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A bill to be entitled

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An act relating to the Florida Hurricane Catastrophe Fund;

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amending s. 215.555, F.S.; creating the Division of the

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Florida Hurricane Catastrophe Fund as a division of the

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State Board of Administration; providing for a board of

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the division; revising legislative findings; revising the

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definition of "retention," "covered policy," and

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"estimated claims-paying capacity" to account for the

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creation of the division; defining the terms "division,"

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"director," "FHCF," "fund," and "board"; clarifying

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provisions requiring the State Board of Administration to

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invest certain funds; requiring that the board of the

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division appoint a director; providing duties of the

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director; providing that the appointment of a director is

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subject to the approval of the board by a majority vote;

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authorizing the division to employ or contract with such

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staff as the division deems necessary to administer the

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fund; requiring that the division enter into a contract

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with each insurer writing covered policies in this state

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to provide to the insurer reimbursement as prescribed by

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state law; requiring that such contracts contain certain

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elements or provisions and provide the division with

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certain obligations; extending for an additional year the

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offer of reimbursement coverage of up to $10 million for

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specified insurers; revising the qualifying criteria for

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such insurers; requiring that the division publish certain

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information in the Florida Administrative Weekly at

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specified times; authorizing the payment of advancements

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of reimbursements or reimbursement premiums to certain

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entities under certain conditions; requiring that the

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division inspect, examine, and verify the records of each

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insurer's covered policies at such times as the division

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deems appropriate and according to standards established

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by rule for the specific purpose of validating the

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accuracy of exposures and losses required to be reported

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under the terms and conditions of the reimbursement

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contract; providing for the payments of expenses

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associated with such inspection, examination, or

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verification; providing for the reimbursement of the

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division for such expenses by an insurer under certain

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circumstances; authorizing the division to take certain

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action if it finds any insurer's records or other

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necessary information to be inadequate or inadequately

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posted, recorded, or maintained; requiring that the

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division select an independent consultant to develop a

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formula for determining the actuarially indicated premium

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to be paid to the fund; requiring that the division

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consider certain factors when establishing a reimbursement

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premium; providing for the calculation of such premium by

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the division; providing for the payment of reimbursement

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premium; providing for the collection of interest on

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certain late reimbursement premium payments; providing

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responsibilities of the division if Citizens Property

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Insurance Corporation assumes or otherwise provides

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coverage for policies of an insurer placed in liquidation;

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authorizing the division to execute agreements regarding

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revenue bonds or other financing arrangements for the

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purpose of evidencing, securing, preserving, or protecting

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a pledge of revenue by the corporation; requiring that the

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Florida Surplus Lines Service Office assist the division

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in ensuring the accurate and timely collection and

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remittance of assessments of surplus lines premiums;

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requiring that the office report certain information to

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the division at a time and in a manner prescribed by the

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division; providing for the issuance of revenue bonds

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through counties or municipalities; revising the

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membership of the Florida Hurricane Catastrophe Fund

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Finance Corporation; providing that there is no liability

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on the part of any member of the board of directors or

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employees of the corporation for any actions taken by them

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in the performance of their duties; providing additional

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powers and duties of the board of the division and the

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division; requiring that the board of the division appoint

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an advisory council; providing for membership of the

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council; providing duties of the council; authorizing the

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division to take any action necessary to enforce certain

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rules and provisions of a reimbursement contract;

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requiring that the division make certain recommendations

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to the Legislature upon the creation of a federal or

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multistate catastrophic insurance or reinsurance program

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intended to serve purposes similar to the purposes of the

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fund; providing for the reversion of fund assets upon

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termination of the fund; providing for optional coverages

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of the fund; revising the temporary increases in coverage

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limits (TICL); requiring that a TICL addendum contain a

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promise by the division to make certain reimbursements to

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the TICL insurer; including the level of TICL coverage

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specified by the board among the factors that must be

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considered when determining the amount of increase in the

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claims-paying capacity of the fund; amending s. 215.557,

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F.S.; conforming provisions to changes made by the act;

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amending s. 215.5586, F.S.; requiring that the director of

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the division serve on the advisory council of the My Safe

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Florida Home Program; amending s. 215.559, F.S., relating

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to the Hurricane Loss Mitigation Program; conforming a

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cross-reference; amending s. 215.5595, F.S., relating to

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the Insurance Capital Build-up Incentive Program;

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conforming provisions to changes made by the act; revising

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the definition of "board" to conform to changes made by

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the act; amending s. 627.0628, F.S.; revising legislative

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intent; assigning the Florida Commission on Hurricane Loss

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Projection Methodology to the division; requiring that the

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director of the fund serve on the commission; requiring

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that the board of the division annually appoint one of the

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members of the commission to serve as chair; requiring

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that the division provide for travel, expenses, and staff

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support for the commission; indemnifying members and

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employees of the division from liability for action taken

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with respect to the commission or its activities;

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requiring that the division employ certain methods,

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principles, standards, models, or output ranges when

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establishing reimbursement premiums for the fund;

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providing an effective date.

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

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     Section 1.  Section 215.555, Florida Statutes, is amended to

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read:

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     215.555  Florida Hurricane Catastrophe Fund.--

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     (1)  FINDINGS AND PURPOSE.--The Legislature finds and

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declares as follows:

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     (a)  There is a compelling state interest in maintaining a

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viable and orderly private sector market for property insurance

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in this state. To the extent that the private sector is unable to

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maintain a viable and orderly market for property insurance in

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this state, state actions to maintain such a viable and orderly

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market are valid and necessary exercises of the police power.

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     (b)  As a result of unprecedented levels of catastrophic

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insured losses in recent years, and especially as a result of

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Hurricane Andrew, numerous insurers have determined that in order

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to protect their solvency, it is necessary for them to reduce

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their exposure to hurricane losses. Also as a result of these

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events, world reinsurance capacity has significantly contracted,

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increasing the pressure on insurers to reduce their catastrophic

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exposures.

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     (c)  Mortgages require reliable property insurance, and the

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unavailability of reliable property insurance would therefore

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make most real estate transactions impossible. In addition, the

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public health, safety, and welfare demand that structures damaged

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or destroyed in a catastrophe be repaired or reconstructed as

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soon as possible. Therefore, the inability of the private sector

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insurance and reinsurance markets to maintain sufficient capacity

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to enable residents of this state to obtain property insurance

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coverage in the private sector endangers the economy of the state

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and endangers the public health, safety, and welfare.

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Accordingly, state action to correct for this inability of the

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private sector constitutes a valid and necessary public and

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governmental purpose.

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     (d)  The insolvencies and financial impairments resulting

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from Hurricane Andrew demonstrate that many property insurers are

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unable or unwilling to maintain reserves, surplus, and

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reinsurance sufficient to enable the insurers to pay all claims

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in full in the event of a catastrophe. State action is therefore

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necessary to protect the public from an insurer's unwillingness

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or inability to maintain sufficient reserves, surplus, and

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reinsurance.

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     (e)  A state program to provide a stable and ongoing source

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of reimbursement to insurers for a portion of their catastrophic

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hurricane losses will create additional insurance capacity

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sufficient to ameliorate the current dangers to the state's

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economy and to the public health, safety, and welfare.

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     (f)  It is essential to the functioning of a state program

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to increase insurance capacity that revenues received be exempt

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from federal taxation. It is therefore the intent of the

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Legislature that this program be structured as a state trust fund

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under the direction and control of the Division of the Florida

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Hurricane Catastrophe Fund within the State Board of

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Administration and operate exclusively for the purpose of

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protecting and advancing the state's interest in maintaining

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insurance capacity in this state.

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     (g)  Hurricane Andrew, which caused insured and uninsured

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losses in excess of $20 billion, will likely not be the last

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major windstorm to strike Florida. Recognizing that a future wind

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catastrophe could cause damages in excess of $60 billion,

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especially if a major urban area or series of urban areas were

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hit, it is the intent of the Legislature to balance equitably its

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concerns about mitigation of hurricane impact, insurance

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affordability and availability, and the risk of insurer and joint

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underwriting association insolvency, as well as assessment and

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bonding limitations.

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     (2)  DEFINITIONS.--As used in this section:

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     (a)  "Actuarially indicated" means, with respect to premiums

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paid by insurers for reimbursement provided by the fund, an

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amount determined according to principles of actuarial science to

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be adequate, but not excessive, in the aggregate, to pay current

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and future obligations and expenses of the fund, including

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additional amounts if needed to pay debt service on revenue bonds

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issued under this section and to provide required debt service

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coverage in excess of the amounts required to pay actual debt

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service on revenue bonds issued under subsection (7) (6), and

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determined according to principles of actuarial science to

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reflect each insurer's relative exposure to hurricane losses.

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     (b)  "Covered event" means any one storm declared to be a

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hurricane by the National Hurricane Center, which storm causes

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insured losses in this state.

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     (c)  "Covered policy" means any insurance policy covering

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residential property in this state, including, but not limited

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to, any homeowner's, mobile home owner's, farm owner's,

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condominium association, condominium unit owner's, tenant's, or

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apartment building policy, or any other policy covering a

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residential structure or its contents issued by any authorized

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insurer, including a commercial self-insurance fund holding a

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certificate of authority issued by the Office of Insurance

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Regulation under s. 624.462, the Citizens Property Insurance

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Corporation, and any joint underwriting association or similar

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entity created under law. The term "covered policy" includes any

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collateral protection insurance policy covering personal

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residences which protects both the borrower's and the lender's

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financial interests, in an amount at least equal to the coverage

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for the dwelling in place under the lapsed homeowner's policy, if

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such policy can be accurately reported as required in subsection

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(6) (5). Additionally, covered policies include policies covering

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the peril of wind removed from the Florida Residential Property

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and Casualty Joint Underwriting Association or from the Citizens

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Property Insurance Corporation, created under s. 627.351(6), or

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from the Florida Windstorm Underwriting Association, created

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under s. 627.351(2), by an authorized insurer under the terms and

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conditions of an executed assumption agreement between the

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authorized insurer and such association or Citizens Property

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Insurance Corporation. Each assumption agreement between the

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association and such authorized insurer or Citizens Property

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Insurance Corporation must be approved by the Office of Insurance

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Regulation before the effective date of the assumption, and the

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Office of Insurance Regulation must provide written notification

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to the division board within 15 working days after such approval.

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"Covered policy" does not include any policy that excludes wind

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coverage or hurricane coverage or any reinsurance agreement and

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does not include any policy otherwise meeting this definition

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which is issued by a surplus lines insurer or a reinsurer. All

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commercial residential excess policies and all deductible buy-

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back policies that, based on sound actuarial principles, require

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individual ratemaking shall be excluded by rule if the actuarial

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soundness of the fund is not jeopardized. For this purpose, the

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term "excess policy" means a policy that provides insurance

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protection for large commercial property risks and that provides

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a layer of coverage above a primary layer insured by another

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insurer.

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     (d)  "Losses" means direct incurred losses under covered

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policies, which shall include losses for additional living

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expenses not to exceed 40 percent of the insured value of a

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residential structure or its contents and shall exclude loss

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adjustment expenses. "Losses" does not include losses for fair

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rental value, loss of rent or rental income, or business

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interruption losses.

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     (e)  "Retention" means the amount of losses below which an

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insurer is not entitled to reimbursement from the fund. An

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insurer's retention shall be calculated as follows:

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     1. The division board shall calculate and report to each

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insurer the retention multiples for that year. For the contract

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year beginning June 1, 2005, the retention multiple shall be

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equal to $4.5 billion divided by the total estimated

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reimbursement premium for the contract year; for subsequent

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years, the retention multiple shall be equal to $4.5 billion,

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adjusted based upon the reported exposure from the prior contract

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year to reflect the percentage growth in exposure to the fund for

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covered policies since 2004, divided by the total estimated

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reimbursement premium for the contract year. Total reimbursement

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premium for purposes of the calculation under this subparagraph

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shall be estimated using the assumption that all insurers have

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selected the 90-percent coverage level.

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     2.  The retention multiple as determined under subparagraph

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1. shall be adjusted to reflect the coverage level elected by the

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insurer. For insurers electing the 90-percent coverage level, the

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adjusted retention multiple is 100 percent of the amount

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determined under subparagraph 1. For insurers electing the 75-

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percent coverage level, the retention multiple is 120 percent of

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the amount determined under subparagraph 1. For insurers electing

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the 45-percent coverage level, the adjusted retention multiple is

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200 percent of the amount determined under subparagraph 1.

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     3.  An insurer shall determine its provisional retention by

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multiplying its provisional reimbursement premium by the

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applicable adjusted retention multiple and shall determine its

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actual retention by multiplying its actual reimbursement premium

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by the applicable adjusted retention multiple.

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     4.  For insurers who experience multiple covered events

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causing loss during the contract year, beginning June 1, 2005,

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each insurer's full retention shall be applied to each of the

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covered events causing the two largest losses for that insurer.

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For each other covered event resulting in losses, the insurer's

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retention shall be reduced to one-third of the full retention.

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The reimbursement contract shall provide for the reimbursement of

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losses for each covered event based on the full retention with

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adjustments made to reflect the reduced retentions after January

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1 of the contract year provided the insurer reports its losses as

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specified in the reimbursement contract.

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     (f)  "Workers' compensation" includes both workers'

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compensation and excess workers' compensation insurance.

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     (g)  "Bond" means any bond, debenture, note, or other

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evidence of financial indebtedness issued under this section.

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     (h)  "Debt service" means the amount required in any fiscal

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year to pay the principal of, redemption premium, if any, and

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interest on revenue bonds and any amounts required by the terms

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of documents authorizing, securing, or providing liquidity for

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revenue bonds necessary to maintain in effect any such liquidity

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or security arrangements.

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     (i)  "Debt service coverage" means the amount, if any,

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required by the documents under which revenue bonds are issued,

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which amount is to be received in any fiscal year in excess of

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the amount required to pay debt service for such fiscal year.

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     (j)  "Local government" means a unit of general purpose

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local government as defined in s. 218.31(2).

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     (k)  "Pledged revenues" means all or any portion of revenues

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to be derived from reimbursement premiums under subsection (6)

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(5) or from emergency assessments under paragraph (7)(b) (6)(b),

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as determined by the board.

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     (l)  "Estimated claims-paying capacity" means the sum of the

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projected year-end balance of the fund as of December 31 of a

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contract year, plus any reinsurance purchased by the fund, plus

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the division's board's estimate of the board's borrowing

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capacity.

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     (m)  "Actual claims-paying capacity" means the sum of the

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balance of the fund as of December 31 of a contract year, plus

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any reinsurance purchased by the fund, plus the amount the board

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is able to raise through the issuance of revenue bonds under

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subsection (7) (6).

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     (n)  "Corporation" means the Florida Hurricane Catastrophe

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Fund Finance Corporation created in paragraph (7)(d) (6)(d).

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     (o) "Division" means the Division of the Florida Hurricane

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Catastrophe Fund.

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     (p) "Director" means the chief administrator of the

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division, who shall act on behalf of the division as authorized

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by the board.

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     (q) "FHCF" or "fund" means the Florida Hurricane

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Catastrophe Fund.

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     (r) "Board" means the governing board of the division,

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which shall be composed of the Governor and the Cabinet. The

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Governor shall serve as chair of the board, the Attorney General

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shall serve as secretary of the board, and the Chief Financial

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Officer shall serve as treasurer of the board.

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     (3) DIVISION OF THE FLORIDA HURRICANE CATASTROPHE FUND

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CREATED.--There is created a division of the State Board of

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Administration known as the Division of the Florida Hurricane

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Catastrophe Fund, which shall administer the Florida Hurricane

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Catastrophe Fund. For purposes of this section, the board of the

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division shall consist of the Governor and the Cabinet.

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     (4)(3) FLORIDA HURRICANE CATASTROPHE FUND CREATED.--There

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is created the Florida Hurricane Catastrophe Fund within to be

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administered by the State Board of Administration. Moneys in the

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fund may not be expended, loaned, or appropriated except to pay

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obligations of the fund arising out of reimbursement contracts

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entered into under subsection (5) (4), payment of debt service on

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revenue bonds issued under subsection (7) (6), costs of the

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mitigation program under subsection (8) (7), costs of procuring

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reinsurance, and costs of administration of the fund. The State

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Board of Administration board shall invest the moneys in the fund

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pursuant to ss. 215.44-215.52. Except as otherwise provided in

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this section, earnings from all investments shall be retained in

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the fund. The board shall appoint a director who shall be

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responsible for the administration of the fund. The appointment

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of the director of the Division of the Florida Hurricane

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Catastrophe Fund shall be subject to the approval by a majority

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vote of the board. The division board may employ or contract with

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such staff and professionals as the division board deems

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necessary for the administration of the fund. The board may adopt

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such rules as are reasonable and necessary to implement this

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section and shall specify interest due on any delinquent

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remittances, which interest may not exceed the fund's rate of

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return plus 5 percent. Such rules must conform to the

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Legislature's specific intent in establishing the fund as

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expressed in subsection (1), must enhance the fund's potential

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ability to respond to claims for covered events, must contain

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general provisions so that the rules can be applied with

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reasonable flexibility so as to accommodate insurers in

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situations of an unusual nature or where undue hardship may

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result, except that such flexibility may not in any way impair,

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override, supersede, or constrain the public purpose of the fund,

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and must be consistent with sound insurance practices. The board

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may, by rule, provide for the exemption from subsections (5) (4)

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and (6) (5) of insurers writing covered policies with less than

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$10 million in aggregate exposure for covered policies if the

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exemption does not affect the actuarial soundness of the fund.

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The division shall have the power to sue and be sued in the name

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of the division.

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     (5)(4) REIMBURSEMENT CONTRACTS.--

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     (a) The division board shall enter into a contract with

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each insurer writing covered policies in this state to provide to

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the insurer the reimbursement described in paragraphs (b) and

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(d), in exchange for the reimbursement premium paid into the fund

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under subsection (6) (5). As a condition of doing business in

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this state, each such insurer shall enter into such a contract.

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     (b)1. The contract shall contain a promise by the division

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board to reimburse the insurer for 45 percent, 75 percent, or 90

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percent of its losses from each covered event in excess of the

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insurer's retention, plus 5 percent of the reimbursed losses to

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cover loss adjustment expenses.

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     2.  The insurer must elect one of the percentage coverage

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levels specified in this paragraph and may, upon renewal of a

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reimbursement contract, elect a lower percentage coverage level

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if no revenue bonds issued under subsection (7) (6) after a

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covered event are outstanding, or elect a higher percentage

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coverage level, regardless of whether or not revenue bonds are

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outstanding. All members of an insurer group must elect the same

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percentage coverage level. Any joint underwriting association,

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risk apportionment plan, or other entity created under s. 627.351

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must elect the 90-percent coverage level.

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     3.  The contract shall provide that reimbursement amounts

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shall not be reduced by reinsurance paid or payable to the

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insurer from other sources.

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     4. Notwithstanding any other provision contained in this

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section, the board shall make available to insurers that

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purchased coverage provided by this subparagraph in 2007

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2006,insurers qualifying as limited apportionment companies under

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s. 627.351(6)(c), and insurers that have been were approved to

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participate in 2006 or that are approved in 2007 for the

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Insurance Capital Build-Up Incentive Program pursuant to s.

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215.5595, a contract or contract addendum that provides an

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additional amount of reimbursement coverage of up to $10 million.

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The premium to be charged for this additional reimbursement

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coverage shall be 50 percent of the additional reimbursement

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coverage provided, which shall include one prepaid reinstatement.

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The minimum retention level that an eligible participating

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insurer must retain associated with this additional coverage

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layer is 30 percent of the insurer's surplus as of December 31,

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2007 2006. This coverage is shall be in addition to all other

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coverage that may be provided under this section. The coverage

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provided by the fund under this subparagraph shall be in addition

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to the claims-paying capacity as defined in subparagraph (c)1.,

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but only with respect to those insurers that select the

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additional coverage option and meet the requirements of this

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subparagraph. The claims-paying capacity with respect to all

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other participating insurers and limited apportionment companies

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that do not select the additional coverage option shall be

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limited to their reimbursement premium's proportionate share of

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the actual claims-paying capacity otherwise defined in

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subparagraph (c)1. and as provided for under the terms of the

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reimbursement contract. Coverage provided in the reimbursement

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contract is will not be affected by the additional premiums paid

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by participating insurers exercising the additional coverage

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option allowed in this subparagraph. This subparagraph expires on

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May 31, 2009 2008.

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     (c)1.  The contract shall also provide that the obligation

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of the division board with respect to all contracts covering a

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particular contract year shall not exceed the actual claims-

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paying capacity of the fund up to a limit of $15 billion for that

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contract year adjusted based upon the reported exposure from the

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prior contract year to reflect the percentage growth in exposure

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to the fund for covered policies since 2003, provided the dollar

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growth in the limit may not increase in any year by an amount

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greater than the dollar growth of the balance of the fund as of

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December 31, less any premiums or interest attributable to

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optional coverage, as defined by rule which occurred over the

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prior calendar year.

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     2.  In May before the start of the upcoming contract year

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and in October during the contract year, the division board shall

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publish in the Florida Administrative Weekly a statement of the

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fund's estimated borrowing capacity and the projected balance of

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the fund as of December 31. After the end of each calendar year,

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the division board shall notify insurers of the estimated

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borrowing capacity and the balance of the fund as of December 31

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to provide insurers with data necessary to assist them in

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determining their retention and projected payout from the fund

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for loss reimbursement purposes. In conjunction with the

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development of the premium formula, as provided for in subsection

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(6) (5), the division board shall publish factors or multiples

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that assist insurers in determining their retention and projected

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payout for the next contract year. For all regulatory and

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reinsurance purposes, an insurer may calculate its projected

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payout from the fund as its share of the total fund premium for

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the current contract year multiplied by the sum of the projected

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balance of the fund as of December 31 and the estimated borrowing

461

capacity for that contract year as reported under this

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subparagraph.

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     (d)1.  For purposes of determining potential liability and

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to aid in the sound administration of the fund, the contract

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shall require each insurer to report such insurer's losses from

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each covered event on an interim basis, as directed by the

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division board. The contract shall require the insurer to report

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to the division board no later than December 31 of each year, and

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quarterly thereafter, its reimbursable losses from covered events

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for the year. The contract shall require the division board to

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determine and pay, as soon as practicable after receiving these

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reports of reimbursable losses, the initial amount of

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reimbursement due and adjustments to this amount based on later

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loss information. The adjustments to reimbursement amounts shall

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require the division board to pay, or the insurer to return,

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amounts reflecting the most recent calculation of losses.

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     2.  In determining reimbursements pursuant to this

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subsection, the contract shall provide that the division board

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shall pay to each insurer such insurer's projected payout, which

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is the amount of reimbursement it is owed, up to an amount equal

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to the insurer's share of the actual premium paid for that

482

contract year, multiplied by the actual claims-paying capacity

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available for that contract year.

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     (e)1.  Except as provided in subparagraphs 2. and 3., the

485

contract shall provide that if an insurer demonstrates to the

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division board that it is likely to qualify for reimbursement

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under the contract, and demonstrates to the division board that

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the immediate receipt of moneys from the division board is likely

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to prevent the insurer from becoming insolvent, the division

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board shall advance the insurer, at market interest rates, the

491

amounts necessary to maintain the solvency of the insurer, up to

492

50 percent of the division's board's estimate of the

493

reimbursement due the insurer. The insurer's reimbursement shall

494

be reduced by an amount equal to the amount of the advance and

495

interest thereon.

496

     2.  With respect only to an entity created under s. 627.351,

497

the contract shall also provide that the division board may, upon

498

application by such entity, advance to such entity, at market

499

interest rates, up to 90 percent of the lesser of:

500

     a. The division's board's estimate of the amount of

501

reimbursement due to such entity; or

502

     b.  The entity's share of the actual reimbursement premium

503

paid for that contract year, multiplied by the currently

504

available liquid assets of the fund. In order for the entity to

505

qualify for an advance under this subparagraph, the entity must

506

demonstrate to the division board that the advance is essential

507

to allow the entity to pay claims for a covered event and the

508

division board must determine that the fund's assets are

509

sufficient and are sufficiently liquid to allow the division

510

board to make an advance to the entity and still fulfill the

511

board's reimbursement obligations to other insurers. The entity's

512

final reimbursement for any contract year in which an advance has

513

been made under this subparagraph must be reduced by an amount

514

equal to the amount of the advance and any interest on such

515

advance. In order to determine what amounts, if any, are due the

516

entity, the division board may require the entity to report its

517

exposure and its losses at any time to determine retention levels

518

and reimbursements payable.

519

     3.  The contract shall also provide specifically and solely

520

with respect to any limited apportionment company under s.

521

627.351(2)(b)3. that the division board may, upon application by

522

such company, advance to such company the amount of the estimated

523

reimbursement payable to such company as calculated pursuant to

524

paragraph (d), at market interest rates, if the division board

525

determines that the fund's assets are sufficient and are

526

sufficiently liquid to permit the division board to make an

527

advance to such company and at the same time fulfill its

528

reimbursement obligations to the insurers that are participants

529

in the fund. Such company's final reimbursement for any contract

530

year in which an advance pursuant to this subparagraph has been

531

made shall be reduced by an amount equal to the amount of the

532

advance and interest thereon. In order to determine what amounts,

533

if any, are due to such company, the division board may require

534

such company to report its exposure and its losses at such times

535

as may be required to determine retention levels and loss

536

reimbursements payable.

537

     (f)  In order to ensure that insurers have properly reported

538

the insured values on which the reimbursement premium is based

539

and to ensure that insurers have properly reported the losses for

540

which reimbursements have been made, the division board shall

541

inspect, examine, and verify the records of each insurer's

542

covered policies at such times as the division board deems

543

appropriate and according to standards established by rule for

544

the specific purpose of validating the accuracy of exposures and

545

losses required to be reported under the terms and conditions of

546

the reimbursement contract. The costs of the examinations shall

547

be borne by the division board. However, in order to remove any

548

incentive for an insurer to delay preparations for an

549

examination, the division board shall be reimbursed by the

550

insurer for any examination expenses incurred in addition to the

551

usual and customary costs of the examination, which additional

552

expenses were incurred as a result of an insurer's failure,

553

despite proper notice, to be prepared for the examination or as a

554

result of an insurer's failure to provide requested information

555

while the examination is in progress. If the division board finds

556

any insurer's records or other necessary information to be

557

inadequate or inadequately posted, recorded, or maintained, the

558

division board may employ experts to reconstruct, rewrite,

559

record, post, or maintain such records or information, at the

560

expense of the insurer being examined, if such insurer has failed

561

to maintain, complete, or correct such records or deficiencies

562

after the division board has given the insurer notice and a

563

reasonable opportunity to do so. Any information contained in an

564

examination report, which information is described in s. 215.557,

565

is confidential and exempt from the provisions of s. 119.07(1)

566

and s. 24(a), Art. I of the State Constitution, as provided in s.

567

215.557. Nothing in this paragraph expands the exemption in s.

568

215.557.

569

     (g)  The contract shall provide that in the event of the

570

insolvency of an insurer, the fund shall pay directly to the

571

Florida Insurance Guaranty Association for the benefit of Florida

572

policyholders of the insurer the net amount of all reimbursement

573

moneys owed to the insurer. As used in this paragraph, the term

574

"net amount of all reimbursement moneys" means that amount which

575

remains after reimbursement for:

576

     1.  Preliminary or duplicate payments owed to private

577

reinsurers or other inuring reinsurance payments to private

578

reinsurers that satisfy statutory or contractual obligations of

579

the insolvent insurer attributable to covered events to such

580

reinsurers; or

581

     2.  Funds owed to a bank or other financial institution to

582

cover obligations of the insolvent insurer under a credit

583

agreement that assists the insolvent insurer in paying claims

584

attributable to covered events.

585

586

The private reinsurers, banks, or other financial institutions

587

shall be reimbursed or otherwise paid prior to payment to the

588

Florida Insurance Guaranty Association, notwithstanding any law

589

to the contrary. The guaranty association shall pay all claims up

590

to the maximum amount permitted by chapter 631; thereafter, any

591

remaining moneys shall be paid pro rata to claims not fully

592

satisfied. This paragraph does not apply to a joint underwriting

593

association, risk apportionment plan, or other entity created

594

under s. 627.351.

595

     (6)(5) REIMBURSEMENT PREMIUMS.--

596

     (a)  Each reimbursement contract shall require the insurer

597

to annually pay to the fund an actuarially indicated premium for

598

the reimbursement.

599

     (b) The division State Board of Administration shall select

600

an independent consultant to develop a formula for determining

601

the actuarially indicated premium to be paid to the fund. The

602

formula shall specify, for each zip code or other limited

603

geographical area, the amount of premium to be paid by an insurer

604

for each $1,000 of insured value under covered policies in that

605

zip code or other area. In establishing premiums, the division

606

board shall consider the coverage elected under paragraph (5)(b)

607

(4)(b) and any factors that tend to enhance the actuarial

608

sophistication of ratemaking for the fund, including deductibles,

609

type of construction, type of coverage provided, relative

610

concentration of risks, and other such factors deemed by the

611

division board to be appropriate. The formula may provide for a

612

procedure to determine the premiums to be paid by new insurers

613

that begin writing covered policies after the beginning of a

614

contract year, taking into consideration when the insurer starts

615

writing covered policies, the potential exposure of the insurer,

616

the potential exposure of the fund, the administrative costs to

617

the insurer and to the fund, and any other factors deemed

618

appropriate by the board. The formula must be approved by

619

unanimous vote of the board. The board may, at any time, revise

620

the formula pursuant to the procedure provided in this paragraph.

621

     (c)  No later than September 1 of each year, each insurer

622

shall notify the division board of its insured values under

623

covered policies by zip code, as of June 30 of that year. On the

624

basis of these reports, the division board shall calculate the

625

premium due from the insurer, based on the formula adopted under

626

paragraph (b). The insurer shall pay the required annual premium

627

pursuant to a periodic payment plan specified in the contract.

628

The division board shall provide for payment of reimbursement

629

premium in periodic installments and for the adjustment of

630

provisional premium installments collected prior to submission of

631

the exposure report to reflect data in the exposure report. The

632

division board shall collect interest on late reimbursement

633

premium payments consistent with the assumptions made in

634

developing the premium formula in accordance with paragraph (b).

635

     (d)  All premiums paid to the fund under reimbursement

636

contracts shall be treated as premium for approved reinsurance

637

for all accounting and regulatory purposes.

638

     (e)  If Citizens Property Insurance Corporation assumes or

639

otherwise provides coverage for policies of an insurer placed in

640

liquidation under chapter 631 pursuant to s. 627.351(6), the

641

corporation may, pursuant to conditions mutually agreed to

642

between the corporation and the division State Board of

643

Administration, obtain coverage for such policies under its

644

contract with the fund or accept an assignment of the liquidated

645

insurer's contract with the fund. If Citizens Property Insurance

646

Corporation elects to cover these policies under the

647

corporation's contract with the division fund, it shall notify

648

the division board of its insured values with respect to such

649

policies within a specified time mutually agreed to between the

650

corporation and the division board, after such assumption or

651

other coverage transaction, and the division fund shall treat

652

such policies as having been in effect as of June 30 of that

653

year. In the event of an assignment, the fund shall apply that

654

contract to such policies and treat Citizens Property Insurance

655

Corporation as if the corporation were the liquidated insurer for

656

the remaining term of the contract, and the corporation shall

657

have all rights and duties of the liquidated insurer beginning on

658

the date it provides coverage for such policies, but the

659

corporation is not subject to any preexisting rights,

660

liabilities, or duties of the liquidated insurer. The assignment,

661

including any unresolved issues between the liquidated insurer

662

and Citizens Property Insurance Corporation under the contract,

663

shall be provided for in the liquidation order or otherwise

664

determined by the court. However, if a covered event occurs

665

before the effective date of the assignment, the corporation may

666

not obtain coverage for such policies under its contract with the

667

fund and shall accept an assignment of the liquidated insurer's

668

contract as provided in this paragraph.

669

     (7)(6) REVENUE BONDS.--

670

     (a)  General provisions.--

671

     1.  Upon the occurrence of a hurricane and a determination

672

that the moneys in the fund are or will be insufficient to pay

673

reimbursement at the levels promised in the reimbursement

674

contracts, the board may take the necessary steps under paragraph

675

(c) or paragraph (d) for the issuance of revenue bonds for the

676

benefit of the fund. The proceeds of such revenue bonds may be

677

used to make reimbursement payments under reimbursement

678

contracts; to refinance or replace previously existing borrowings

679

or financial arrangements; to pay interest on bonds; to fund

680

reserves for the bonds; to pay expenses incident to the issuance

681

or sale of any bond issued under this section, including costs of

682

validating, printing, and delivering the bonds, costs of printing

683

the official statement, costs of publishing notices of sale of

684

the bonds, and related administrative expenses; or for such other

685

purposes related to the financial obligations of the fund as the

686

board may determine. The term of the bonds may not exceed 30

687

years. The board may pledge or authorize the corporation to

688

pledge all or a portion of all revenues under subsection (6) (5)

689

and under paragraph (b) to secure such revenue bonds and the

690

division board may execute such agreements between the division

691

board and the issuer of any revenue bonds and providers of other

692

financing arrangements under paragraph (8)(b) (7)(b) as the

693

division board deems necessary to evidence, secure, preserve, and

694

protect such pledge. If reimbursement premiums received under

695

subsection (6) (5) or earnings on such premiums are used to pay

696

debt service on revenue bonds, such premiums and earnings shall

697

be used only after the use of the moneys derived from assessments

698

under paragraph (b). The funds, credit, property, or taxing power

699

of the state or political subdivisions of the state shall not be

700

pledged for the payment of such bonds. The division board may

701

also enter into agreements under paragraph (c) or paragraph (d)

702

for the purpose of issuing revenue bonds in the absence of a

703

hurricane upon a determination that such action would maximize

704

the ability of the fund to meet future obligations.

705

     2.  The Legislature finds and declares that the issuance of

706

bonds under this subsection is for the public purpose of paying

707

the proceeds of the bonds to insurers, thereby enabling insurers

708

to pay the claims of policyholders to assure that policyholders

709

are able to pay the cost of construction, reconstruction, repair,

710

restoration, and other costs associated with damage to property

711

of policyholders of covered policies after the occurrence of a

712

hurricane.

713

     (b)  Emergency assessments.--

714

     1.  If the board determines that the amount of revenue

715

produced under subsection (6) (5) is insufficient to fund the

716

obligations, costs, and expenses of the fund and the corporation,

717

including repayment of revenue bonds and that portion of the debt

718

service coverage not met by reimbursement premiums, the board

719

shall direct the Office of Insurance Regulation to levy, by

720

order, an emergency assessment on direct premiums for all

721

property and casualty lines of business in this state, including

722

property and casualty business of surplus lines insurers

723

regulated under part VIII of chapter 626, but not including any

724

workers' compensation premiums or medical malpractice premiums.

725

As used in this subsection, the term "property and casualty

726

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

727

Exhibit of Premiums and Losses, in the annual statement required

728

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

729

this section, except for those lines identified as accident and

730

health insurance and except for policies written under the

731

National Flood Insurance Program. The assessment shall be

732

specified as a percentage of direct written premium and is

733

subject to annual adjustments by the board in order to meet debt

734

obligations. The same percentage shall apply to all policies in

735

lines of business subject to the assessment issued or renewed

736

during the 12-month period beginning on the effective date of the

737

assessment.

738

     2.  A premium is not subject to an annual assessment under

739

this paragraph in excess of 6 percent of premium with respect to

740

obligations arising out of losses attributable to any one

741

contract year, and a premium is not subject to an aggregate

742

annual assessment under this paragraph in excess of 10 percent of

743

premium. An annual assessment under this paragraph shall continue

744

as long as the revenue bonds issued with respect to which the

745

assessment was imposed are outstanding, including any bonds the

746

proceeds of which were used to refund the revenue bonds, unless

747

adequate provision has been made for the payment of the bonds

748

under the documents authorizing issuance of the bonds.

749

     3.  Emergency assessments shall be collected from

750

policyholders. Emergency assessments shall be remitted by

751

insurers as a percentage of direct written premium for the

752

preceding calendar quarter as specified in the order from the

753

Office of Insurance Regulation. The office shall verify the

754

accurate and timely collection and remittance of emergency

755

assessments and shall report the information to the division

756

board in a form and at a time specified by the division board.

757

Each insurer collecting assessments shall provide the information

758

with respect to premiums and collections as may be required by

759

the office to enable the office to monitor and verify compliance

760

with this paragraph.

761

     4.  With respect to assessments of surplus lines premiums,

762

each surplus lines agent shall collect the assessment at the same

763

time as the agent collects the surplus lines tax required by s.

764

626.932, and the surplus lines agent shall remit the assessment

765

to the Florida Surplus Lines Service Office created by s. 626.921

766

at the same time as the agent remits the surplus lines tax to the

767

Florida Surplus Lines Service Office. The emergency assessment on

768

each insured procuring coverage and filing under s. 626.938 shall

769

be remitted by the insured to the Florida Surplus Lines Service

770

Office at the time the insured pays the surplus lines tax to the

771

Florida Surplus Lines Service Office. The Florida Surplus Lines

772

Service Office shall remit the collected assessments to the fund

773

or corporation as provided in the order levied by the Office of

774

Insurance Regulation. The Florida Surplus Lines Service Office

775

shall verify the proper application of such emergency assessments

776

and shall assist the division board in ensuring the accurate and

777

timely collection and remittance of assessments as required by

778

the board. The Florida Surplus Lines Service Office shall

779

annually calculate the aggregate written premium on property and

780

casualty business, other than workers' compensation and medical

781

malpractice, procured through surplus lines agents and insureds

782

procuring coverage and filing under s. 626.938 and shall report

783

the information to the division board in a form and at a time

784

specified by the division board.

785

     5.  Any assessment authority not used for a particular

786

contract year may be used for a subsequent contract year. If, for

787

a subsequent contract year, the board determines that the amount

788

of revenue produced under subsection (6) (5) is insufficient to

789

fund the obligations, costs, and expenses of the fund and the

790

corporation, including repayment of revenue bonds and that

791

portion of the debt service coverage not met by reimbursement

792

premiums, the board shall direct the Office of Insurance

793

Regulation to levy an emergency assessment up to an amount not

794

exceeding the amount of unused assessment authority from a

795

previous contract year or years, plus an additional 4 percent

796

provided that the assessments in the aggregate do not exceed the

797

limits specified in subparagraph 2.

798

     6.  The assessments otherwise payable to the corporation

799

under this paragraph shall be paid to the fund unless and until

800

the Office of Insurance Regulation and the Florida Surplus Lines

801

Service Office have received from the corporation and the fund a

802

notice, which shall be conclusive and upon which they may rely

803

without further inquiry, that the corporation has issued bonds

804

and the fund has no agreements in effect with local governments

805

under paragraph (c). On or after the date of the notice and until

806

the date the corporation has no bonds outstanding, the fund shall

807

have no right, title, or interest in or to the assessments,

808

except as provided in the fund's agreement with the corporation.

809

     7.  Emergency assessments are not premium and are not

810

subject to the premium tax, to the surplus lines tax, to any

811

fees, or to any commissions. An insurer is liable for all

812

assessments that it collects and must treat the failure of an

813

insured to pay an assessment as a failure to pay the premium. An

814

insurer is not liable for uncollectible assessments.

815

     8.  When an insurer is required to return an unearned

816

premium, it shall also return any collected assessment

817

attributable to the unearned premium. A credit adjustment to the

818

collected assessment may be made by the insurer with regard to

819

future remittances that are payable to the fund or corporation,

820

but the insurer is not entitled to a refund.

821

     9.  When a surplus lines insured or an insured who has

822

procured coverage and filed under s. 626.938 is entitled to the

823

return of an unearned premium, the Florida Surplus Lines Service

824

Office shall provide a credit or refund to the agent or such

825

insured for the collected assessment attributable to the unearned

826

premium prior to remitting the emergency assessment collected to

827

the fund or corporation.

828

     10.  The exemption of medical malpractice insurance premiums

829

from emergency assessments under this paragraph is repealed May

830

31, 2010, and medical malpractice insurance premiums shall be

831

subject to emergency assessments attributable to loss events

832

occurring in the contract years commencing on June 1, 2010.

833

     (c)  Revenue bond issuance through counties or

834

municipalities.--

835

     1.  If the board elects to enter into agreements with local

836

governments for the issuance of revenue bonds for the benefit of

837

the fund, the division board shall enter into such contracts with

838

one or more local governments, including agreements providing for

839

the pledge of revenues, as are necessary to effect such issuance.

840

The governing body of a county or municipality is authorized to

841

issue bonds as defined in s. 125.013 or s. 166.101 from time to

842

time to fund an assistance program, in conjunction with the

843

Florida Hurricane Catastrophe Fund, for the purposes set forth in

844

this section or for the purpose of paying the costs of

845

construction, reconstruction, repair, restoration, and other

846

costs associated with damage to properties of policyholders of

847

covered policies due to the occurrence of a hurricane by assuring

848

that policyholders located in this state are able to recover

849

claims under property insurance policies after a covered event.

850

     2.  In order to avoid needless and indiscriminate

851

proliferation, duplication, and fragmentation of such assistance

852

programs, any local government may provide for the payment of

853

fund reimbursements, regardless of whether or not the losses for

854

which reimbursement is made occurred within or outside of the

855

territorial jurisdiction of the local government.

856

     3.  The state hereby covenants with holders of bonds issued

857

under this paragraph that the state will not repeal or abrogate

858

the power of the board to direct the Office of Insurance

859

Regulation to levy the assessments and to collect the proceeds of

860

the revenues pledged to the payment of such bonds as long as any

861

such bonds remain outstanding unless adequate provision has been

862

made for the payment of such bonds pursuant to the documents

863

authorizing the issuance of such bonds.

864

     4.  There shall be no liability on the part of, and no cause

865

of action shall arise against any members or employees of the

866

governing body of a local government for any actions taken by

867

them in the performance of their duties under this paragraph.

868

     (d)  Florida Hurricane Catastrophe Fund Finance

869

Corporation.--

870

     1.  In addition to the findings and declarations in

871

subsection (1), the Legislature also finds and declares that:

872

     a.  The public benefits corporation created under this

873

paragraph will provide a mechanism necessary for the cost-

874

effective and efficient issuance of bonds. This mechanism will

875

eliminate unnecessary costs in the bond issuance process, thereby

876

increasing the amounts available to pay reimbursement for losses

877

to property sustained as a result of hurricane damage.

878

     b.  The purpose of such bonds is to fund reimbursements

879

through the Florida Hurricane Catastrophe Fund to pay for the

880

costs of construction, reconstruction, repair, restoration, and

881

other costs associated with damage to properties of policyholders

882

of covered policies due to the occurrence of a hurricane.

883

     c.  The efficacy of the financing mechanism will be enhanced

884

by the corporation's ownership of the assessments, by the

885

insulation of the assessments from possible bankruptcy

886

proceedings, and by covenants of the state with the corporation's

887

bondholders.

888

     2.a.  There is created a public benefits corporation, which

889

is an instrumentality of the state, to be known as the Florida

890

Hurricane Catastrophe Fund Finance Corporation.

891

     b. The corporation shall operate under a six-member five-

892

member board of directors consisting of the Governor or a

893

designee, the Chief Financial Officer or a designee, the Attorney

894

General or a designee, the Commissioner of the Department of

895

Agriculture and Consumer Services or a designee, the director of

896

the Division of Bond Finance of the State Board of

897

Administration, and the director of the division senior employee

898

of the State Board of Administration responsible for operations

899

of the Florida Hurricane Catastrophe Fund of the State Board of

900

Administration.

901

     c.  The corporation has all of the powers of corporations

902

under chapter 607 and under chapter 617, subject only to the

903

provisions of this subsection.

904

     d.  The corporation may issue bonds and engage in such other

905

financial transactions as are necessary to provide sufficient

906

funds to achieve the purposes of this section.

907

     e.  The corporation may invest in any of the investments

908

authorized under s. 215.47.

909

     f.  There shall be no liability on the part of, and no cause

910

of action shall arise against, any member of the board of

911

directors members or employees of the corporation for any actions

912

taken by them in the performance of their duties under this

913

paragraph.

914

     3.a.  In actions under chapter 75 to validate any bonds

915

issued by the corporation, the notice required by s. 75.06 shall

916

be published only in Leon County and in two newspapers of general

917

circulation in the state, and the complaint and order of the

918

court shall be served only on the State Attorney of the Second

919

Judicial Circuit.

920

     b.  The state hereby covenants with holders of bonds of the

921

corporation that the state will not repeal or abrogate the power

922

of the board to direct the Office of Insurance Regulation to levy

923

the assessments and to collect the proceeds of the revenues

924

pledged to the payment of such bonds as long as any such bonds

925

remain outstanding unless adequate provision has been made for

926

the payment of such bonds pursuant to the documents authorizing

927

the issuance of such bonds.

928

     4.  The bonds of the corporation are not a debt of the state

929

or of any political subdivision, and neither the state nor any

930

political subdivision is liable on such bonds. The corporation

931

does not have the power to pledge the credit, the revenues, or

932

the taxing power of the state or of any political subdivision.

933

The credit, revenues, or taxing power of the state or of any

934

political subdivision shall not be deemed to be pledged to the

935

payment of any bonds of the corporation.

936

     5.a.  The property, revenues, and other assets of the

937

corporation; the transactions and operations of the corporation

938

and the income from such transactions and operations; and all

939

bonds issued under this paragraph and interest on such bonds are

940

exempt from taxation by the state and any political subdivision,

941

including the intangibles tax under chapter 199 and the income

942

tax under chapter 220. This exemption does not apply to any tax

943

imposed by chapter 220 on interest, income, or profits on debt

944

obligations owned by corporations other than the Florida

945

Hurricane Catastrophe Fund Finance Corporation.

946

     b.  All bonds of the corporation shall be and constitute

947

legal investments without limitation for all public bodies of

948

this state; for all banks, trust companies, savings banks,

949

savings associations, savings and loan associations, and

950

investment companies; for all administrators, executors,

951

trustees, and other fiduciaries; for all insurance companies and

952

associations and other persons carrying on an insurance business;

953

and for all other persons who are now or may hereafter be

954

authorized to invest in bonds or other obligations of the state

955

and shall be and constitute eligible securities to be deposited

956

as collateral for the security of any state, county, municipal,

957

or other public funds. This sub-subparagraph shall be considered

958

as additional and supplemental authority and shall not be limited

959

without specific reference to this sub-subparagraph.

960

     6.  The corporation and its corporate existence shall

961

continue until terminated by law; however, no such law shall take

962

effect as long as the corporation has bonds outstanding unless

963

adequate provision has been made for the payment of such bonds

964

pursuant to the documents authorizing the issuance of such bonds.

965

Upon termination of the existence of the corporation, all of its

966

rights and properties in excess of its obligations shall pass to

967

and be vested in the state.

968

     (e)  Protection of bondholders.--

969

     1.  As long as the corporation has any bonds outstanding,

970

neither the fund nor the corporation shall have the authority to

971

file a voluntary petition under chapter 9 of the federal

972

Bankruptcy Code or such corresponding chapter or sections as may

973

be in effect, from time to time, and neither any public officer

974

nor any organization, entity, or other person shall authorize the

975

fund or the corporation to be or become a debtor under chapter 9

976

of the federal Bankruptcy Code or such corresponding chapter or

977

sections as may be in effect, from time to time, during any such

978

period.

979

     2.  The state hereby covenants with holders of bonds of the

980

corporation that the state will not limit or alter the denial of

981

authority under this paragraph or the rights under this section

982

vested in the fund or the corporation to fulfill the terms of any

983

agreements made with such bondholders or in any way impair the

984

rights and remedies of such bondholders as long as any such bonds

985

remain outstanding unless adequate provision has been made for

986

the payment of such bonds pursuant to the documents authorizing

987

the issuance of such bonds.

988

     3.  Notwithstanding any other provision of law, any pledge

989

of or other security interest in revenue, money, accounts,

990

contract rights, general intangibles, or other personal property

991

made or created by the fund or the corporation shall be valid,

992

binding, and perfected from the time such pledge is made or other

993

security interest attaches without any physical delivery of the

994

collateral or further act and the lien of any such pledge or

995

other security interest shall be valid, binding, and perfected

996

against all parties having claims of any kind in tort, contract,

997

or otherwise against the fund or the corporation irrespective of

998

whether or not such parties have notice of such claims. No

999

instrument by which such a pledge or security interest is created

1000

nor any financing statement need be recorded or filed.

1001

     (8)(7) ADDITIONAL POWERS AND DUTIES.--

1002

     (a) The board may authorize the division's procurement of

1003

procure reinsurance from reinsurers acceptable to the Office of

1004

Insurance Regulation for the purpose of maximizing the capacity

1005

of the fund and may enter into capital market transactions,

1006

including, but not limited to, industry loss warranties,

1007

catastrophe bonds, side-car arrangements, or financial contracts

1008

permissible for the State Board of Administration's board's usage

1009

under s. 215.47(10) and (11), consistent with prudent management

1010

of the fund.

1011

     (b) In addition to borrowing under subsection (7) (6), the

1012

board may also authorize the division to borrow from, or enter

1013

into other financing arrangements with, any market sources at

1014

prevailing interest rates.

1015

     (c)  Each fiscal year, the Legislature shall appropriate

1016

from the investment income of the Florida Hurricane Catastrophe

1017

Fund an amount no less than $10 million and no more than 35

1018

percent of the investment income based upon the most recent

1019

fiscal year-end audited financial statements for the purpose of

1020

providing funding for local governments, state agencies, public

1021

and private educational institutions, and nonprofit organizations

1022

to support programs intended to improve hurricane preparedness,

1023

reduce potential losses in the event of a hurricane, provide

1024

research into means to reduce such losses, educate or inform the

1025

public as to means to reduce hurricane losses, assist the public

1026

in determining the appropriateness of particular upgrades to

1027

structures or in the financing of such upgrades, or protect local

1028

infrastructure from potential damage from a hurricane. Moneys

1029

shall first be available for appropriation under this paragraph

1030

in fiscal year 1997-1998. Moneys in excess of the $10 million

1031

specified in this paragraph shall not be available for

1032

appropriation under this paragraph if the board State Board of

1033

Administration finds that an appropriation of investment income

1034

from the fund would jeopardize the actuarial soundness of the

1035

fund.

1036

     (d) The division board may allow insurers to comply with

1037

reporting requirements and reporting format requirements by using

1038

alternative methods of reporting if the proper administration of

1039

the fund is not thereby impaired and if the alternative methods

1040

produce data which is consistent with the purposes of this

1041

section.

1042

     (e)  In order to assure the equitable operation of the fund,

1043

the division board may impose a reasonable fee on an insurer to

1044

recover costs involved in reprocessing inaccurate, incomplete, or

1045

untimely exposure data submitted by the insurer.

1046

     (9)(8) ADVISORY COUNCIL.--The division State Board of

1047

Administration shall appoint a nine-member advisory council that

1048

consists of an actuary, a meteorologist, an engineer, a

1049

representative of insurers, a representative of insurance agents,

1050

a representative of reinsurers, and three consumers who shall

1051

also be representatives of other affected professions and

1052

industries, to provide the division board with information and

1053

advice in connection with its duties under this section. Members

1054

of the advisory council shall serve at the pleasure of the board

1055

and are eligible for per diem and travel expenses under s.

1056

112.061.

1057

     (10)(9) APPLICABILITY OF S. 19, ART. III OF THE STATE

1058

CONSTITUTION.--The Legislature finds that the Florida Hurricane

1059

Catastrophe Fund created by this section is a trust fund

1060

established for bond covenants, indentures, or resolutions within

1061

the meaning of s. 19(f)(3), Art. III of the State Constitution.

1062

     (11)(10) VIOLATIONS.--Any violation of this section or of

1063

rules adopted under this section constitutes a violation of the

1064

insurance code.

1065

     (12)(11) LEGAL PROCEEDINGS.--The division board is

1066

authorized to take any action necessary to enforce the rules, and

1067

the provisions and requirements of the reimbursement contract,

1068

required by and adopted pursuant to this section.

1069

     (13)(12) FEDERAL OR MULTISTATE CATASTROPHIC FUNDS.--Upon

1070

the creation of a federal or multistate catastrophic insurance or

1071

reinsurance program intended to serve purposes similar to the

1072

purposes of the fund created by this section, the division, upon

1073

approval by the board, State Board of Administration shall

1074

promptly make recommendations to the Legislature for coordination

1075

with the federal or multistate program, for termination of the

1076

fund, or for such other actions as the board finds appropriate in

1077

the circumstances.

1078

     (14)(13) REVERSION OF FUND ASSETS UPON TERMINATION.--The

1079

fund, the division, and the duties of the board under this

1080

section may be terminated only by law. Upon termination of the

1081

fund, all assets of the fund shall revert to the General Revenue

1082

Fund.

1083

     (15)(14) SEVERABILITY.--If any provision of this section or

1084

its application to any person or circumstance is held invalid,

1085

the invalidity does not affect other provisions or applications

1086

of the section which can be given effect without the invalid

1087

provision or application, and to this end the provisions of this

1088

section are declared severable.

1089

     (16)(15) COLLATERAL PROTECTION INSURANCE.--As used in this

1090

section and ss. 627.311 and 627.351, the term "collateral

1091

protection insurance" means commercial property insurance of

1092

which a creditor is the primary beneficiary and policyholder and

1093

which protects or covers an interest of the creditor arising out

1094

of a credit transaction secured by real or personal property.

1095

Initiation of such coverage is triggered by the mortgagor's

1096

failure to maintain insurance coverage as required by the

1097

mortgage or other lending document. Collateral protection

1098

insurance is not residential coverage.

1099

     (17)(16) TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL

1100

COVERAGE OPTIONS.--

1101

     (a)  Findings and intent.--

1102

     1.  The Legislature finds that:

1103

     a.  Because of temporary disruptions in the market for

1104

catastrophic reinsurance, many property insurers were unable to

1105

procure reinsurance for the 2006 hurricane season with an

1106

attachment point below the insurers' respective Florida Hurricane

1107

Catastrophe Fund attachment points, were unable to procure

1108

sufficient amounts of such reinsurance, or were able to procure

1109

such reinsurance only by incurring substantially higher costs

1110

than in prior years.

1111

     b.  The reinsurance market problems were responsible, at

1112

least in part, for substantial premium increases to many

1113

consumers and increases in the number of policies issued by the

1114

Citizens Property Insurance Corporation.

1115

     c.  It is likely that the reinsurance market disruptions

1116

will not significantly abate prior to the 2007 hurricane season.

1117

     2.  It is the intent of the Legislature to create a

1118

temporary emergency program, applicable to the 2007, 2008, and

1119

2009 hurricane seasons, to address these market disruptions and

1120

enable insurers, at their option, to procure additional coverage

1121

from the Florida Hurricane Catastrophe Fund.

1122

     (b)  Applicability of other provisions of this section.--All

1123

provisions of this section and the rules adopted under this

1124

section apply to the program created by this subsection unless

1125

specifically superseded by this subsection.

1126

     (c)  Optional coverage.--For the contract year commencing

1127

June 1, 2007, and ending May 31, 2008, the contract year

1128

commencing June 1, 2008, and ending May 31, 2009, and the

1129

contract year commencing June 1, 2009, and ending May 31, 2010,

1130

the board shall offer for each of such years the optional

1131

coverage as provided in this subsection.

1132

     (d)  Additional definitions.--As used in this subsection,

1133

the term:

1134

     1.  "TEACO options" means the temporary emergency additional

1135

coverage options created under this subsection.

1136

     2.  "TEACO insurer" means an insurer that has opted to

1137

obtain coverage under the TEACO options in addition to the

1138

coverage provided to the insurer under its reimbursement

1139

contract.

1140

     3.  "TEACO reimbursement premium" means the premium charged

1141

by the fund for coverage provided under the TEACO options.

1142

     4.  "TEACO retention" means the amount of losses below which

1143

a TEACO insurer is not entitled to reimbursement from the fund

1144

under the TEACO option selected. A TEACO insurer's retention

1145

options shall be calculated as follows:

1146

     a. The division board shall calculate and report to each

1147

TEACO insurer the TEACO retention multiples. There shall be three

1148

TEACO retention multiples for defining coverage. Each multiple

1149

shall be calculated by dividing $3 billion, $4 billion, or $5

1150

billion by the total estimated mandatory FHCF reimbursement

1151

premium assuming all insurers selected the 90-percent coverage

1152

level.

1153

     b.  The TEACO retention multiples as determined under sub-

1154

subparagraph a. shall be adjusted to reflect the coverage level

1155

elected by the insurer. For insurers electing the 90-percent

1156

coverage level, the adjusted retention multiple is 100 percent of

1157

the amount determined under sub-subparagraph a. For insurers

1158

electing the 75-percent coverage level, the retention multiple is

1159

120 percent of the amount determined under sub-subparagraph a.

1160

For insurers electing the 45-percent coverage level, the adjusted

1161

retention multiple is 200 percent of the amount determined under

1162

sub-subparagraph a.

1163

     c.  An insurer shall determine its provisional TEACO

1164

retention by multiplying its estimated mandatory FHCF

1165

reimbursement premium by the applicable adjusted TEACO retention

1166

multiple and shall determine its actual TEACO retention by

1167

multiplying its actual mandatory FHCF reimbursement premium by

1168

the applicable adjusted TEACO retention multiple.

1169

     d.  For TEACO insurers who experience multiple covered

1170

events causing loss during the contract year, the insurer's full

1171

TEACO retention shall be applied to each of the covered events

1172

causing the two largest losses for that insurer. For other

1173

covered events resulting in losses, the TEACO option does not

1174

apply and the insurer's retention shall be one-third of the full

1175

retention as calculated under paragraph (2)(e).

1176

     5.  "TEACO addendum" means an addendum to the reimbursement

1177

contract reflecting the obligations of the fund and TEACO

1178

insurers under the program created by this subsection.

1179

     6.  "FHCF" means the Florida Hurricane Catastrophe Fund.

1180

     (e)  TEACO addendum.--

1181

     1.  The TEACO addendum shall provide for reimbursement of

1182

TEACO insurers for covered events occurring during the contract

1183

year, in exchange for the TEACO reimbursement premium paid into

1184

the fund under paragraph (f). Any insurer writing covered

1185

policies has the option of choosing to accept the TEACO addendum

1186

for any of the 3 contract years that the coverage is offered.

1187

     2.  The TEACO addendum shall contain a promise by the

1188

division board to reimburse the TEACO insurer for 45 percent, 75

1189

percent, or 90 percent of its losses from each covered event in

1190

excess of the insurer's TEACO retention, plus 5 percent of the

1191

reimbursed losses to cover loss adjustment expenses. The

1192

percentage shall be the same as the coverage level selected by

1193

the insurer under paragraph (5)(b) (4)(b).

1194

     3.  The TEACO addendum shall provide that reimbursement

1195

amounts shall not be reduced by reinsurance paid or payable to

1196

the insurer from other sources.

1197

     4.  The TEACO addendum shall also provide that the

1198

obligation of the division board with respect to all TEACO

1199

addenda shall not exceed an amount equal to two times the

1200

difference between the industry retention level calculated under

1201

paragraph (2)(e) and the $3 billion, $4 billion, or $5 billion

1202

industry TEACO retention level options actually selected, but in

1203

no event may the division's board's obligation exceed the actual

1204

claims-paying capacity of the fund plus the additional capacity

1205

created in paragraph (g). If the actual claims-paying capacity

1206

and the additional capacity created under paragraph (g) fall

1207

short of the division's board's obligations under the

1208

reimbursement contract, each insurer's share of the fund's

1209

capacity shall be prorated based on the premium an insurer pays

1210

for its mandatory reimbursement coverage and the premium paid for

1211

its optional TEACO coverage as each such premium bears to the

1212

total premiums paid to the fund times the available capacity.

1213

     5.  The priorities, schedule, and method of reimbursements

1214

under the TEACO addendum shall be the same as provided under

1215

subsection (5) (4).

1216

     6.  A TEACO insurer's maximum reimbursement for a single

1217

event shall be equal to the product of multiplying its mandatory

1218

FHCF premium by the difference between its FHCF retention

1219

multiple and its TEACO retention multiple under the TEACO option

1220

selected and by the coverage selected under paragraph (5)(b)

1221

(4)(b), plus an additional 5 percent for loss adjustment

1222

expenses. A TEACO insurer's maximum reimbursement under the TEACO

1223

option selected for a TEACO insurer's two largest events shall be

1224

twice its maximum reimbursement for a single event.

1225

     (f)  TEACO reimbursement premiums.--

1226

     1.  Each TEACO insurer shall pay to the fund, in the manner

1227

and at the time provided in the reimbursement contract for

1228

payment of reimbursement premiums, a TEACO reimbursement premium

1229

calculated as specified in this paragraph.

1230

     2.  The insurer's TEACO reimbursement premium associated

1231

with the $3 billion retention option shall be equal to 85 percent

1232

of a TEACO insurer's maximum reimbursement for a single event as

1233

calculated under subparagraph (e)6. The TEACO reimbursement

1234

premium associated with the $4 billion retention option shall be

1235

equal to 80 percent of a TEACO insurer's maximum reimbursement

1236

for a single event as calculated under subparagraph (e)6. The

1237

TEACO premium associated with the $5 billion retention option

1238

shall be equal to 75 percent of a TEACO insurer's maximum

1239

reimbursement for a single event as calculated under subparagraph

1240

(e)6.

1241

     (g)  Effect on claims-paying capacity of the fund.--For the

1242

contract term commencing June 1, 2007, the contract year

1243

commencing June 1, 2008, and the contract term beginning June 1,

1244

2009, the program created by this subsection shall increase the

1245

claims-paying capacity of the fund as provided in subparagraph

1246

(5)(c)1. (4)(c)1. by an amount equal to two times the difference

1247

between the industry retention level calculated under paragraph

1248

(2)(e) and the $3 billion industry TEACO retention level

1249

specified in sub-subparagraph (d)4.a. The additional capacity

1250

shall apply only to the additional coverage provided by the TEACO

1251

option and shall not otherwise affect any insurer's reimbursement

1252

from the fund.

1253

     (18)(17) TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS.--

1254

     (a)  Findings and intent.--

1255

     1.  The Legislature finds that:

1256

     a.  Because of temporary disruptions in the market for

1257

catastrophic reinsurance, many property insurers were unable to

1258

procure sufficient amounts of reinsurance for the 2006 hurricane

1259

season or were able to procure such reinsurance only by incurring

1260

substantially higher costs than in prior years.

1261

     b.  The reinsurance market problems were responsible, at

1262

least in part, for substantial premium increases to many

1263

consumers and increases in the number of policies issued by

1264

Citizens Property Insurance Corporation.

1265

     c.  It is likely that the reinsurance market disruptions

1266

will not significantly abate prior to the 2008 2007 hurricane

1267

season.

1268

     2.  It is the intent of the Legislature to create options

1269

for insurers to purchase a temporary increased coverage limit

1270

above the statutorily determined limit in subparagraph (4)(c)1.,

1271

applicable for the 2007, 2008, and 2009 hurricane seasons, to

1272

address market disruptions and enable insurers, at their option,

1273

to procure additional coverage from the Florida Hurricane

1274

Catastrophe Fund.

1275

     (b)  Applicability of other provisions of this section.--All

1276

provisions of this section and the rules adopted under this

1277

section apply to the coverage created by this subsection unless

1278

specifically superseded by provisions in this subsection.

1279

     (c)  Optional coverage.--For the contract year commencing

1280

June 1, 2007, and ending May 31, 2008, the contract year

1281

commencing June 1, 2008, and ending May 31, 2009, and the

1282

contract year commencing June 1, 2009, and ending May 31, 2010,

1283

the board shall offer, for each of such years, the optional

1284

coverage as provided in this subsection.

1285

     (d)  Additional definitions.--As used in this subsection,

1286

the term:

1287

     1.  "FHCF" means Florida Hurricane Catastrophe Fund.

1288

     2.  "FHCF reimbursement premium" means the premium paid by

1289

an insurer for its coverage as a mandatory participant in the

1290

FHCF, but does not include additional premiums for optional

1291

coverages.

1292

     3.  "Payout multiple" means the number or multiple created

1293

by dividing the statutorily defined claims-paying capacity as

1294

determined in subparagraph (5)(c)1. (4)(c)1. by the aggregate

1295

reimbursement premiums paid by all insurers estimated or

1296

projected as of calendar year-end.

1297

     4.  "TICL" means the temporary increase in coverage limit.

1298

     5.  "TICL options" means the temporary increase in coverage

1299

options created under this subsection.

1300

     6.  "TICL insurer" means an insurer that has opted to obtain

1301

coverage under the TICL options addendum in addition to the

1302

coverage provided to the insurer under its FHCF reimbursement

1303

contract.

1304

     7.  "TICL reimbursement premium" means the premium charged

1305

by the fund for coverage provided under the TICL option.

1306

     8.  "TICL coverage multiple" means the coverage multiple

1307

when multiplied by an insurer's FHCF's reimbursement premium that

1308

defines the temporary increase in coverage limit.

1309

     9.  "TICL coverage" means the coverage for an insurer's

1310

losses above the insurer's statutorily determined claims-paying

1311

capacity based on the claims-paying limit in subparagraph

1312

(5)(c)1. (4)(c)1., which an insurer selects as its temporary

1313

increase in coverage from the fund under the TICL options

1314

selected. A TICL insurer's increased coverage limit options shall

1315

be calculated as follows:

1316

     a. The division board shall calculate and report to each

1317

TICL insurer the TICL coverage multiples based on 9 12 options

1318

for increasing the insurer's FHCF coverage limit. Each TICL

1319

coverage multiple shall be calculated by dividing $1 billion, $2

1320

billion, $3 billion, $4 billion, $5 billion, $6 billion, $7

1321

billion, $8 billion, and $9 billion, $10 billion, $11 billion, or

1322

$12 billion by the total estimated aggregate FHCF reimbursement

1323

premiums for the 2007-2008 contract year, the 2008-2009 contract

1324

year, and the 2009-2010 contract year.

1325

     b.  The TICL insurer's increased coverage shall be the FHCF

1326

reimbursement premium multiplied by the TICL coverage multiple

1327

for the TICL option selected. In order to determine an insurer's

1328

total limit of coverage, an insurer shall add its TICL coverage

1329

multiple to its payout multiple. The total shall represent a

1330

number that, when multiplied by an insurer's FHCF reimbursement

1331

premium for a given reimbursement contract year, defines an

1332

insurer's total limit of FHCF reimbursement coverage for that

1333

reimbursement contract year.

1334

     10.  "TICL options addendum" means an addendum to the

1335

reimbursement contract reflecting the obligations of the fund and

1336

insurers selecting an option to increase an insurer's FHCF

1337

coverage limit.

1338

     (e)  TICL options addendum.--

1339

     1.  The TICL options addendum shall provide for

1340

reimbursement of TICL insurers for covered events occurring

1341

between June 1, 2007, and May 31, 2008, and between June 1, 2008,

1342

and May 31, 2009, or between June 1, 2009, and May 31, 2010, in

1343

exchange for the TICL reimbursement premium paid into the fund

1344

under paragraph (f). Any insurer writing covered policies has the

1345

option of selecting an increased limit of coverage under the TICL

1346

options addendum and shall select such coverage at the time that

1347

it executes the FHCF reimbursement contract.

1348

     2.  The TICL addendum shall contain a promise by the board

1349

to reimburse the TICL insurer for 70 percent of the insurer's 45

1350

percent, 75 percent, or 90 percent of its losses from each

1351

covered event in excess of the insurer's mandatory coverage,

1352

including retention, plus 5 percent of the reimbursed losses to

1353

cover loss adjustment expenses from each covered event. The

1354

percentage shall be the same as the coverage level selected by

1355

the insurer under paragraph (4)(b).

1356

     3.  The TICL addendum shall provide that reimbursement

1357

amounts shall not be reduced by reinsurance paid or payable to

1358

the insurer from other sources.

1359

     4.  The priorities, schedule, and method of reimbursements

1360

under the TICL addendum shall be the same as provided under

1361

subsection (5) (4).

1362

     (f)  TICL reimbursement premiums.--Each TICL insurer shall

1363

pay to the fund, in the manner and at the time provided in the

1364

reimbursement contract for payment of reimbursement premiums, a

1365

TICL reimbursement premium determined as specified in subsection

1366

(5).

1367

     (g)  Effect on claims-paying capacity of the fund.--For the

1368

contract terms commencing June 1, 2007, June 1, 2008, and June 1,

1369

2009, the program created by this subsection shall increase the

1370

claims-paying capacity of the fund as provided in subparagraph

1371

(5)(c)1. (4)(c)1. by an amount not to exceed $9 $12 billion and

1372

shall depend on the TICL coverage options selected and the number

1373

of insurers that select the TICL optional coverage. The

1374

additional capacity shall apply only to the additional coverage

1375

provided under the TICL options and shall not otherwise affect

1376

any insurer's reimbursement from the fund if the insurer chooses

1377

not to select the temporary option to increase its limit of

1378

coverage under the FHCF.

1379

     (h)  Increasing the claims-paying capacity of the fund.--For

1380

the contract years commencing June 1, 2007, June 1, 2008, and

1381

June 1, 2009, the board may increase the claims-paying capacity

1382

of the fund as provided in paragraph (g) by an amount not to

1383

exceed $4 billion in four $1 billion options and shall depend on

1384

the TICL coverage options selected and the number of insurers

1385

that select the TICL optional coverage. Each insurer's TICL

1386

premium shall be calculated based upon the additional limit of

1387

increased coverage that the insurer selects. Such limit is

1388

determined by multiplying the TICL multiple associated with one

1389

of the four options times the insurer's FHCF reimbursement

1390

premium. The reimbursement premium associated with the additional

1391

coverage provided in this paragraph shall be determined as

1392

specified in subsection (6) (5).

1393

     Section 2.  Section 215.557, Florida Statutes, is amended to

1394

read:

1395

     215.557  Reports of insured values.--The reports of insured

1396

values under covered policies by zip code submitted to the

1397

Division of the Florida Hurricane Catastrophe Fund State Board of

1398

Administration pursuant to s. 215.555, as created by s. 1, ch.

1399

93-409, Laws of Florida, or similar legislation, are confidential

1400

and exempt from the provisions of s. 119.07(1) and s. 24(a), Art.

1401

I of the State Constitution.

1402

     Section 3.  Paragraph (h) of subsection (4) of section

1403

215.5586, Florida Statutes, is amended to read:

1404

     215.5586  My Safe Florida Home Program.--There is

1405

established within the Department of Financial Services the My

1406

Safe Florida Home Program. The department shall provide fiscal

1407

accountability, contract management, and strategic leadership for

1408

the program, consistent with this section. This section does not

1409

create an entitlement for property owners or obligate the state

1410

in any way to fund the inspection or retrofitting of residential

1411

property in this state. Implementation of this program is subject

1412

to annual legislative appropriations. It is the intent of the

1413

Legislature that the My Safe Florida Home Program provide

1414

inspections for at least 400,000 site-built, single-family,

1415

residential properties and provide grants to at least 35,000

1416

applicants before June 30, 2009. The program shall develop and

1417

implement a comprehensive and coordinated approach for hurricane

1418

damage mitigation that shall include the following:

1419

     (4)  ADVISORY COUNCIL.--There is created an advisory council

1420

to provide advice and assistance to the department regarding

1421

administration of the program. The advisory council shall consist

1422

of:

1423

     (h) The director senior officer of the Division of the

1424

Florida Hurricane Catastrophe Fund.

1425

1426

Members appointed under paragraphs (a)-(d) shall serve at the

1427

pleasure of the Financial Services Commission. Members appointed

1428

under paragraphs (e) and (f) shall serve at the pleasure of the

1429

appointing officer. All other members shall serve voting ex

1430

officio. Members of the advisory council shall serve without

1431

compensation but may receive reimbursement as provided in s.

1432

112.061 for per diem and travel expenses incurred in the

1433

performance of their official duties.

1434

     Section 4.  Subsection (1) of section 215.559, Florida

1435

Statutes, is amended to read:

1436

     215.559  Hurricane Loss Mitigation Program.--

1437

     (1)  There is created a Hurricane Loss Mitigation Program.

1438

The Legislature shall annually appropriate $10 million of the

1439

moneys authorized for appropriation under s. 215.555(8) s.

1440

215.555(7)(c) from the Florida Hurricane Catastrophe Fund to the

1441

Department of Community Affairs for the purposes set forth in

1442

this section.

1443

     Section 5.  Subsection (2) and paragraph (a) of subsection

1444

(3) of section 215.5595, Florida Statutes, are amended to read:

1445

     215.5595  Insurance Capital Build-Up Incentive Program.--

1446

     (2)  The purpose of this section is to provide surplus notes

1447

to new or existing authorized residential property insurers under

1448

the Insurance Capital Build-Up Incentive Program administered by

1449

the Division of the Florida Hurricane Catastrophe Fund of the

1450

State Board of Administration, under the following conditions:

1451

     (a)  The amount of the surplus note for any insurer or

1452

insurer group, other than an insurer writing only manufactured

1453

housing policies, may not exceed $25 million or 20 percent of the

1454

total amount of funds available under the program, whichever is

1455

greater. The amount of the surplus note for any insurer or

1456

insurer group writing residential property insurance covering

1457

only manufactured housing may not exceed $7 million.

1458

     (b)  The insurer must contribute an amount of new capital to

1459

its surplus which is at least equal to the amount of the surplus

1460

note and must apply to the board by July 1, 2006. If an insurer

1461

applies after July 1, 2006, but before June 1, 2007, the amount

1462

of the surplus note is limited to one-half of the new capital

1463

that the insurer contributes to its surplus, except that an

1464

insurer writing only manufactured housing policies is eligible to

1465

receive a surplus note of up to $7 million. For purposes of this

1466

section, new capital must be in the form of cash or cash

1467

equivalents as specified in s. 625.012(1).

1468

     (c)  The insurer's surplus, new capital, and the surplus

1469

note must total at least $50 million, except for insurers writing

1470

residential property insurance covering only manufactured

1471

housing. The insurer's surplus, new capital, and the surplus note

1472

must total at least $14 million for insurers writing only

1473

residential property insurance covering manufactured housing

1474

policies as provided in paragraph (a).

1475

     (d)  The insurer must commit to meeting a minimum writing

1476

ratio of net written premium to surplus of at least 2:1 for the

1477

term of the surplus note, which shall be determined by the Office

1478

of Insurance Regulation and certified quarterly to the board. For

1479

this purpose, the term "net written premium" means net written

1480

premium for residential property insurance in Florida, including

1481

the peril of wind, and "surplus" refers to the entire surplus of

1482

the insurer. If the required ratio is not maintained during the

1483

term of the surplus note, the board may increase the interest

1484

rate, accelerate the repayment of interest and principal, or

1485

shorten the term of the surplus note, subject to approval by the

1486

Commissioner of Insurance of payments by the insurer of principal

1487

and interest as provided in paragraph (f).

1488

     (e)  If the requirements of this section are met, the board

1489

may approve an application by an insurer for a surplus note,

1490

unless the board determines that the financial condition of the

1491

insurer and its business plan for writing residential property

1492

insurance in Florida places an unreasonably high level of

1493

financial risk to the state of nonpayment in full of the interest

1494

and principal. The board shall consult with the Office of

1495

Insurance Regulation and may contract with independent financial

1496

and insurance consultants in making this determination.

1497

     (f)  The surplus note must be repayable to the state with a

1498

term of 20 years. The surplus note shall accrue interest on the

1499

unpaid principal balance at a rate equivalent to the 10-year U.S.

1500

Treasury Bond rate, require the payment only of interest during

1501

the first 3 years, and include such other terms as approved by

1502

the board. Payment of principal or interest by the insurer on the

1503

surplus note must be approved by the Commissioner of Insurance,

1504

who shall approve such payment unless the commissioner determines

1505

that such payment will substantially impair the financial

1506

condition of the insurer. If such a determination is made, the

1507

commissioner shall approve such payment that will not

1508

substantially impair the financial condition of the insurer.

1509

     (g)  The total amount of funds available for the program is

1510

limited to the amount appropriated by the Legislature for this

1511

purpose. If the amount of surplus notes requested by insurers

1512

exceeds the amount of funds available, the board may prioritize

1513

insurers that are eligible and approved, with priority for

1514

funding given to insurers writing only manufactured housing

1515

policies, regardless of the date of application, based on the

1516

financial strength of the insurer, the viability of its proposed

1517

business plan for writing additional residential property

1518

insurance in the state, and the effect on competition in the

1519

residential property insurance market. Between insurers writing

1520

residential property insurance covering manufactured housing,

1521

priority shall be given to the insurer writing the highest

1522

percentage of its policies covering manufactured housing.

1523

     (h)  The board may allocate portions of the funds available

1524

for the program and establish dates for insurers to apply for

1525

surplus notes from such allocation which are earlier than the

1526

dates established in paragraph (b).

1527

     (i)  Notwithstanding paragraph (d), a newly formed

1528

manufactured housing insurer that is eligible for a surplus note

1529

under this section shall meet the premium to surplus ratio

1530

provisions of s. 624.4095.

1531

     (j)  As used in this section, "an insurer writing only

1532

manufactured housing policies" includes:

1533

     1.  A Florida domiciled insurer that begins writing personal

1534

lines residential manufactured housing policies in Florida after

1535

March 1, 2007, and that removes a minimum of 50,000 policies from

1536

Citizens Property Insurance Corporation without accepting a

1537

bonus, provided at least 25 percent of its policies cover

1538

manufactured housing. Such an insurer may count any funds above

1539

the minimum capital and surplus requirement that were contributed

1540

into the insurer after March 1, 2007, as new capital under this

1541

section.

1542

     2.  A Florida domiciled insurer that writes at least 40

1543

percent of its policies covering manufactured housing in Florida.

1544

     (3)  As used in this section, the term:

1545

     (a) "Board" means the Division of the Florida Hurricane

1546

Catastrophe Fund of the State Board of Administration.

1547

     Section 6.  Paragraph (c) of subsection (1), paragraphs (a),

1548

(b), (d), (f), and (g) of subsection (2), and paragraph (b) of

1549

subsection (3) of section 627.0628, Florida Statutes, are amended

1550

to read:

1551

     627.0628  Florida Commission on Hurricane Loss Projection

1552

Methodology; public records exemption; public meetings

1553

exemption.--

1554

     (1)  LEGISLATIVE FINDINGS AND INTENT.--

1555

     (c)  It is the intent of the Legislature to create the

1556

Florida Commission on Hurricane Loss Projection Methodology as a

1557

panel of experts to provide the most actuarially sophisticated

1558

guidelines and standards for projection of hurricane losses

1559

possible, given the current state of actuarial science. It is the

1560

further intent of the Legislature that such standards and

1561

guidelines must be used by the Division of the Florida Hurricane

1562

Catastrophe Fund of the State Board of Administration in

1563

developing reimbursement premium rates for the Florida Hurricane

1564

Catastrophe Fund, and, subject to paragraph (3)(c), may be used

1565

by insurers in rate filings under s. 627.062 unless the way in

1566

which such standards and guidelines were applied by the insurer

1567

was erroneous, as shown by a preponderance of the evidence.

1568

     (2)  COMMISSION CREATED.--

1569

     (a)  There is created the Florida Commission on Hurricane

1570

Loss Projection Methodology, which is assigned to the Division of

1571

the Florida Hurricane Catastrophe Fund of the State Board of

1572

Administration. For the purposes of this section, the term

1573

"commission" means the Florida Commission on Hurricane Loss

1574

Projection Methodology. The commission shall be administratively

1575

housed within the State Board of Administration, but it shall

1576

independently exercise the powers and duties specified in this

1577

section.

1578

     (b)  The commission shall consist of the following 11

1579

members:

1580

     1.  The insurance consumer advocate.

1581

     2. The director of the Division of the Florida Hurricane

1582

Catastrophe Fund senior employee of the State Board of

1583

Administration responsible for operations of the Florida

1584

Hurricane Catastrophe Fund.

1585

     3.  The Executive Director of the Citizens Property

1586

Insurance Corporation.

1587

     4.  The Director of the Division of Emergency Management of

1588

the Department of Community Affairs.

1589

     5.  The actuary member of the Florida Hurricane Catastrophe

1590

Fund Advisory Council.

1591

     6.  An employee of the office who is an actuary responsible

1592

for property insurance rate filings and who is appointed by the

1593

director of the office.

1594

     7.  Five members appointed by the Chief Financial Officer,

1595

as follows:

1596

     a.  An actuary who is employed full time by a property and

1597

casualty insurer which was responsible for at least 1 percent of

1598

the aggregate statewide direct written premium for homeowner's

1599

insurance in the calendar year preceding the member's appointment

1600

to the commission.

1601

     b.  An expert in insurance finance who is a full-time member

1602

of the faculty of the State University System and who has a

1603

background in actuarial science.

1604

     c.  An expert in statistics who is a full-time member of the

1605

faculty of the State University System and who has a background

1606

in insurance.

1607

     d.  An expert in computer system design who is a full-time

1608

member of the faculty of the State University System.

1609

     e.  An expert in meteorology who is a full-time member of

1610

the faculty of the State University System and who specializes in

1611

hurricanes.

1612

     (d) The board of the Division of the Florida Hurricane

1613

Catastrophe Fund of the State Board of Administration shall

1614

annually appoint one of the members of the commission to serve as

1615

chair.

1616

     (f) The Division of the Florida Hurricane Catastrophe Fund

1617

of the State Board of Administration shall, as a cost of

1618

administration of the Florida Hurricane Catastrophe Fund, provide

1619

for travel, expenses, and staff support for the commission.

1620

     (g)  There shall be no liability on the part of, and no

1621

cause of action of any nature shall arise against, any member of

1622

the commission, any member of the State Board of Administration,

1623

or any employee of the Division of the Florida Hurricane

1624

Catastrophe Fund of the State Board of Administration for any

1625

action taken in the performance of their duties under this

1626

section. In addition, the commission may, in writing, waive any

1627

potential cause of action for negligence of a consultant,

1628

contractor, or contract employee engaged to assist the

1629

commission.

1630

     (3)  ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.--

1631

     (b)  In establishing reimbursement premiums for the Florida

1632

Hurricane Catastrophe Fund, the Division of the Florida Hurricane

1633

Catastrophe Fund State Board of Administration must, to the

1634

extent feasible, employ actuarial methods, principles, standards,

1635

models, or output ranges found by the commission to be accurate

1636

or reliable.

1637

     Section 7.  This act shall take effect June 1, 2008.