Senate Bill sb2498c1

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    Florida Senate - 2007                           CS for SB 2498

    By the Committee on Banking and Insurance; and Senator Garcia





    597-2347-07

  1                      A bill to be entitled

  2         An act relating to property insurance; amending

  3         s. 627.351, F.S.; revising legislative findings

  4         to provide a finding that the lack of

  5         affordable property insurance threatens the

  6         public health, safety, and welfare and

  7         threatens the economic health of the state;

  8         revising provisions for determining eligibility

  9         for coverage under Citizens Property Insurance

10         Corporation; prohibiting issuance of new

11         certificates of authority to certain insurers;

12         requiring rate filings of certain insurers to

13         include certain parent company profits

14         information; providing effective dates.

15  

16  Be It Enacted by the Legislature of the State of Florida:

17  

18         Section 1.  Paragraphs (a) and (c) of subsection (6) of

19  section 627.351, Florida Statutes, as amended by section 21 of

20  chapter 2007-1, Laws of Florida, is amended to read:

21         627.351  Insurance risk apportionment plans.--

22         (6)  CITIZENS PROPERTY INSURANCE CORPORATION.--

23         (a)1.  It is the public purpose of this subsection to

24  ensure the existence of an orderly market for property

25  insurance for Floridians and Florida businesses. The

26  Legislature finds that private insurers are unwilling or

27  unable to provide affordable property insurance coverage in

28  this state to the extent sought and needed. The absence of

29  affordable property insurance threatens the public health,

30  safety, and welfare and likewise threatens the economic health

31  of the state. The state therefore has a compelling public

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    Florida Senate - 2007                           CS for SB 2498
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 1  interest and a public purpose to assist in assuring that

 2  property in the state is insured and that it is insured at

 3  affordable rates so as to facilitate the remediation,

 4  reconstruction, and replacement of damaged or destroyed

 5  property in order to reduce or avoid the negative effects

 6  otherwise resulting to the public health, safety, and welfare;

 7  to the economy of the state; and to the revenues of the state

 8  and local governments which are needed to provide for the

 9  public welfare. It is necessary, therefore, to provide

10  affordable property insurance to applicants who are in good

11  faith entitled to procure insurance through the voluntary

12  market but are unable to do so. The Legislature intends by

13  this subsection that affordable property insurance be provided

14  and that it continue to be provided, as long as necessary,

15  through Citizens Property Insurance Corporation, a government

16  entity that is an integral part of the state, and that is not

17  a private insurance company. To that end, Citizens Property

18  Insurance Company shall strive to increase the availability of

19  affordable property insurance in this state, while achieving

20  efficiencies and economies, and while providing service to

21  policyholders, applicants, and agents which is no less than

22  the quality generally provided in the voluntary market, for

23  the achievement of the foregoing public purposes. Because it

24  is essential for this government entity to have the maximum

25  financial resources to pay claims following a catastrophic

26  hurricane, it is the intent of the Legislature that Citizens

27  Property Insurance Corporation continue to be an integral part

28  of the state and that the income of the corporation be exempt

29  from federal income taxation and that interest on the debt

30  obligations issued by the corporation be exempt from federal

31  income taxation.  The Legislature finds that actual and

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    Florida Senate - 2007                           CS for SB 2498
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 1  threatened catastrophic losses to property in this state from

 2  hurricanes have caused insurers to be unwilling or unable to

 3  provide property insurance coverage to the extent sought and

 4  needed. It is in the public interest and a public purpose to

 5  assist in assuring that property in the state is insured so as

 6  to facilitate the remediation, reconstruction, and replacement

 7  of damaged or destroyed property in order to reduce or avoid

 8  the negative effects otherwise resulting to the public health,

 9  safety, and welfare; to the economy of the state; and to the

10  revenues of the state and local governments needed to provide

11  for the public welfare. It is necessary, therefore, to provide

12  property insurance to applicants who are in good faith

13  entitled to procure insurance through the voluntary market but

14  are unable to do so. The Legislature intends by this

15  subsection that property insurance be provided and that it

16  continues, as long as necessary, through an entity organized

17  to achieve efficiencies and economies, while providing service

18  to policyholders, applicants, and agents that is no less than

19  the quality generally provided in the voluntary market, all

20  toward the achievement of the foregoing public purposes.

21  Because it is essential for the corporation to have the

22  maximum financial resources to pay claims following a

23  catastrophic hurricane, it is the intent of the Legislature

24  that the income of the corporation be exempt from federal

25  income taxation and that interest on the debt obligations

26  issued by the corporation be exempt from federal income

27  taxation.

28         2.  The Residential Property and Casualty Joint

29  Underwriting Association originally created by this statute

30  shall be known, as of July 1, 2002, as the Citizens Property

31  Insurance Corporation. The corporation shall provide insurance

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    Florida Senate - 2007                           CS for SB 2498
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 1  for residential and commercial property, for applicants who

 2  are in good faith entitled, but are unable, to procure

 3  insurance through the voluntary market. The corporation shall

 4  operate pursuant to a plan of operation approved by order of

 5  the Financial Services Commission. The plan is subject to

 6  continuous review by the commission. The commission may, by

 7  order, withdraw approval of all or part of a plan if the

 8  commission determines that conditions have changed since

 9  approval was granted and that the purposes of the plan require

10  changes in the plan. The corporation shall continue to operate

11  pursuant to the plan of operation approved by the Office of

12  Insurance Regulation until October 1, 2006. For the purposes

13  of this subsection, residential coverage includes both

14  personal lines residential coverage, which consists of the

15  type of coverage provided by homeowner's, mobile home owner's,

16  dwelling, tenant's, condominium unit owner's, and similar

17  policies, and commercial lines residential coverage, which

18  consists of the type of coverage provided by condominium

19  association, apartment building, and similar policies.

20         3.  For the purposes of this subsection, the term

21  "homestead property" means:

22         a.  Property that has been granted a homestead

23  exemption under chapter 196;

24         b.  Property for which the owner has a current, written

25  lease with a renter for a term of at least 7 months and for

26  which the dwelling is insured by the corporation for $200,000

27  or less;

28         c.  An owner-occupied mobile home or manufactured home,

29  as defined in s. 320.01, which is permanently affixed to real

30  property, is owned by a Florida resident, and has been granted

31  a homestead exemption under chapter 196 or, if the owner does

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    Florida Senate - 2007                           CS for SB 2498
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 1  not own the real property, the owner certifies that the mobile

 2  home or manufactured home is his or her principal place of

 3  residence;

 4         d.  Tenant's coverage;

 5         e.  Commercial lines residential property; or

 6         f.  Any county, district, or municipal hospital; a

 7  hospital licensed by any not-for-profit corporation qualified

 8  under s. 501(c)(3) of the United States Internal Revenue Code;

 9  or a continuing care retirement community that is certified

10  under chapter 651 and that receives an exemption from ad

11  valorem taxes under chapter 196.

12         4.  For the purposes of this subsection, the term

13  "nonhomestead property" means property that is not homestead

14  property.

15         5.  Effective July 1, 2008, a personal lines

16  residential structure that has a dwelling replacement cost of

17  $1 million or more, or a single condominium unit that has a

18  combined dwelling and content replacement cost of $1 million

19  or more is not eligible for coverage by the corporation. Such

20  dwellings insured by the corporation on June 30, 2008, may

21  continue to be covered by the corporation until the end of the

22  policy term. However, such dwellings that are insured by the

23  corporation and become ineligible for coverage due to the

24  provisions of this subparagraph may reapply and obtain

25  coverage in the high-risk account and be considered

26  "nonhomestead property" if the property owner provides the

27  corporation with a sworn affidavit from one or more insurance

28  agents, on a form provided by the corporation, stating that

29  the agents have made their best efforts to obtain coverage and

30  that the property has been rejected for coverage by at least

31  one authorized insurer and at least three surplus lines

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    Florida Senate - 2007                           CS for SB 2498
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 1  insurers. If such conditions are met, the dwelling may be

 2  insured by the corporation for up to 3 years, after which time

 3  the dwelling is ineligible for coverage. The office shall

 4  approve the method used by the corporation for valuing the

 5  dwelling replacement cost for the purposes of this

 6  subparagraph. If a policyholder is insured by the corporation

 7  prior to being determined to be ineligible pursuant to this

 8  subparagraph and such policyholder files a lawsuit challenging

 9  the determination, the policyholder may remain insured by the

10  corporation until the conclusion of the litigation.

11         6.  For properties constructed on or after January 1,

12  2009, the corporation may not insure any property located

13  within 2,500 feet landward of the coastal construction control

14  line created pursuant to s. 161.053 unless the property meets

15  the requirements of the code-plus building standards developed

16  by the Florida Building Commission.

17         7.  It is the intent of the Legislature that

18  policyholders, applicants, and agents of the corporation

19  receive service and treatment of the highest possible level

20  but never less than that generally provided in the voluntary

21  market. It also is intended that the corporation be held to

22  service standards no less than those applied to insurers in

23  the voluntary market by the office with respect to

24  responsiveness, timeliness, customer courtesy, and overall

25  dealings with policyholders, applicants, or agents of the

26  corporation.

27         (c)  The plan of operation of the corporation:

28         1.  Must provide for adoption of residential property

29  and casualty insurance policy forms and commercial residential

30  and nonresidential property insurance forms, which forms must

31  

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    Florida Senate - 2007                           CS for SB 2498
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 1  be approved by the office prior to use. The corporation shall

 2  adopt the following policy forms:

 3         a.  Standard personal lines policy forms that are

 4  comprehensive multiperil policies providing full coverage of a

 5  residential property equivalent to the coverage provided in

 6  the private insurance market under an HO-3, HO-4, or HO-6

 7  policy.

 8         b.  Basic personal lines policy forms that are policies

 9  similar to an HO-8 policy or a dwelling fire policy that

10  provide coverage meeting the requirements of the secondary

11  mortgage market, but which coverage is more limited than the

12  coverage under a standard policy.

13         c.  Commercial lines residential and nonresidential

14  policy forms that are generally similar to the basic perils of

15  full coverage obtainable for commercial residential structures

16  and commercial nonresidential structures in the admitted

17  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         f.  The corporation may adopt variations of the policy

29  forms listed in sub-subparagraphs a.-e. that contain more

30  restrictive coverage.

31  

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 1         2.a.  Must provide that the corporation adopt a program

 2  in which the corporation and authorized insurers enter into

 3  quota share primary insurance agreements for hurricane

 4  coverage, as defined in s. 627.4025(2)(a), for eligible risks,

 5  and adopt property insurance forms for eligible risks which

 6  cover the peril of wind only. As used in this subsection, the

 7  term:

 8         (I)  "Quota share primary insurance" means an

 9  arrangement in which the primary hurricane coverage of an

10  eligible risk is provided in specified percentages by the

11  corporation and an authorized insurer. The corporation and

12  authorized insurer are each solely responsible for a specified

13  percentage of hurricane coverage of an eligible risk as set

14  forth in a quota share primary insurance agreement between the

15  corporation and an authorized insurer and the insurance

16  contract. The responsibility of the corporation or authorized

17  insurer to pay its specified percentage of hurricane losses of

18  an eligible risk, as set forth in the quota share primary

19  insurance agreement, may not be altered by the inability of

20  the other party to the agreement to pay its specified

21  percentage of hurricane losses. Eligible risks that are

22  provided hurricane coverage through a quota share primary

23  insurance arrangement must be provided policy forms that set

24  forth the obligations of the corporation and authorized

25  insurer under the arrangement, clearly specify the percentages

26  of quota share primary insurance provided by the corporation

27  and authorized insurer, and conspicuously and clearly state

28  that neither the authorized insurer nor the corporation may be

29  held responsible beyond its specified percentage of coverage

30  of hurricane losses.

31  

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 1         (II)  "Eligible risks" means personal lines residential

 2  and commercial lines residential risks that meet the

 3  underwriting criteria of the corporation and are located in

 4  areas that were eligible for coverage by the Florida Windstorm

 5  Underwriting Association on January 1, 2002.

 6         b.  The corporation may enter into quota share primary

 7  insurance agreements with authorized insurers at corporation

 8  coverage levels of 90 percent and 50 percent.

 9         c.  If the corporation determines that additional

10  coverage levels are necessary to maximize participation in

11  quota share primary insurance agreements by authorized

12  insurers, the corporation may establish additional coverage

13  levels. However, the corporation's quota share primary

14  insurance coverage level may not exceed 90 percent.

15         d.  Any quota share primary insurance agreement entered

16  into between an authorized insurer and the corporation must

17  provide for a uniform specified percentage of coverage of

18  hurricane losses, by county or territory as set forth by the

19  corporation board, for all eligible risks of the authorized

20  insurer covered under the quota share primary insurance

21  agreement.

22         e.  Any quota share primary insurance agreement entered

23  into between an authorized insurer and the corporation is

24  subject to review and approval by the office. However, such

25  agreement shall be authorized only as to insurance contracts

26  entered into between an authorized insurer and an insured who

27  is already insured by the corporation for wind coverage.

28         f.  For all eligible risks covered under quota share

29  primary insurance agreements, the exposure and coverage levels

30  for both the corporation and authorized insurers shall be

31  reported by the corporation to the Florida Hurricane

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 1  Catastrophe Fund. For all policies of eligible risks covered

 2  under quota share primary insurance agreements, the

 3  corporation and the authorized insurer shall maintain complete

 4  and accurate records for the purpose of exposure and loss

 5  reimbursement audits as required by Florida Hurricane

 6  Catastrophe Fund rules. The corporation and the authorized

 7  insurer shall each maintain duplicate copies of policy

 8  declaration pages and supporting claims documents.

 9         g.  The corporation board shall establish in its plan

10  of operation standards for quota share agreements which ensure

11  that there is no discriminatory application among insurers as

12  to the terms of quota share agreements, pricing of quota share

13  agreements, incentive provisions if any, and consideration

14  paid for servicing policies or adjusting claims.

15         h.  The quota share primary insurance agreement between

16  the corporation and an authorized insurer must set forth the

17  specific terms under which coverage is provided, including,

18  but not limited to, the sale and servicing of policies issued

19  under the agreement by the insurance agent of the authorized

20  insurer producing the business, the reporting of information

21  concerning eligible risks, the payment of premium to the

22  corporation, and arrangements for the adjustment and payment

23  of hurricane claims incurred on eligible risks by the claims

24  adjuster and personnel of the authorized insurer. Entering

25  into a quota sharing insurance agreement between the

26  corporation and an authorized insurer shall be voluntary and

27  at the discretion of the authorized insurer.

28         3.  May provide that the corporation may employ or

29  otherwise contract with individuals or other entities to

30  provide administrative or professional services that may be

31  appropriate to effectuate the plan. The corporation shall have

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 1  the power to borrow funds, by issuing bonds or by incurring

 2  other indebtedness, and shall have other powers reasonably

 3  necessary to effectuate the requirements of this subsection,

 4  including, without limitation, the power to issue bonds and

 5  incur other indebtedness in order to refinance outstanding

 6  bonds or other indebtedness. The corporation may, but is not

 7  required to, seek judicial validation of its bonds or other

 8  indebtedness under chapter 75. The corporation may issue bonds

 9  or incur other indebtedness, or have bonds issued on its

10  behalf by a unit of local government pursuant to subparagraph

11  (g)2., in the absence of a hurricane or other weather-related

12  event, upon a determination by the corporation, subject to

13  approval by the office, that such action would enable it to

14  efficiently meet the financial obligations of the corporation

15  and that such financings are reasonably necessary to

16  effectuate the requirements of this subsection. The

17  corporation is authorized to take all actions needed to

18  facilitate tax-free status for any such bonds or indebtedness,

19  including formation of trusts or other affiliated entities.

20  The corporation shall have the authority to pledge

21  assessments, projected recoveries from the Florida Hurricane

22  Catastrophe Fund, other reinsurance recoverables, market

23  equalization and other surcharges, and other funds available

24  to the corporation as security for bonds or other

25  indebtedness. In recognition of s. 10, Art. I of the State

26  Constitution, prohibiting the impairment of obligations of

27  contracts, it is the intent of the Legislature that no action

28  be taken whose purpose is to impair any bond indenture or

29  financing agreement or any revenue source committed by

30  contract to such bond or other indebtedness.

31  

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 1         4.a.  Must require that the corporation operate subject

 2  to the supervision and approval of a board of governors

 3  consisting of eight individuals who are residents of this

 4  state, from different geographical areas of this state. The

 5  Governor, the Chief Financial Officer, the President of the

 6  Senate, and the Speaker of the House of Representatives shall

 7  each appoint two members of the board. At least one of the two

 8  members appointed by each appointing officer must have

 9  demonstrated expertise in insurance. The Chief Financial

10  Officer shall designate one of the appointees as chair. All

11  board members serve at the pleasure of the appointing officer.

12  All members of the board of governors are subject to removal

13  at will by the officers who appointed them. All board members,

14  including the chair, must be appointed to serve for 3-year

15  terms beginning annually on a date designated by the plan. Any

16  board vacancy shall be filled for the unexpired term by the

17  appointing officer. The Chief Financial Officer shall appoint

18  a technical advisory group to provide information and advice

19  to the board of governors in connection with the board's

20  duties under this subsection. The executive director and

21  senior managers of the corporation shall be engaged by the

22  board and serve at the pleasure of the board. Any executive

23  director appointed on or after July 1, 2006, is subject to

24  confirmation by the Senate. The executive director is

25  responsible for employing other staff as the corporation may

26  require, subject to review and concurrence by the board.

27         b.  The board shall create a Market Accountability

28  Advisory Committee to assist the corporation in developing

29  awareness of its rates and its customer and agent service

30  levels in relationship to the voluntary market insurers

31  writing similar coverage. The members of the advisory

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 1  committee shall consist of the following 11 persons, one of

 2  whom must be elected chair by the members of the committee:

 3  four representatives, one appointed by the Florida Association

 4  of Insurance Agents, one by the Florida Association of

 5  Insurance and Financial Advisors, one by the Professional

 6  Insurance Agents of Florida, and one by the Latin American

 7  Association of Insurance Agencies; three representatives

 8  appointed by the insurers with the three highest voluntary

 9  market share of residential property insurance business in the

10  state; one representative from the Office of Insurance

11  Regulation; one consumer appointed by the board who is insured

12  by the corporation at the time of appointment to the

13  committee; one representative appointed by the Florida

14  Association of Realtors; and one representative appointed by

15  the Florida Bankers Association. All members must serve for

16  3-year terms and may serve for consecutive terms. The

17  committee shall report to the corporation at each board

18  meeting on insurance market issues which may include rates and

19  rate competition with the voluntary market; service, including

20  policy issuance, claims processing, and general responsiveness

21  to policyholders, applicants, and agents; and matters relating

22  to depopulation.

23         5.  Must provide a procedure for determining the

24  eligibility of a risk for coverage, as follows:

25         a.  Subject to the provisions of s. 627.3517, with

26  respect to personal lines residential risks, if the risk is

27  offered coverage from an authorized insurer at the insurer's

28  approved rate under either a standard policy including wind

29  coverage or, if consistent with the insurer's underwriting

30  rules as filed with the office, a basic policy including wind

31  coverage, for a new application to the corporation for

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 1  coverage, the risk is not eligible for any policy issued by

 2  the corporation unless the premium for coverage from the

 3  authorized insurer is more than 15 25 percent greater than the

 4  premium for comparable coverage from the corporation. If the

 5  risk is not able to obtain any such offer, the risk is

 6  eligible for either a standard policy including wind coverage

 7  or a basic policy including wind coverage issued by the

 8  corporation; however, if the risk could not be insured under a

 9  standard policy including wind coverage regardless of market

10  conditions, the risk shall be eligible for a basic policy

11  including wind coverage unless rejected under subparagraph 8.

12  However, with regard to a policyholder of the corporation, the

13  policyholder remains eligible for coverage from the

14  corporation regardless of any offer of coverage from an

15  authorized insurer or surplus lines insurer. The corporation

16  shall determine the type of policy to be provided on the basis

17  of objective standards specified in the underwriting manual

18  and based on generally accepted underwriting practices.

19         (I)  If the risk accepts an offer of coverage through

20  the market assistance plan or an offer of coverage through a

21  mechanism established by the corporation before a policy is

22  issued to the risk by the corporation or during the first 30

23  days of coverage by the corporation, and the producing agent

24  who submitted the application to the plan or to the

25  corporation is not currently appointed by the insurer, the

26  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         b.  With respect to commercial lines residential risks,

29  for a new application to the corporation for coverage, if the

30  risk is offered coverage under a policy including wind

31  coverage from an authorized insurer at its approved rate, the

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 1  risk is not eligible for any policy issued by the corporation

 2  unless the premium for coverage from the authorized insurer is

 3  more than 15 25 percent greater than the premium for

 4  comparable coverage from the corporation. If the risk is not

 5  able to obtain any such offer, the risk is eligible for a

 6  policy including wind coverage issued by the corporation.

 7  However, with regard to a policyholder of the corporation, the

 8  policyholder remains eligible for coverage from the

 9  corporation regardless of any offer of coverage from an

10  authorized insurer or surplus lines insurer.

11         (I)  If the risk accepts an offer of coverage through

12  the market assistance plan or an offer of coverage through a

13  mechanism established by the corporation before a policy is

14  issued to the risk by the corporation or during the first 30

15  days of coverage by the corporation, and the producing agent

16  who submitted the application to the plan or the corporation

17  is not currently appointed by the insurer, the insurer shall:

18         (A)  Pay to the producing agent of record of the

19  policy, for the first year, an amount that is the greater of

20  the insurer's usual and customary commission for the type of

21  policy written or a fee equal to the usual and customary

22  commission of the corporation; or

23         (B)  Offer to allow the producing agent of record of

24  the policy to continue servicing the policy for a period of

25  not less than 1 year and offer to pay the agent the greater of

26  the insurer's or the corporation's usual and customary

27  commission for the type of policy written.

28  

29  If the producing agent is unwilling or unable to accept

30  appointment, the new insurer shall pay the agent in accordance

31  with sub-sub-sub-subparagraph (A).

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 1         (II)  When the corporation enters into a contractual

 2  agreement for a take-out plan, the producing agent of record

 3  of the corporation policy is entitled to retain any unearned

 4  commission on the policy, and the insurer shall:

 5         (A)  Pay to the producing agent of record of the

 6  corporation policy, for the first year, an amount that is the

 7  greater of the insurer's usual and customary commission for

 8  the type of policy written or a fee equal to the usual and

 9  customary commission of the corporation; or

10         (B)  Offer to allow the producing agent of record of

11  the corporation policy to continue servicing the policy for a

12  period of not less than 1 year and offer to pay the agent the

13  greater of the insurer's or the corporation's usual and

14  customary 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-sub-subparagraph (A).

19         6.  Must provide by July 1, 2007, that an application

20  for coverage for a new policy is subject to a waiting period

21  of 10 days before coverage is effective, during which time the

22  corporation shall make such application available for review

23  by general lines agents and authorized property and casualty

24  insurers. The board shall approve an exception that allows for

25  coverage to be effective before the end of the 10-day waiting

26  period, for coverage issued in conjunction with a real estate

27  closing. The board may approve such other exceptions as the

28  board determines are necessary to prevent lapses in coverage.

29         7.  Must include rules for classifications of risks and

30  rates therefor.

31  

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 1         8.  Must provide that if premium and investment income

 2  for an account attributable to a particular calendar year are

 3  in excess of projected losses and expenses for the account

 4  attributable to that year, such excess shall be held in

 5  surplus in the account. Such surplus shall be available to

 6  defray deficits in that account as to future years and shall

 7  be used for that purpose prior to assessing assessable

 8  insurers and assessable insureds as to any calendar year.

 9         9.  Must provide objective criteria and procedures to

10  be uniformly applied for all applicants in determining whether

11  an individual risk is so hazardous as to be uninsurable. In

12  making this determination and in establishing the criteria and

13  procedures, the following shall be considered:

14         a.  Whether the likelihood of a loss for the individual

15  risk is substantially higher than for other risks of the same

16  class; and

17         b.  Whether the uncertainty associated with the

18  individual risk is such that an appropriate premium cannot be

19  determined.

20  

21  The acceptance or rejection of a risk by the corporation shall

22  be construed as the private placement of insurance, and the

23  provisions of chapter 120 shall not apply.

24         10.  Must provide that the corporation shall make its

25  best efforts to procure catastrophe reinsurance at reasonable

26  rates, to cover its projected 100-year probable maximum loss

27  as determined by the board of governors.

28         11.  Must provide that in the event of regular deficit

29  assessments under sub-subparagraph (b)3.a. or sub-subparagraph

30  (b)3.b., in the personal lines account, the commercial lines

31  residential account, or the high-risk account, the corporation

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    Florida Senate - 2007                           CS for SB 2498
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 1  shall levy upon corporation policyholders in its next rate

 2  filing, or by a separate rate filing solely for this purpose,

 3  a Citizens policyholder surcharge arising from a regular

 4  assessment in such account in a percentage equal to the total

 5  amount of such regular assessments divided by the aggregate

 6  statewide direct written premium for subject lines of business

 7  for the prior calendar year. For purposes of calculating the

 8  Citizens policyholder surcharge to be levied under this

 9  subparagraph, the total amount of the regular assessment to

10  which this surcharge is related shall be determined as set

11  forth in subparagraph (b)3., without deducting the estimated

12  Citizens policyholder surcharge. Citizens policyholder

13  surcharges under this subparagraph are not considered premium

14  and are not subject to commissions, fees, or premium taxes;

15  however, failure to pay a market equalization surcharge shall

16  be treated as failure to pay premium.

17         12.  The policies issued by the corporation must

18  provide that, if the corporation or the market assistance plan

19  obtains an offer from an authorized insurer to cover the risk

20  at its approved rates, the risk is no longer eligible for

21  renewal through the corporation, except as otherwise provided

22  in this subsection.

23         13.  Corporation policies and applications must include

24  a notice that the corporation policy could, under this

25  section, be replaced with a policy issued by an authorized

26  insurer that does not provide coverage identical to the

27  coverage provided by the corporation. The notice shall also

28  specify that acceptance of corporation coverage creates a

29  conclusive presumption that the applicant or policyholder is

30  aware of this potential.

31  

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 1         14.  May establish, subject to approval by the office,

 2  different eligibility requirements and operational procedures

 3  for any line or type of coverage for any specified county or

 4  area if the board determines that such changes to the

 5  eligibility requirements and operational procedures are

 6  justified due to the voluntary market being sufficiently

 7  stable and competitive in such area or for such line or type

 8  of coverage and that consumers who, in good faith, are unable

 9  to obtain insurance through the voluntary market through

10  ordinary methods would continue to have access to coverage

11  from the corporation. When coverage is sought in connection

12  with a real property transfer, such requirements and

13  procedures shall not provide for an effective date of coverage

14  later than the date of the closing of the transfer as

15  established by the transferor, the transferee, and, if

16  applicable, the lender.

17         15.  Must provide that, with respect to the high-risk

18  account, any assessable insurer with a surplus as to

19  policyholders of $25 million or less writing 25 percent or

20  more of its total countrywide property insurance premiums in

21  this state may petition the office, within the first 90 days

22  of each calendar year, to qualify as a limited apportionment

23  company. A regular assessment levied by the corporation on a

24  limited apportionment company for a deficit incurred by the

25  corporation for the high-risk account in 2006 or thereafter

26  may be paid to the corporation on a monthly basis as the

27  assessments are collected by the limited apportionment company

28  from its insureds pursuant to s. 627.3512, but the regular

29  assessment must be paid in full within 12 months after being

30  levied by the corporation. A limited apportionment company

31  shall collect from its policyholders any emergency assessment

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 1  imposed under sub-subparagraph (b)3.d. The plan shall provide

 2  that, if the office determines that any regular assessment

 3  will result in an impairment of the surplus of a limited

 4  apportionment company, the office may direct that all or part

 5  of such assessment be deferred as provided in subparagraph

 6  (g)4. However, there shall be no limitation or deferment of an

 7  emergency assessment to be collected from policyholders under

 8  sub-subparagraph (b)3.d.

 9         16.  Must provide that the corporation appoint as its

10  licensed agents only those agents who also hold an appointment

11  as defined in s. 626.015(3) with an insurer who at the time of

12  the agent's initial appointment by the corporation is

13  authorized to write and is actually writing personal lines

14  residential property coverage, commercial residential property

15  coverage, or commercial nonresidential property coverage

16  within the state.

17         17.  Must provide, by July 1, 2007, a premium payment

18  plan option to its policyholders which allows for quarterly

19  and semiannual payment of premiums.

20         18.  Must provide, effective June 1, 2007, that the

21  corporation contract with each insurer providing the non-wind

22  coverage for risks insured by the corporation in the high-risk

23  account, requiring that the insurer provide claims adjusting

24  services for the wind coverage provided by the corporation for

25  such risks. An insurer is required to enter into this contract

26  as a condition of providing non-wind coverage for a risk that

27  is insured by the corporation in the high-risk account unless

28  the board finds, after a hearing, that the insurer is not

29  capable of providing adjusting services at an acceptable level

30  of quality to corporation policyholders. The terms and

31  conditions of such contracts must be substantially the same as

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 1  the contracts that the corporation executed with insurers

 2  under the "adjust-your-own" program in 2006, except as may be

 3  mutually agreed to by the parties and except for such changes

 4  that the board determines are necessary to ensure that claims

 5  are adjusted appropriately. The corporation shall provide a

 6  process for neutral arbitration of any dispute between the

 7  corporation and the insurer regarding the terms of the

 8  contract. The corporation shall review and monitor the

 9  performance of insurers under these contracts.

10         19.  Must limit coverage on mobile homes or

11  manufactured homes built prior to 1994 to actual cash value of

12  the dwelling rather than replacement costs of the dwelling.

13         20.  May provide such limits of coverage as the board

14  determines, consistent with the requirements of this

15  subsection.

16         21.  May require commercial property to meet specified

17  hurricane mitigation construction features as a condition of

18  eligibility for coverage.

19         Section 2.  Effective January 1, 2008, and

20  notwithstanding any other provision of law:

21         (1)  A new certificate of authority for the transaction

22  of residential property insurance may not be issued to any

23  insurer domiciled in this state which is a wholly owned

24  subsidiary of an insurer authorized to do business in any

25  other state.

26         (2)  The rate filings of any insurer domiciled in this

27  state that is a wholly owned subsidiary of an insurer

28  authorized to do business in any other state shall include

29  information relating to the profits of the parent company of

30  the insurer domiciled in this state.

31  

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 1         Section 3.  Except as otherwise expressly provided in

 2  this act, this act shall take effect upon becoming a law.

 3  

 4          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
 5                         Senate Bill 2498

 6                                 

 7  The committee substitute makes the following changes:

 8  1.   Removes the bill's provision authorizing Citizens
         Property Insurance Corporation ("Citizens") to offer
 9       multiperil and wind-only coverages in its high-risk
         account, which is addressed in current law.
10  
    2.   Provides that if a new applicant to Citizens is offered
11       coverage from an insurer at its approved rate, the
         applicant is not eligible for a Citizens policy unless
12       the insurer's premium is more than 15 percent greater
         than the premium for comparable Citizens' coverage.
13  
    3.   Removes the bill's provision that revised Citizens'
14       underwriting criteria for determining eligibility for
         coverage based on whether applicants have taken actions
15       to mitigate the risk of windstorm loss.

16  4.   Removes the provision that an existing certificate of
         authority of a Florida domestic residential property
17       insurer that is wholly owned subsidiary of an insurer
         authorized to conduct business in another state shall
18       expire at the end of its period of validation and may not
         be renewed.
19  

20  

21  

22  

23  

24  

25  

26  

27  

28  

29  

30  

31  

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