amount of such
31 reimbursement shall be the lesser of $10 million or an amount
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Florida Senate - 2006 SB 2664
14-1495B-06 See HB 1209
1 equal to 10 times the insurer's reimbursement premium for the
2 current year. The amount of reimbursement paid under this
3 sub-subparagraph may not exceed the full amount of
4 reimbursement promised in the reimbursement contract. This
5 sub-subparagraph does not apply with respect to any contract
6 year in which the year-end projected cash balance of the fund,
7 exclusive of any bonding capacity of the fund, exceeds $2
8 billion. Only one member of any insurer group may receive
9 reimbursement under this sub-subparagraph.
10 b. Next pay to each insurer such insurer's projected
11 payout, which is the amount of reimbursement it is owed, up to
12 an amount equal to the insurer's share of the actual premium
13 paid for that contract year, multiplied by the actual
14 claims-paying capacity available for that contract year;
15 provided, entities created pursuant to s. 627.351 shall be
16 further reimbursed in accordance with sub-subparagraph c.
17 c. Thereafter, establish the prorated reimbursement
18 level at the highest level for which any remaining fund
19 balance or bond proceeds are sufficient to reimburse entities
20 created pursuant to s. 627.351 based on reimbursable losses
21 exceeding the amounts payable pursuant to sub-subparagraph b.
22 for the current contract year.
23 (e)1. Except as provided in subparagraphs 2. and 3.,
24 the contract shall provide that if an insurer demonstrates to
25 the board that it is likely to qualify for reimbursement under
26 the contract, and demonstrates to the board that the immediate
27 receipt of moneys from the board is likely to prevent the
28 insurer from becoming insolvent, the board shall advance the
29 insurer, at market interest rates, the amounts necessary to
30 maintain the solvency of the insurer, up to 50 percent of the
31 board's estimate of the reimbursement due the insurer. The
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Florida Senate - 2006 SB 2664
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1 insurer's reimbursement shall be reduced by an amount equal to
2 the amount of the advance and interest thereon.
3 2. With respect only to an entity created under s.
4 627.351, the contract shall also provide that the board may,
5 upon application by such entity, advance to such entity, at
6 market interest rates, up to 90 percent of the lesser of:
7 a. The board's estimate of the amount of reimbursement
8 due to such entity; or
9 b. The entity's share of the actual reimbursement
10 premium paid for that contract year, multiplied by the
11 currently available liquid assets of the fund. In order for
12 the entity to qualify for an advance under this subparagraph,
13 the entity must demonstrate to the board that the advance is
14 essential to allow the entity to pay claims for a covered
15 event and the board must determine that the fund's assets are
16 sufficient and are sufficiently liquid to allow the board to
17 make an advance to the entity and still fulfill the board's
18 reimbursement obligations to other insurers. The entity's
19 final reimbursement for any contract year in which an advance
20 has been made under this subparagraph must be reduced by an
21 amount equal to the amount of the advance and any interest on
22 such advance. In order to determine what amounts, if any, are
23 due the entity, the board may require the entity to report its
24 exposure and its losses at any time to determine retention
25 levels and reimbursements payable.
26 3. The contract shall also provide specifically and
27 solely with respect to any limited apportionment company under
28 s. 627.351(2)(b)3. that the board may, upon application by
29 such company, advance to such company the amount of the
30 estimated reimbursement payable to such company as calculated
31 pursuant to paragraph (d), at market interest rates, if the
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Florida Senate - 2006 SB 2664
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1 board determines that the fund's assets are sufficient and are
2 sufficiently liquid to permit the board to make an advance to
3 such company and at the same time fulfill its reimbursement
4 obligations to the insurers that are participants in the fund.
5 Such company's final reimbursement for any contract year in
6 which an advance pursuant to this subparagraph has been made
7 shall be reduced by an amount equal to the amount of the
8 advance and interest thereon. In order to determine what
9 amounts, if any, are due to such company, the board may
10 require such company to report its exposure and its losses at
11 such times as may be required to determine retention levels
12 and loss reimbursements payable.
13 (e)(f) In order to ensure that insurers have properly
14 reported the insured values on which the reimbursement premium
15 is based and to ensure that insurers have properly reported
16 the losses for which reimbursements have been made, the board
17 shall inspect, examine, and verify the records of each
18 insurer's covered policies at such times as the board deems
19 appropriate and according to standards established by rule for
20 the specific purpose of validating the accuracy of exposures
21 and losses required to be reported under the terms and
22 conditions of the reimbursement contract. The costs of the
23 examinations shall be borne by the board. However, in order to
24 remove any incentive for an insurer to delay preparations for
25 an examination, the board shall be reimbursed by the insurer
26 for any examination expenses incurred in addition to the usual
27 and customary costs of the examination, which additional
28 expenses were incurred as a result of an insurer's failure,
29 despite proper notice, to be prepared for the examination or
30 as a result of an insurer's failure to provide requested
31 information while the examination is in progress. If the board
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Florida Senate - 2006 SB 2664
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1 finds any insurer's records or other necessary information to
2 be inadequate or inadequately posted, recorded, or maintained,
3 the board may employ experts to reconstruct, rewrite, record,
4 post, or maintain such records or information, at the expense
5 of the insurer being examined, if such insurer has failed to
6 maintain, complete, or correct such records or deficiencies
7 after the board has given the insurer notice and a reasonable
8 opportunity to do so. Any information contained in an
9 examination report, which information is described in s.
10 215.557, is confidential and exempt from the provisions of s.
11 119.07(1) and s. 24(a), Art. I of the State Constitution, as
12 provided in s. 215.557. Nothing in this paragraph expands the
13 exemption in s. 215.557.
14 (f)(g) The contract shall provide that in the event of
15 the insolvency of an insurer, the fund shall pay directly to
16 the Florida Insurance Guaranty Association for the benefit of
17 Florida policyholders of the insurer the net amount of all
18 reimbursement moneys owed to the insurer. As used in this
19 paragraph, the term "net amount of all reimbursement moneys"
20 means that amount which remains after reimbursement for:
21 1. Preliminary or duplicate payments owed to private
22 reinsurers or other inuring reinsurance payments to private
23 reinsurers that satisfy statutory or contractual obligations
24 of the insolvent insurer attributable to covered events to
25 such reinsurers; or
26 2. Funds owed to a bank or other financial institution
27 to cover obligations of the insolvent insurer under a credit
28 agreement that assists the insolvent insurer in paying claims
29 attributable to covered events.
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Florida Senate - 2006 SB 2664
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1 The private reinsurers, banks, or other financial institutions
2 shall be reimbursed or otherwise paid prior to payment to the
3 Florida Insurance Guaranty Association, notwithstanding any
4 law to the contrary. The guaranty association shall pay all
5 claims up to the maximum amount permitted by chapter 631;
6 thereafter, any remaining moneys shall be paid pro rata to
7 claims not fully satisfied. This paragraph does not apply to a
8 joint underwriting association, risk apportionment plan, or
9 other entity created under s. 627.351.
10 (5) REIMBURSEMENT PREMIUMS.--
11 (a) Each reimbursement contract shall require the
12 insurer to annually pay to the fund an actuarially indicated
13 premium for the reimbursement of hurricane losses.
14 (b) The State Board of Administration shall select an
15 independent consultant to develop a formula for determining
16 the actuarially indicated premium to be paid to the fund. The
17 formula shall specify, for each zip code or other limited
18 geographical area, the amount of premium to be paid by an
19 insurer for each $1,000 of insured value under covered
20 policies in that zip code or other area. In establishing
21 premiums, the board shall consider the coverage elected under
22 paragraph (4)(b) and any factors that tend to enhance the
23 actuarial sophistication of ratemaking for the fund, including
24 deductibles, type of construction, type of coverage provided,
25 relative concentration of risks, loss mitigation efforts, a
26 factor providing for more rapid cash buildup in the fund until
27 the fund capacity for a single hurricane season is fully
28 funded, and other such factors deemed by the board to be
29 appropriate. The formula may provide for a procedure to
30 determine the premiums to be paid by new insurers that begin
31 writing covered policies after the beginning of a contract
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1 year, taking into consideration when the insurer starts
2 writing covered policies, the potential exposure of the
3 insurer, the potential exposure of the fund, the
4 administrative costs to the insurer and to the fund, and any
5 other factors deemed appropriate by the board. The formula
6 must be approved by unanimous vote of the board. The board
7 may, at any time, revise the formula pursuant to the procedure
8 provided in this paragraph.
9 (c) No later than September 1 of each year, each
10 insurer shall notify the board of its insured values under
11 covered policies by zip code, as of June 30 of that year. On
12 the basis of these reports, the board shall calculate the
13 premium due from the insurer, based on the formula adopted
14 under paragraph (b). The insurer shall pay the required annual
15 premium pursuant to a periodic payment plan specified in the
16 contract. The board shall provide for payment of reimbursement
17 premium in periodic installments and for the adjustment of
18 provisional premium installments collected prior to submission
19 of the exposure report to reflect data in the exposure report.
20 The board shall collect interest on late reimbursement premium
21 payments consistent with the assumptions made in developing
22 the premium formula in accordance with paragraph (b).
23 (d) All premiums paid to the fund under reimbursement
24 contracts shall be treated as premium for approved reinsurance
25 for all accounting and regulatory purposes.
26 (6) REVENUE BONDS.--
27 (a) General provisions.--
28 1. Upon the occurrence of a hurricane and a
29 determination that the moneys in the fund are or will be
30 insufficient to pay reimbursement at the levels promised in
31 the reimbursement contracts, the board may take the necessary
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1 steps under paragraph (c) or paragraph (d) for the issuance of
2 revenue bonds for the benefit of the fund. The proceeds of
3 such revenue bonds may be used to make reimbursement payments
4 under reimbursement contracts; to refinance or replace
5 previously existing borrowings or financial arrangements; to
6 pay interest on bonds; to fund reserves for the bonds; to pay
7 expenses incident to the issuance or sale of any bond issued
8 under this section, including costs of validating, printing,
9 and delivering the bonds, costs of printing the official
10 statement, costs of publishing notices of sale of the bonds,
11 and related administrative expenses; or for such other
12 purposes related to the financial obligations of the fund as
13 the board may determine. The term of the bonds may not exceed
14 30 years. The board may pledge or authorize the corporation to
15 pledge all or a portion of all revenues under subsection (5)
16 and under paragraph (b) to secure such revenue bonds and the
17 board may execute such agreements between the board and the
18 issuer of any revenue bonds and providers of other financing
19 arrangements under paragraph (7)(b) as the board deems
20 necessary to evidence, secure, preserve, and protect such
21 pledge. If reimbursement premiums received under subsection
22 (5) or earnings on such premiums are used to pay debt service
23 on revenue bonds, such premiums and earnings shall be used
24 only after the use of the moneys derived from assessments
25 under paragraph (b). The funds, credit, property, or taxing
26 power of the state or political subdivisions of the state
27 shall not be pledged for the payment of such bonds. The board
28 may also enter into agreements under paragraph (c) or
29 paragraph (d) for the purpose of issuing revenue bonds in the
30 absence of a hurricane upon a determination that such action
31
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1 would maximize the ability of the fund to meet future
2 obligations.
3 2. The Legislature finds and declares that the
4 issuance of bonds under this subsection is for the public
5 purpose of paying the proceeds of the bonds to insurers,
6 thereby enabling insurers to pay the claims of policyholders
7 to assure that policyholders are able to pay the cost of
8 construction, reconstruction, repair, restoration, and other
9 costs associated with damage to property of policyholders of
10 covered policies after the occurrence of a hurricane. Revenue
11 bonds may not be issued under this subsection until validated
12 under chapter 75. The validation of at least the first
13 obligations incurred pursuant to this subsection shall be
14 appealed to the Supreme Court, to be handled on an expedited
15 basis.
16 (b) Emergency assessments.--
17 1. If the board determines that the amount of revenue
18 produced under subsection (5) is insufficient to fund the
19 obligations, costs, and expenses of the fund and the
20 corporation, including repayment of revenue bonds and that
21 portion of the debt service coverage not met by reimbursement
22 premiums, the board shall direct the Office of Insurance
23 Regulation to levy, by order, an emergency assessment on
24 direct premiums for all property and casualty lines of
25 business in this state, including property and casualty
26 business of surplus lines insurers regulated under part VIII
27 of chapter 626, but not including any workers' compensation
28 premiums or medical malpractice premiums. As used in this
29 subsection, the term "property and casualty business" includes
30 all lines of business identified on Form 2, Exhibit of
31 Premiums and Losses, in the annual statement required of
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1 authorized insurers by s. 624.424 and any rule adopted under
2 this section, except for those lines identified as accident
3 and health insurance and except for policies written under the
4 National Flood Insurance Program. The assessment shall be
5 specified as a percentage of future premium collections and is
6 subject to annual adjustments by the board to reflect changes
7 in premiums subject to assessments collected under this
8 subparagraph in order to meet debt obligations. The same
9 percentage shall apply to all policies in lines of business
10 subject to the assessment issued or renewed during the
11 12-month period beginning on the effective date of the
12 assessment.
13 2. A premium is not subject to an annual assessment
14 under this paragraph in excess of 6 percent of premium with
15 respect to obligations arising out of losses attributable to
16 any one contract year, and a premium is not subject to an
17 aggregate annual assessment under this paragraph in excess of
18 10 percent of premium. An annual assessment under this
19 paragraph shall continue until the revenue bonds issued with
20 respect to which the assessment was imposed are outstanding,
21 including any bonds the proceeds of which were used to refund
22 the revenue bonds, unless adequate provision has been made for
23 the payment of the bonds under the documents authorizing
24 issuance of the bonds.
25 3. With respect to each insurer collecting premiums
26 that are subject to the assessment, the insurer shall collect
27 the assessment at the same time as it collects the premium
28 payment for each policy and shall remit the assessment
29 collected to the fund or corporation as provided in the order
30 issued by the Office of Insurance Regulation. The office shall
31 verify the accurate and timely collection and remittance of
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1 emergency assessments and shall report the information to the
2 board in a form and at a time specified by the board. Each
3 insurer collecting assessments shall provide the information
4 with respect to premiums and collections as may be required by
5 the office to enable the office to monitor and verify
6 compliance with this paragraph.
7 4. With respect to assessments of surplus lines
8 premiums, each surplus lines agent shall collect the
9 assessment at the same time as the agent collects the surplus
10 lines tax required by s. 626.932, and the surplus lines agent
11 shall remit the assessment to the Florida Surplus Lines
12 Service Office created by s. 626.921 at the same time as the
13 agent remits the surplus lines tax to the Florida Surplus
14 Lines Service Office. The emergency assessment on each insured
15 procuring coverage and filing under s. 626.938 shall be
16 remitted by the insured to the Florida Surplus Lines Service
17 Office at the time the insured pays the surplus lines tax to
18 the Florida Surplus Lines Service Office. The Florida Surplus
19 Lines Service Office shall remit the collected assessments to
20 the fund or corporation as provided in the order levied by the
21 Office of Insurance Regulation. The Florida Surplus Lines
22 Service Office shall verify the proper application of such
23 emergency assessments and shall assist the board in ensuring
24 the accurate and timely collection and remittance of
25 assessments as required by the board. The Florida Surplus
26 Lines Service Office shall annually calculate the aggregate
27 written premium on property and casualty business, other than
28 workers' compensation and medical malpractice, procured
29 through surplus lines agents and insureds procuring coverage
30 and filing under s. 626.938 and shall report the information
31 to the board in a form and at a time specified by the board.
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1 5. Any assessment authority not used for a particular
2 contract year may be used for a subsequent contract year. If,
3 for a subsequent contract year, the board determines that the
4 amount of revenue produced under subsection (5) is
5 insufficient to fund the obligations, costs, and expenses of
6 the fund and the corporation, including repayment of revenue
7 bonds and that portion of the debt service coverage not met by
8 reimbursement premiums, the board shall direct the Office of
9 Insurance Regulation to levy an emergency assessment up to an
10 amount not exceeding the amount of unused assessment authority
11 from a previous contract year or years, plus an additional 4
12 percent provided that the assessments in the aggregate do not
13 exceed the limits specified in subparagraph 2.
14 6. The assessments otherwise payable to the
15 corporation under this paragraph shall be paid to the fund
16 unless and until the Office of Insurance Regulation and the
17 Florida Surplus Lines Service Office have received from the
18 corporation and the fund a notice, which shall be conclusive
19 and upon which they may rely without further inquiry, that the
20 corporation has issued bonds and the fund has no agreements in
21 effect with local governments under paragraph (c). On or after
22 the date of the notice and until the date the corporation has
23 no bonds outstanding, the fund shall have no right, title, or
24 interest in or to the assessments, except as provided in the
25 fund's agreement with the corporation.
26 7. Emergency assessments are not premium and are not
27 subject to the premium tax, to the surplus lines tax, to any
28 fees, or to any commissions. An insurer is liable for all
29 assessments that it collects and must treat the failure of an
30 insured to pay an assessment as a failure to pay the premium.
31 An insurer is not liable for uncollectible assessments.
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1 8. When an insurer is required to return an unearned
2 premium, it shall also return any collected assessment
3 attributable to the unearned premium. A credit adjustment to
4 the collected assessment may be made by the insurer with
5 regard to future remittances that are payable to the fund or
6 corporation, but the insurer is not entitled to a refund.
7 9. When a surplus lines insured or an insured who has
8 procured coverage and filed under s. 626.938 is entitled to
9 the return of an unearned premium, the Florida Surplus Lines
10 Service Office shall provide a credit or refund to the agent
11 or such insured for the collected assessment attributable to
12 the unearned premium prior to remitting the emergency
13 assessment collected to the fund or corporation.
14 10. The exemption of medical malpractice insurance
15 premiums from emergency assessments under this paragraph is
16 repealed May 31, 2007, and medical malpractice insurance
17 premiums shall be subject to emergency assessments
18 attributable to loss events occurring in the contract years
19 commencing on June 1, 2007.
20 (c) Revenue bond issuance through counties or
21 municipalities.--
22 1. If the board elects to enter into agreements with
23 local governments for the issuance of revenue bonds for the
24 benefit of the fund, the board shall enter into such contracts
25 with one or more local governments, including agreements
26 providing for the pledge of revenues, as are necessary to
27 effect such issuance. The governing body of a county or
28 municipality is authorized to issue bonds as defined in s.
29 125.013 or s. 166.101 from time to time to fund an assistance
30 program, in conjunction with the Florida Hurricane Insurance
31 Catastrophe Fund, for the purposes set forth in this section
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1 or for the purpose of paying the costs of construction,
2 reconstruction, repair, restoration, and other costs
3 associated with damage to properties of policyholders of
4 covered policies due to the occurrence of a hurricane by
5 assuring that policyholders located in this state are able to
6 recover claims under property insurance policies after a
7 covered event.
8 2. In order to avoid needless and indiscriminate
9 proliferation, duplication, and fragmentation of such
10 assistance programs, any local government may provide for the
11 payment of fund reimbursements, regardless of whether or not
12 the losses for which reimbursement is made occurred within or
13 outside of the territorial jurisdiction of the local
14 government.
15 3. The state hereby covenants with holders of bonds
16 issued under this paragraph that the state will not repeal or
17 abrogate the power of the board to direct the Office of
18 Insurance Regulation to levy the assessments and to collect
19 the proceeds of the revenues pledged to the payment of such
20 bonds as long as any such bonds remain outstanding unless
21 adequate provision has been made for the payment of such bonds
22 pursuant to the documents authorizing the issuance of such
23 bonds.
24 4. There shall be no liability on the part of, and no
25 cause of action shall arise against any members or employees
26 of the governing body of a local government for any actions
27 taken by them in the performance of their duties under this
28 paragraph.
29 (d) Florida Hurricane Insurance Catastrophe Fund
30 Finance Corporation.--
31
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1 1. In addition to the findings and declarations in
2 subsection (1), the Legislature also finds and declares that:
3 a. The public benefits corporation created under this
4 paragraph will provide a mechanism necessary for the
5 cost-effective and efficient issuance of bonds. This mechanism
6 will eliminate unnecessary costs in the bond issuance process,
7 thereby increasing the amounts available to pay reimbursement
8 for losses to property sustained as a result of hurricane
9 damage.
10 b. The purpose of such bonds is to fund reimbursements
11 through the Florida Hurricane Insurance Catastrophe Fund to
12 pay for the costs of construction, reconstruction, repair,
13 restoration, and other costs associated with damage to
14 properties of policyholders of covered policies due to the
15 occurrence of a hurricane.
16 c. The efficacy of the financing mechanism will be
17 enhanced by the corporation's ownership of the assessments, by
18 the insulation of the assessments from possible bankruptcy
19 proceedings, and by covenants of the state with the
20 corporation's bondholders.
21 2.a. There is created a public benefits corporation,
22 which is an instrumentality of the state, to be known as the
23 Florida Hurricane Insurance Catastrophe Fund Finance
24 Corporation.
25 b. The corporation shall operate under a five-member
26 board of directors consisting of the Governor or a designee,
27 the Chief Financial Officer or a designee, the Attorney
28 General or a designee, the director of the Division of Bond
29 Finance of the State Board of Administration, and the senior
30 employee of the State Board of Administration responsible for
31
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1 operations of the Florida Hurricane Insurance Catastrophe
2 Fund.
3 c. The corporation has all of the powers of
4 corporations under chapter 607 and under chapter 617, subject
5 only to the provisions of this subsection.
6 d. The corporation may issue bonds and engage in such
7 other financial transactions as are necessary to provide
8 sufficient funds to achieve the purposes of this section.
9 e. The corporation may invest in any of the
10 investments authorized under s. 215.47.
11 f. There shall be no liability on the part of, and no
12 cause of action shall arise against, any board members or
13 employees of the corporation for any actions taken by them in
14 the performance of their duties under this paragraph.
15 3.a. In actions under chapter 75 to validate any bonds
16 issued by the corporation, the notice required by s. 75.06
17 shall be published only in Leon County and in two newspapers
18 of general circulation in the state, and the complaint and
19 order of the court shall be served only on the State Attorney
20 of the Second Judicial Circuit.
21 b. The state hereby covenants with holders of bonds of
22 the corporation that the state will not repeal or abrogate the
23 power of the board to direct the Office of Insurance
24 Regulation to levy the assessments and to collect the proceeds
25 of the revenues pledged to the payment of such bonds as long
26 as any such bonds remain outstanding unless adequate provision
27 has been made for the payment of such bonds pursuant to the
28 documents authorizing the issuance of such bonds.
29 4. The bonds of the corporation are not a debt of the
30 state or of any political subdivision, and neither the state
31 nor any political subdivision is liable on such bonds. The
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1 corporation does not have the power to pledge the credit, the
2 revenues, or the taxing power of the state or of any political
3 subdivision. The credit, revenues, or taxing power of the
4 state or of any political subdivision shall not be deemed to
5 be pledged to the payment of any bonds of the corporation.
6 5.a. The property, revenues, and other assets of the
7 corporation; the transactions and operations of the
8 corporation and the income from such transactions and
9 operations; and all bonds issued under this paragraph and
10 interest on such bonds are exempt from taxation by the state
11 and any political subdivision, including the intangibles tax
12 under chapter 199 and the income tax under chapter 220. This
13 exemption does not apply to any tax imposed by chapter 220 on
14 interest, income, or profits on debt obligations owned by
15 corporations other than the Florida Hurricane Insurance
16 Catastrophe Fund Finance Corporation.
17 b. All bonds of the corporation shall be and
18 constitute legal investments without limitation for all public
19 bodies of this state; for all banks, trust companies, savings
20 banks, savings associations, savings and loan associations,
21 and investment companies; for all administrators, executors,
22 trustees, and other fiduciaries; for all insurance companies
23 and associations and other persons carrying on an insurance
24 business; and for all other persons who are now or may
25 hereafter be authorized to invest in bonds or other
26 obligations of the state and shall be and constitute eligible
27 securities to be deposited as collateral for the security of
28 any state, county, municipal, or other public funds. This
29 sub-subparagraph shall be considered as additional and
30 supplemental authority and shall not be limited without
31 specific reference to this sub-subparagraph.
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1 6. The corporation and its corporate existence shall
2 continue until terminated by law; however, no such law shall
3 take effect as long as the corporation has bonds outstanding
4 unless adequate provision has been made for the payment of
5 such bonds pursuant to the documents authorizing the issuance
6 of such bonds. Upon termination of the existence of the
7 corporation, all of its rights and properties in excess of its
8 obligations shall pass to and be vested in the state.
9 (e) Protection of bondholders.--
10 1. As long as the corporation has any bonds
11 outstanding, neither the fund nor the corporation shall have
12 the authority to file a voluntary petition under chapter 9 of
13 the federal Bankruptcy Code or such corresponding chapter or
14 sections as may be in effect, from time to time, and neither
15 any public officer nor any organization, entity, or other
16 person shall authorize the fund or the corporation to be or
17 become a debtor under chapter 9 of the federal Bankruptcy Code
18 or such corresponding chapter or sections as may be in effect,
19 from time to time, during any such period.
20 2. The state hereby covenants with holders of bonds of
21 the corporation that the state will not limit or alter the
22 denial of authority under this paragraph or the rights under
23 this section vested in the fund or the corporation to fulfill
24 the terms of any agreements made with such bondholders or in
25 any way impair the rights and remedies of such bondholders as
26 long as any such bonds remain outstanding unless adequate
27 provision has been made for the payment of such bonds pursuant
28 to the documents authorizing the issuance of such bonds.
29 3. Notwithstanding any other provision of law, any
30 pledge of or other security interest in revenue, money,
31 accounts, contract rights, general intangibles, or other
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1 personal property made or created by the fund or the
2 corporation shall be valid, binding, and perfected from the
3 time such pledge is made or other security interest attaches
4 without any physical delivery of the collateral or further act
5 and the lien of any such pledge or other security interest
6 shall be valid, binding, and perfected against all parties
7 having claims of any kind in tort, contract, or otherwise
8 against the fund or the corporation irrespective of whether or
9 not such parties have notice of such claims. No instrument by
10 which such a pledge or security interest is created nor any
11 financing statement need be recorded or filed.
12 (7) ADDITIONAL POWERS AND DUTIES.--
13 (a) The board may procure reinsurance from reinsurers
14 acceptable to the Office of Insurance Regulation for the
15 purpose of maximizing the capacity of the fund.
16 (b) In addition to borrowing under subsection (6), the
17 board may also borrow from, or enter into other financing
18 arrangements with, any market sources at prevailing interest
19 rates.
20 (c) Each fiscal year, the Legislature shall
21 appropriate from the investment income of the Florida
22 Hurricane Catastrophe Fund an amount no less than $10 million
23 and no more than 35 percent of the investment income based
24 upon the most recent fiscal year-end audited financial
25 statements for the purpose of providing funding for local
26 governments, state agencies, public and private educational
27 institutions, and nonprofit organizations to support programs
28 intended to improve hurricane preparedness, reduce potential
29 losses in the event of a hurricane, provide research into
30 means to reduce such losses, educate or inform the public as
31 to means to reduce hurricane losses, assist the public in
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1 determining the appropriateness of particular upgrades to
2 structures or in the financing of such upgrades, or protect
3 local infrastructure from potential damage from a hurricane.
4 Moneys shall first be available for appropriation under this
5 paragraph in fiscal year 1997-1998. Moneys in excess of the
6 $10 million specified in this paragraph shall not be available
7 for appropriation under this paragraph if the State Board of
8 Administration finds that an appropriation of investment
9 income from the fund would jeopardize the actuarial soundness
10 of the fund.
11 (c)(d) The board may allow insurers to comply with
12 reporting requirements and reporting format requirements by
13 using alternative methods of reporting if the proper
14 administration of the fund is not thereby impaired and if the
15 alternative methods produce data which is consistent with the
16 purposes of this section.
17 (d)(e) In order to assure the equitable operation of
18 the fund, the board may impose a reasonable fee on an insurer
19 to recover costs involved in reprocessing inaccurate,
20 incomplete, or untimely exposure data submitted by the
21 insurer.
22 (8) ADVISORY COUNCIL.--The State Board of
23 Administration shall appoint a nine-member Florida Hurricane
24 Insurance Fund Advisory Council that consists of an actuary, a
25 meteorologist, an engineer, a representative of insurers, a
26 representative of insurance agents, a representative of
27 reinsurers, and three consumers who shall also be
28 representatives of other affected professions and industries,
29 to provide the board with information and advice in connection
30 with its duties under this section. Members of the advisory
31
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1 council shall serve at the pleasure of the board and are
2 eligible for per diem and travel expenses under s. 112.061.
3 (9) APPLICABILITY OF S. 19, ART. III OF THE STATE
4 CONSTITUTION.--The Legislature finds that the Florida
5 Hurricane Insurance Catastrophe Fund created by this section
6 is a trust fund established for bond covenants, indentures, or
7 resolutions within the meaning of s. 19(f)(3), Art. III of the
8 State Constitution.
9 (10) VIOLATIONS.--Any violation of this section or of
10 rules adopted under this section constitutes a violation of
11 the insurance code.
12 (11) LEGAL PROCEEDINGS.--The board is authorized to
13 take any action necessary to enforce the rules, and the
14 provisions and requirements of the reimbursement contract,
15 required by and adopted pursuant to this section.
16 (12) FEDERAL OR MULTISTATE CATASTROPHIC FUNDS.--Upon
17 the creation of a federal or multistate catastrophic insurance
18 or reinsurance program intended to serve purposes similar to
19 the purposes of the fund created by this section, the State
20 Board of Administration shall promptly make recommendations to
21 the Legislature for coordination with the federal or
22 multistate program, for termination of the fund, or for such
23 other actions as the board finds appropriate in the
24 circumstances.
25 (13) REVERSION OF FUND ASSETS UPON TERMINATION.--The
26 fund and the duties of the board under this section may be
27 terminated only by law. Upon termination of the fund, all
28 assets of the fund shall revert to the General Revenue Fund.
29 (14) SEVERABILITY.--If any provision of this section
30 or its application to any person or circumstance is held
31 invalid, the invalidity does not affect other provisions or
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1 applications of the section which can be given effect without
2 the invalid provision or application, and to this end the
3 provisions of this section are declared severable.
4 (15) COLLATERAL PROTECTION INSURANCE.--As used in this
5 section and ss. 627.311 and 627.351, the term "collateral
6 protection insurance" means commercial property insurance of
7 which a creditor is the primary beneficiary and policyholder
8 and which protects or covers an interest of the creditor
9 arising out of a credit transaction secured by real or
10 personal property. Initiation of such coverage is triggered by
11 the mortgagor's failure to maintain insurance coverage as
12 required by the mortgage or other lending document. Collateral
13 protection insurance is not residential coverage.
14 Section 2. Section 215.556, Florida Statutes, is
15 amended to read:
16 215.556 Exemption.--The Florida Hurricane Insurance
17 Catastrophe Fund created by s. 215.555 is exempt from the
18 deduction required by s. 215.20(1).
19 Section 3. Subsection (1) of section 215.559, Florida
20 Statutes, is amended to read:
21 215.559 Hurricane Loss Mitigation Program.--
22 (1) There is created a Hurricane Loss Mitigation
23 Program. The Legislature shall annually appropriate $10
24 million of the moneys authorized for appropriation under s.
25 215.555(7)(c) from the Florida Hurricane Insurance Catastrophe
26 Fund to the Department of Community Affairs for the purposes
27 set forth in this section.
28 Section 4. Subsection (10) of section 624.424, Florida
29 Statutes, is amended to read:
30 624.424 Annual statement and other information.--
31
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1 (10) Each insurer or insurer group doing business in
2 this state shall file on a quarterly basis in conjunction with
3 financial reports required by paragraph (1)(a) a supplemental
4 report on an individual and group basis on a form prescribed
5 by the commission with information on personal lines and
6 commercial lines residential property insurance policies in
7 this state. The supplemental report shall include separate
8 information for personal lines property policies and for
9 commercial lines property policies and totals for each item
10 specified, including premiums written for each of the property
11 lines of business as described in ss. 215.555(2)(f)(c) and
12 627.351(6)(a). The report shall include the following
13 information for each county on a monthly basis:
14 (a) Total number of policies in force at the end of
15 each month.
16 (b) Total number of policies canceled.
17 (c) Total number of policies nonrenewed.
18 (d) Number of policies canceled due to hurricane risk.
19 (e) Number of policies nonrenewed due to hurricane
20 risk.
21 (f) Number of new policies written.
22 (g) Total dollar value of structure exposure under
23 policies that include wind coverage.
24 (h) Number of policies that exclude wind coverage.
25 Section 5. Subsection (3) of section 624.5091, Florida
26 Statutes, is amended to read:
27 624.5091 Retaliatory provision, insurers.--
28 (3) This section does not apply as to personal income
29 taxes, nor as to sales or use taxes, nor as to ad valorem
30 taxes on real or personal property, nor as to reimbursement
31 premiums paid to the Florida Hurricane Insurance Catastrophe
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1 Fund, nor as to emergency assessments paid to the Florida
2 Hurricane Insurance Catastrophe Fund, nor as to special
3 purpose obligations or assessments imposed in connection with
4 particular kinds of insurance other than property insurance,
5 except that deductions, from premium taxes or other taxes
6 otherwise payable, allowed on account of real estate or
7 personal property taxes paid shall be taken into consideration
8 by the department in determining the propriety and extent of
9 retaliatory action under this section.
10 Section 6. Subsection (5) of section 627.062, Florida
11 Statutes, is amended to read:
12 627.062 Rate standards.--
13 (5) With respect to a rate filing involving coverage
14 of the type for which the insurer is required to pay a
15 reimbursement premium to the Florida Hurricane Insurance
16 Catastrophe Fund, the insurer may fully recoup in its property
17 insurance premiums any reimbursement premiums paid to the
18 Florida Hurricane Insurance Catastrophe Fund, together with
19 reasonable costs of other reinsurance, but may not recoup
20 reinsurance costs that duplicate coverage provided by the
21 Florida Hurricane Insurance Catastrophe Fund. An insurer may
22 not recoup more than 1 year of reimbursement premium at a
23 time. Any under-recoupment from the prior year may be added to
24 the following year's reimbursement premium and any
25 over-recoupment shall be subtracted from the following year's
26 reimbursement premium.
27 Section 7. Paragraph (c) of subsection (1), paragraphs
28 (b) and (f) of subsection (2), and paragraph (b) of subsection
29 (3) of section 627.0628, Florida Statutes, are amended to
30 read:
31
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1 627.0628 Florida Commission on Hurricane Loss
2 Projection Methodology; public records exemption; public
3 meetings exemption.--
4 (1) LEGISLATIVE FINDINGS AND INTENT.--
5 (c) It is the intent of the Legislature to create the
6 Florida Commission on Hurricane Loss Projection Methodology as
7 a panel of experts to provide the most actuarially
8 sophisticated guidelines and standards for projection of
9 hurricane losses possible, given the current state of
10 actuarial science. It is the further intent of the Legislature
11 that such standards and guidelines must be used by the State
12 Board of Administration in developing reimbursement premium
13 rates for the Florida Hurricane Insurance Catastrophe Fund,
14 and, subject to paragraph (3)(c), may be used by insurers in
15 rate filings under s. 627.062 unless the way in which such
16 standards and guidelines were applied by the insurer was
17 erroneous, as shown by a preponderance of the evidence.
18 (2) COMMISSION CREATED.--
19 (b) The commission shall consist of the following 11
20 members:
21 1. The insurance consumer advocate.
22 2. The senior employee of the State Board of
23 Administration responsible for operations of the Florida
24 Hurricane Insurance Catastrophe Fund.
25 3. The Executive Director of the Citizens Property
26 Insurance Corporation.
27 4. The Director of the Division of Emergency
28 Management of the Department of Community Affairs.
29 5. The actuary member of the Florida Hurricane
30 Insurance Catastrophe Fund Advisory Council.
31
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1 6. An employee of the office who is an actuary
2 responsible for property insurance rate filings and who is
3 appointed by the director of the office.
4 7. Five members appointed by the Chief Financial
5 Officer, as follows:
6 a. An actuary who is employed full time by a property
7 and casualty insurer which was responsible for at least 1
8 percent of the aggregate statewide direct written premium for
9 homeowner's insurance in the calendar year preceding the
10 member's appointment to the commission.
11 b. An expert in insurance finance who is a full-time
12 member of the faculty of the State University System and who
13 has a background in actuarial science.
14 c. An expert in statistics who is a full-time member
15 of the faculty of the State University System and who has a
16 background in insurance.
17 d. An expert in computer system design who is a
18 full-time member of the faculty of the State University
19 System.
20 e. An expert in meteorology who is a full-time member
21 of the faculty of the State University System and who
22 specializes in hurricanes.
23 (f) The State Board of Administration shall, as a cost
24 of administration of the Florida Hurricane Insurance
25 Catastrophe Fund, provide for travel, expenses, and staff
26 support for the commission.
27 (3) ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--
28 (b) In establishing reimbursement premiums for the
29 Florida Hurricane Insurance Catastrophe Fund, the State Board
30 of Administration must, to the extent feasible, employ
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1 actuarial methods, principles, standards, models, or output
2 ranges found by the commission to be accurate or reliable.
3 Section 8. Subsection (10) of section 627.0629,
4 Florida Statutes, is amended to read:
5 627.0629 Residential property insurance; rate
6 filings.--
7 (10) A property insurance rate filing that includes
8 any adjustments related to premiums paid to the Florida
9 Hurricane Insurance Catastrophe Fund must include a complete
10 calculation of the insurer's catastrophe load, and the
11 information in the filing may not be limited solely to
12 recovery of moneys paid to the fund.
13 Section 9. Paragraph (b) of subsection (2) and
14 paragraphs (b), (c), (k), and (l) of subsection (6) of section
15 627.351, Florida Statutes, are amended to read:
16 627.351 Insurance risk apportionment plans.--
17 (2) WINDSTORM INSURANCE RISK APPORTIONMENT.--
18 (b) The department shall require all insurers holding
19 a certificate of authority to transact property insurance on a
20 direct basis in this state, other than joint underwriting
21 associations and other entities formed pursuant to this
22 section, to provide windstorm coverage to applicants from
23 areas determined to be eligible pursuant to paragraph (c) who
24 in good faith are entitled to, but are unable to procure, such
25 coverage through ordinary means; or it shall adopt a
26 reasonable plan or plans for the equitable apportionment or
27 sharing among such insurers of windstorm coverage, which may
28 include formation of an association for this purpose. As used
29 in this subsection, the term "property insurance" means
30 insurance on real or personal property, as defined in s.
31 624.604, including insurance for fire, industrial fire, allied
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1 lines, farmowners multiperil, homeowners' multiperil,
2 commercial multiperil, and mobile homes, and including
3 liability coverages on all such insurance, but excluding
4 inland marine as defined in s. 624.607(3) and excluding
5 vehicle insurance as defined in s. 624.605(1)(a) other than
6 insurance on mobile homes used as permanent dwellings. The
7 department shall adopt rules that provide a formula for the
8 recovery and repayment of any deferred assessments.
9 1. For the purpose of this section, properties
10 eligible for such windstorm coverage are defined as dwellings,
11 buildings, and other structures, including mobile homes which
12 are used as dwellings and which are tied down in compliance
13 with mobile home tie-down requirements prescribed by the
14 Department of Highway Safety and Motor Vehicles pursuant to s.
15 320.8325, and the contents of all such properties. An
16 applicant or policyholder is eligible for coverage only if an
17 offer of coverage cannot be obtained by or for the applicant
18 or policyholder from an admitted insurer at approved rates.
19 2.a.(I) All insurers required to be members of such
20 association shall participate in its writings, expenses, and
21 losses. Surplus of the association shall be retained for the
22 payment of claims and shall not be distributed to the member
23 insurers. Such participation by member insurers shall be in
24 the proportion that the net direct premiums of each member
25 insurer written for property insurance in this state during
26 the preceding calendar year bear to the aggregate net direct
27 premiums for property insurance of all member insurers, as
28 reduced by any credits for voluntary writings, in this state
29 during the preceding calendar year. For the purposes of this
30 subsection, the term "net direct premiums" means direct
31 written premiums for property insurance, reduced by premium
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1 for liability coverage and for the following if included in
2 allied lines: rain and hail on growing crops; livestock;
3 association direct premiums booked; National Flood Insurance
4 Program direct premiums; and similar deductions specifically
5 authorized by the plan of operation and approved by the
6 department. A member's participation shall begin on the first
7 day of the calendar year following the year in which it is
8 issued a certificate of authority to transact property
9 insurance in the state and shall terminate 1 year after the
10 end of the calendar year during which it no longer holds a
11 certificate of authority to transact property insurance in the
12 state. The commissioner, after review of annual statements,
13 other reports, and any other statistics that the commissioner
14 deems necessary, shall certify to the association the
15 aggregate direct premiums written for property insurance in
16 this state by all member insurers.
17 (II) Effective July 1, 2002, the association shall
18 operate subject to the supervision and approval of a board of
19 governors who are the same individuals that have been
20 appointed by the Treasurer to serve on the board of governors
21 of the Citizens Property Insurance Corporation.
22 (III) The plan of operation shall provide a formula
23 whereby a company voluntarily providing windstorm coverage in
24 affected areas will be relieved wholly or partially from
25 apportionment of a regular assessment pursuant to
26 sub-sub-subparagraph d.(I) or sub-sub-subparagraph d.(II).
27 (IV) A company which is a member of a group of
28 companies under common management may elect to have its
29 credits applied on a group basis, and any company or group may
30 elect to have its credits applied to any other company or
31 group.
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1 (V) There shall be no credits or relief from
2 apportionment to a company for emergency assessments collected
3 from its policyholders under sub-sub-subparagraph d.(III).
4 (VI) The plan of operation may also provide for the
5 award of credits, for a period not to exceed 3 years, from a
6 regular assessment pursuant to sub-sub-subparagraph d.(I) or
7 sub-sub-subparagraph d.(II) as an incentive for taking
8 policies out of the Residential Property and Casualty Joint
9 Underwriting Association. In order to qualify for the
10 exemption under this sub-sub-subparagraph, the take-out plan
11 must provide that at least 40 percent of the policies removed
12 from the Residential Property and Casualty Joint Underwriting
13 Association cover risks located in Dade, Broward, and Palm
14 Beach Counties or at least 30 percent of the policies so
15 removed cover risks located in Dade, Broward, and Palm Beach
16 Counties and an additional 50 percent of the policies so
17 removed cover risks located in other coastal counties, and
18 must also provide that no more than 15 percent of the policies
19 so removed may exclude windstorm coverage. With the approval
20 of the department, the association may waive these geographic
21 criteria for a take-out plan that removes at least the lesser
22 of 100,000 Residential Property and Casualty Joint
23 Underwriting Association policies or 15 percent of the total
24 number of Residential Property and Casualty Joint Underwriting
25 Association policies, provided the governing board of the
26 Residential Property and Casualty Joint Underwriting
27 Association certifies that the take-out plan will materially
28 reduce the Residential Property and Casualty Joint
29 Underwriting Association's 100-year probable maximum loss from
30 hurricanes. With the approval of the department, the board may
31 extend such credits for an additional year if the insurer
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1 guarantees an additional year of renewability for all policies
2 removed from the Residential Property and Casualty Joint
3 Underwriting Association, or for 2 additional years if the
4 insurer guarantees 2 additional years of renewability for all
5 policies removed from the Residential Property and Casualty
6 Joint Underwriting Association.
7 b. Assessments to pay deficits in the association
8 under this subparagraph shall be included as an appropriate
9 factor in the making of rates as provided in s. 627.3512.
10 c. The Legislature finds that the potential for
11 unlimited deficit assessments under this subparagraph may
12 induce insurers to attempt to reduce their writings in the
13 voluntary market, and that such actions would worsen the
14 availability problems that the association was created to
15 remedy. It is the intent of the Legislature that insurers
16 remain fully responsible for paying regular assessments and
17 collecting emergency assessments for any deficits of the
18 association; however, it is also the intent of the Legislature
19 to provide a means by which assessment liabilities may be
20 amortized over a period of years.
21 d.(I) When the deficit incurred in a particular
22 calendar year is 10 percent or less of the aggregate statewide
23 direct written premium for property insurance for the prior
24 calendar year for all member insurers, the association shall
25 levy an assessment on member insurers in an amount equal to
26 the deficit.
27 (II) When the deficit incurred in a particular
28 calendar year exceeds 10 percent of the aggregate statewide
29 direct written premium for property insurance for the prior
30 calendar year for all member insurers, the association shall
31 levy an assessment on member insurers in an amount equal to
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1 the greater of 10 percent of the deficit or 10 percent of the
2 aggregate statewide direct written premium for property
3 insurance for the prior calendar year for member insurers. Any
4 remaining deficit shall be recovered through emergency
5 assessments under sub-sub-subparagraph (III).
6 (III) Upon a determination by the board of directors
7 that a deficit exceeds the amount that will be recovered
8 through regular assessments on member insurers, pursuant to
9 sub-sub-subparagraph (I) or sub-sub-subparagraph (II), the
10 board shall levy, after verification by the department,
11 emergency assessments to be collected by member insurers and
12 by underwriting associations created pursuant to this section
13 which write property insurance, upon issuance or renewal of
14 property insurance policies other than National Flood
15 Insurance policies in the year or years following levy of the
16 regular assessments. The amount of the emergency assessment
17 collected in a particular year shall be a uniform percentage
18 of that year's direct written premium for property insurance
19 for all member insurers and underwriting associations,
20 excluding National Flood Insurance policy premiums, as
21 annually determined by the board and verified by the
22 department. The department shall verify the arithmetic
23 calculations involved in the board's determination within 30
24 days after receipt of the information on which the
25 determination was based. Notwithstanding any other provision
26 of law, each member insurer and each underwriting association
27 created pursuant to this section shall collect emergency
28 assessments from its policyholders without such obligation
29 being affected by any credit, limitation, exemption, or
30 deferment. The emergency assessments so collected shall be
31 transferred directly to the association on a periodic basis as
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1 determined by the association. The aggregate amount of
2 emergency assessments levied under this sub-sub-subparagraph
3 in any calendar year may not exceed the greater of 10 percent
4 of the amount needed to cover the original deficit, plus
5 interest, fees, commissions, required reserves, and other
6 costs associated with financing of the original deficit, or 10
7 percent of the aggregate statewide direct written premium for
8 property insurance written by member insurers and underwriting
9 associations for the prior year, plus interest, fees,
10 commissions, required reserves, and other costs associated
11 with financing the original deficit. The board may pledge the
12 proceeds of the emergency assessments under this
13 sub-sub-subparagraph as the source of revenue for bonds, to
14 retire any other debt incurred as a result of the deficit or
15 events giving rise to the deficit, or in any other way that
16 the board determines will efficiently recover the deficit. The
17 emergency assessments under this sub-sub-subparagraph shall
18 continue as long as any bonds issued or other indebtedness
19 incurred with respect to a deficit for which the assessment
20 was imposed remain outstanding, unless adequate provision has
21 been made for the payment of such bonds or other indebtedness
22 pursuant to the document governing such bonds or other
23 indebtedness. Emergency assessments collected under this
24 sub-sub-subparagraph are not part of an insurer's rates, are
25 not premium, and are not subject to premium tax, fees, or
26 commissions; however, failure to pay the emergency assessment
27 shall be treated as failure to pay premium.
28 (IV) Each member insurer's share of the total regular
29 assessments under sub-sub-subparagraph (I) or
30 sub-sub-subparagraph (II) shall be in the proportion that the
31 insurer's net direct premium for property insurance in this
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1 state, for the year preceding the assessment bears to the
2 aggregate statewide net direct premium for property insurance
3 of all member insurers, as reduced by any credits for
4 voluntary writings for that year.
5 (V) If regular deficit assessments are made under
6 sub-sub-subparagraph (I) or sub-sub-subparagraph (II), or by
7 the Residential Property and Casualty Joint Underwriting
8 Association under sub-subparagraph (6)(b)3.a. or
9 sub-subparagraph (6)(b)3.b., the association shall levy upon
10 the association's policyholders, as part of its next rate
11 filing, or by a separate rate filing solely for this purpose,
12 a market equalization surcharge in a percentage equal to the
13 total amount of such regular assessments divided by the
14 aggregate statewide direct written premium for property
15 insurance for member insurers for the prior calendar year.
16 Market equalization surcharges under this sub-sub-subparagraph
17 are not considered premium and are not subject to commissions,
18 fees, or premium taxes; however, failure to pay a market
19 equalization surcharge shall be treated as failure to pay
20 premium.
21 e. The governing body of any unit of local government,
22 any residents of which are insured under the plan, may issue
23 bonds as defined in s. 125.013 or s. 166.101 to fund an
24 assistance program, in conjunction with the association, for
25 the purpose of defraying deficits of the association. In order
26 to avoid needless and indiscriminate proliferation,
27 duplication, and fragmentation of such assistance programs,
28 any unit of local government, any residents of which are
29 insured by the association, may provide for the payment of
30 losses, regardless of whether or not the losses occurred
31 within or outside of the territorial jurisdiction of the local
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1 government. Revenue bonds may not be issued until validated
2 pursuant to chapter 75, unless a state of emergency is
3 declared by executive order or proclamation of the Governor
4 pursuant to s. 252.36 making such findings as are necessary to
5 determine that it is in the best interests of, and necessary
6 for, the protection of the public health, safety, and general
7 welfare of residents of this state and the protection and
8 preservation of the economic stability of insurers operating
9 in this state, and declaring it an essential public purpose to
10 permit certain municipalities or counties to issue bonds as
11 will provide relief to claimants and policyholders of the
12 association and insurers responsible for apportionment of plan
13 losses. Any such unit of local government may enter into such
14 contracts with the association and with any other entity
15 created pursuant to this subsection as are necessary to carry
16 out this paragraph. Any bonds issued under this
17 sub-subparagraph shall be payable from and secured by moneys
18 received by the association from assessments under this
19 subparagraph, and assigned and pledged to or on behalf of the
20 unit of local government for the benefit of the holders of
21 such bonds. The funds, credit, property, and taxing power of
22 the state or of the unit of local government shall not be
23 pledged for the payment of such bonds. If any of the bonds
24 remain unsold 60 days after issuance, the department shall
25 require all insurers subject to assessment to purchase the
26 bonds, which shall be treated as admitted assets; each insurer
27 shall be required to purchase that percentage of the unsold
28 portion of the bond issue that equals the insurer's relative
29 share of assessment liability under this subsection. An
30 insurer shall not be required to purchase the bonds to the
31 extent that the department determines that the purchase would
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1 endanger or impair the solvency of the insurer. The authority
2 granted by this sub-subparagraph is additional to any bonding
3 authority granted by subparagraph 6.
4 3. The plan shall also provide that any member with a
5 surplus as to policyholders of $20 million or less writing 25
6 percent or more of its total countrywide property insurance
7 premiums in this state may petition the department, within the
8 first 90 days of each calendar year, to qualify as a limited
9 apportionment company. The apportionment of such a member
10 company in any calendar year for which it is qualified shall
11 not exceed its gross participation, which shall not be
12 affected by the formula for voluntary writings. In no event
13 shall a limited apportionment company be required to
14 participate in any apportionment of losses pursuant to
15 sub-sub-subparagraph 2.d.(I) or sub-sub-subparagraph 2.d.(II)
16 in the aggregate which exceeds $50 million after payment of
17 available plan funds in any calendar year. However, a limited
18 apportionment company shall collect from its policyholders any
19 emergency assessment imposed under sub-sub-subparagraph
20 2.d.(III). The plan shall provide that, if the department
21 determines that any regular assessment will result in an
22 impairment of the surplus of a limited apportionment company,
23 the department may direct that all or part of such assessment
24 be deferred. However, there shall be no limitation or
25 deferment of an emergency assessment to be collected from
26 policyholders under sub-sub-subparagraph 2.d.(III).
27 4. The plan shall provide for the deferment, in whole
28 or in part, of a regular assessment of a member insurer under
29 sub-sub-subparagraph 2.d.(I) or sub-sub-subparagraph 2.d.(II),
30 but not for an emergency assessment collected from
31 policyholders under sub-sub-subparagraph 2.d.(III), if, in the
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1 opinion of the commissioner, payment of such regular
2 assessment would endanger or impair the solvency of the member
3 insurer. In the event a regular assessment against a member
4 insurer is deferred in whole or in part, the amount by which
5 such assessment is deferred may be assessed against the other
6 member insurers in a manner consistent with the basis for
7 assessments set forth in sub-sub-subparagraph 2.d.(I) or
8 sub-sub-subparagraph 2.d.(II).
9 5.a. The plan of operation may include deductibles and
10 rules for classification of risks and rate modifications
11 consistent with the objective of providing and maintaining
12 funds sufficient to pay catastrophe losses.
13 b. The association may require arbitration of a rate
14 filing under s. 627.062(6). It is the intent of the
15 Legislature that the rates for coverage provided by the
16 association be actuarially sound and not competitive with
17 approved rates charged in the admitted voluntary market such
18 that the association functions as a residual market mechanism
19 to provide insurance only when the insurance cannot be
20 procured in the voluntary market. The plan of operation shall
21 provide a mechanism to assure that, beginning no later than
22 January 1, 1999, the rates charged by the association for each
23 line of business are reflective of approved rates in the
24 voluntary market for hurricane coverage for each line of
25 business in the various areas eligible for association
26 coverage.
27 c. The association shall provide for windstorm
28 coverage on residential properties in limits up to $10 million
29 for commercial lines residential risks and up to $1 million
30 for personal lines residential risks. If coverage with the
31 association is sought for a residential risk valued in excess
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1 of these limits, coverage shall be available to the risk up to
2 the replacement cost or actual cash value of the property, at
3 the option of the insured, if coverage for the risk cannot be
4 located in the authorized market. The association must accept
5 a commercial lines residential risk with limits above $10
6 million or a personal lines residential risk with limits above
7 $1 million if coverage is not available in the authorized
8 market. The association may write coverage above the limits
9 specified in this subparagraph with or without facultative or
10 other reinsurance coverage, as the association determines
11 appropriate.
12 d. The plan of operation must provide objective
13 criteria and procedures, approved by the department, to be
14 uniformly applied for all applicants in determining whether an
15 individual risk is so hazardous as to be uninsurable. In
16 making this determination and in establishing the criteria and
17 procedures, the following shall be considered:
18 (I) Whether the likelihood of a loss for the
19 individual risk is substantially higher than for other risks
20 of the same class; and
21 (II) Whether the uncertainty associated with the
22 individual risk is such that an appropriate premium cannot be
23 determined.
24
25 The acceptance or rejection of a risk by the association
26 pursuant to such criteria and procedures must be construed as
27 the private placement of insurance, and the provisions of
28 chapter 120 do not apply.
29 e. If the risk accepts an offer of coverage through
30 the market assistance program or through a mechanism
31 established by the association, either before the policy is
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1 issued by the association or during the first 30 days of
2 coverage by the association, and the producing agent who
3 submitted the application to the association is not currently
4 appointed by the insurer, the insurer shall:
5 (I) Pay to the producing agent of record of the
6 policy, for the first year, an amount that is the greater of
7 the insurer's usual and customary commission for the type of
8 policy written or a fee equal to the usual and customary
9 commission of the association; or
10 (II) Offer to allow the producing agent of record of
11 the policy to continue servicing the policy for a period of
12 not less than 1 year and offer to pay the agent the greater of
13 the insurer's or the association's usual and customary
14 commission for the type of policy written.
15
16 If the producing agent is unwilling or unable to accept
17 appointment, the new insurer shall pay the agent in accordance
18 with sub-sub-subparagraph (I). Subject to the provisions of s.
19 627.3517, the policies issued by the association must provide
20 that if the association obtains an offer from an authorized
21 insurer to cover the risk at its approved rates under either a
22 standard policy including wind coverage or, if consistent with
23 the insurer's underwriting rules as filed with the department,
24 a basic policy including wind coverage, the risk is no longer
25 eligible for coverage through the association. Upon
26 termination of eligibility, the association shall provide
27 written notice to the policyholder and agent of record stating
28 that the association policy must be canceled as of 60 days
29 after the date of the notice because of the offer of coverage
30 from an authorized insurer. Other provisions of the insurance
31
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1 code relating to cancellation and notice of cancellation do
2 not apply to actions under this sub-subparagraph.
3 f. When the association enters into a contractual
4 agreement for a take-out plan, the producing agent of record
5 of the association policy is entitled to retain any unearned
6 commission on the policy, and the insurer shall:
7 (I) Pay to the producing agent of record of the
8 association policy, for the first year, an amount that is the
9 greater of the insurer's usual and customary commission for
10 the type of policy written or a fee equal to the usual and
11 customary commission of the association; or
12 (II) Offer to allow the producing agent of record of
13 the association policy to continue servicing the policy for a
14 period of not less than 1 year and offer to pay the agent the
15 greater of the insurer's or the association's usual and
16 customary commission for the type of policy written.
17
18 If the producing agent is unwilling or unable to accept
19 appointment, the new insurer shall pay the agent in accordance
20 with sub-sub-subparagraph (I).
21 6.a. The plan of operation may authorize the formation
22 of a private nonprofit corporation, a private nonprofit
23 unincorporated association, a partnership, a trust, a limited
24 liability company, or a nonprofit mutual company which may be
25 empowered, among other things, to borrow money by issuing
26 bonds or by incurring other indebtedness and to accumulate
27 reserves or funds to be used for the payment of insured
28 catastrophe losses. The plan may authorize all actions
29 necessary to facilitate the issuance of bonds, including the
30 pledging of assessments or other revenues.
31
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1 b. Any entity created under this subsection, or any
2 entity formed for the purposes of this subsection, may sue and
3 be sued, may borrow money; issue bonds, notes, or debt
4 instruments; pledge or sell assessments, market equalization
5 surcharges and other surcharges, rights, premiums, contractual
6 rights, projected recoveries from the Florida Hurricane
7 Insurance Catastrophe Fund, other reinsurance recoverables,
8 and other assets as security for such bonds, notes, or debt
9 instruments; enter into any contracts or agreements necessary
10 or proper to accomplish such borrowings; and take other
11 actions necessary to carry out the purposes of this
12 subsection. The association may issue bonds or incur other
13 indebtedness, or have bonds issued on its behalf by a unit of
14 local government pursuant to subparagraph (6)(g)2., in the
15 absence of a hurricane or other weather-related event, upon a
16 determination by the association subject to approval by the
17 department that such action would enable it to efficiently
18 meet the financial obligations of the association and that
19 such financings are reasonably necessary to effectuate the
20 requirements of this subsection. Any such entity may
21 accumulate reserves and retain surpluses as of the end of any
22 association year to provide for the payment of losses incurred
23 by the association during that year or any future year. The
24 association shall incorporate and continue the plan of
25 operation and articles of agreement in effect on the effective
26 date of chapter 76-96, Laws of Florida, to the extent that it
27 is not inconsistent with chapter 76-96, and as subsequently
28 modified consistent with chapter 76-96. The board of directors
29 and officers currently serving shall continue to serve until
30 their successors are duly qualified as provided under the
31 plan. The assets and obligations of the plan in effect
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1 immediately prior to the effective date of chapter 76-96 shall
2 be construed to be the assets and obligations of the successor
3 plan created herein.
4 c. In recognition of s. 10, Art. I of the State
5 Constitution, prohibiting the impairment of obligations of
6 contracts, it is the intent of the Legislature that no action
7 be taken whose purpose is to impair any bond indenture or
8 financing agreement or any revenue source committed by
9 contract to such bond or other indebtedness issued or incurred
10 by the association or any other entity created under this
11 subsection.
12 7. On such coverage, an agent's remuneration shall be
13 that amount of money payable to the agent by the terms of his
14 or her contract with the company with which the business is
15 placed. However, no commission will be paid on that portion of
16 the premium which is in excess of the standard premium of that
17 company.
18 8. Subject to approval by the department, the
19 association may establish different eligibility requirements
20 and operational procedures for any line or type of coverage
21 for any specified eligible area or portion of an eligible area
22 if the board determines that such changes to the eligibility
23 requirements and operational procedures are justified due to
24 the voluntary market being sufficiently stable and competitive
25 in such area or for such line or type of coverage and that
26 consumers who, in good faith, are unable to obtain insurance
27 through the voluntary market through ordinary methods would
28 continue to have access to coverage from the association. When
29 coverage is sought in connection with a real property
30 transfer, such requirements and procedures shall not provide
31 for an effective date of coverage later than the date of the
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1 closing of the transfer as established by the transferor, the
2 transferee, and, if applicable, the lender.
3 9. Notwithstanding any other provision of law:
4 a. The pledge or sale of, the lien upon, and the
5 security interest in any rights, revenues, or other assets of
6 the association created or purported to be created pursuant to
7 any financing documents to secure any bonds or other
8 indebtedness of the association shall be and remain valid and
9 enforceable, notwithstanding the commencement of and during
10 the continuation of, and after, any rehabilitation,
11 insolvency, liquidation, bankruptcy, receivership,
12 conservatorship, reorganization, or similar proceeding against
13 the association under the laws of this state or any other
14 applicable laws.
15 b. No such proceeding shall relieve the association of
16 its obligation, or otherwise affect its ability to perform its
17 obligation, to continue to collect, or levy and collect,
18 assessments, market equalization or other surcharges,
19 projected recoveries from the Florida Hurricane Insurance
20 Catastrophe Fund, reinsurance recoverables, or any other
21 rights, revenues, or other assets of the association pledged.
22 c. Each such pledge or sale of, lien upon, and
23 security interest in, including the priority of such pledge,
24 lien, or security interest, any such assessments, emergency
25 assessments, market equalization or renewal surcharges,
26 projected recoveries from the Florida Hurricane Insurance
27 Catastrophe Fund, reinsurance recoverables, or other rights,
28 revenues, or other assets which are collected, or levied and
29 collected, after the commencement of and during the pendency
30 of or after any such proceeding shall continue unaffected by
31 such proceeding.
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1 d. As used in this subsection, the term "financing
2 documents" means any agreement, instrument, or other document
3 now existing or hereafter created evidencing any bonds or
4 other indebtedness of the association or pursuant to which any
5 such bonds or other indebtedness has been or may be issued and
6 pursuant to which any rights, revenues, or other assets of the
7 association are pledged or sold to secure the repayment of
8 such bonds or indebtedness, together with the payment of
9 interest on such bonds or such indebtedness, or the payment of
10 any other obligation of the association related to such bonds
11 or indebtedness.
12 e. Any such pledge or sale of assessments, revenues,
13 contract rights or other rights or assets of the association
14 shall constitute a lien and security interest, or sale, as the
15 case may be, that is immediately effective and attaches to
16 such assessments, revenues, contract, or other rights or
17 assets, whether or not imposed or collected at the time the
18 pledge or sale is made. Any such pledge or sale is effective,
19 valid, binding, and enforceable against the association or
20 other entity making such pledge or sale, and valid and binding
21 against and superior to any competing claims or obligations
22 owed to any other person or entity, including policyholders in
23 this state, asserting rights in any such assessments,
24 revenues, contract, or other rights or assets to the extent
25 set forth in and in accordance with the terms of the pledge or
26 sale contained in the applicable financing documents, whether
27 or not any such person or entity has notice of such pledge or
28 sale and without the need for any physical delivery,
29 recordation, filing, or other action.
30 f. There shall be no liability on the part of, and no
31 cause of action of any nature shall arise against, any member
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1 insurer or its agents or employees, agents or employees of the
2 association, members of the board of directors of the
3 association, or the department or its representatives, for any
4 action taken by them in the performance of their duties or
5 responsibilities under this subsection. Such immunity does not
6 apply to actions for breach of any contract or agreement
7 pertaining to insurance, or any willful tort.
8 (6) CITIZENS PROPERTY INSURANCE CORPORATION.--
9 (b)1. All insurers authorized to write one or more
10 subject lines of business in this state are subject to
11 assessment by the corporation and, for the purposes of this
12 subsection, are referred to collectively as "assessable
13 insurers." Insurers writing one or more subject lines of
14 business in this state pursuant to part VIII of chapter 626
15 are not assessable insurers, but insureds who procure one or
16 more subject lines of business in this state pursuant to part
17 VIII of chapter 626 are subject to assessment by the
18 corporation and are referred to collectively as "assessable
19 insureds." An authorized insurer's assessment liability shall
20 begin on the first day of the calendar year following the year
21 in which the insurer was issued a certificate of authority to
22 transact insurance for subject lines of business in this state
23 and shall terminate 1 year after the end of the first calendar
24 year during which the insurer no longer holds a certificate of
25 authority to transact insurance for subject lines of business
26 in this state.
27 2.a. All revenues, assets, liabilities, losses, and
28 expenses of the corporation shall be divided into three
29 separate accounts as follows:
30 (I) A personal lines account for personal residential
31 policies issued by the corporation or issued by the
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1 Residential Property and Casualty Joint Underwriting
2 Association and renewed by the corporation that provide
3 comprehensive, multiperil coverage on risks that are not
4 located in areas eligible for coverage in the Florida
5 Windstorm Underwriting Association as those areas were defined
6 on January 1, 2002, and for such policies that do not provide
7 coverage for the peril of wind on risks that are located in
8 such areas;
9 (II) A commercial lines account for commercial
10 residential policies issued by the corporation or issued by
11 the Residential Property and Casualty Joint Underwriting
12 Association and renewed by the corporation that provide
13 coverage for basic property perils on risks that are not
14 located in areas eligible for coverage in the Florida
15 Windstorm Underwriting Association as those areas were defined
16 on January 1, 2002, and for such policies that do not provide
17 coverage for the peril of wind on risks that are located in
18 such areas; and
19 (III) A high-risk account for personal residential
20 policies and commercial residential and commercial
21 nonresidential property policies issued by the corporation or
22 transferred to the corporation that provide coverage for the
23 peril of wind on risks that are located in areas eligible for
24 coverage in the Florida Windstorm Underwriting Association as
25 those areas were defined on January 1, 2002. The high-risk
26 account must also include quota share primary insurance under
27 subparagraph (c)2. The area eligible for coverage under the
28 high-risk account also includes the area within Port
29 Canaveral, which is bordered on the south by the City of Cape
30 Canaveral, bordered on the west by the Banana River, and
31 bordered on the north by Federal Government property. The
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1 office may remove territory from the area eligible for
2 wind-only and quota share coverage if, after a public hearing,
3 the office finds that authorized insurers in the voluntary
4 market are willing and able to write sufficient amounts of
5 personal and commercial residential coverage for all perils in
6 the territory, including coverage for the peril of wind, such
7 that risks covered by wind-only policies in the removed
8 territory could be issued a policy by the corporation in
9 either the personal lines or commercial lines account without
10 a significant increase in the corporation's probable maximum
11 loss in such account. Removal of territory from the area
12 eligible for wind-only or quota share coverage does not alter
13 the assignment of wind coverage written in such areas to the
14 high-risk account.
15 b. The three separate accounts must be maintained as
16 long as financing obligations entered into by the Florida
17 Windstorm Underwriting Association or Residential Property and
18 Casualty Joint Underwriting Association are outstanding, in
19 accordance with the terms of the corresponding financing
20 documents. When the financing obligations are no longer
21 outstanding, in accordance with the terms of the corresponding
22 financing documents, the corporation may use a single account
23 for all revenues, assets, liabilities, losses, and expenses of
24 the corporation.
25 c. Creditors of the Residential Property and Casualty
26 Joint Underwriting Association shall have a claim against, and
27 recourse to, the accounts referred to in sub-sub-subparagraphs
28 a.(I) and (II) and shall have no claim against, or recourse
29 to, the account referred to in sub-sub-subparagraph a.(III).
30 Creditors of the Florida Windstorm Underwriting Association
31 shall have a claim against, and recourse to, the account
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1 referred to in sub-sub-subparagraph a.(III) and shall have no
2 claim against, or recourse to, the accounts referred to in
3 sub-sub-subparagraphs a.(I) and (II).
4 d. Revenues, assets, liabilities, losses, and expenses
5 not attributable to particular accounts shall be prorated
6 among the accounts.
7 e. The Legislature finds that the revenues of the
8 corporation are revenues that are necessary to meet the
9 requirements set forth in documents authorizing the issuance
10 of bonds under this subsection.
11 f. No part of the income of the corporation may inure
12 to the benefit of any private person.
13 3. With respect to a deficit in an account:
14 a. When the deficit incurred in a particular calendar
15 year is not greater than 10 percent of the aggregate statewide
16 direct written premium for the subject lines of business for
17 the prior calendar year, the entire deficit shall be recovered
18 through regular assessments of assessable insurers under
19 paragraph (g) and assessable insureds.
20 b. When the deficit incurred in a particular calendar
21 year exceeds 10 percent of the aggregate statewide direct
22 written premium for the subject lines of business for the
23 prior calendar year, the corporation shall levy regular
24 assessments on assessable insurers under paragraph (g) and on
25 assessable insureds in an amount equal to the greater of 10
26 percent of the deficit or 10 percent of the aggregate
27 statewide direct written premium for the subject lines of
28 business for the prior calendar year. Any remaining deficit
29 shall be recovered through emergency assessments under
30 sub-subparagraph d.
31
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1 c. Each assessable insurer's share of the amount being
2 assessed under sub-subparagraph a. or sub-subparagraph b.
3 shall be in the proportion that the assessable insurer's
4 direct written premium for the subject lines of business for
5 the year preceding the assessment bears to the aggregate
6 statewide direct written premium for the subject lines of
7 business for that year. The assessment percentage applicable
8 to each assessable insured is the ratio of the amount being
9 assessed under sub-subparagraph a. or sub-subparagraph b. to
10 the aggregate statewide direct written premium for the subject
11 lines of business for the prior year. Assessments levied by
12 the corporation on assessable insurers under sub-subparagraphs
13 a. and b. shall be paid as required by the corporation's plan
14 of operation and paragraph (g). Assessments levied by the
15 corporation on assessable insureds under sub-subparagraphs a.
16 and b. shall be collected by the surplus lines agent at the
17 time the surplus lines agent collects the surplus lines tax
18 required by s. 626.932 and shall be paid to the Florida
19 Surplus Lines Service Office at the time the surplus lines
20 agent pays the surplus lines tax to the Florida Surplus Lines
21 Service Office. Upon receipt of regular assessments from
22 surplus lines agents, the Florida Surplus Lines Service Office
23 shall transfer the assessments directly to the corporation as
24 determined by the corporation.
25 d. Upon a determination by the board of governors that
26 a deficit in an account exceeds the amount that will be
27 recovered through regular assessments under sub-subparagraph
28 a. or sub-subparagraph b., the board shall levy, after
29 verification by the office, emergency assessments, for as many
30 years as necessary to cover the deficits, to be collected by
31 assessable insurers and the corporation and collected from
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1 assessable insureds upon issuance or renewal of policies for
2 subject lines of business, excluding National Flood Insurance
3 policies. The amount of the emergency assessment collected in
4 a particular year shall be a uniform percentage of that year's
5 direct written premium for subject lines of business and all
6 accounts of the corporation, excluding National Flood
7 Insurance Program policy premiums, as annually determined by
8 the board and verified by the office. The office shall verify
9 the arithmetic calculations involved in the board's
10 determination within 30 days after receipt of the information
11 on which the determination was based. Notwithstanding any
12 other provision of law, the corporation and each assessable
13 insurer that writes subject lines of business shall collect
14 emergency assessments from its policyholders without such
15 obligation being affected by any credit, limitation,
16 exemption, or deferment. Emergency assessments levied by the
17 corporation on assessable insureds shall be collected by the
18 surplus lines agent at the time the surplus lines agent
19 collects the surplus lines tax required by s. 626.932 and
20 shall be paid to the Florida Surplus Lines Service Office at
21 the time the surplus lines agent pays the surplus lines tax to
22 the Florida Surplus Lines Service Office. The emergency
23 assessments so collected shall be transferred directly to the
24 corporation on a periodic basis as determined by the
25 corporation and shall be held by the corporation solely in the
26 applicable account. The aggregate amount of emergency
27 assessments levied for an account under this sub-subparagraph
28 in any calendar year may not exceed the greater of 10 percent
29 of the amount needed to cover the original deficit, plus
30 interest, fees, commissions, required reserves, and other
31 costs associated with financing of the original deficit, or 10
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1 percent of the aggregate statewide direct written premium for
2 subject lines of business and for all accounts of the
3 corporation for the prior year, plus interest, fees,
4 commissions, required reserves, and other costs associated
5 with financing the original deficit.
6 e. The corporation may pledge the proceeds of
7 assessments, projected recoveries from the Florida Hurricane
8 Insurance Catastrophe Fund, other insurance and reinsurance
9 recoverables, market equalization surcharges and other
10 surcharges, and other funds available to the corporation as
11 the source of revenue for and to secure bonds issued under
12 paragraph (g), bonds or other indebtedness issued under
13 subparagraph (c)3., or lines of credit or other financing
14 mechanisms issued or created under this subsection, or to
15 retire any other debt incurred as a result of deficits or
16 events giving rise to deficits, or in any other way that the
17 board determines will efficiently recover such deficits. The
18 purpose of the lines of credit or other financing mechanisms
19 is to provide additional resources to assist the corporation
20 in covering claims and expenses attributable to a catastrophe.
21 As used in this subsection, the term "assessments" includes
22 regular assessments under sub-subparagraph a.,
23 sub-subparagraph b., or subparagraph (g)1. and emergency
24 assessments under sub-subparagraph d. Emergency assessments
25 collected under sub-subparagraph d. are not part of an
26 insurer's rates, are not premium, and are not subject to
27 premium tax, fees, or commissions; however, failure to pay the
28 emergency assessment shall be treated as failure to pay
29 premium. The emergency assessments under sub-subparagraph d.
30 shall continue as long as any bonds issued or other
31 indebtedness incurred with respect to a deficit for which the
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1 assessment was imposed remain outstanding, unless adequate
2 provision has been made for the payment of such bonds or other
3 indebtedness pursuant to the documents governing such bonds or
4 other indebtedness.
5 f. As used in this subsection, the term "subject lines
6 of business" means insurance written by assessable insurers or
7 procured by assessable insureds on real or personal property,
8 as defined in s. 624.604, including insurance for fire,
9 industrial fire, allied lines, farmowners multiperil,
10 homeowners multiperil, commercial multiperil, and mobile
11 homes, and including liability coverage on all such insurance,
12 but excluding inland marine as defined in s. 624.607(3) and
13 excluding vehicle insurance as defined in s. 624.605(1) other
14 than insurance on mobile homes used as permanent dwellings.
15 g. The Florida Surplus Lines Service Office shall
16 determine annually the aggregate statewide written premium in
17 subject lines of business procured by assessable insureds and
18 shall report that information to the corporation in a form and
19 at a time the corporation specifies to ensure that the
20 corporation can meet the requirements of this subsection and
21 the corporation's financing obligations.
22 h. The Florida Surplus Lines Service Office shall
23 verify the proper application by surplus lines agents of
24 assessment percentages for regular assessments and emergency
25 assessments levied under this subparagraph on assessable
26 insureds and shall assist the corporation in ensuring the
27 accurate, timely collection and payment of assessments by
28 surplus lines agents as required by the corporation.
29 (c) The plan of operation of the corporation:
30 1. Must provide for adoption of residential property
31 and casualty insurance policy forms and commercial residential
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1 and nonresidential property insurance forms, which forms must
2 be approved by the office prior to use. The corporation shall
3 adopt the following policy forms:
4 a. Standard personal lines policy forms that are
5 comprehensive multiperil policies providing full coverage of a
6 residential property equivalent to the coverage provided in
7 the private insurance market under an HO-3, HO-4, or HO-6
8 policy.
9 b. Basic personal lines policy forms that are policies
10 similar to an HO-8 policy or a dwelling fire policy that
11 provide coverage meeting the requirements of the secondary
12 mortgage market, but which coverage is more limited than the
13 coverage under a standard policy.
14 c. Commercial lines residential policy forms that are
15 generally similar to the basic perils of full coverage
16 obtainable for commercial residential structures in the
17 admitted voluntary market.
18 d. Personal lines and commercial lines residential
19 property insurance forms that cover the peril of wind only.
20 The forms are applicable only to residential properties
21 located in areas eligible for coverage under the high-risk
22 account referred to in sub-subparagraph (b)2.a.
23 e. Commercial lines nonresidential property insurance
24 forms that cover the peril of wind only. The forms are
25 applicable only to nonresidential properties located in areas
26 eligible for coverage under the high-risk account referred to
27 in sub-subparagraph (b)2.a.
28 2.a. Must provide that the corporation adopt a program
29 in which the corporation and authorized insurers enter into
30 quota share primary insurance agreements for hurricane
31 coverage, as defined in s. 627.4025(2)(a), for eligible risks,
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1 and adopt property insurance forms for eligible risks which
2 cover the peril of wind only. As used in this subsection, the
3 term:
4 (I) "Quota share primary insurance" means an
5 arrangement in which the primary hurricane coverage of an
6 eligible risk is provided in specified percentages by the
7 corporation and an authorized insurer. The corporation and
8 authorized insurer are each solely responsible for a specified
9 percentage of hurricane coverage of an eligible risk as set
10 forth in a quota share primary insurance agreement between the
11 corporation and an authorized insurer and the insurance
12 contract. The responsibility of the corporation or authorized
13 insurer to pay its specified percentage of hurricane losses of
14 an eligible risk, as set forth in the quota share primary
15 insurance agreement, may not be altered by the inability of
16 the other party to the agreement to pay its specified
17 percentage of hurricane losses. Eligible risks that are
18 provided hurricane coverage through a quota share primary
19 insurance arrangement must be provided policy forms that set
20 forth the obligations of the corporation and authorized
21 insurer under the arrangement, clearly specify the percentages
22 of quota share primary insurance provided by the corporation
23 and authorized insurer, and conspicuously and clearly state
24 that neither the authorized insurer nor the corporation may be
25 held responsible beyond its specified percentage of coverage
26 of hurricane losses.
27 (II) "Eligible risks" means personal lines residential
28 and commercial lines residential risks that meet the
29 underwriting criteria of the corporation and are located in
30 areas that were eligible for coverage by the Florida Windstorm
31 Underwriting Association on January 1, 2002.
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1 b. The corporation may enter into quota share primary
2 insurance agreements with authorized insurers at corporation
3 coverage levels of 90 percent and 50 percent.
4 c. If the corporation determines that additional
5 coverage levels are necessary to maximize participation in
6 quota share primary insurance agreements by authorized
7 insurers, the corporation may establish additional coverage
8 levels. However, the corporation's quota share primary
9 insurance coverage level may not exceed 90 percent.
10 d. Any quota share primary insurance agreement entered
11 into between an authorized insurer and the corporation must
12 provide for a uniform specified percentage of coverage of
13 hurricane losses, by county or territory as set forth by the
14 corporation board, for all eligible risks of the authorized
15 insurer covered under the quota share primary insurance
16 agreement.
17 e. Any quota share primary insurance agreement entered
18 into between an authorized insurer and the corporation is
19 subject to review and approval by the office. However, such
20 agreement shall be authorized only as to insurance contracts
21 entered into between an authorized insurer and an insured who
22 is already insured by the corporation for wind coverage.
23 f. For all eligible risks covered under quota share
24 primary insurance agreements, the exposure and coverage levels
25 for both the corporation and authorized insurers shall be
26 reported by the corporation to the Florida Hurricane Insurance
27 Catastrophe Fund. For all policies of eligible risks covered
28 under quota share primary insurance agreements, the
29 corporation and the authorized insurer shall maintain complete
30 and accurate records for the purpose of exposure and loss
31 reimbursement audits as required by Florida Hurricane
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1 Insurance Catastrophe Fund rules. The corporation and the
2 authorized insurer shall each maintain duplicate copies of
3 policy declaration pages and supporting claims documents.
4 g. The corporation board shall establish in its plan
5 of operation standards for quota share agreements which ensure
6 that there is no discriminatory application among insurers as
7 to the terms of quota share agreements, pricing of quota share
8 agreements, incentive provisions if any, and consideration
9 paid for servicing policies or adjusting claims.
10 h. The quota share primary insurance agreement between
11 the corporation and an authorized insurer must set forth the
12 specific terms under which coverage is provided, including,
13 but not limited to, the sale and servicing of policies issued
14 under the agreement by the insurance agent of the authorized
15 insurer producing the business, the reporting of information
16 concerning eligible risks, the payment of premium to the
17 corporation, and arrangements for the adjustment and payment
18 of hurricane claims incurred on eligible risks by the claims
19 adjuster and personnel of the authorized insurer. Entering
20 into a quota sharing insurance agreement between the
21 corporation and an authorized insurer shall be voluntary and
22 at the discretion of the authorized insurer.
23 3. May provide that the corporation may employ or
24 otherwise contract with individuals or other entities to
25 provide administrative or professional services that may be
26 appropriate to effectuate the plan. The corporation shall have
27 the power to borrow funds, by issuing bonds or by incurring
28 other indebtedness, and shall have other powers reasonably
29 necessary to effectuate the requirements of this subsection,
30 including, without limitation, the power to issue bonds and
31 incur other indebtedness in order to refinance outstanding
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1 bonds or other indebtedness. The corporation may, but is not
2 required to, seek judicial validation of its bonds or other
3 indebtedness under chapter 75. The corporation may issue bonds
4 or incur other indebtedness, or have bonds issued on its
5 behalf by a unit of local government pursuant to subparagraph
6 (g)2., in the absence of a hurricane or other weather-related
7 event, upon a determination by the corporation, subject to
8 approval by the office, that such action would enable it to
9 efficiently meet the financial obligations of the corporation
10 and that such financings are reasonably necessary to
11 effectuate the requirements of this subsection. The
12 corporation is authorized to take all actions needed to
13 facilitate tax-free status for any such bonds or indebtedness,
14 including formation of trusts or other affiliated entities.
15 The corporation shall have the authority to pledge
16 assessments, projected recoveries from the Florida Hurricane
17 Insurance Catastrophe Fund, other reinsurance recoverables,
18 market equalization and other surcharges, and other funds
19 available to the corporation as security for bonds or other
20 indebtedness. In recognition of s. 10, Art. I of the State
21 Constitution, prohibiting the impairment of obligations of
22 contracts, it is the intent of the Legislature that no action
23 be taken whose purpose is to impair any bond indenture or
24 financing agreement or any revenue source committed by
25 contract to such bond or other indebtedness.
26 4.a. Must require that the corporation operate subject
27 to the supervision and approval of a board of governors
28 consisting of 8 individuals who are residents of this state,
29 from different geographical areas of this state. The Governor,
30 the Chief Financial Officer, the President of the Senate, and
31 the Speaker of the House of Representatives shall each appoint
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1 two members of the board, effective August 1, 2005. At least
2 one of the two members appointed by each appointing officer
3 must have demonstrated expertise in insurance. The Chief
4 Financial Officer shall designate one of the appointees as
5 chair. All board members serve at the pleasure of the
6 appointing officer. All board members, including the chair,
7 must be appointed to serve for 3-year terms beginning annually
8 on a date designated by the plan. Any board vacancy shall be
9 filled for the unexpired term by the appointing officer. The
10 Chief Financial Officer shall appoint a technical advisory
11 group to provide information and advice to the board of
12 governors in connection with the board's duties under this
13 subsection. The executive director and senior managers of the
14 corporation shall be engaged by the board, as recommended by
15 the Chief Financial Officer, and serve at the pleasure of the
16 board. The executive director is responsible for employing
17 other staff as the corporation may require, subject to review
18 and concurrence by the board and the Chief Financial Officer.
19 b. The board shall create a Market Accountability
20 Advisory Committee to assist the corporation in developing
21 awareness of its rates and its customer and agent service
22 levels in relationship to the voluntary market insurers
23 writing similar coverage. The members of the advisory
24 committee shall consist of the following 11 persons, one of
25 whom must be elected chair by the members of the committee:
26 four representatives, one appointed by the Florida Association
27 of Insurance Agents, one by the Florida Association of
28 Insurance and Financial Advisors, one by the Professional
29 Insurance Agents of Florida, and one by the Latin American
30 Association of Insurance Agencies; three representatives
31 appointed by the insurers with the three highest voluntary
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1 market share of residential property insurance business in the
2 state; one representative from the Office of Insurance
3 Regulation; one consumer appointed by the board who is insured
4 by the corporation at the time of appointment to the
5 committee; one representative appointed by the Florida
6 Association of Realtors; and one representative appointed by
7 the Florida Bankers Association. All members must serve for
8 3-year terms and may serve for consecutive terms. The
9 committee shall report to the corporation at each board
10 meeting on insurance market issues which may include rates and
11 rate competition with the voluntary market; service, including
12 policy issuance, claims processing, and general responsiveness
13 to policyholders, applicants, and agents; and matters relating
14 to depopulation.
15 5. Must provide a procedure for determining the
16 eligibility of a risk for coverage, as follows:
17 a. Subject to the provisions of s. 627.3517, with
18 respect to personal lines residential risks, if the risk is
19 offered coverage from an authorized insurer at the insurer's
20 approved rate under either a standard policy including wind
21 coverage or, if consistent with the insurer's underwriting
22 rules as filed with the office, a basic policy including wind
23 coverage, the risk is not eligible for any policy issued by
24 the corporation. If the risk is not able to obtain any such
25 offer, the risk is eligible for either a standard policy
26 including wind coverage or a basic policy including wind
27 coverage issued by the corporation; however, if the risk could
28 not be insured under a standard policy including wind coverage
29 regardless of market conditions, the risk shall be eligible
30 for a basic policy including wind coverage unless rejected
31 under subparagraph 8. The corporation shall determine the type
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1 of policy to be provided on the basis of objective standards
2 specified in the underwriting manual and based on generally
3 accepted underwriting practices.
4 (I) If the risk accepts an offer of coverage through
5 the market assistance plan or an offer of coverage through a
6 mechanism established by the corporation before a policy is
7 issued to the risk by the corporation or during the first 30
8 days of coverage by the corporation, and the producing agent
9 who submitted the application to the plan or to the
10 corporation is not currently appointed by the insurer, the
11 insurer shall:
12 (A) Pay to the producing agent of record of the
13 policy, for the first year, an amount that is the greater of
14 the insurer's usual and customary commission for the type of
15 policy written or a fee equal to the usual and customary
16 commission of the corporation; or
17 (B) Offer to allow the producing agent of record of
18 the policy to continue servicing the policy for a period of
19 not less than 1 year and offer to pay the agent the greater of
20 the insurer's or the corporation's usual and customary
21 commission for the type of policy written.
22
23 If the producing agent is unwilling or unable to accept
24 appointment, the new insurer shall pay the agent in accordance
25 with sub-sub-sub-subparagraph (A).
26 (II) When the corporation enters into a contractual
27 agreement for a take-out plan, the producing agent of record
28 of the corporation policy is entitled to retain any unearned
29 commission on the policy, and the insurer shall:
30 (A) Pay to the producing agent of record of the
31 corporation policy, for the first year, an amount that is the
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1 greater of the insurer's usual and customary commission for
2 the type of policy written or a fee equal to the usual and
3 customary commission of the corporation; or
4 (B) Offer to allow the producing agent of record of
5 the corporation policy to continue servicing the policy for a
6 period of not less than 1 year and offer to pay the agent the
7 greater of the insurer's or the corporation's usual and
8 customary commission for the type of policy written.
9
10 If the producing agent is unwilling or unable to accept
11 appointment, the new insurer shall pay the agent in accordance
12 with sub-sub-sub-subparagraph (A).
13 b. With respect to commercial lines residential risks,
14 if the risk is offered coverage under a policy including wind
15 coverage from an authorized insurer at its approved rate, the
16 risk is not eligible for any policy issued by the corporation.
17 If the risk is not able to obtain any such offer, the risk is
18 eligible for a policy including wind coverage issued by the
19 corporation.
20 (I) If the risk accepts an offer of coverage through
21 the market assistance plan or an offer of coverage through a
22 mechanism established by the corporation before a policy is
23 issued to the risk by the corporation or during the first 30
24 days of coverage by the corporation, and the producing agent
25 who submitted the application to the plan or the corporation
26 is not currently appointed by the insurer, the insurer shall:
27 (A) Pay to the producing agent of record of the
28 policy, for the first year, an amount that is the greater of
29 the insurer's usual and customary commission for the type of
30 policy written or a fee equal to the usual and customary
31 commission of the corporation; or
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1 (B) Offer to allow the producing agent of record of
2 the policy to continue servicing the policy for a period of
3 not less than 1 year and offer to pay the agent the greater of
4 the insurer's or the corporation's usual and customary
5 commission for the type of policy written.
6
7 If the producing agent is unwilling or unable to accept
8 appointment, the new insurer shall pay the agent in accordance
9 with sub-sub-sub-subparagraph (A).
10 (II) When the corporation enters into a contractual
11 agreement for a take-out plan, the producing agent of record
12 of the corporation policy is entitled to retain any unearned
13 commission on the policy, and the insurer shall:
14 (A) Pay to the producing agent of record of the
15 corporation policy, for the first year, an amount that is the
16 greater of the insurer's usual and customary commission for
17 the type of policy written or a fee equal to the usual and
18 customary commission of the corporation; or
19 (B) Offer to allow the producing agent of record of
20 the corporation policy to continue servicing the policy for a
21 period of not less than 1 year and offer to pay the agent the
22 greater of the insurer's or the corporation's usual and
23 customary commission for the type of policy written.
24
25 If the producing agent is unwilling or unable to accept
26 appointment, the new insurer shall pay the agent in accordance
27 with sub-sub-sub-subparagraph (A).
28 6. Must include rules for classifications of risks and
29 rates therefor.
30 7. Must provide that if premium and investment income
31 for an account attributable to a particular calendar year are
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1 in excess of projected losses and expenses for the account
2 attributable to that year, such excess shall be held in
3 surplus in the account. Such surplus shall be available to
4 defray deficits in that account as to future years and shall
5 be used for that purpose prior to assessing assessable
6 insurers and assessable insureds as to any calendar year.
7 8. Must provide objective criteria and procedures to
8 be uniformly applied for all applicants in determining whether
9 an individual risk is so hazardous as to be uninsurable. In
10 making this determination and in establishing the criteria and
11 procedures, the following shall be considered:
12 a. Whether the likelihood of a loss for the individual
13 risk is substantially higher than for other risks of the same
14 class; and
15 b. Whether the uncertainty associated with the
16 individual risk is such that an appropriate premium cannot be
17 determined.
18
19 The acceptance or rejection of a risk by the corporation shall
20 be construed as the private placement of insurance, and the
21 provisions of chapter 120 shall not apply.
22 9. Must provide that the corporation shall make its
23 best efforts to procure catastrophe reinsurance at reasonable
24 rates, to cover its projected 100-year probable maximum loss
25 as determined by the board of governors.
26 10. Must provide that in the event of regular deficit
27 assessments under sub-subparagraph (b)3.a. or sub-subparagraph
28 (b)3.b., in the personal lines account, the commercial lines
29 residential account, or the high-risk account, the corporation
30 shall levy upon corporation policyholders in its next rate
31 filing, or by a separate rate filing solely for this purpose,
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1 a market equalization surcharge arising from a regular
2 assessment in such account in a percentage equal to the total
3 amount of such regular assessments divided by the aggregate
4 statewide direct written premium for subject lines of business
5 for the prior calendar year. Market equalization surcharges
6 under this subparagraph are not considered premium and are not
7 subject to commissions, fees, or premium taxes; however,
8 failure to pay a market equalization surcharge shall be
9 treated as failure to pay premium.
10 11. The policies issued by the corporation must
11 provide that, if the corporation or the market assistance plan
12 obtains an offer from an authorized insurer to cover the risk
13 at its approved rates, the risk is no longer eligible for
14 renewal through the corporation.
15 12. Corporation policies and applications must include
16 a notice that the corporation policy could, under this
17 section, be replaced with a policy issued by an authorized
18 insurer that does not provide coverage identical to the
19 coverage provided by the corporation. The notice shall also
20 specify that acceptance of corporation coverage creates a
21 conclusive presumption that the applicant or policyholder is
22 aware of this potential.
23 13. May establish, subject to approval by the office,
24 different eligibility requirements and operational procedures
25 for any line or type of coverage for any specified county or
26 area if the board determines that such changes to the
27 eligibility requirements and operational procedures are
28 justified due to the voluntary market being sufficiently
29 stable and competitive in such area or for such line or type
30 of coverage and that consumers who, in good faith, are unable
31 to obtain insurance through the voluntary market through
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1 ordinary methods would continue to have access to coverage
2 from the corporation. When coverage is sought in connection
3 with a real property transfer, such requirements and
4 procedures shall not provide for an effective date of coverage
5 later than the date of the closing of the transfer as
6 established by the transferor, the transferee, and, if
7 applicable, the lender.
8 14. Must provide that, with respect to the high-risk
9 account, any assessable insurer with a surplus as to
10 policyholders of $25 million or less writing 25 percent or
11 more of its total countrywide property insurance premiums in
12 this state may petition the office, within the first 90 days
13 of each calendar year, to qualify as a limited apportionment
14 company. In no event shall a limited apportionment company be
15 required to participate in the portion of any assessment,
16 within the high-risk account, pursuant to sub-subparagraph
17 (b)3.a. or sub-subparagraph (b)3.b. in the aggregate which
18 exceeds $50 million after payment of available high-risk
19 account funds in any calendar year. However, a limited
20 apportionment company shall collect from its policyholders any
21 emergency assessment imposed under sub-subparagraph (b)3.d.
22 The plan shall provide that, if the office determines that any
23 regular assessment will result in an impairment of the surplus
24 of a limited apportionment company, the office may direct that
25 all or part of such assessment be deferred as provided in
26 subparagraph (g)4. However, there shall be no limitation or
27 deferment of an emergency assessment to be collected from
28 policyholders under sub-subparagraph (b)3.d.
29 15. Must provide that the corporation appoint as its
30 licensed agents only those agents who also hold an appointment
31 as defined in s. 626.015(3) with an insurer who at the time of
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1 the agent's initial appointment by the corporation is
2 authorized to write and is actually writing personal lines
3 residential property coverage, commercial residential property
4 coverage, or commercial nonresidential property coverage
5 within the state.
6 (k) Upon a determination by the office that the
7 conditions giving rise to the establishment and activation of
8 the corporation no longer exist, the corporation is dissolved.
9 Upon dissolution, the assets of the corporation shall be
10 applied first to pay all debts, liabilities, and obligations
11 of the corporation, including the establishment of reasonable
12 reserves for any contingent liabilities or obligations, and
13 all remaining assets of the corporation shall become property
14 of the state and shall be deposited in the Florida Hurricane
15 Insurance Catastrophe Fund. However, no dissolution shall take
16 effect as long as the corporation has bonds or other financial
17 obligations outstanding unless adequate provision has been
18 made for the payment of the bonds or other financial
19 obligations pursuant to the documents authorizing the issuance
20 of the bonds or other financial obligations.
21 (l)1. Effective July 1, 2002, policies of the
22 Residential Property and Casualty Joint Underwriting
23 Association shall become policies of the corporation. All
24 obligations, rights, assets and liabilities of the Residential
25 Property and Casualty Joint Underwriting Association,
26 including bonds, note and debt obligations, and the financing
27 documents pertaining to them become those of the corporation
28 as of July 1, 2002. The corporation is not required to issue
29 endorsements or certificates of assumption to insureds during
30 the remaining term of in-force transferred policies.
31
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1 2. Effective July 1, 2002, policies of the Florida
2 Windstorm Underwriting Association are transferred to the
3 corporation and shall become policies of the corporation. All
4 obligations, rights, assets, and liabilities of the Florida
5 Windstorm Underwriting Association, including bonds, note and
6 debt obligations, and the financing documents pertaining to
7 them are transferred to and assumed by the corporation on July
8 1, 2002. The corporation is not required to issue endorsement
9 or certificates of assumption to insureds during the remaining
10 term of in-force transferred policies.
11 3. The Florida Windstorm Underwriting Association and
12 the Residential Property and Casualty Joint Underwriting
13 Association shall take all actions as may be proper to further
14 evidence the transfers and shall provide the documents and
15 instruments of further assurance as may reasonably be
16 requested by the corporation for that purpose. The corporation
17 shall execute assumptions and instruments as the trustees or
18 other parties to the financing documents of the Florida
19 Windstorm Underwriting Association or the Residential Property
20 and Casualty Joint Underwriting Association may reasonably
21 request to further evidence the transfers and assumptions,
22 which transfers and assumptions, however, are effective on the
23 date provided under this paragraph whether or not, and
24 regardless of the date on which, the assumptions or
25 instruments are executed by the corporation. Subject to the
26 relevant financing documents pertaining to their outstanding
27 bonds, notes, indebtedness, or other financing obligations,
28 the moneys, investments, receivables, choses in action, and
29 other intangibles of the Florida Windstorm Underwriting
30 Association shall be credited to the high-risk account of the
31 corporation, and those of the personal lines residential
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1 coverage account and the commercial lines residential coverage
2 account of the Residential Property and Casualty Joint
3 Underwriting Association shall be credited to the personal
4 lines account and the commercial lines account, respectively,
5 of the corporation.
6 4. Effective July 1, 2002, a new applicant for
7 property insurance coverage who would otherwise have been
8 eligible for coverage in the Florida Windstorm Underwriting
9 Association is eligible for coverage from the corporation as
10 provided in this subsection.
11 5. The transfer of all policies, obligations, rights,
12 assets, and liabilities from the Florida Windstorm
13 Underwriting Association to the corporation and the renaming
14 of the Residential Property and Casualty Joint Underwriting
15 Association as the corporation shall in no way affect the
16 coverage with respect to covered policies as defined in s.
17 215.555(2)(c) provided to these entities by the Florida
18 Hurricane Insurance Catastrophe Fund. The coverage provided by
19 the Florida Hurricane Insurance Catastrophe Fund to the
20 Florida Windstorm Underwriting Association based on its
21 exposures as of June 30, 2002, and each June 30 thereafter
22 shall be redesignated as coverage for the high-risk account of
23 the corporation. Notwithstanding any other provision of law,
24 the coverage provided by the Florida Hurricane Insurance
25 Catastrophe Fund to the Residential Property and Casualty
26 Joint Underwriting Association based on its exposures as of
27 June 30, 2002, and each June 30 thereafter shall be
28 transferred to the personal lines account and the commercial
29 lines account of the corporation. Notwithstanding any other
30 provision of law, the high-risk account shall be treated, for
31 all Florida Hurricane Insurance Catastrophe Fund purposes, as
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1 if it were a separate participating insurer with its own
2 exposures, reimbursement premium, and loss reimbursement.
3 Likewise, the personal lines and commercial lines accounts
4 shall be viewed together, for all Florida Hurricane Insurance
5 Catastrophe Fund purposes, as if the two accounts were one and
6 represent a single, separate participating insurer with its
7 own exposures, reimbursement premium, and loss reimbursement.
8 The coverage provided by the Florida Hurricane Insurance
9 Catastrophe Fund to the corporation shall constitute and
10 operate as a full transfer of coverage from the Florida
11 Windstorm Underwriting Association and Residential Property
12 and Casualty Joint Underwriting to the corporation.
13 Section 10. Paragraph (d) of subsection (6) of section
14 627.701, Florida Statutes, is amended to read:
15 627.701 Liability of insureds; coinsurance;
16 deductibles.--
17 (6)
18 (d) The office shall draft and formally propose as a
19 rule the form for the certificate of security. The certificate
20 of security may be issued in any of the following
21 circumstances:
22 1. A mortgage lender or other financial institution
23 may issue a certificate of security after granting the
24 applicant a line of credit, secured by equity in real property
25 or other reasonable security, which line of credit may be
26 drawn on only to pay for the deductible portion of insured
27 construction or reconstruction after a hurricane loss. In the
28 sole discretion of the mortgage lender or other financial
29 institution, the line of credit may be issued to an applicant
30 on an unsecured basis.
31
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1 2. A licensed insurance agent may issue a certificate
2 of security after obtaining for an applicant a line of credit,
3 secured by equity in real property or other reasonable
4 security, which line of credit may be drawn on only to pay for
5 the deductible portion of insured construction or
6 reconstruction after a hurricane loss. The Florida Hurricane
7 Insurance Catastrophe Fund shall negotiate agreements creating
8 a financing consortium to serve as an additional source of
9 lines of credit to secure deductibles. Any licensed insurance
10 agent may act as the agent of such consortium.
11 3. Any person qualified to act as a trustee for any
12 purpose may issue a certificate of security secured by a
13 pledge of assets, with the restriction that the assets may be
14 drawn on only to pay for the deductible portion of insured
15 construction or reconstruction after a hurricane loss.
16 4. Any insurer, including any admitted insurer or any
17 surplus lines insurer, may issue a certificate of security
18 after issuing the applicant a policy of supplemental insurance
19 that will pay for 100 percent of the deductible portion of
20 insured construction or reconstruction after a hurricane loss.
21 5. Any other method approved by the office upon
22 finding that such other method provides a similar level of
23 security as the methods specified in this paragraph and that
24 such other method has no negative impact on residential
25 property insurance catastrophic capacity. The legislative
26 intent of this subparagraph is to provide the flexibility
27 needed to achieve the public policy of expanding property
28 insurance capacity while improving the affordability of
29 property insurance.
30 Section 11. Paragraph (a) of subsection (3) of section
31 627.7077, Florida Statutes, is amended to read:
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1 627.7077 Florida Sinkhole Insurance Facility and other
2 matters related to affordability and availability of sinkhole
3 insurance; feasibility study.--
4 (3) The feasibility study shall, at a minimum, address
5 the following issues:
6 (a) Where the facility should be housed, including,
7 but not limited to, the options of creating a separate
8 facility or using the Citizens Property Insurance Corporation
9 or the Florida Hurricane Insurance Catastrophe Fund.
10 Section 12. Subsection (3) of section 109 of chapter
11 2000-141, Laws of Florida, is amended to read:
12 Section 109. The Legislature has reviewed the Florida
13 Building Code that was adopted by action of the Florida
14 Building Commission on February 15, 2000, and that was noticed
15 for rule adoption by reference in Rule 9B-3.047, F.A.C., on
16 February 18, 2000, in the Florida Administrative Weekly on
17 page 731. The Florida Building Commission is directed to
18 continue the process to adopt the code, pursuant to section
19 120.54(3), Florida Statutes, and to incorporate the following
20 provisions or standards for the State of Florida:
21 (3) For areas of the state not within the high
22 velocity hurricane zone, the commission shall adopt, pursuant
23 to s. 553.73, Florida Statutes, the wind protection
24 requirements of the American Society of Civil Engineers,
25 Standard 7, 1998 edition as implemented by the International
26 Building Code, 2000 edition, and as modified by the commission
27 in its February 15, 2000, adoption of the Florida Building
28 Code for rule adoption by reference in Rule 9B-3.047, Florida
29 Administrative Code. However, from the eastern border of
30 Franklin County to the Florida-Alabama line, only land within
31 1 mile of the coast shall be subject to the windborne-debris
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1 requirements adopted by the commission. The exact location of
2 wind speed lines shall be established by local ordinance,
3 using recognized physical landmarks such as major roads,
4 canals, rivers, and lake shores, wherever possible. Buildings
5 constructed in the windborne debris region must be either
6 designed for internal pressures that may result inside a
7 building when a window or door is broken or a hole is created
8 in its walls or roof by large debris, or be designed with
9 protected openings. Except in the high velocity hurricane
10 zone, local governments may not prohibit the option of
11 designing buildings to resist internal pressures.
12
13 The Legislature declares that changes made to the proposed
14 Rule 9B-3.047, Florida Administrative Code, to implement the
15 requirements of this act prior to October 1, 2000, are not
16 subject to rule challenges under section 120.56, Florida
17 Statutes. However, the entire rule, adopted pursuant to s.
18 120.54(3), Florida Statutes, as amended after October 1, 2000,
19 is subject to rule challenges under s. 120.56, Florida
20 Statutes.
21 Section 13. This act shall take effect July 1, 2006.
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