HB 1001

1	A bill to be entitled
2	An act relating to commercial property insurance; amending
3	s. 627.041, F.S.; defining the terms "assessable
4	commercial property insurance" and "nonassessable
5	commercial property insurance"; amending s. 627.062, F.S.;
6	providing rate standards regarding nonassessable
7	commercial property insurance; providing that
8	nonassessable commercial property insurance is not subject
9	to a determination that the rate is excessive or unfairly
10	discriminatory; providing an exception; amending s.
11	627.351, F.S.; excluding nonassessable commercial property
12	insurance from the definition of "subject lines of
13	business"; specifying that insurers issuing nonassessable
14	commercial property insurance policies are not assessable
15	for portions of assessments from which such policies are
16	exempt; creating s. 627.7031, F.S.; authorizing insurers
17	offering assessable commercial property insurance policies
18	to offer potential insureds nonassessable commercial
19	property insurance policies; authorizing owners of
20	commercial property to purchase nonassessable commercial
21	property insurance policies regarding that property under
22	certain circumstances; requiring that an application for a
23	nonassessable commercial property policy contain a
24	specified disclaimer; requiring that the declarations page
25	of a nonassessable commercial property policy contain a
26	specified disclaimer; providing an effective date.
27
28	Be It Enacted by the Legislature of the State of Florida:
29
30	Section 1.  Subsections (10) and (11) are added to section
31	627.041, Florida Statutes, to read:
32	627.041  Definitions.--As used in this part:
33	(10)  "Assessable commercial property insurance" means
34	insurance on commercial property of every kind, as well as every
35	interest therein, whether such property is on land, water, or in
36	the air, against loss or damage from any and all hazard or
37	cause, and against loss consequential upon such loss or damage,
38	other than noncontractual legal liability for any such loss or
39	damage that is subject to the rate standards set forth in s.
40	627.062 and deficit assessments by Citizens Property Insurance
41	Corporation. Assessable commercial property insurance may
42	contain a provision for accidental death or injury as part of a
43	multiple peril policy.
44	(11)  "Nonassessable commercial property insurance" means
45	insurance on commercial property of every kind, as well as every
46	interest therein, whether such property is on land, water, or in
47	the air, against loss or damage from any and all hazard or
48	cause, and against loss consequential upon such loss or damage,
49	other than noncontractual legal liability for any such loss or
50	damage that is not subject to the rate standards set forth in s.
51	627.062 or deficit assessments by Citizens Property Insurance
52	Corporation. Nonassessable commercial property insurance may
53	contain a provision for accidental death or injury as part of a
54	multiple peril policy.
55	Section 2.  Paragraph (k) is added to subsection (2) of
56	section 627.062, Florida Statutes, to read:
57	627.062  Rate standards.--
58	(2)  As to all such classes of insurance:
59	(k)1.  Notwithstanding any other provisions of this
60	section, nonassessable commercial property insurance is not
61	subject to a determination that the rate is excessive or
62	unfairly discriminatory, except as provided in subparagraph 3.
63	2.  This paragraph does not apply to filings for commercial
64	lines residential insurance, medical malpractice insurance,
65	workers' compensation insurance, or assessable commercial
66	property insurance.
67	3.  This paragraph does not affect the power of the office
68	to disapprove a rate as inadequate or to disapprove a filing for
69	unlawful use of unfairly discriminatory rating factors that are
70	prohibited by Florida law.
71
72	The provisions of this subsection shall not apply to workers'
73	compensation and employer's liability insurance and to motor
74	vehicle insurance.
75	Section 3.  Paragraph (b) of subsection (6) of section
76	627.351, Florida Statutes, is amended to read:
77	627.351  Insurance risk apportionment plans.--
78	(6)  CITIZENS PROPERTY INSURANCE CORPORATION.--
79	(b)1.  All insurers authorized to write one or more subject
80	lines of business in this state are subject to assessment by the
81	corporation and, for the purposes of this subsection, are
82	referred to collectively as "assessable insurers." Insurers
83	writing one or more subject lines of business in this state
84	pursuant to part VIII of chapter 626 are not assessable
85	insurers, but insureds who procure one or more subject lines of
86	business in this state pursuant to part VIII of chapter 626 are
87	subject to assessment by the corporation and are referred to
88	collectively as "assessable insureds." An authorized insurer's
89	assessment liability shall begin on the first day of the
90	calendar year following the year in which the insurer was issued
91	a certificate of authority to transact insurance for subject
92	lines of business in this state and shall terminate 1 year after
93	the end of the first calendar year during which the insurer no
94	longer holds a certificate of authority to transact insurance
95	for subject lines of business in this state.
96	2.a.  All revenues, assets, liabilities, losses, and
97	expenses of the corporation shall be divided into three separate
98	accounts as follows:
99	(I)  A personal lines account for personal residential
100	policies issued by the corporation or issued by the Residential
101	Property and Casualty Joint Underwriting Association and renewed
102	by the corporation that provide comprehensive, multiperil
103	coverage on risks that are not located in areas eligible for
104	coverage in the Florida Windstorm Underwriting Association as
105	those areas were defined on January 1, 2002, and for such
106	policies that do not provide coverage for the peril of wind on
107	risks that are located in such areas;
108	(II)  A commercial lines account for commercial residential
109	and commercial nonresidential policies issued by the corporation
110	or issued by the Residential Property and Casualty Joint
111	Underwriting Association and renewed by the corporation that
112	provide coverage for basic property perils on risks that are not
113	located in areas eligible for coverage in the Florida Windstorm
114	Underwriting Association as those areas were defined on January
115	1, 2002, and for such policies that do not provide coverage for
116	the peril of wind on risks that are located in such areas; and
117	(III)  A high-risk account for personal residential
118	policies and commercial residential and commercial
119	nonresidential property policies issued by the corporation or
120	transferred to the corporation that provide coverage for the
121	peril of wind on risks that are located in areas eligible for
122	coverage in the Florida Windstorm Underwriting Association as
123	those areas were defined on January 1, 2002. Subject to the
124	approval of a business plan by the Financial Services Commission
125	and Legislative Budget Commission as provided in this sub-sub-
126	subparagraph, but no earlier than March 31, 2007, the
127	corporation may offer policies that provide multiperil coverage
128	and the corporation shall continue to offer policies that
129	provide coverage only for the peril of wind for risks located in
130	areas eligible for coverage in the high-risk account. In issuing
131	multiperil coverage, the corporation may use its approved policy
132	forms and rates for the personal lines account. An applicant or
133	insured who is eligible to purchase a multiperil policy from the
134	corporation may purchase a multiperil policy from an authorized
135	insurer without prejudice to the applicant's or insured's
136	eligibility to prospectively purchase a policy that provides
137	coverage only for the peril of wind from the corporation. An
138	applicant or insured who is eligible for a corporation policy
139	that provides coverage only for the peril of wind may elect to
140	purchase or retain such policy and also purchase or retain
141	coverage excluding wind from an authorized insurer without
142	prejudice to the applicant's or insured's eligibility to
143	prospectively purchase a policy that provides multiperil
144	coverage from the corporation. It is the goal of the Legislature
145	that there would be an overall average savings of 10 percent or
146	more for a policyholder who currently has a wind-only policy
147	with the corporation, and an ex-wind policy with a voluntary
148	insurer or the corporation, and who then obtains a multiperil
149	policy from the corporation. It is the intent of the Legislature
150	that the offer of multiperil coverage in the high-risk account
151	be made and implemented in a manner that does not adversely
152	affect the tax-exempt status of the corporation or
153	creditworthiness of or security for currently outstanding
154	financing obligations or credit facilities of the high-risk
155	account, the personal lines account, or the commercial lines
156	account. By March 1, 2007, the corporation shall prepare and
157	submit for approval by the Financial Services Commission and
158	Legislative Budget Commission a report detailing the
159	corporation's business plan for issuing multiperil coverage in
160	the high-risk account. The business plan shall be approved or
161	disapproved within 30 days after receipt, as submitted or
162	modified and resubmitted by the corporation. The business plan
163	must include: the impact of such multiperil coverage on the
164	corporation's financial resources, the impact of such multiperil
165	coverage on the corporation's tax-exempt status, the manner in
166	which the corporation plans to implement the processing of
167	applications and policy forms for new and existing
168	policyholders, the impact of such multiperil coverage on the
169	corporation's ability to deliver customer service at the high
170	level required by this subsection, the ability of the
171	corporation to process claims, the ability of the corporation to
172	quote and issue policies, the impact of such multiperil coverage
173	on the corporation's agents, the impact of such multiperil
174	coverage on the corporation's existing policyholders, and the
175	impact of such multiperil coverage on rates and premium. The
176	high-risk account must also include quota share primary
177	insurance under subparagraph (c)2. The area eligible for
178	coverage under the high-risk account also includes the area
179	within Port Canaveral, which is bordered on the south by the
180	City of Cape Canaveral, bordered on the west by the Banana
181	River, and bordered on the north by Federal Government property.
182	b.  The three separate accounts must be maintained as long
183	as financing obligations entered into by the Florida Windstorm
184	Underwriting Association or Residential Property and Casualty
185	Joint Underwriting Association are outstanding, in accordance
186	with the terms of the corresponding financing documents. When
187	the financing obligations are no longer outstanding, in
188	accordance with the terms of the corresponding financing
189	documents, the corporation may use a single account for all
190	revenues, assets, liabilities, losses, and expenses of the
191	corporation. Consistent with the requirement of this
192	subparagraph and prudent investment policies that minimize the
193	cost of carrying debt, the board shall exercise its best efforts
194	to retire existing debt or to obtain approval of necessary
195	parties to amend the terms of existing debt, so as to structure
196	the most efficient plan to consolidate the three separate
197	accounts into a single account. By February 1, 2007, the board
198	shall submit a report to the Financial Services Commission, the
199	President of the Senate, and the Speaker of the House of
200	Representatives which includes an analysis of consolidating the
201	accounts, the actions the board has taken to minimize the cost
202	of carrying debt, and its recommendations for executing the most
203	efficient plan.
204	c.  Creditors of the Residential Property and Casualty
205	Joint Underwriting Association and of the accounts specified in
206	sub-sub-subparagraphs a.(I) and (II) may have a claim against,
207	and recourse to, the accounts referred to in sub-sub-
208	subparagraphs a.(I) and (II) and shall have no claim against, or
209	recourse to, the account referred to in sub-sub-subparagraph
210	a.(III). Creditors of the Florida Windstorm Underwriting
211	Association shall have a claim against, and recourse to, the
212	account referred to in sub-sub-subparagraph a.(III) and shall
213	have no claim against, or recourse to, the accounts referred to
214	in sub-sub-subparagraphs a.(I) and (II).
215	d.  Revenues, assets, liabilities, losses, and expenses not
216	attributable to particular accounts shall be prorated among the
217	accounts.
218	e.  The Legislature finds that the revenues of the
219	corporation are revenues that are necessary to meet the
220	requirements set forth in documents authorizing the issuance of
221	bonds under this subsection.
222	f.  No part of the income of the corporation may inure to
223	the benefit of any private person.
224	3.  With respect to a deficit in an account:
225	a.  When the deficit incurred in a particular calendar year
226	is not greater than 10 percent of the aggregate statewide direct
227	written premium for the subject lines of business for the prior
228	calendar year, the entire deficit shall be recovered through
229	regular assessments of assessable insurers under paragraph (p)
230	and assessable insureds.
231	b.  When the deficit incurred in a particular calendar year
232	exceeds 10 percent of the aggregate statewide direct written
233	premium for the subject lines of business for the prior calendar
234	year, the corporation shall levy regular assessments on
235	assessable insurers under paragraph (p) and on assessable
236	insureds in an amount equal to the greater of 10 percent of the
237	deficit or 10 percent of the aggregate statewide direct written
238	premium for the subject lines of business for the prior calendar
239	year. Any remaining deficit shall be recovered through emergency
240	assessments under sub-subparagraph d.
241	c.  Each assessable insurer's share of the amount being
242	assessed under sub-subparagraph a. or sub-subparagraph b. shall
243	be in the proportion that the assessable insurer's direct
244	written premium for the subject lines of business for the year
245	preceding the assessment bears to the aggregate statewide direct
246	written premium for the subject lines of business for that year.
247	The assessment percentage applicable to each assessable insured
248	is the ratio of the amount being assessed under sub-subparagraph
249	a. or sub-subparagraph b. to the aggregate statewide direct
250	written premium for the subject lines of business for the prior
251	year. Assessments levied by the corporation on assessable
252	insurers under sub-subparagraphs a. and b. shall be paid as
253	required by the corporation's plan of operation and paragraph
254	(p). Notwithstanding any other provision of this subsection, the
255	aggregate amount of a regular assessment for a deficit incurred
256	in a particular calendar year shall be reduced by the estimated
257	amount to be received by the corporation from the Citizens
258	policyholder surcharge under subparagraph (c)10. and the amount
259	collected or estimated to be collected from the assessment on
260	Citizens policyholders pursuant to sub-subparagraph i.
261	Assessments levied by the corporation on assessable insureds
262	under sub-subparagraphs a. and b. shall be collected by the
263	surplus lines agent at the time the surplus lines agent collects
264	the surplus lines tax required by s. 626.932 and shall be paid
265	to the Florida Surplus Lines Service Office at the time the
266	surplus lines agent pays the surplus lines tax to the Florida
267	Surplus Lines Service Office. Upon receipt of regular
268	assessments from surplus lines agents, the Florida Surplus Lines
269	Service Office shall transfer the assessments directly to the
270	corporation as determined by the corporation.
271	d.  Upon a determination by the board of governors that a
272	deficit in an account exceeds the amount that will be recovered
273	through regular assessments under sub-subparagraph a. or sub-
274	subparagraph b., the board shall levy, after verification by the
275	office, emergency assessments, for as many years as necessary to
276	cover the deficits, to be collected by assessable insurers and
277	the corporation and collected from assessable insureds upon
278	issuance or renewal of policies for subject lines of business,
279	excluding National Flood Insurance policies. The amount of the
280	emergency assessment collected in a particular year shall be a
281	uniform percentage of that year's direct written premium for
282	subject lines of business and all accounts of the corporation,
283	excluding National Flood Insurance Program policy premiums, as
284	annually determined by the board and verified by the office. The
285	office shall verify the arithmetic calculations involved in the
286	board's determination within 30 days after receipt of the
287	information on which the determination was based.
288	Notwithstanding any other provision of law, the corporation and
289	each assessable insurer that writes subject lines of business
290	shall collect emergency assessments from its policyholders
291	without such obligation being affected by any credit,
292	limitation, exemption, or deferment. Emergency assessments
293	levied by the corporation on assessable insureds shall be
294	collected by the surplus lines agent at the time the surplus
295	lines agent collects the surplus lines tax required by s.
296	626.932 and shall be paid to the Florida Surplus Lines Service
297	Office at the time the surplus lines agent pays the surplus
298	lines tax to the Florida Surplus Lines Service Office. The
299	emergency assessments so collected shall be transferred directly
300	to the corporation on a periodic basis as determined by the
301	corporation and shall be held by the corporation solely in the
302	applicable account. The aggregate amount of emergency
303	assessments levied for an account under this sub-subparagraph in
304	any calendar year may not exceed the greater of 10 percent of
305	the amount needed to cover the original deficit, plus interest,
306	fees, commissions, required reserves, and other costs associated
307	with financing of the original deficit, or 10 percent of the
308	aggregate statewide direct written premium for subject lines of
309	business and for all accounts of the corporation for the prior
310	year, plus interest, fees, commissions, required reserves, and
311	other costs associated with financing the original deficit.
312	e.  The corporation may pledge the proceeds of assessments,
313	projected recoveries from the Florida Hurricane Catastrophe
314	Fund, other insurance and reinsurance recoverables, policyholder
315	surcharges and other surcharges, and other funds available to
316	the corporation as the source of revenue for and to secure bonds
317	issued under paragraph (p), bonds or other indebtedness issued
318	under subparagraph (c)3., or lines of credit or other financing
319	mechanisms issued or created under this subsection, or to retire
320	any other debt incurred as a result of deficits or events giving
321	rise to deficits, or in any other way that the board determines
322	will efficiently recover such deficits. The purpose of the lines
323	of credit or other financing mechanisms is to provide additional
324	resources to assist the corporation in covering claims and
325	expenses attributable to a catastrophe. As used in this
326	subsection, the term "assessments" includes regular assessments
327	under sub-subparagraph a., sub-subparagraph b., or subparagraph
328	(p)1. and emergency assessments under sub-subparagraph d.
329	Emergency assessments collected under sub-subparagraph d. are
330	not part of an insurer's rates, are not premium, and are not
331	subject to premium tax, fees, or commissions; however, failure
332	to pay the emergency assessment shall be treated as failure to
333	pay premium. The emergency assessments under sub-subparagraph d.
334	shall continue as long as any bonds issued or other indebtedness
335	incurred with respect to a deficit for which the assessment was
336	imposed remain outstanding, unless adequate provision has been
337	made for the payment of such bonds or other indebtedness
338	pursuant to the documents governing such bonds or other
339	indebtedness.
340	f.  As used in this subsection for purposes of any deficit
341	incurred on or after January 25, 2007, the term "subject lines
342	of business" means insurance written by assessable insurers or
343	procured by assessable insureds for all property and casualty
344	lines of business in this state, but not including workers'
345	compensation, or medical malpractice, or nonassessable
346	commercial property insurance as defined in s. 627.041. As used
347	in the sub-subparagraph, the term "property and casualty lines
348	of business" includes all lines of business identified on Form
349	2, Exhibit of Premiums and Losses, in the annual statement
350	required of authorized insurers by s. 624.424 and any rule
351	adopted under this section, except for those lines identified as
352	accident and health insurance and except for policies written
353	under the National Flood Insurance Program or the Federal Crop
354	Insurance Program. Insurers that issue nonassessable commercial
355	property insurance policies are not assessable for the portion
356	of the assessment from which the nonassessable commercial
357	property insurance policy is exempt. For purposes of this sub-
358	subparagraph, the term "workers' compensation" includes both
359	workers' compensation insurance and excess workers' compensation
360	insurance.
361	g.  The Florida Surplus Lines Service Office shall
362	determine annually the aggregate statewide written premium in
363	subject lines of business procured by assessable insureds and
364	shall report that information to the corporation in a form and
365	at a time the corporation specifies to ensure that the
366	corporation can meet the requirements of this subsection and the
367	corporation's financing obligations.
368	h.  The Florida Surplus Lines Service Office shall verify
369	the proper application by surplus lines agents of assessment
370	percentages for regular assessments and emergency assessments
371	levied under this subparagraph on assessable insureds and shall
372	assist the corporation in ensuring the accurate, timely
373	collection and payment of assessments by surplus lines agents as
374	required by the corporation.
375	i.  If a deficit is incurred in any account in 2008 or
376	thereafter, the board of governors shall levy an immediate
377	assessment against the premium of each nonhomestead property
378	policyholder in all accounts of the corporation, as a uniform
379	percentage of the premium of the policy of up to 10 percent of
380	such premium, which funds shall be used to offset the deficit.
381	If this assessment is insufficient to eliminate the deficit, the
382	board of governors shall levy an additional assessment against
383	all policyholders of the corporation, which shall be collected
384	at the time of issuance or renewal of a policy, as a uniform
385	percentage of the premium for the policy of up to 10 percent of
386	such premium, which funds shall be used to further offset the
387	deficit.
388	j.  The board of governors shall maintain separate
389	accounting records that consolidate data for nonhomestead
390	properties, including, but not limited to, number of policies,
391	insured values, premiums written, and losses. The board of
392	governors shall annually report to the office and the
393	Legislature a summary of such data.
394	Section 4.  Section 627.7031, Florida Statutes, is created
395	to read:
396	627.7031  Commercial property insurance.--
397	(1)  Insurers offering assessable commercial property
398	insurance policies as defined in s. 627.041(10) may offer
399	nonassessable commercial property insurance policies as defined
400	in s. 627.041(11).
401	(2)  An owner of commercial property may purchase a
402	nonassessable commercial property insurance policy if such a
403	policy is offered by the insurer.
404	(3)  The application for a nonassessable commercial
405	property insurance policy shall contain the following disclaimer
406	printed in at least 12-point boldfaced type:
407
408	THIS APPLICATION IS FOR A COMMERCIAL PROPERTY POLICY THAT IS NOT
409	SUBJECT TO RATE REGULATION REQUIREMENTS OF FLORIDA LAW OR
410	DEFICIT ASSESSMENTS BY CITIZENS PROPERTY INSURANCE CORPORATION.
411	A COMMERCIAL PROPERTY POLICY THAT IS SUBJECT TO RATE REGULATION
412	REQUIREMENTS AND DEFICIT ASSESSMENT BY CITIZENS PROPERTY
413	INSURANCE CORPORATION IS AVAILABLE. PLEASE DISCUSS YOUR POLICY
414	OPTIONS WITH YOUR INSURANCE AGENT.
415
416	(4)  The declarations page of a nonassessable commercial
417	property insurance policy shall contain the following disclaimer
418	printed in at least 12-point boldfaced type:
419
420	THIS COMMERCIAL PROPERTY POLICY IS NOT SUBJECT TO RATE
421	REGULATION REQUIREMENTS OF FLORIDA LAW OR DEFICIT ASSESSMENTS BY
422	CITIZENS PROPERTY INSURANCE CORPORATION. A COMMERCIAL PROPERTY
423	POLICY THAT IS SUBJECT TO RATE REGULATION REQUIREMENTS AND
424	DEFICIT ASSESSMENT BY CITIZENS PROPERTY INSURANCE CORPORATION IS
425	AVAILABLE. PLEASE DISCUSS YOUR POLICY OPTIONS WITH YOUR
426	INSURANCE AGENT.
427	Section 5.  This act shall take effect July 1, 2008.

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