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"; providing that insurers issuing nonassessable

14

commercial property insurance policies are not assessable

15

for the portion of the assessment from which the

16

nonassessable commercial property insurance policy is

17

exempt; creating s. 627.7031, F.S.; authorizing insurers

18

offering policies covering commercial property risks to

19

offer potential insureds assessable commercial property

20

insurance policies and nonassessable commercial property

21

insurance policies; requiring that an owner of commercial

22

property have the option to purchase either a

23

nonassessable commercial property insurance policy or an

24

assessable commercial property insurance policy regarding

25

that property, if an assessable commercial property

26

insurance policy is offered by the insurer; requiring that

27

an application for a nonassessable commercial property

28

policy contain a specified disclaimer; requiring that the

29

declarations page of a nonassessable commercial property

30

policy contain a specified disclaimer; providing an

31

effective date.

32

33

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

34

35

     Section 1.  Subsections (10) and (11) are added to section

36

627.041, Florida Statutes, to read:

37

     627.041  Definitions.--As used in this part:

38

     (10) "Assessable commercial property insurance" means

39

insurance on commercial property of every kind, as well as every

40

interest therein, whether such property is on land, water, or in

41

the air, against loss or damage from any and all hazard or cause,

42

and against loss consequential upon such loss or damage, other

43

than noncontractual legal liability for any such loss or damage

44

that is subject to the rate standards set forth in s. 627.062 and

45

deficit assessments by Citizens Property Insurance Corporation.

46

Assessable commercial property insurance may contain a provision

47

for accidental death or injury as part of a multiple peril

48

policy.

49

     (11) "Nonassessable commercial property insurance" means

50

insurance on commercial property of every kind, as well as every

51

interest therein, whether such property is on land, water, or in

52

the air, against loss or damage from any and all hazard or cause,

53

and against loss consequential upon such loss or damage, other

54

than noncontractual legal liability for any such loss or damage

55

that is not subject to the rate standards set forth in s. 627.062

56

or deficit assessments by Citizens Property Insurance

57

Corporation. Nonassessable commercial property insurance may

58

contain a provision for accidental death or injury as part of a

59

multiple peril policy.

60

     Section 2.  Paragraph (k) is added to subsection (2) of

61

section 627.062, Florida Statutes, to read:

62

     627.062  Rate standards.--

63

     (2)  As to all such classes of insurance:

64

     (k)1. Notwithstanding any other provisions of this section,

65

nonassessable commercial property insurance is not subject to a

66

determination that the rate is excessive or unfairly

67

discriminatory, except as provided in subparagraph 3.

68

2. This paragraph does not apply to filings for commercial

69

lines residential insurance, medical malpractice insurance,

70

workers' compensation insurance, or assessable commercial

71

property insurance.

72

     3. This paragraph does not affect the power of the office

73

to disapprove a rate as inadequate or to disapprove a filing for

74

unlawful use of unfairly discriminatory rating factors that are

75

prohibited by Florida law.

76

77

The provisions of this subsection shall not apply to workers'

78

compensation and employer's liability insurance and to motor

79

vehicle insurance.

80

     Section 3.  Paragraph (b) of subsection (6) of section

81

627.351, Florida Statutes, is amended to read:

82

     627.351  Insurance risk apportionment plans.--

83

     (6)  CITIZENS PROPERTY INSURANCE CORPORATION.--

84

     (b)1.  All insurers authorized to write one or more subject

85

lines of business in this state are subject to assessment by the

86

corporation and, for the purposes of this subsection, are

87

referred to collectively as "assessable insurers." Insurers

88

writing one or more subject lines of business in this state

89

pursuant to part VIII of chapter 626 are not assessable insurers,

90

but insureds who procure one or more subject lines of business in

91

this state pursuant to part VIII of chapter 626 are subject to

92

assessment by the corporation and are referred to collectively as

93

"assessable insureds." An authorized insurer's assessment

94

liability shall begin on the first day of the calendar year

95

following the year in which the insurer was issued a certificate

96

of authority to transact insurance for subject lines of business

97

in this state and shall terminate 1 year after the end of the

98

first calendar year during which the insurer no longer holds a

99

certificate of authority to transact insurance for subject lines

100

of business in this state.

101

     2.a.  All revenues, assets, liabilities, losses, and

102

expenses of the corporation shall be divided into three separate

103

accounts as follows:

104

     (I)  A personal lines account for personal residential

105

policies issued by the corporation or issued by the Residential

106

Property and Casualty Joint Underwriting Association and renewed

107

by the corporation that provide comprehensive, multiperil

108

coverage on risks that are not located in areas eligible for

109

coverage in the Florida Windstorm Underwriting Association as

110

those areas were defined on January 1, 2002, and for such

111

policies that do not provide coverage for the peril of wind on

112

risks that are located in such areas;

113

     (II)  A commercial lines account for commercial residential

114

and commercial nonresidential policies issued by the corporation

115

or issued by the Residential Property and Casualty Joint

116

Underwriting Association and renewed by the corporation that

117

provide coverage for basic property perils on risks that are not

118

located in areas eligible for coverage in the Florida Windstorm

119

Underwriting Association as those areas were defined on January

120

1, 2002, and for such policies that do not provide coverage for

121

the peril of wind on risks that are located in such areas; and

122

     (III)  A high-risk account for personal residential policies

123

and commercial residential and commercial nonresidential property

124

policies issued by the corporation or transferred to the

125

corporation that provide coverage for the peril of wind on risks

126

that are located in areas eligible for coverage in the Florida

127

Windstorm Underwriting Association as those areas were defined on

128

January 1, 2002. Subject to the approval of a business plan by

129

the Financial Services Commission and Legislative Budget

130

Commission as provided in this sub-sub-subparagraph, but no

131

earlier than March 31, 2007, the corporation may offer policies

132

that provide multiperil coverage and the corporation shall

133

continue to offer policies that provide coverage only for the

134

peril of wind for risks located in areas eligible for coverage in

135

the high-risk account. In issuing multiperil coverage, the

136

corporation may use its approved policy forms and rates for the

137

personal lines account. An applicant or insured who is eligible

138

to purchase a multiperil policy from the corporation may purchase

139

a multiperil policy from an authorized insurer without prejudice

140

to the applicant's or insured's eligibility to prospectively

141

purchase a policy that provides coverage only for the peril of

142

wind from the corporation. An applicant or insured who is

143

eligible for a corporation policy that provides coverage only for

144

the peril of wind may elect to purchase or retain such policy and

145

also purchase or retain coverage excluding wind from an

146

authorized insurer without prejudice to the applicant's or

147

insured's eligibility to prospectively purchase a policy that

148

provides multiperil coverage from the corporation. It is the goal

149

of the Legislature that there would be an overall average savings

150

of 10 percent or more for a policyholder who currently has a

151

wind-only policy with the corporation, and an ex-wind policy with

152

a voluntary insurer or the corporation, and who then obtains a

153

multiperil policy from the corporation. It is the intent of the

154

Legislature that the offer of multiperil coverage in the high-

155

risk account be made and implemented in a manner that does not

156

adversely affect the tax-exempt status of the corporation or

157

creditworthiness of or security for currently outstanding

158

financing obligations or credit facilities of the high-risk

159

account, the personal lines account, or the commercial lines

160

account. By March 1, 2007, the corporation shall prepare and

161

submit for approval by the Financial Services Commission and

162

Legislative Budget Commission a report detailing the

163

corporation's business plan for issuing multiperil coverage in

164

the high-risk account. The business plan shall be approved or

165

disapproved within 30 days after receipt, as submitted or

166

modified and resubmitted by the corporation. The business plan

167

must include: the impact of such multiperil coverage on the

168

corporation's financial resources, the impact of such multiperil

169

coverage on the corporation's tax-exempt status, the manner in

170

which the corporation plans to implement the processing of

171

applications and policy forms for new and existing policyholders,

172

the impact of such multiperil coverage on the corporation's

173

ability to deliver customer service at the high level required by

174

this subsection, the ability of the corporation to process

175

claims, the ability of the corporation to quote and issue

176

policies, the impact of such multiperil coverage on the

177

corporation's agents, the impact of such multiperil coverage on

178

the corporation's existing policyholders, and the impact of such

179

multiperil coverage on rates and premium. The high-risk account

180

must also include quota share primary insurance under

181

subparagraph (c)2. The area eligible for coverage under the high-

182

risk account also includes the area within Port Canaveral, which

183

is bordered on the south by the City of Cape Canaveral, bordered

184

on the west by the Banana River, and bordered on the north by

185

Federal Government property.

186

     b.  The three separate accounts must be maintained as long

187

as financing obligations entered into by the Florida Windstorm

188

Underwriting Association or Residential Property and Casualty

189

Joint Underwriting Association are outstanding, in accordance

190

with the terms of the corresponding financing documents. When the

191

financing obligations are no longer outstanding, in accordance

192

with the terms of the corresponding financing documents, the

193

corporation may use a single account for all revenues, assets,

194

liabilities, losses, and expenses of the corporation. Consistent

195

with the requirement of this subparagraph and prudent investment

196

policies that minimize the cost of carrying debt, the board shall

197

exercise its best efforts to retire existing debt or to obtain

198

approval of necessary parties to amend the terms of existing

199

debt, so as to structure the most efficient plan to consolidate

200

the three separate accounts into a single account. By February 1,

201

2007, the board shall submit a report to the Financial Services

202

Commission, the President of the Senate, and the Speaker of the

203

House of Representatives which includes an analysis of

204

consolidating the accounts, the actions the board has taken to

205

minimize the cost of carrying debt, and its recommendations for

206

executing the most efficient plan.

207

     c.  Creditors of the Residential Property and Casualty Joint

208

Underwriting Association and of the accounts specified in sub-

209

sub-subparagraphs a.(I) and (II) may have a claim against, and

210

recourse to, the accounts referred to in sub-sub-subparagraphs

211

a.(I) and (II) and shall have no claim against, or recourse to,

212

the account referred to in sub-sub-subparagraph a.(III).

213

Creditors of the Florida Windstorm Underwriting Association shall

214

have a claim against, and recourse to, the account referred to in

215

sub-sub-subparagraph a.(III) and shall have no claim against, or

216

recourse to, the accounts referred to in sub-sub-subparagraphs

217

a.(I) and (II).

218

     d.  Revenues, assets, liabilities, losses, and expenses not

219

attributable to particular accounts shall be prorated among the

220

accounts.

221

     e.  The Legislature finds that the revenues of the

222

corporation are revenues that are necessary to meet the

223

requirements set forth in documents authorizing the issuance of

224

bonds under this subsection.

225

     f.  No part of the income of the corporation may inure to

226

the benefit of any private person.

227

     3.  With respect to a deficit in an account:

228

     a.  When the deficit incurred in a particular calendar year

229

is not greater than 10 percent of the aggregate statewide direct

230

written premium for the subject lines of business for the prior

231

calendar year, the entire deficit shall be recovered through

232

regular assessments of assessable insurers under paragraph (p)

233

and assessable insureds.

234

     b.  When the deficit incurred in a particular calendar year

235

exceeds 10 percent of the aggregate statewide direct written

236

premium for the subject lines of business for the prior calendar

237

year, the corporation shall levy regular assessments on

238

assessable insurers under paragraph (p) and on assessable

239

insureds in an amount equal to the greater of 10 percent of the

240

deficit or 10 percent of the aggregate statewide direct written

241

premium for the subject lines of business for the prior calendar

242

year. Any remaining deficit shall be recovered through emergency

243

assessments under sub-subparagraph d.

244

     c.  Each assessable insurer's share of the amount being

245

assessed under sub-subparagraph a. or sub-subparagraph b. shall

246

be in the proportion that the assessable insurer's direct written

247

premium for the subject lines of business for the year preceding

248

the assessment bears to the aggregate statewide direct written

249

premium for the subject lines of business for that year. The

250

assessment percentage applicable to each assessable insured is

251

the ratio of the amount being assessed under sub-subparagraph a.

252

or sub-subparagraph b. to the aggregate statewide direct written

253

premium for the subject lines of business for the prior year.

254

Assessments levied by the corporation on assessable insurers

255

under sub-subparagraphs a. and b. shall be paid as required by

256

the corporation's plan of operation and paragraph (p).

257

Notwithstanding any other provision of this subsection, the

258

aggregate amount of a regular assessment for a deficit incurred

259

in a particular calendar year shall be reduced by the estimated

260

amount to be received by the corporation from the Citizens

261

policyholder surcharge under subparagraph (c)10. and the amount

262

collected or estimated to be collected from the assessment on

263

Citizens policyholders pursuant to sub-subparagraph i.

264

Assessments levied by the corporation on assessable insureds

265

under sub-subparagraphs a. and b. shall be collected by the

266

surplus lines agent at the time the surplus lines agent collects

267

the surplus lines tax required by s. 626.932 and shall be paid to

268

the Florida Surplus Lines Service Office at the time the surplus

269

lines agent pays the surplus lines tax to the Florida Surplus

270

Lines Service Office. Upon receipt of regular assessments from

271

surplus lines agents, the Florida Surplus Lines Service Office

272

shall transfer the assessments directly to the corporation as

273

determined by the corporation.

274

     d.  Upon a determination by the board of governors that a

275

deficit in an account exceeds the amount that will be recovered

276

through regular assessments under sub-subparagraph a. or sub-

277

subparagraph b., the board shall levy, after verification by the

278

office, emergency assessments, for as many years as necessary to

279

cover the deficits, to be collected by assessable insurers and

280

the corporation and collected from assessable insureds upon

281

issuance or renewal of policies for subject lines of business,

282

excluding National Flood Insurance policies. The amount of the

283

emergency assessment collected in a particular year shall be a

284

uniform percentage of that year's direct written premium for

285

subject lines of business and all accounts of the corporation,

286

excluding National Flood Insurance Program policy premiums, as

287

annually determined by the board and verified by the office. The

288

office shall verify the arithmetic calculations involved in the

289

board's determination within 30 days after receipt of the

290

information on which the determination was based. Notwithstanding

291

any other provision of law, the corporation and each assessable

292

insurer that writes subject lines of business shall collect

293

emergency assessments from its policyholders without such

294

obligation being affected by any credit, limitation, exemption,

295

or deferment. Emergency assessments levied by the corporation on

296

assessable insureds shall be collected by the surplus lines agent

297

at the time the surplus lines agent collects the surplus lines

298

tax required by s. 626.932 and shall be paid to the Florida

299

Surplus Lines Service Office at the time the surplus lines agent

300

pays the surplus lines tax to the Florida Surplus Lines Service

301

Office. The emergency assessments so collected shall be

302

transferred directly to the corporation on a periodic basis as

303

determined by the corporation and shall be held by the

304

corporation solely in the applicable account. The aggregate

305

amount of emergency assessments levied for an account under this

306

sub-subparagraph in any calendar year may not exceed the greater

307

of 10 percent of the amount needed to cover the original deficit,

308

plus interest, fees, commissions, required reserves, and other

309

costs associated with financing of the original deficit, or 10

310

percent of the aggregate statewide direct written premium for

311

subject lines of business and for all accounts of the corporation

312

for the prior year, plus interest, fees, commissions, required

313

reserves, and other costs associated with financing the original

314

deficit.

315

     e.  The corporation may pledge the proceeds of assessments,

316

projected recoveries from the Florida Hurricane Catastrophe Fund,

317

other insurance and reinsurance recoverables, policyholder

318

surcharges and other surcharges, and other funds available to the

319

corporation as the source of revenue for and to secure bonds

320

issued under paragraph (p), bonds or other indebtedness issued

321

under subparagraph (c)3., or lines of credit or other financing

322

mechanisms issued or created under this subsection, or to retire

323

any other debt incurred as a result of deficits or events giving

324

rise to deficits, or in any other way that the board determines

325

will efficiently recover such deficits. The purpose of the lines

326

of credit or other financing mechanisms is to provide additional

327

resources to assist the corporation in covering claims and

328

expenses attributable to a catastrophe. As used in this

329

subsection, the term "assessments" includes regular assessments

330

under sub-subparagraph a., sub-subparagraph b., or subparagraph

331

(p)1. and emergency assessments under sub-subparagraph d.

332

Emergency assessments collected under sub-subparagraph d. are not

333

part of an insurer's rates, are not premium, and are not subject

334

to premium tax, fees, or commissions; however, failure to pay the

335

emergency assessment shall be treated as failure to pay premium.

336

The emergency assessments under sub-subparagraph d. shall

337

continue as long as any bonds issued or other indebtedness

338

incurred with respect to a deficit for which the assessment was

339

imposed remain outstanding, unless adequate provision has been

340

made for the payment of such bonds or other indebtedness pursuant

341

to the documents governing such bonds or other indebtedness.

342

     f.  As used in this subsection for purposes of any deficit

343

incurred on or after January 25, 2007, the term "subject lines of

344

business" means insurance written by assessable insurers or

345

procured by assessable insureds for all property and casualty

346

lines of business in this state, but not including workers'

347

compensation, or medical malpractice, or nonassessable commercial

348

property insurance as defined in s. 627.041(11). As used in the

349

sub-subparagraph, the term "property and casualty lines of

350

business" includes all lines of business identified on Form 2,

351

Exhibit of Premiums and Losses, in the annual statement required

352

of authorized insurers by s. 624.424 and any rule adopted under

353

this section, except for those lines identified as accident and

354

health insurance and except for policies written under the

355

National Flood Insurance Program or the Federal Crop Insurance

356

Program. For purposes of this sub-subparagraph, the term

357

"workers' compensation" includes both workers' compensation

358

insurance and excess workers' compensation insurance. Insurers

359

issuing nonassessable commercial property insurance policies are

360

not assessable for the portion of the assessment from which the

361

nonassessable commercial property insurance policy is exempt.

362

     g.  The Florida Surplus Lines Service Office shall determine

363

annually the aggregate statewide written premium in subject lines

364

of business procured by assessable insureds and shall report that

365

information to the corporation in a form and at a time the

366

corporation specifies to ensure that the corporation can meet the

367

requirements of this subsection and the corporation's financing

368

obligations.

369

     h.  The Florida Surplus Lines Service Office shall verify

370

the proper application by surplus lines agents of assessment

371

percentages for regular assessments and emergency assessments

372

levied under this subparagraph on assessable insureds and shall

373

assist the corporation in ensuring the accurate, timely

374

collection and payment of assessments by surplus lines agents as

375

required by the corporation.

376

     i.  If a deficit is incurred in any account in 2008 or

377

thereafter, the board of governors shall levy an immediate

378

assessment against the premium of each nonhomestead property

379

policyholder in all accounts of the corporation, as a uniform

380

percentage of the premium of the policy of up to 10 percent of

381

such premium, which funds shall be used to offset the deficit. If

382

this assessment is insufficient to eliminate the deficit, the

383

board of governors shall levy an additional assessment against

384

all policyholders of the corporation, which shall be collected at

385

the time of issuance or renewal of a policy, as a uniform

386

percentage of the premium for the policy of up to 10 percent of

387

such premium, which funds shall be used to further offset the

388

deficit.

389

     j.  The board of governors shall maintain separate

390

accounting records that consolidate data for nonhomestead

391

properties, including, but not limited to, number of policies,

392

insured values, premiums written, and losses. The board of

393

governors shall annually report to the office and the Legislature

394

a summary of such data.

395

     Section 4.  Section 627.7031, Florida Statutes, is created

396

to read:

397

     627.7031 Commercial property insurance.--

398

     (1) Insurers offering policies of insurance covering

399

commercial property risks may offer assessable commercial

400

property insurance policies as defined in s. 627.041(10) and

401

nonassessable commercial property insurance policies as defined

402

in s. 627.041(11).

403

(2) An owner of commercial property shall have the option to

404

purchase either a nonassessable commercial property insurance

405

policy or an assessable commercial property insurance policy, if an

406

assessable commercial property insurance policy is offered by the

407

insurer.

408

(3) The application for a nonassessable commercial property

409

insurance policy shall contain the following disclaimer printed in

410

at least 12-point boldfaced type:

411

412

THIS APPLICATION IS FOR A COMMERCIAL PROPERTY POLICY THAT IS NOT

413

SUBJECT TO RATE REGULATION REQUIREMENTS OF FLORIDA LAW OR DEFICIT

414

ASSESSMENTS BY CITIZENS PROPERTY INSURANCE CORPORATION. A

415

COMMERCIAL PROPERTY POLICY THAT IS SUBJECT TO RATE REGULATION

416

REQUIREMENTS AND DEFICIT ASSESSMENT BY CITIZENS PROPERTY

417

INSURANCE CORPORATION IS AVAILABLE. PLEASE DISCUSS YOUR POLICY

418

OPTIONS WITH YOUR INSURANCE AGENT.

419

420

(4) The declarations page of a nonassessable commercial

421

property insurance policy shall contain the following disclaimer

422

printed in at least 12-point boldfaced type:

423

424

THIS COMMERCIAL PROPERTY POLICY IS NOT SUBJECT TO RATE REGULATION

425

REQUIREMENTS OF FLORIDA LAW OR DEFICIT ASSESSMENTS BY CITIZENS

426

PROPERTY INSURANCE CORPORATION. A COMMERCIAL PROPERTY POLICY THAT

427

IS SUBJECT TO RATE REGULATION REQUIREMENTS AND DEFICIT ASSESSMENT

428

BY CITIZENS PROPERTY INSURANCE CORPORATION IS AVAILABLE. PLEASE

429

DISCUSS YOUR POLICY OPTIONS WITH YOUR INSURANCE AGENT.

430

431

     Section 5.  This act shall take effect July 1, 2008.