| 1 | A bill to be entitled |
| 2 | An act relating to Citizens Property Insurance |
| 3 | Corporation; amending s. 627.351, F.S.; deleting criteria |
| 4 | for determining whether a rate is inadequate; deleting |
| 5 | legislative intent with regard to rate adequacy in the |
| 6 | residual market; providing an effective date. |
| 7 |
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| 8 | Be It Enacted by the Legislature of the State of Florida: |
| 9 |
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| 10 | Section 1. Paragraph (m) of subsection (6) of section |
| 11 | 627.351, Florida Statutes, is amended to read: |
| 12 | 627.351 Insurance risk apportionment plans.-- |
| 13 | (6) CITIZENS PROPERTY INSURANCE CORPORATION.-- |
| 14 | (m)1.a. Rates for coverage provided by the corporation |
| 15 | shall be actuarially sound and not competitive with approved |
| 16 | rates charged in the admitted voluntary market, so that the |
| 17 | corporation functions as a residual market mechanism to provide |
| 18 | insurance only when the insurance cannot be procured in the |
| 19 | voluntary market. Rates shall include an appropriate catastrophe |
| 20 | loading factor that reflects the actual catastrophic exposure of |
| 21 | the corporation. For policies in the personal lines account and |
| 22 | the commercial lines account issued or renewed on or after March |
| 23 | 1, 2007, a rate is deemed inadequate if the rate, including |
| 24 | investment income, is not sufficient to provide for the |
| 25 | procurement of coverage under the Florida Hurricane Catastrophe |
| 26 | Fund and private reinsurance costs, whether or not reinsurance |
| 27 | is procured, and to pay all claims and expenses reasonably |
| 28 | expected to result from a 100-year probable maximum loss event |
| 29 | without resort to any regular or emergency assessments, long- |
| 30 | term debt, state revenues, or other funding sources. For |
| 31 | policies in the high-risk account issued or renewed on or after |
| 32 | March 1, 2007, a rate is deemed inadequate if the rate, |
| 33 | including investment income, is not sufficient to provide for |
| 34 | the procurement of coverage under the Florida Hurricane |
| 35 | Catastrophe Fund and private reinsurance costs, whether or not |
| 36 | reinsurance is procured, and to pay all claims and expenses |
| 37 | reasonably expected to result from a 70-year probable maximum |
| 38 | loss event with resort to any regular or emergency assessments, |
| 39 | long-term debt, state revenues, or other funding sources. For |
| 40 | policies in the high-risk account issued or renewed in 2008 and |
| 41 | 2009, the rate must be based upon an 85-year and 100-year |
| 42 | probable maximum loss event, respectively. |
| 43 | b. It is the intent of the Legislature to reaffirm the |
| 44 | requirement of rate adequacy in the residual market. Recognizing |
| 45 | that rates may comply with the intent expressed in sub- |
| 46 | subparagraph a. and yet be inadequate and recognizing the public |
| 47 | need to limit subsidies within the residual market, it is the |
| 48 | further intent of the Legislature to establish statutory |
| 49 | standards for rate adequacy. Such standards are intended to |
| 50 | supplement the standard specified in s. 627.062(2)(e)3., |
| 51 | providing that rates are inadequate if they are clearly |
| 52 | insufficient to sustain projected losses and expenses in the |
| 53 | class of business to which they apply. |
| 54 | 2. For each county, the average rates of the corporation |
| 55 | for each line of business for personal lines residential |
| 56 | policies excluding rates for wind-only policies shall be no |
| 57 | lower than the average rates charged by the insurer that had the |
| 58 | highest average rate in that county among the 20 insurers with |
| 59 | the greatest total direct written premium in the state for that |
| 60 | line of business in the preceding year, except that with respect |
| 61 | to mobile home coverages, the average rates of the corporation |
| 62 | shall be no lower than the average rates charged by the insurer |
| 63 | that had the highest average rate in that county among the 5 |
| 64 | insurers with the greatest total written premium for mobile home |
| 65 | owner's policies in the state in the preceding year. |
| 66 | 3. Rates for personal lines residential wind-only policies |
| 67 | must be actuarially sound and not competitive with approved |
| 68 | rates charged by authorized insurers. If the filing under this |
| 69 | subparagraph is made at least 90 days before the proposed |
| 70 | effective date and the filing is not implemented during the |
| 71 | office's review of the filing and any proceeding and judicial |
| 72 | review, such filing shall be considered a "file and use" filing. |
| 73 | In such case, the office shall finalize its review by issuance |
| 74 | of a notice of intent to approve or a notice of intent to |
| 75 | disapprove within 90 days after receipt of the filing. The |
| 76 | notice of intent to approve and the notice of intent to |
| 77 | disapprove constitute agency action for purposes of the |
| 78 | Administrative Procedure Act. Requests for supporting |
| 79 | information, requests for mathematical or mechanical |
| 80 | corrections, or notification to the insurer by the office of its |
| 81 | preliminary findings shall not toll the 90-day period during any |
| 82 | such proceedings and subsequent judicial review. The rate shall |
| 83 | be deemed approved if the office does not issue a notice of |
| 84 | intent to approve or a notice of intent to disapprove within 90 |
| 85 | days after receipt of the filing. Corporation rate manuals shall |
| 86 | include a rate surcharge for seasonal occupancy. To ensure that |
| 87 | personal lines residential wind-only rates are not competitive |
| 88 | with approved rates charged by authorized insurers, the |
| 89 | corporation, in conjunction with the office, shall develop a |
| 90 | wind-only ratemaking methodology, which methodology shall be |
| 91 | contained in each rate filing made by the corporation with the |
| 92 | office. If the office determines that the wind-only rates or |
| 93 | rating factors filed by the corporation fail to comply with the |
| 94 | wind-only ratemaking methodology provided for in this |
| 95 | subsection, it shall so notify the corporation and require the |
| 96 | corporation to amend its rates or rating factors to come into |
| 97 | compliance within 90 days of notice from the office. |
| 98 | 4. The requirements of this paragraph that rates not be |
| 99 | competitive with approved rates charged by authorized insurers |
| 100 | do not apply in a county or area for which the office determines |
| 101 | that no authorized insurer is offering coverage. The corporation |
| 102 | shall amend its rates or rating factors for the affected county |
| 103 | or area in conjunction with its next rate filing after such |
| 104 | determination is made. |
| 105 | 5. For the purposes of establishing a pilot program to |
| 106 | evaluate issues relating to the availability and affordability |
| 107 | of insurance in an area where historically there has been little |
| 108 | market competition, the provisions of subparagraph 2. do not |
| 109 | apply to coverage provided by the corporation in Monroe County |
| 110 | if the office determines that a reasonable degree of competition |
| 111 | does not exist for personal lines residential policies. The |
| 112 | provisions of subparagraph 3. do not apply to coverage provided |
| 113 | by the corporation in Monroe County if the office determines |
| 114 | that a reasonable degree of competition does not exist for |
| 115 | personal lines residential policies in the area of that county |
| 116 | which is eligible for wind-only coverage. In this county, the |
| 117 | rates for personal lines residential coverage shall be |
| 118 | actuarially sound and not excessive, inadequate, or unfairly |
| 119 | discriminatory and are subject to the other provisions of the |
| 120 | paragraph and s. 627.062. The commission shall adopt rules |
| 121 | establishing the criteria for determining whether a reasonable |
| 122 | degree of competition exists for personal lines residential |
| 123 | policies in Monroe County. By March 1, 2006, the office shall |
| 124 | submit a report to the Legislature providing an evaluation of |
| 125 | the implementation of the pilot program affecting Monroe County. |
| 126 | 6. Rates for commercial lines coverage shall not be |
| 127 | subject to the requirements of subparagraph 2., but shall be |
| 128 | subject to all other requirements of this paragraph and s. |
| 129 | 627.062. |
| 130 | 7. Nothing in this paragraph shall require or allow the |
| 131 | corporation to adopt a rate that is inadequate under s. 627.062. |
| 132 | 8. The corporation shall certify to the office at least |
| 133 | twice annually that its personal lines rates comply with the |
| 134 | requirements of subparagraphs 1., 2., and 3. If any adjustment |
| 135 | in the rates or rating factors of the corporation is necessary |
| 136 | to ensure such compliance, the corporation shall make and |
| 137 | implement such adjustments and file its revised rates and rating |
| 138 | factors with the office. If the office thereafter determines |
| 139 | that the revised rates and rating factors fail to comply with |
| 140 | the provisions of subparagraphs 1., 2., and 3., it shall notify |
| 141 | the corporation and require the corporation to amend its rates |
| 142 | or rating factors in conjunction with its next rate filing. The |
| 143 | office must notify the corporation by electronic means of any |
| 144 | rate filing it approves for any insurer among the insurers |
| 145 | referred to in subparagraph 2. |
| 146 | 9. In addition to the rates otherwise determined pursuant |
| 147 | to this paragraph, the corporation shall impose and collect an |
| 148 | amount equal to the premium tax provided for in s. 624.509 to |
| 149 | augment the financial resources of the corporation. |
| 150 | 10. The corporation shall develop a notice to |
| 151 | policyholders or applicants that the rates of Citizens Property |
| 152 | Insurance Corporation are intended to be higher than the rates |
| 153 | of any admitted carrier and providing other information the |
| 154 | corporation deems necessary to assist consumers in finding other |
| 155 | voluntary admitted insurers willing to insure their property. |
| 156 | 11. After the public hurricane loss-projection model under |
| 157 | s. 627.06281 has been found to be accurate and reliable by the |
| 158 | Florida Commission on Hurricane Loss Projection Methodology, |
| 159 | that model shall serve as the minimum benchmark for determining |
| 160 | the windstorm portion of the corporation's rates. This |
| 161 | subparagraph does not require or allow the corporation to adopt |
| 162 | rates lower than the rates otherwise required or allowed by this |
| 163 | paragraph. |
| 164 | Section 2. This act shall take effect upon becoming a law. |