Florida Senate - 2008 SB 1422
By Senator Bennett
21-02872A-08 20081422__
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A bill to be entitled
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An act relating to commercial property insurance; amending
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s. 627.041, F.S.; defining the terms "assessable
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commercial property insurance" and "nonassessable
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commercial property insurance"; amending s. 627.062, F.S.;
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providing rate standards regarding nonassessable
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commercial property insurance; providing that
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nonassessable commercial property insurance is not subject
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to a determination that the rate is excessive or unfairly
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discriminatory; providing an exception; amending s.
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627.351, F.S.; excluding nonassessable commercial property
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insurance from the definition of "subject lines of
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business"; providing that insurers issuing nonassessable
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commercial property insurance policies are not assessable
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for the portion of the assessment from which the
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nonassessable commercial property insurance policy is
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exempt; creating s. 627.7031, F.S.; authorizing insurers
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offering policies covering commercial property risks to
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offer potential insureds assessable commercial property
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insurance policies and nonassessable commercial property
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insurance policies; requiring that an owner of commercial
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property have the option to purchase either a
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nonassessable commercial property insurance policy or an
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assessable commercial property insurance policy regarding
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that property, if an assessable commercial property
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insurance policy is offered by the insurer; requiring that
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an application for a nonassessable commercial property
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policy contain a specified disclaimer; requiring that the
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declarations page of a nonassessable commercial property
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policy contain a specified disclaimer; providing an
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effective date.
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Be It Enacted by the Legislature of the State of Florida:
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Section 1. Subsections (10) and (11) are added to section
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627.041, Florida Statutes, to read:
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627.041 Definitions.--As used in this part:
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(10) "Assessable commercial property insurance" means
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insurance on commercial property of every kind, as well as every
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interest therein, whether such property is on land, water, or in
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the air, against loss or damage from any and all hazard or cause,
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and against loss consequential upon such loss or damage, other
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than noncontractual legal liability for any such loss or damage
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that is subject to the rate standards set forth in s. 627.062 and
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deficit assessments by Citizens Property Insurance Corporation.
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Assessable commercial property insurance may contain a provision
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for accidental death or injury as part of a multiple peril
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policy.
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(11) "Nonassessable commercial property insurance" means
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insurance on commercial property of every kind, as well as every
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interest therein, whether such property is on land, water, or in
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the air, against loss or damage from any and all hazard or cause,
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and against loss consequential upon such loss or damage, other
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than noncontractual legal liability for any such loss or damage
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that is not subject to the rate standards set forth in s. 627.062
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or deficit assessments by Citizens Property Insurance
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Corporation. Nonassessable commercial property insurance may
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contain a provision for accidental death or injury as part of a
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multiple peril policy.
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Section 2. Paragraph (k) is added to subsection (2) of
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section 627.062, Florida Statutes, to read:
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627.062 Rate standards.--
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(2) As to all such classes of insurance:
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(k)1. Notwithstanding any other provisions of this section,
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nonassessable commercial property insurance is not subject to a
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determination that the rate is excessive or unfairly
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discriminatory, except as provided in subparagraph 3.
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2. This paragraph does not apply to filings for commercial
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lines residential insurance, medical malpractice insurance,
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workers' compensation insurance, or assessable commercial
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property insurance.
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3. This paragraph does not affect the power of the office
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to disapprove a rate as inadequate or to disapprove a filing for
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unlawful use of unfairly discriminatory rating factors that are
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prohibited by Florida law.
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The provisions of this subsection shall not apply to workers'
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compensation and employer's liability insurance and to motor
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vehicle insurance.
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Section 3. Paragraph (b) of subsection (6) of section
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627.351, Florida Statutes, is amended to read:
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627.351 Insurance risk apportionment plans.--
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(6) CITIZENS PROPERTY INSURANCE CORPORATION.--
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(b)1. All insurers authorized to write one or more subject
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lines of business in this state are subject to assessment by the
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corporation and, for the purposes of this subsection, are
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referred to collectively as "assessable insurers." Insurers
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writing one or more subject lines of business in this state
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pursuant to part VIII of chapter 626 are not assessable insurers,
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but insureds who procure one or more subject lines of business in
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this state pursuant to part VIII of chapter 626 are subject to
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assessment by the corporation and are referred to collectively as
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"assessable insureds." An authorized insurer's assessment
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liability shall begin on the first day of the calendar year
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following the year in which the insurer was issued a certificate
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of authority to transact insurance for subject lines of business
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in this state and shall terminate 1 year after the end of the
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first calendar year during which the insurer no longer holds a
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certificate of authority to transact insurance for subject lines
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of business in this state.
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2.a. All revenues, assets, liabilities, losses, and
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expenses of the corporation shall be divided into three separate
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accounts as follows:
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(I) A personal lines account for personal residential
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policies issued by the corporation or issued by the Residential
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Property and Casualty Joint Underwriting Association and renewed
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by the corporation that provide comprehensive, multiperil
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coverage on risks that are not located in areas eligible for
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coverage in the Florida Windstorm Underwriting Association as
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those areas were defined on January 1, 2002, and for such
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policies that do not provide coverage for the peril of wind on
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risks that are located in such areas;
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(II) A commercial lines account for commercial residential
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and commercial nonresidential policies issued by the corporation
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or issued by the Residential Property and Casualty Joint
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Underwriting Association and renewed by the corporation that
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provide coverage for basic property perils on risks that are not
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located in areas eligible for coverage in the Florida Windstorm
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Underwriting Association as those areas were defined on January
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1, 2002, and for such policies that do not provide coverage for
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the peril of wind on risks that are located in such areas; and
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(III) A high-risk account for personal residential policies
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and commercial residential and commercial nonresidential property
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policies issued by the corporation or transferred to the
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corporation that provide coverage for the peril of wind on risks
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that are located in areas eligible for coverage in the Florida
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Windstorm Underwriting Association as those areas were defined on
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January 1, 2002. Subject to the approval of a business plan by
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the Financial Services Commission and Legislative Budget
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Commission as provided in this sub-sub-subparagraph, but no
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earlier than March 31, 2007, the corporation may offer policies
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that provide multiperil coverage and the corporation shall
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continue to offer policies that provide coverage only for the
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peril of wind for risks located in areas eligible for coverage in
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the high-risk account. In issuing multiperil coverage, the
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corporation may use its approved policy forms and rates for the
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personal lines account. An applicant or insured who is eligible
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to purchase a multiperil policy from the corporation may purchase
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a multiperil policy from an authorized insurer without prejudice
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to the applicant's or insured's eligibility to prospectively
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purchase a policy that provides coverage only for the peril of
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wind from the corporation. An applicant or insured who is
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eligible for a corporation policy that provides coverage only for
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the peril of wind may elect to purchase or retain such policy and
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also purchase or retain coverage excluding wind from an
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authorized insurer without prejudice to the applicant's or
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insured's eligibility to prospectively purchase a policy that
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provides multiperil coverage from the corporation. It is the goal
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of the Legislature that there would be an overall average savings
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of 10 percent or more for a policyholder who currently has a
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wind-only policy with the corporation, and an ex-wind policy with
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a voluntary insurer or the corporation, and who then obtains a
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multiperil policy from the corporation. It is the intent of the
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Legislature that the offer of multiperil coverage in the high-
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risk account be made and implemented in a manner that does not
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adversely affect the tax-exempt status of the corporation or
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creditworthiness of or security for currently outstanding
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financing obligations or credit facilities of the high-risk
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account, the personal lines account, or the commercial lines
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account. By March 1, 2007, the corporation shall prepare and
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submit for approval by the Financial Services Commission and
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Legislative Budget Commission a report detailing the
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corporation's business plan for issuing multiperil coverage in
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the high-risk account. The business plan shall be approved or
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disapproved within 30 days after receipt, as submitted or
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modified and resubmitted by the corporation. The business plan
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must include: the impact of such multiperil coverage on the
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corporation's financial resources, the impact of such multiperil
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coverage on the corporation's tax-exempt status, the manner in
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which the corporation plans to implement the processing of
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applications and policy forms for new and existing policyholders,
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the impact of such multiperil coverage on the corporation's
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ability to deliver customer service at the high level required by
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this subsection, the ability of the corporation to process
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claims, the ability of the corporation to quote and issue
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policies, the impact of such multiperil coverage on the
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corporation's agents, the impact of such multiperil coverage on
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the corporation's existing policyholders, and the impact of such
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multiperil coverage on rates and premium. The high-risk account
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must also include quota share primary insurance under
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subparagraph (c)2. The area eligible for coverage under the high-
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risk account also includes the area within Port Canaveral, which
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is bordered on the south by the City of Cape Canaveral, bordered
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on the west by the Banana River, and bordered on the north by
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Federal Government property.
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b. The three separate accounts must be maintained as long
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as financing obligations entered into by the Florida Windstorm
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Underwriting Association or Residential Property and Casualty
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Joint Underwriting Association are outstanding, in accordance
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with the terms of the corresponding financing documents. When the
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financing obligations are no longer outstanding, in accordance
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with the terms of the corresponding financing documents, the
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corporation may use a single account for all revenues, assets,
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liabilities, losses, and expenses of the corporation. Consistent
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with the requirement of this subparagraph and prudent investment
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policies that minimize the cost of carrying debt, the board shall
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exercise its best efforts to retire existing debt or to obtain
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approval of necessary parties to amend the terms of existing
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debt, so as to structure the most efficient plan to consolidate
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the three separate accounts into a single account. By February 1,
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2007, the board shall submit a report to the Financial Services
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Commission, the President of the Senate, and the Speaker of the
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House of Representatives which includes an analysis of
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consolidating the accounts, the actions the board has taken to
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minimize the cost of carrying debt, and its recommendations for
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executing the most efficient plan.
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c. Creditors of the Residential Property and Casualty Joint
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Underwriting Association and of the accounts specified in sub-
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sub-subparagraphs a.(I) and (II) may have a claim against, and
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recourse to, the accounts referred to in sub-sub-subparagraphs
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a.(I) and (II) and shall have no claim against, or recourse to,
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the account referred to in sub-sub-subparagraph a.(III).
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Creditors of the Florida Windstorm Underwriting Association shall
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have a claim against, and recourse to, the account referred to in
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sub-sub-subparagraph a.(III) and shall have no claim against, or
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recourse to, the accounts referred to in sub-sub-subparagraphs
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a.(I) and (II).
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d. Revenues, assets, liabilities, losses, and expenses not
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attributable to particular accounts shall be prorated among the
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accounts.
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e. The Legislature finds that the revenues of the
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corporation are revenues that are necessary to meet the
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requirements set forth in documents authorizing the issuance of
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bonds under this subsection.
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f. No part of the income of the corporation may inure to
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the benefit of any private person.
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3. With respect to a deficit in an account:
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a. When the deficit incurred in a particular calendar year
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is not greater than 10 percent of the aggregate statewide direct
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written premium for the subject lines of business for the prior
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calendar year, the entire deficit shall be recovered through
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regular assessments of assessable insurers under paragraph (p)
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and assessable insureds.
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b. When the deficit incurred in a particular calendar year
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exceeds 10 percent of the aggregate statewide direct written
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premium for the subject lines of business for the prior calendar
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year, the corporation shall levy regular assessments on
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assessable insurers under paragraph (p) and on assessable
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insureds in an amount equal to the greater of 10 percent of the
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deficit or 10 percent of the aggregate statewide direct written
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premium for the subject lines of business for the prior calendar
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year. Any remaining deficit shall be recovered through emergency
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assessments under sub-subparagraph d.
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c. Each assessable insurer's share of the amount being
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assessed under sub-subparagraph a. or sub-subparagraph b. shall
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be in the proportion that the assessable insurer's direct written
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premium for the subject lines of business for the year preceding
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the assessment bears to the aggregate statewide direct written
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premium for the subject lines of business for that year. The
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assessment percentage applicable to each assessable insured is
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the ratio of the amount being assessed under sub-subparagraph a.
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or sub-subparagraph b. to the aggregate statewide direct written
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premium for the subject lines of business for the prior year.
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Assessments levied by the corporation on assessable insurers
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under sub-subparagraphs a. and b. shall be paid as required by
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the corporation's plan of operation and paragraph (p).
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Notwithstanding any other provision of this subsection, the
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aggregate amount of a regular assessment for a deficit incurred
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in a particular calendar year shall be reduced by the estimated
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amount to be received by the corporation from the Citizens
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policyholder surcharge under subparagraph (c)10. and the amount
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collected or estimated to be collected from the assessment on
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Citizens policyholders pursuant to sub-subparagraph i.
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Assessments levied by the corporation on assessable insureds
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under sub-subparagraphs a. and b. shall be collected by the
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surplus lines agent at the time the surplus lines agent collects
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the surplus lines tax required by s. 626.932 and shall be paid to
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the Florida Surplus Lines Service Office at the time the surplus
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lines agent pays the surplus lines tax to the Florida Surplus
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Lines Service Office. Upon receipt of regular assessments from
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surplus lines agents, the Florida Surplus Lines Service Office
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shall transfer the assessments directly to the corporation as
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determined by the corporation.
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d. Upon a determination by the board of governors that a
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deficit in an account exceeds the amount that will be recovered
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through regular assessments under sub-subparagraph a. or sub-
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subparagraph b., the board shall levy, after verification by the
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office, emergency assessments, for as many years as necessary to
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cover the deficits, to be collected by assessable insurers and
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the corporation and collected from assessable insureds upon
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issuance or renewal of policies for subject lines of business,
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excluding National Flood Insurance policies. The amount of the
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emergency assessment collected in a particular year shall be a
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uniform percentage of that year's direct written premium for
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subject lines of business and all accounts of the corporation,
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excluding National Flood Insurance Program policy premiums, as
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annually determined by the board and verified by the office. The
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office shall verify the arithmetic calculations involved in the
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board's determination within 30 days after receipt of the
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information on which the determination was based. Notwithstanding
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any other provision of law, the corporation and each assessable
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insurer that writes subject lines of business shall collect
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emergency assessments from its policyholders without such
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obligation being affected by any credit, limitation, exemption,
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or deferment. Emergency assessments levied by the corporation on
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assessable insureds shall be collected by the surplus lines agent
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at the time the surplus lines agent collects the surplus lines
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tax required by s. 626.932 and shall be paid to the Florida
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Surplus Lines Service Office at the time the surplus lines agent
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pays the surplus lines tax to the Florida Surplus Lines Service
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Office. The emergency assessments so collected shall be
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transferred directly to the corporation on a periodic basis as
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determined by the corporation and shall be held by the
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corporation solely in the applicable account. The aggregate
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amount of emergency assessments levied for an account under this
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sub-subparagraph in any calendar year may not exceed the greater
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of 10 percent of the amount needed to cover the original deficit,
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plus interest, fees, commissions, required reserves, and other
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costs associated with financing of the original deficit, or 10
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percent of the aggregate statewide direct written premium for
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subject lines of business and for all accounts of the corporation
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for the prior year, plus interest, fees, commissions, required
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reserves, and other costs associated with financing the original
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deficit.
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e. The corporation may pledge the proceeds of assessments,
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projected recoveries from the Florida Hurricane Catastrophe Fund,
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other insurance and reinsurance recoverables, policyholder
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surcharges and other surcharges, and other funds available to the
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corporation as the source of revenue for and to secure bonds
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issued under paragraph (p), bonds or other indebtedness issued
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under subparagraph (c)3., or lines of credit or other financing
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mechanisms issued or created under this subsection, or to retire
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any other debt incurred as a result of deficits or events giving
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rise to deficits, or in any other way that the board determines
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will efficiently recover such deficits. The purpose of the lines
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of credit or other financing mechanisms is to provide additional
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resources to assist the corporation in covering claims and
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expenses attributable to a catastrophe. As used in this
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subsection, the term "assessments" includes regular assessments
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under sub-subparagraph a., sub-subparagraph b., or subparagraph
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(p)1. and emergency assessments under sub-subparagraph d.
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Emergency assessments collected under sub-subparagraph d. are not
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part of an insurer's rates, are not premium, and are not subject
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to premium tax, fees, or commissions; however, failure to pay the
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emergency assessment shall be treated as failure to pay premium.
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The emergency assessments under sub-subparagraph d. shall
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continue as long as any bonds issued or other indebtedness
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incurred with respect to a deficit for which the assessment was
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imposed remain outstanding, unless adequate provision has been
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made for the payment of such bonds or other indebtedness pursuant
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to the documents governing such bonds or other indebtedness.
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f. As used in this subsection for purposes of any deficit
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incurred on or after January 25, 2007, the term "subject lines of
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business" means insurance written by assessable insurers or
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procured by assessable insureds for all property and casualty
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lines of business in this state, but not including workers'
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compensation, or medical malpractice, or nonassessable commercial
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property insurance as defined in s. 627.041(11). As used in the
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sub-subparagraph, the term "property and casualty lines of
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business" includes all lines of business identified on Form 2,
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Exhibit of Premiums and Losses, in the annual statement required
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of authorized insurers by s. 624.424 and any rule adopted under
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this section, except for those lines identified as accident and
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health insurance and except for policies written under the
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National Flood Insurance Program or the Federal Crop Insurance
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Program. For purposes of this sub-subparagraph, the term
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"workers' compensation" includes both workers' compensation
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insurance and excess workers' compensation insurance. Insurers
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issuing nonassessable commercial property insurance policies are
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not assessable for the portion of the assessment from which the
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nonassessable commercial property insurance policy is exempt.
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g. The Florida Surplus Lines Service Office shall determine
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annually the aggregate statewide written premium in subject lines
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of business procured by assessable insureds and shall report that
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information to the corporation in a form and at a time the
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corporation specifies to ensure that the corporation can meet the
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requirements of this subsection and the corporation's financing
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obligations.
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h. The Florida Surplus Lines Service Office shall verify
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the proper application by surplus lines agents of assessment
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percentages for regular assessments and emergency assessments
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levied under this subparagraph on assessable insureds and shall
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assist the corporation in ensuring the accurate, timely
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collection and payment of assessments by surplus lines agents as
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required by the corporation.
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i. If a deficit is incurred in any account in 2008 or
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thereafter, the board of governors shall levy an immediate
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assessment against the premium of each nonhomestead property
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policyholder in all accounts of the corporation, as a uniform
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percentage of the premium of the policy of up to 10 percent of
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such premium, which funds shall be used to offset the deficit. If
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this assessment is insufficient to eliminate the deficit, the
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board of governors shall levy an additional assessment against
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all policyholders of the corporation, which shall be collected at
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the time of issuance or renewal of a policy, as a uniform
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percentage of the premium for the policy of up to 10 percent of
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such premium, which funds shall be used to further offset the
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deficit.
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j. The board of governors shall maintain separate
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accounting records that consolidate data for nonhomestead
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properties, including, but not limited to, number of policies,
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insured values, premiums written, and losses. The board of
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governors shall annually report to the office and the Legislature
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a summary of such data.
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Section 4. Section 627.7031, Florida Statutes, is created
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to read:
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627.7031 Commercial property insurance.--
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(1) Insurers offering policies of insurance covering
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commercial property risks may offer assessable commercial
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property insurance policies as defined in s. 627.041(10) and
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nonassessable commercial property insurance policies as defined
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in s. 627.041(11).
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(2) An owner of commercial property shall have the option to
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purchase either a nonassessable commercial property insurance
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policy or an assessable commercial property insurance policy, if an
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assessable commercial property insurance policy is offered by the
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insurer.
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(3) The application for a nonassessable commercial property
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insurance policy shall contain the following disclaimer printed in
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at least 12-point boldfaced type:
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THIS APPLICATION IS FOR A COMMERCIAL PROPERTY POLICY THAT IS NOT
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SUBJECT TO RATE REGULATION REQUIREMENTS OF FLORIDA LAW OR DEFICIT
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ASSESSMENTS BY CITIZENS PROPERTY INSURANCE CORPORATION. A
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COMMERCIAL PROPERTY POLICY THAT IS SUBJECT TO RATE REGULATION
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REQUIREMENTS AND DEFICIT ASSESSMENT BY CITIZENS PROPERTY
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INSURANCE CORPORATION IS AVAILABLE. PLEASE DISCUSS YOUR POLICY
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OPTIONS WITH YOUR INSURANCE AGENT.
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(4) The declarations page of a nonassessable commercial
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property insurance policy shall contain the following disclaimer
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printed in at least 12-point boldfaced type:
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THIS COMMERCIAL PROPERTY POLICY IS NOT SUBJECT TO RATE REGULATION
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REQUIREMENTS OF FLORIDA LAW OR DEFICIT ASSESSMENTS BY CITIZENS
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PROPERTY INSURANCE CORPORATION. A COMMERCIAL PROPERTY POLICY THAT
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IS SUBJECT TO RATE REGULATION REQUIREMENTS AND DEFICIT ASSESSMENT
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BY CITIZENS PROPERTY INSURANCE CORPORATION IS AVAILABLE. PLEASE
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DISCUSS YOUR POLICY OPTIONS WITH YOUR INSURANCE AGENT.
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Section 5. This act shall take effect July 1, 2008.
CODING: Words stricken are deletions; words underlined are additions.