1 | A bill to be entitled |
2 | An act relating to the Florida Hurricane Catastrophe Fund; |
3 | amending s. 215.555, F.S.; providing a definition; |
4 | specifying the board of directors of the Florida Hurricane |
5 | Catastrophe Fund Finance Corporation as the Rate Reduction |
6 | Authority for certain purposes; providing for the |
7 | authority to extend and expand a temporary emergency |
8 | program applicable only to certain hurricane seasons; |
9 | authorizing the authority to provide additional contract |
10 | years for certain optional coverage; authorizing the Rate |
11 | Reduction Authority to sell reinsurance to private |
12 | insurance companies at discounted rates under certain |
13 | circumstances; providing requirements; extending eligible |
14 | contract years for purposes of certain temporary increase |
15 | in coverage limit options; increasing the claims-paying |
16 | capacity of the fund; increasing the reimbursement premium |
17 | amount for certain additional coverage; limiting purchases |
18 | of such additional insurance; specifying additional powers |
19 | of the Rate Reduction Authority relating to contract |
20 | refund requirements, antitrust actions, and selling |
21 | reinsurance; providing an effective date. |
22 |
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23 | Be It Enacted by the Legislature of the State of Florida: |
24 |
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25 | Section 1. Paragraph (o) is added to subsection (2) of |
26 | section 215.555, Florida Statutes, paragraph (d) of subsection |
27 | (6), paragraphs (a) and (c) of subsection (16), and paragraphs |
28 | (c) and (h) of subsection (17) of that section are amended, and |
29 | paragraph (h) is added to subsection (16) of that section, to |
30 | read: |
31 | 215.555 Florida Hurricane Catastrophe Fund.-- |
32 | (2) DEFINITIONS.--As used in this section: |
33 | (o) "Board" means the board of directors of the |
34 | corporation. |
35 | (6) REVENUE BONDS.-- |
36 | (d) Florida Hurricane Catastrophe Fund Finance |
37 | Corporation.-- |
38 | 1. In addition to the findings and declarations in |
39 | subsection (1), the Legislature also finds and declares that: |
40 | a. The public benefits corporation created under this |
41 | paragraph will provide a mechanism necessary for the cost- |
42 | effective and efficient issuance of bonds. This mechanism will |
43 | eliminate unnecessary costs in the bond issuance process, |
44 | thereby increasing the amounts available to pay reimbursement |
45 | for losses to property sustained as a result of hurricane |
46 | damage. |
47 | b. The purpose of such bonds is to fund reimbursements |
48 | through the Florida Hurricane Catastrophe Fund to pay for the |
49 | costs of construction, reconstruction, repair, restoration, and |
50 | other costs associated with damage to properties of |
51 | policyholders of covered policies due to the occurrence of a |
52 | hurricane. |
53 | c. The efficacy of the financing mechanism will be |
54 | enhanced by the corporation's ownership of the assessments, by |
55 | the insulation of the assessments from possible bankruptcy |
56 | proceedings, and by covenants of the state with the |
57 | corporation's bondholders. |
58 | 2.a. There is created a public benefits corporation, which |
59 | is an instrumentality of the state, to be known as the Florida |
60 | Hurricane Catastrophe Fund Finance Corporation. |
61 | b. The corporation shall operate under a five-member board |
62 | of directors consisting of the Governor or a designee, the Chief |
63 | Financial Officer or a designee, the Attorney General or a |
64 | designee, the director of the Division of Bond Finance of the |
65 | State Board of Administration, and the senior employee of the |
66 | State Board of Administration responsible for operations of the |
67 | Florida Hurricane Catastrophe Fund. The board shall also operate |
68 | as the Rate Reduction Authority in its capacity as regulating |
69 | and controlling property insurance insurers and the rates of |
70 | such insurers. |
71 | c. The corporation has all of the powers of corporations |
72 | under chapter 607 and under chapter 617, subject only to the |
73 | provisions of this subsection. |
74 | d. The corporation may issue bonds and engage in such |
75 | other financial transactions as are necessary to provide |
76 | sufficient funds to achieve the purposes of this section. |
77 | e. The corporation may invest in any of the investments |
78 | authorized under s. 215.47. |
79 | f. There shall be no liability on the part of, and no |
80 | cause of action shall arise against, any board members or |
81 | employees of the corporation for any actions taken by them in |
82 | the performance of their duties under this paragraph. |
83 | 3.a. In actions under chapter 75 to validate any bonds |
84 | issued by the corporation, the notice required by s. 75.06 shall |
85 | be published only in Leon County and in two newspapers of |
86 | general circulation in the state, and the complaint and order of |
87 | the court shall be served only on the State Attorney of the |
88 | Second Judicial Circuit. |
89 | b. The state hereby covenants with holders of bonds of the |
90 | corporation that the state will not repeal or abrogate the power |
91 | of the board to direct the Office of Insurance Regulation to |
92 | levy the assessments and to collect the proceeds of the revenues |
93 | pledged to the payment of such bonds as long as any such bonds |
94 | remain outstanding unless adequate provision has been made for |
95 | the payment of such bonds pursuant to the documents authorizing |
96 | the issuance of such bonds. |
97 | 4. The bonds of the corporation are not a debt of the |
98 | state or of any political subdivision, and neither the state nor |
99 | any political subdivision is liable on such bonds. The |
100 | corporation does not have the power to pledge the credit, the |
101 | revenues, or the taxing power of the state or of any political |
102 | subdivision. The credit, revenues, or taxing power of the state |
103 | or of any political subdivision shall not be deemed to be |
104 | pledged to the payment of any bonds of the corporation. |
105 | 5.a. The property, revenues, and other assets of the |
106 | corporation; the transactions and operations of the corporation |
107 | and the income from such transactions and operations; and all |
108 | bonds issued under this paragraph and interest on such bonds are |
109 | exempt from taxation by the state and any political subdivision, |
110 | including the intangibles tax under chapter 199 and the income |
111 | tax under chapter 220. This exemption does not apply to any tax |
112 | imposed by chapter 220 on interest, income, or profits on debt |
113 | obligations owned by corporations other than the Florida |
114 | Hurricane Catastrophe Fund Finance Corporation. |
115 | b. All bonds of the corporation shall be and constitute |
116 | legal investments without limitation for all public bodies of |
117 | this state; for all banks, trust companies, savings banks, |
118 | savings associations, savings and loan associations, and |
119 | investment companies; for all administrators, executors, |
120 | trustees, and other fiduciaries; for all insurance companies and |
121 | associations and other persons carrying on an insurance |
122 | business; and for all other persons who are now or may hereafter |
123 | be authorized to invest in bonds or other obligations of the |
124 | state and shall be and constitute eligible securities to be |
125 | deposited as collateral for the security of any state, county, |
126 | municipal, or other public funds. This sub-subparagraph shall be |
127 | considered as additional and supplemental authority and shall |
128 | not be limited without specific reference to this sub- |
129 | subparagraph. |
130 | 6. The corporation and its corporate existence shall |
131 | continue until terminated by law; however, no such law shall |
132 | take effect as long as the corporation has bonds outstanding |
133 | unless adequate provision has been made for the payment of such |
134 | bonds pursuant to the documents authorizing the issuance of such |
135 | bonds. Upon termination of the existence of the corporation, all |
136 | of its rights and properties in excess of its obligations shall |
137 | pass to and be vested in the state. |
138 | (16) TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL |
139 | COVERAGE.-- |
140 | (a) Findings and intent.-- |
141 | 1. The Legislature finds that: |
142 | a. Because of temporary disruptions in the market for |
143 | catastrophic reinsurance, many property insurers were unable to |
144 | procure reinsurance for the 2006 hurricane season with an |
145 | attachment point below the insurers' respective Florida |
146 | Hurricane Catastrophe Fund attachment points, were unable to |
147 | procure sufficient amounts of such reinsurance, or were able to |
148 | procure such reinsurance only by incurring substantially higher |
149 | costs than in prior years. |
150 | b. The reinsurance market problems were responsible, at |
151 | least in part, for substantial premium increases to many |
152 | consumers and increases in the number of policies issued by the |
153 | Citizens Property Insurance Corporation. |
154 | c. It is likely that the reinsurance market disruptions |
155 | will not significantly abate prior to the 2007 hurricane season. |
156 | 2. It is the intent of the Legislature to create a |
157 | temporary emergency program, applicable to the 2007, 2008, and |
158 | 2009 hurricane seasons, to address these market disruptions and |
159 | enable insurers, at their option, to procure additional coverage |
160 | from the Florida Hurricane Catastrophe Fund and to allow the |
161 | Rate Reduction Authority to extend and expand the program. |
162 | (c) Optional coverage.--For the contract year commencing |
163 | June 1, 2007, and ending May 31, 2008, the contract year |
164 | commencing June 1, 2008, and ending May 31, 2009, and the |
165 | contract year commencing June 1, 2009, and ending May 31, 2010, |
166 | the board shall offer for each of such years the optional |
167 | coverage as provided in this subsection. Additional contract |
168 | years may be added by the Rate Reduction Authority. |
169 | (h)1. The Rate Reduction Authority may sell reinsurance |
170 | below the $6 billion retention level in the Florida Hurricane |
171 | Catastrophe Fund within the range of 30 to 60 percent online to |
172 | private insurance companies that agree to take out of Citizens |
173 | Property Insurance Corporation a specified number of individual |
174 | policies held by Citizens Property Insurance Corporation, on a |
175 | geographically diverse basis. |
176 | 2. Policyholders of Citizens Property Insurance |
177 | Corporation that are taken out pursuant to subparagraph 1. must |
178 | receive a discount no less than a rate specified by the Rate |
179 | Reduction Authority, which must be no less than 10 percent. |
180 | 3. The Rate Reduction Authority may offer discounted |
181 | reinsurance rates to private insurance companies through offers |
182 | to negotiate via auction, individual negotiation, or any method |
183 | designed to achieve the best-discounted rate for policyholders |
184 | of Citizens Property Insurance Corporation. |
185 | 4. The Rate Reduction Authority may determine how many |
186 | policies a private company must assume from Citizens Property |
187 | Insurance Corporation in order to purchase reinsurance from the |
188 | state at the discounted rate. |
189 | 5. Private insurance companies shall assume 100 percent of |
190 | each policy taken from Citizens Property Insurance Corporation |
191 | in exchange for the discounted reinsurance rate. |
192 | (17) TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS.-- |
193 | (c) Optional coverage.--For the contract year commencing |
194 | June 1, 2007, and ending May 31, 2008, the contract year |
195 | commencing June 1, 2008, and ending May 31, 2009, and the |
196 | contract year commencing June 1, 2009, and ending May 31, 2010, |
197 | the board shall offer, for each of such contract years and for |
198 | the 10 subsequent contract years, the optional coverage as |
199 | provided in this subsection, and may for those years extend the |
200 | coverage to cover additional amounts. Additional contract years |
201 | may be added by the Rate Reduction Authority. |
202 | (h) Increasing the claims-paying capacity of the |
203 | fund.--For the contract years commencing June 1, 2007, June 1, |
204 | 2008, and years thereafter June 1, 2009, the board may increase |
205 | the claims-paying capacity of the fund as provided in paragraph |
206 | (g) by an amount not to exceed $15 $4 billion in four $1 billion |
207 | options and shall depend on the TICL coverage options selected |
208 | and the number of insurers that select the TICL optional |
209 | coverage. Each insurer's TICL premium shall be calculated based |
210 | upon the additional limit of increased coverage that the insurer |
211 | selects. Such limit is determined by multiplying the TICL |
212 | multiple associated with one of the four options times the |
213 | insurer's FHCF reimbursement premium. The reimbursement premium |
214 | associated with the additional coverage provided in this |
215 | paragraph shall be determined by the board but shall be no less |
216 | than 150 percent of the amount as specified in subsection (5). |
217 | This additional insurance may not be purchased from an |
218 | affiliated or parent company, as defined by the board. |
219 | Section 2. Additional powers of the Rate Reduction |
220 | Authority.--In addition to any other power granted to the State |
221 | Board of Administration or the Rate Reduction Authority, the |
222 | Rate Reduction Authority may also: |
223 | (1) Require all property insurance contracts to contain a |
224 | provision entitling the insured to a refund if the insured is |
225 | canceled without good cause. The refund shall be established by |
226 | the authority but shall be no less than 50 percent of an annual |
227 | premium and no more than 200 percent of an annual premium. This |
228 | provision shall not apply if 2 years' notice of cancellation is |
229 | given. |
230 | (2) File a collusion or antitrust action against any |
231 | insurer or individual, notwithstanding any exemptions in law, |
232 | including s. 542.21, Florida Statutes. |
233 | (3) Devise a different manner of selling reinsurance to |
234 | Citizens Property Insurance Corporation or private insurers in |
235 | order to reduce rates. |
236 | Section 3. This act shall take effect July 1, 2008. |