| 1 | Representatives Gelber and Taylor offered the following: |
| 2 |
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| 3 | Amendment to Amendment (439287) (with title amendment) |
| 4 | Between lines 2452 and 2453, insert: |
| 5 | Section 22. Effective June 1, 2009, paragraph (h) is added |
| 6 | to subsection (1) of section 215.555, Florida Statutes, |
| 7 | paragraphs (a), (c), and (e) of subsection (2), subsection (3), |
| 8 | paragraph (c) of subsection (4), and paragraphs (a) and (b) of |
| 9 | subsection (6) of that section are amended, and subsection (18) |
| 10 | is added to that section, to read: |
| 11 | 215.555 Florida Hurricane Catastrophe Fund.-- |
| 12 | (1) FINDINGS AND PURPOSE.--The Legislature finds and |
| 13 | declares as follows: |
| 14 | (h)1. The Legislature further finds that, as of January |
| 15 | 2008, more than 15 years of efforts to use state regulatory, |
| 16 | financial, and insurance mechanisms to ensure availability and |
| 17 | affordability of residential property insurance coverage have |
| 18 | failed to satisfactorily achieve these goals. |
| 19 | 2. The continuing lack of available, affordable coverage |
| 20 | creates a substantial burden on the state's economy. |
| 21 | 3. The unsatisfactory performance of a system intended to |
| 22 | provide available, affordable coverage for windstorm losses in |
| 23 | this state indicates that, in light of this state's unique |
| 24 | exposure to windstorm losses, windstorm may be an uninsurable |
| 25 | peril in all or parts of this state as the concept of |
| 26 | insurability is commonly understood. Therefore, a restructured |
| 27 | system of protecting homeowners from windstorm losses is |
| 28 | necessary to maintain the viability of the economy of this |
| 29 | state. |
| 30 | (2) DEFINITIONS.--As used in this section: |
| 31 | (a) "Actuarially indicated" means, with respect to |
| 32 | premiums paid by insurers for reimbursement provided by the fund |
| 33 | under subsection (4) and premiums paid by insureds for windstorm |
| 34 | coverage provided under subsection (18), an amount determined |
| 35 | according to principles of actuarial science to be adequate, but |
| 36 | not excessive, in the aggregate, to pay current and future |
| 37 | obligations and expenses of the fund, including additional |
| 38 | amounts if needed to pay debt service on revenue bonds issued |
| 39 | under this section and to provide required debt service coverage |
| 40 | in excess of the amounts required to pay actual debt service on |
| 41 | revenue bonds issued under subsection (6), and: |
| 42 | 1. With respect to premiums paid by insurers for |
| 43 | reimbursement under subsection (4), determined according to |
| 44 | principles of actuarial science to reflect each insurer's |
| 45 | relative exposure to hurricane losses; or |
| 46 | 2. With respect to premiums paid by insureds for windstorm |
| 47 | coverage under subsection (18), determined according to |
| 48 | principles of actuarial science to reflect each insured's |
| 49 | relative exposure to windstorm losses. |
| 50 | (c) "Covered policy" means any insurance policy covering |
| 51 | residential property in this state, including, but not limited |
| 52 | to, any homeowner's, mobile home owner's, farm owner's, |
| 53 | condominium association, condominium unit owner's, tenant's, or |
| 54 | apartment building policy, or any other policy covering a |
| 55 | residential structure or its contents issued by any authorized |
| 56 | insurer, including a commercial self-insurance fund holding a |
| 57 | certificate of authority issued by the Office of Insurance |
| 58 | Regulation under s. 624.462, the Citizens Property Insurance |
| 59 | Corporation, and any joint underwriting association or similar |
| 60 | entity created under law. The term "covered policy" includes any |
| 61 | collateral protection insurance policy covering personal |
| 62 | residences which protects both the borrower's and the lender's |
| 63 | financial interests, in an amount at least equal to the coverage |
| 64 | for the dwelling in place under the lapsed homeowner's policy, |
| 65 | if such policy can be accurately reported as required in |
| 66 | subsection (5). Additionally, covered policies include policies |
| 67 | covering the peril of wind removed from the Florida Residential |
| 68 | Property and Casualty Joint Underwriting Association or from the |
| 69 | Citizens Property Insurance Corporation, created under s. |
| 70 | 627.351(6), or from the Florida Windstorm Underwriting |
| 71 | Association, created under s. 627.351(2), by an authorized |
| 72 | insurer under the terms and conditions of an executed assumption |
| 73 | agreement between the authorized insurer and such association or |
| 74 | Citizens Property Insurance Corporation. Each assumption |
| 75 | agreement between the association and such authorized insurer or |
| 76 | Citizens Property Insurance Corporation must be approved by the |
| 77 | Office of Insurance Regulation before the effective date of the |
| 78 | assumption, and the Office of Insurance Regulation must provide |
| 79 | written notification to the board within 15 working days after |
| 80 | such approval. "Covered policy" does not include any policy that |
| 81 | excludes wind coverage or hurricane coverage or any reinsurance |
| 82 | agreement and does not include any policy otherwise meeting this |
| 83 | definition which is issued by a surplus lines insurer or a |
| 84 | reinsurer. All commercial residential excess policies and all |
| 85 | deductible buy-back policies that, based on sound actuarial |
| 86 | principles, require individual ratemaking shall be excluded by |
| 87 | rule if the actuarial soundness of the fund is not jeopardized. |
| 88 | For this purpose, the term "excess policy" means a policy that |
| 89 | provides insurance protection for large commercial property |
| 90 | risks and that provides a layer of coverage above a primary |
| 91 | layer insured by another insurer. Effective June 1, 2010, the |
| 92 | term "covered policy" does not include any policy providing |
| 93 | personal lines residential property insurance coverage as |
| 94 | defined in subsection (18). |
| 95 | (e) "Retention" means the amount of losses below which an |
| 96 | insurer is not entitled to reimbursement from the fund. An |
| 97 | insurer's retention shall be calculated as follows: |
| 98 | 1. The board shall calculate and report to each insurer |
| 99 | the retention multiples for that year. For the contract year |
| 100 | beginning June 1, 2005, the retention multiple shall be equal to |
| 101 | $4.5 billion divided by the total estimated reimbursement |
| 102 | premium for the contract year; for the contract year beginning |
| 103 | June 1, 2006, through the contract year beginning June 1, 2009 |
| 104 | subsequent years, the retention multiple shall be equal to $4.5 |
| 105 | billion, adjusted based upon the reported exposure from the |
| 106 | prior contract year to reflect the percentage growth in exposure |
| 107 | to the fund for covered policies since 2004, divided by the |
| 108 | total estimated reimbursement premium for the contract year. For |
| 109 | the contract year beginning June 1, 2010, the retention multiple |
| 110 | shall be equal to $1 billion divided by the total estimated |
| 111 | reimbursement premium for the contract year; for subsequent |
| 112 | years, the retention multiple shall be equal to $1 billion, |
| 113 | adjusted based upon the reported exposure from the prior |
| 114 | contract year to reflect the percentage growth in exposure to |
| 115 | the fund for covered policies since 2009, divided by the total |
| 116 | estimated reimbursement premium for the contract year. Total |
| 117 | reimbursement premium for purposes of the calculation under this |
| 118 | subparagraph shall be estimated using the assumption that all |
| 119 | insurers have selected the 90-percent coverage level. |
| 120 | 2. The retention multiple as determined under subparagraph |
| 121 | 1. shall be adjusted to reflect the coverage level elected by |
| 122 | the insurer. For insurers electing the 90-percent coverage |
| 123 | level, the adjusted retention multiple is 100 percent of the |
| 124 | amount determined under subparagraph 1. For insurers electing |
| 125 | the 75-percent coverage level, the retention multiple is 120 |
| 126 | percent of the amount determined under subparagraph 1. For |
| 127 | insurers electing the 45-percent coverage level, the adjusted |
| 128 | retention multiple is 200 percent of the amount determined under |
| 129 | subparagraph 1. |
| 130 | 3. An insurer shall determine its provisional retention by |
| 131 | multiplying its provisional reimbursement premium by the |
| 132 | applicable adjusted retention multiple and shall determine its |
| 133 | actual retention by multiplying its actual reimbursement premium |
| 134 | by the applicable adjusted retention multiple. |
| 135 | 4. For insurers who experience multiple covered events |
| 136 | causing loss during the contract year, beginning June 1, 2005, |
| 137 | each insurer's full retention shall be applied to each of the |
| 138 | covered events causing the two largest losses for that insurer. |
| 139 | For each other covered event resulting in losses, the insurer's |
| 140 | retention shall be reduced to one-third of the full retention. |
| 141 | The reimbursement contract shall provide for the reimbursement |
| 142 | of losses for each covered event based on the full retention |
| 143 | with adjustments made to reflect the reduced retentions after |
| 144 | January 1 of the contract year provided the insurer reports its |
| 145 | losses as specified in the reimbursement contract. |
| 146 | (3) FLORIDA HURRICANE CATASTROPHE FUND CREATED.--There is |
| 147 | created the Florida Hurricane Catastrophe Fund to be |
| 148 | administered by the State Board of Administration. Moneys in the |
| 149 | fund may not be expended, loaned, or appropriated except to pay |
| 150 | obligations of the fund arising out of reimbursement contracts |
| 151 | entered into under subsection (4), payment of debt service on |
| 152 | revenue bonds issued under subsection (6), costs of the |
| 153 | mitigation program under subsection (7), costs of procuring |
| 154 | reinsurance, costs of the Florida Windstorm Insurance Program |
| 155 | under subsection (18), and costs of administration of the fund. |
| 156 | The board shall invest the moneys in the fund pursuant to ss. |
| 157 | 215.44-215.52. Except as otherwise provided in this section, |
| 158 | earnings from all investments shall be retained in the fund. The |
| 159 | board may employ or contract with such staff and professionals |
| 160 | as the board deems necessary for the administration of the fund. |
| 161 | The board may adopt such rules as are reasonable and necessary |
| 162 | to implement this section and shall specify interest due on any |
| 163 | delinquent remittances, which interest may not exceed the fund's |
| 164 | rate of return plus 5 percent. Such rules must conform to the |
| 165 | Legislature's specific intent in establishing the fund as |
| 166 | expressed in subsection (1), must enhance the fund's potential |
| 167 | ability to respond to claims for covered events, must contain |
| 168 | general provisions so that the rules can be applied with |
| 169 | reasonable flexibility so as to accommodate insurers in |
| 170 | situations of an unusual nature or where undue hardship may |
| 171 | result, except that such flexibility may not in any way impair, |
| 172 | override, supersede, or constrain the public purpose of the |
| 173 | fund, and must be consistent with sound insurance practices. The |
| 174 | board may, by rule, provide for the exemption from subsections |
| 175 | (4) and (5) of insurers writing covered policies with less than |
| 176 | $10 million in aggregate exposure for covered policies if the |
| 177 | exemption does not affect the actuarial soundness of the fund. |
| 178 | (4) REIMBURSEMENT CONTRACTS.-- |
| 179 | (c)1.a. The contract shall also provide that the |
| 180 | obligation of the board with respect to all contracts covering a |
| 181 | particular contract year shall not exceed the actual claims- |
| 182 | paying capacity of the fund up to a limit of $15 billion for |
| 183 | that contract year adjusted based upon the reported exposure |
| 184 | from the prior contract year to reflect the percentage growth in |
| 185 | exposure to the fund for covered policies since 2003, provided |
| 186 | the dollar growth in the limit may not increase in any year by |
| 187 | an amount greater than the dollar growth of the balance of the |
| 188 | fund as of December 31, less any premiums or interest |
| 189 | attributable to optional coverage, as defined by rule which |
| 190 | occurred over the prior calendar year. This sub-subparagraph |
| 191 | expires June 1, 2010. |
| 192 | b. For the contract year beginning June 1, 2010, and |
| 193 | subsequent contract years, the contract shall provide that the |
| 194 | obligation of the board with respect to all reimbursement |
| 195 | contracts covering a particular contract year shall not exceed |
| 196 | $3 billion for that contract year plus an adjustment based upon |
| 197 | the reported exposure from the prior contract year to reflect |
| 198 | the percentage growth in exposure of the fund for commercial |
| 199 | lines residential policies since 2009. |
| 200 | 2. In May before the start of the upcoming contract year |
| 201 | and in October during the contract year, the board shall publish |
| 202 | in the Florida Administrative Weekly a statement of the fund's |
| 203 | estimated borrowing capacity and the projected balance of the |
| 204 | fund as of December 31. After the end of each calendar year, the |
| 205 | board shall notify insurers of the estimated borrowing capacity |
| 206 | and the balance of the fund as of December 31 to provide |
| 207 | insurers with data necessary to assist them in determining their |
| 208 | retention and projected payout from the fund for loss |
| 209 | reimbursement purposes. In conjunction with the development of |
| 210 | the premium formula, as provided for in subsection (5), the |
| 211 | board shall publish factors or multiples that assist insurers in |
| 212 | determining their retention and projected payout for the next |
| 213 | contract year. For all regulatory and reinsurance purposes, an |
| 214 | insurer may calculate its projected payout from the fund as its |
| 215 | share of the total fund premium for the current contract year |
| 216 | multiplied by the sum of the projected balance of the fund as of |
| 217 | December 31 and the estimated borrowing capacity for that |
| 218 | contract year as reported under this subparagraph. |
| 219 | (6) REVENUE BONDS.-- |
| 220 | (a) General provisions.-- |
| 221 | 1. Upon the occurrence of a hurricane and a determination |
| 222 | that the moneys in the fund are or will be insufficient to pay |
| 223 | reimbursement at the levels promised in the reimbursement |
| 224 | contracts, the board may take the necessary steps under |
| 225 | paragraph (c) or paragraph (d) for the issuance of revenue bonds |
| 226 | for the benefit of the fund. The proceeds of such revenue bonds |
| 227 | may be used to make reimbursement payments under reimbursement |
| 228 | contracts; to refinance or replace previously existing |
| 229 | borrowings or financial arrangements; to pay interest on bonds; |
| 230 | to fund reserves for the bonds; to pay expenses incident to the |
| 231 | issuance or sale of any bond issued under this section, |
| 232 | including costs of validating, printing, and delivering the |
| 233 | bonds, costs of printing the official statement, costs of |
| 234 | publishing notices of sale of the bonds, and related |
| 235 | administrative expenses; or for such other purposes related to |
| 236 | the financial obligations of the fund as the board may |
| 237 | determine. The term of the bonds may not exceed 30 years. The |
| 238 | board may pledge or authorize the corporation to pledge all or a |
| 239 | portion of all revenues under subsection (5) and under paragraph |
| 240 | (b) to secure such revenue bonds and the board may execute such |
| 241 | agreements between the board and the issuer of any revenue bonds |
| 242 | and providers of other financing arrangements under paragraph |
| 243 | (7)(b) as the board deems necessary to evidence, secure, |
| 244 | preserve, and protect such pledge. If reimbursement premiums |
| 245 | received under subsection (5) or earnings on such premiums are |
| 246 | used to pay debt service on revenue bonds, such premiums and |
| 247 | earnings shall be used only after the use of the moneys derived |
| 248 | from assessments under paragraph (b). The funds, credit, |
| 249 | property, or taxing power of the state or political subdivisions |
| 250 | of the state shall not be pledged for the payment of such bonds. |
| 251 | The board may also enter into agreements under paragraph (c) or |
| 252 | paragraph (d) for the purpose of issuing revenue bonds in the |
| 253 | absence of a hurricane upon a determination that such action |
| 254 | would maximize the ability of the fund to meet future |
| 255 | obligations. |
| 256 | 2. The Legislature finds and declares that the issuance of |
| 257 | bonds under this subsection is for the public purpose of paying |
| 258 | the proceeds of the bonds to insurers as required by the |
| 259 | contracts entered into under subsection (4), thereby enabling |
| 260 | insurers to pay the claims of policyholders to assure that |
| 261 | policyholders are able to pay the cost of construction, |
| 262 | reconstruction, repair, and restoration, and other costs |
| 263 | associated with damage to property of policyholders of covered |
| 264 | policies after the occurrence of a hurricane, and for the public |
| 265 | purpose of paying claims of policyholders under subsection (18) |
| 266 | to ensure that policyholders are able to pay the costs of |
| 267 | construction, reconstruction, repair, and restoration and other |
| 268 | costs associated with damage to their property after a hurricane |
| 269 | or other windstorm. |
| 270 | (b) Emergency assessments.-- |
| 271 | 1.a. If the board determines that the amount of revenue |
| 272 | produced under subsections subsection (5) and (18) is |
| 273 | insufficient to fund the obligations, costs, and expenses of the |
| 274 | fund and the corporation, including repayment of revenue bonds |
| 275 | and that portion of the debt service coverage not met by |
| 276 | reimbursement premiums, the board shall direct the Office of |
| 277 | Insurance Regulation to levy, by order, an emergency assessment |
| 278 | on direct premiums for all property and casualty lines of |
| 279 | business in this state, including property and casualty business |
| 280 | of surplus lines insurers regulated under part VIII of chapter |
| 281 | 626, but not including any workers' compensation premiums or |
| 282 | medical malpractice premiums. As used in this subsection, the |
| 283 | term "property and casualty business" includes all lines of |
| 284 | business identified on Form 2, Exhibit of Premiums and Losses, |
| 285 | in the annual statement required of authorized insurers by s. |
| 286 | 624.424 and any rule adopted under this section, except for |
| 287 | those lines identified as accident and health insurance and |
| 288 | except for policies written under the National Flood Insurance |
| 289 | Program. The assessment shall be specified as a percentage of |
| 290 | direct written premium and is subject to annual adjustments by |
| 291 | the board in order to meet debt obligations. The same percentage |
| 292 | shall apply to all policies in lines of business subject to the |
| 293 | assessment issued or renewed during the 12-month period |
| 294 | beginning on the effective date of the assessment. This sub- |
| 295 | subparagraph expires June 1, 2010; however, the expiration of |
| 296 | this sub-subparagraph does not affect any assessments levied |
| 297 | under this sub-subparagraph prior to that date. |
| 298 | b. Effective June 1, 2010, if the board determines that |
| 299 | the amount of revenue produced under subsections (5) and (18) is |
| 300 | insufficient to fund the obligations, costs, and expenses of the |
| 301 | fund and the corporation, including repayment of revenue bonds |
| 302 | and that portion of the debt service coverage not met by |
| 303 | reimbursement premiums, the board shall direct the Office of |
| 304 | Insurance Regulation to levy, by order, an emergency assessment |
| 305 | on direct premiums for all personal lines and commercial lines |
| 306 | policies providing property insurance coverage, including |
| 307 | policies issued by the Florida Windstorm Insurance Program under |
| 308 | subsection (18). The assessment shall be specified as a |
| 309 | percentage of direct written premium and is subject to annual |
| 310 | adjustments by the board in order to meet debt obligations. The |
| 311 | same percentage shall apply to all policies in lines of business |
| 312 | subject to the assessment issued or renewed during the 12-month |
| 313 | period beginning on the effective date of the assessment. An |
| 314 | insurer that is not a participating insurer within the meaning |
| 315 | provided in subsection (18) may not be assessed under this sub- |
| 316 | subparagraph to fund the obligations, costs, and expenses of the |
| 317 | Florida Windstorm Insurance Program. |
| 318 | 2.a. A premium is not subject to an annual assessment |
| 319 | under this paragraph in excess of 6 percent of premium with |
| 320 | respect to obligations arising out of losses attributable to any |
| 321 | one contract year, and a premium is not subject to an aggregate |
| 322 | annual assessment under this paragraph in excess of 10 percent |
| 323 | of premium. This sub-subparagraph expires June 1, 2010; however, |
| 324 | the expiration of this sub-subparagraph does not affect any |
| 325 | assessments levied under this sub-subparagraph prior to that |
| 326 | date. |
| 327 | b. Effective June 1, 2010, the total amount of emergency |
| 328 | assessments under this paragraph with respect to any year may |
| 329 | not exceed 10 percent of the statewide total gross written |
| 330 | premium for all insurers for personal lines and commercial lines |
| 331 | policies providing property insurance coverage, including |
| 332 | policies issued by the Florida Windstorm Insurance Program under |
| 333 | subsection (18), for the prior year. However, if the fund |
| 334 | deficit with respect to any year exceeds such amount and bonds |
| 335 | are issued to defray the deficit, the total amount of emergency |
| 336 | assessments with respect to such deficit may not in any year |
| 337 | exceed 10 percent of the deficit or such lesser percentage as is |
| 338 | sufficient to retire the bonds as determined by the board. |
| 339 | c. An annual assessment under this paragraph shall |
| 340 | continue as long as the revenue bonds issued with respect to |
| 341 | which the assessment was imposed are outstanding, including any |
| 342 | bonds the proceeds of which were used to refund the revenue |
| 343 | bonds, unless adequate provision has been made for the payment |
| 344 | of the bonds under the documents authorizing issuance of the |
| 345 | bonds. |
| 346 | 3. Emergency assessments shall be collected from |
| 347 | policyholders. Emergency assessments shall be remitted by |
| 348 | insurers as a percentage of direct written premium for the |
| 349 | preceding calendar quarter as specified in the order from the |
| 350 | Office of Insurance Regulation. The office shall verify the |
| 351 | accurate and timely collection and remittance of emergency |
| 352 | assessments and shall report the information to the board in a |
| 353 | form and at a time specified by the board. Each insurer |
| 354 | collecting assessments shall provide the information with |
| 355 | respect to premiums and collections as may be required by the |
| 356 | office to enable the office to monitor and verify compliance |
| 357 | with this paragraph. |
| 358 | 4. With respect to assessments of surplus lines premiums, |
| 359 | each surplus lines agent shall collect the assessment at the |
| 360 | same time as the agent collects the surplus lines tax required |
| 361 | by s. 626.932, and the surplus lines agent shall remit the |
| 362 | assessment to the Florida Surplus Lines Service Office created |
| 363 | by s. 626.921 at the same time as the agent remits the surplus |
| 364 | lines tax to the Florida Surplus Lines Service Office. The |
| 365 | emergency assessment on each insured procuring coverage and |
| 366 | filing under s. 626.938 shall be remitted by the insured to the |
| 367 | Florida Surplus Lines Service Office at the time the insured |
| 368 | pays the surplus lines tax to the Florida Surplus Lines Service |
| 369 | Office. The Florida Surplus Lines Service Office shall remit the |
| 370 | collected assessments to the fund or corporation as provided in |
| 371 | the order levied by the Office of Insurance Regulation. The |
| 372 | Florida Surplus Lines Service Office shall verify the proper |
| 373 | application of such emergency assessments and shall assist the |
| 374 | board in ensuring the accurate and timely collection and |
| 375 | remittance of assessments as required by the board. The Florida |
| 376 | Surplus Lines Service Office shall annually calculate the |
| 377 | aggregate written premium on property and casualty business, |
| 378 | other than workers' compensation and medical malpractice, |
| 379 | procured through surplus lines agents and insureds procuring |
| 380 | coverage and filing under s. 626.938 and shall report the |
| 381 | information to the board in a form and at a time specified by |
| 382 | the board. |
| 383 | 5. Any assessment authority not used for a particular |
| 384 | contract year may be used for a subsequent contract year. If, |
| 385 | for a subsequent contract year, the board determines that the |
| 386 | amount of revenue produced under subsection (5) is insufficient |
| 387 | to fund the obligations, costs, and expenses of the fund and the |
| 388 | corporation, including repayment of revenue bonds and that |
| 389 | portion of the debt service coverage not met by reimbursement |
| 390 | premiums, the board shall direct the Office of Insurance |
| 391 | Regulation to levy an emergency assessment up to an amount not |
| 392 | exceeding the amount of unused assessment authority from a |
| 393 | previous contract year or years, plus an additional 4 percent |
| 394 | provided that the assessments in the aggregate do not exceed the |
| 395 | limits specified in subparagraph 2. This subparagraph expires |
| 396 | June 1, 2010; however, the expiration of this subparagraph does |
| 397 | not affect any assessments levied under this subparagraph prior |
| 398 | to that date. |
| 399 | 6. The assessments otherwise payable to the corporation |
| 400 | under this paragraph shall be paid to the fund unless and until |
| 401 | the Office of Insurance Regulation and the Florida Surplus Lines |
| 402 | Service Office have received from the corporation and the fund a |
| 403 | notice, which shall be conclusive and upon which they may rely |
| 404 | without further inquiry, that the corporation has issued bonds |
| 405 | and the fund has no agreements in effect with local governments |
| 406 | under paragraph (c). On or after the date of the notice and |
| 407 | until the date the corporation has no bonds outstanding, the |
| 408 | fund shall have no right, title, or interest in or to the |
| 409 | assessments, except as provided in the fund's agreement with the |
| 410 | corporation. |
| 411 | 7. Emergency assessments are not premium and are not |
| 412 | subject to the premium tax, to the surplus lines tax, to any |
| 413 | fees, or to any commissions. An insurer is liable for all |
| 414 | assessments that it collects and must treat the failure of an |
| 415 | insured to pay an assessment as a failure to pay the premium. An |
| 416 | insurer is not liable for uncollectible assessments. |
| 417 | 8. When an insurer is required to return an unearned |
| 418 | premium, it shall also return any collected assessment |
| 419 | attributable to the unearned premium. A credit adjustment to the |
| 420 | collected assessment may be made by the insurer with regard to |
| 421 | future remittances that are payable to the fund or corporation, |
| 422 | but the insurer is not entitled to a refund. |
| 423 | 9. When a surplus lines insured or an insured who has |
| 424 | procured coverage and filed under s. 626.938 is entitled to the |
| 425 | return of an unearned premium, the Florida Surplus Lines Service |
| 426 | Office shall provide a credit or refund to the agent or such |
| 427 | insured for the collected assessment attributable to the |
| 428 | unearned premium prior to remitting the emergency assessment |
| 429 | collected to the fund or corporation. |
| 430 | 10. The exemption of medical malpractice insurance |
| 431 | premiums from emergency assessments under this paragraph is |
| 432 | repealed May 31, 2010, and medical malpractice insurance |
| 433 | premiums shall be subject to emergency assessments attributable |
| 434 | to loss events occurring in the contract years commencing on |
| 435 | June 1, 2010. |
| 436 | (18) FLORIDA WINDSTORM INSURANCE PROGRAM.-- |
| 437 | (a) Creation; purpose.--The Florida Windstorm Insurance |
| 438 | Program is created within the Florida Hurricane Catastrophe |
| 439 | Fund. The purpose of the program is to provide personal lines |
| 440 | residential windstorm insurance coverage for properties |
| 441 | throughout the state. |
| 442 | (b) Definitions.--The definitions in subsection (2) apply |
| 443 | to the program, except as modified by this paragraph. As used in |
| 444 | this subsection: |
| 445 | 1. "Board" means the State Board of Administration. |
| 446 | 2. "Participating insurer" means an insurer providing |
| 447 | personal lines residential property insurance coverage for |
| 448 | nonwindstorm perils that administers windstorm coverage on |
| 449 | behalf of the program. |
| 450 | 3. "Personal lines residential property insurance |
| 451 | coverage" consists of the type of coverage provided by |
| 452 | homeowner's, mobile home owner's, dwelling, tenant's, |
| 453 | condominium unit owner's, cooperative unit owner's, and similar |
| 454 | policies. The term "personal lines residential property |
| 455 | insurance coverage" does not include the type of coverage |
| 456 | provided by condominium association, cooperative association, |
| 457 | apartment building, and similar policies, including policies |
| 458 | covering the common elements of a homeowners' association. |
| 459 | 4. "Program" means the Florida Windstorm Insurance Program |
| 460 | created under this subsection. |
| 461 | 5. "Windstorm coverage" means coverage for loss or damage |
| 462 | to personal lines residential property caused by wind, wind |
| 463 | gusts, hail, rain, tornadoes, cyclones, tropical storms, or |
| 464 | hurricanes. The term "windstorm coverage" does not include |
| 465 | coverage for loss or damage to residential property caused by |
| 466 | flood, storm surge, or rising water. |
| 467 | (c) Coverage provided; standards; policy forms.-- |
| 468 | 1. The program shall issue a policy providing windstorm |
| 469 | coverage to each personal lines residential risk covered by a |
| 470 | participating insurer, except if inconsistent with the |
| 471 | underwriting standards adopted under the program. Coverage shall |
| 472 | include structure, contents, additional living expenses, |
| 473 | emergency debris removal, and temporary repairs after loss. |
| 474 | 2. The board shall adopt by rule standards for the |
| 475 | program, including, but not limited to, standards relating to |
| 476 | underwriting, mitigation discounts, deductibles, cancellation |
| 477 | and nonrenewal, and recordkeeping. |
| 478 | 3. The board shall adopt by rule policy forms to be used |
| 479 | for program policies. Program policies must comply with part X |
| 480 | of chapter 627. The board shall also adopt by rule such notices, |
| 481 | coverage summaries, and outlines of coverage as are required by |
| 482 | law or as the board deems appropriate, including a notice |
| 483 | informing an insured of the duties of the program and the duties |
| 484 | of the participating insurer. |
| 485 | 4. The policy for coverage of a structure may not exceed |
| 486 | $2 million. The board shall establish by rule policy limits for |
| 487 | coverage of contents, additional living expenses, emergency |
| 488 | debris removal, and temporary repairs after loss. |
| 489 | 5. This subsection does not restrict an insured's ability |
| 490 | to exclude windstorm coverage, hurricane coverage, or contents |
| 491 | coverage under s. 627.712. |
| 492 | 6. Any residential property covered by the program that |
| 493 | sustains a total loss for windstorm coverage more than three |
| 494 | times in any given 10-year period shall no longer be eligible |
| 495 | for coverage under the program. |
| 496 | (d) Participating insurers.-- |
| 497 | 1. The board shall adopt by rule a form for the contract |
| 498 | between the program and a participating insurer specifying the |
| 499 | respective rights and duties of the program and the |
| 500 | participating insurer. The contract shall be effective for a |
| 501 | term of 5 years. |
| 502 | 2. Any insurer writing personal lines residential property |
| 503 | insurance coverage may elect to, and Citizens Property Insurance |
| 504 | Corporation shall, enter into a contract with the program under |
| 505 | which the program agrees to issue a policy providing windstorm |
| 506 | coverage to each insured for which the participating insurer |
| 507 | provides a policy providing personal lines residential property |
| 508 | insurance coverage for other perils, except as provided in sub- |
| 509 | subparagraph 3.b., and under which the participating insurer |
| 510 | agrees to administer the program policy. In the case of a group |
| 511 | of two or more insurers under common ownership, all members of |
| 512 | the group writing personal lines residential property insurance |
| 513 | coverage must make the same election as to participation or |
| 514 | nonparticipation in the program. |
| 515 | 3. The contract shall require the participating insurer |
| 516 | to: |
| 517 | a. Collect premiums for program coverage as established by |
| 518 | the program and apply deductibles, discounts, surcharges, |
| 519 | credits, and limits as established by the program. |
| 520 | b. Administer the windstorm coverage under the program |
| 521 | policy and provide the program policy to each of its personal |
| 522 | lines residential property insureds, except to the extent |
| 523 | inconsistent with program underwriting standards or the property |
| 524 | owner's option to exclude coverage under s. 627.712(2) or (3). |
| 525 | c. Comply with program rules and standards relating to |
| 526 | program policies, including underwriting, and cancellation and |
| 527 | nonrenewal. |
| 528 | d. Provide application processing, premium processing, |
| 529 | claims processing, and adjusting services in accordance with |
| 530 | program rules and standards. |
| 531 | 4. An insurer has a fiduciary duty to the program to |
| 532 | fairly adjust claims and allocate losses between windstorm and |
| 533 | nonwindstorm perils. |
| 534 | 5. The program shall establish an annual audit process to |
| 535 | determine each participating insurer's compliance with the |
| 536 | requirements of the contract. |
| 537 | (e) Program powers and duties.-- |
| 538 | 1. The program shall make claims payments directly to |
| 539 | insureds based on the information provided to the program by the |
| 540 | participating insurer. The contract between the program and the |
| 541 | participating insurer may provide that the participating insurer |
| 542 | shall make claims payments to the insured on behalf of the |
| 543 | program, but only to the extent the program has advanced funds |
| 544 | to the participating insurer for the purpose of paying claims. |
| 545 | 2. The contract between the program and the participating |
| 546 | insurer shall require the program to pay the participating |
| 547 | insurer's loss adjustment expense, reasonable acquisition costs |
| 548 | not to exceed the usual and customary amount for each individual |
| 549 | component of such costs, litigation costs, and judgments |
| 550 | attributable to program policies, except to the extent that the |
| 551 | costs or expenses are the result of the participating insurer's |
| 552 | breach of the contract or breach of its fiduciary duty. |
| 553 | 3. If a participating insurer fails to substantially |
| 554 | comply with its obligations under the program contract or |
| 555 | breaches its fiduciary duty to the program, the program may |
| 556 | impose any combination of the following sanctions: suspension of |
| 557 | the participating insurer's ability to participate in the |
| 558 | program for a period not to exceed 5 years, actual damages plus |
| 559 | a penalty of up to 50 percent, or liquidated damages as |
| 560 | specified in the program contract. |
| 561 | 4. There shall be no liability on the part of, and no |
| 562 | cause of action of any nature shall arise against, any |
| 563 | participating insurer or its agents or employees, the program or |
| 564 | its employees, or members of the board for any action taken by |
| 565 | such persons or entities in the performance of their respective |
| 566 | duties or responsibilities under this subsection. Such immunity |
| 567 | does not apply to: |
| 568 | a. Any of the foregoing persons or entities for any |
| 569 | willful tort. |
| 570 | b. The program, a participating insurer, or a |
| 571 | participating insurer's producing agents for breach of any |
| 572 | written contract or written agreement pertaining to insurance |
| 573 | coverage. |
| 574 | c. The program or the fund with respect to issuance or |
| 575 | payment of debt. |
| 576 | d. Any participating insurer with respect to any action by |
| 577 | the program to enforce a participating insurer's obligations to |
| 578 | the program under this subsection. |
| 579 | e. The program in any action for breach of contract or for |
| 580 | benefits under a policy issued by the program. In any such |
| 581 | action, the program shall be liable to the policyholders and |
| 582 | beneficiaries for attorney's fees as provided in s. 627.428. |
| 583 | 5. The termination of an insurer's participation in the |
| 584 | program terminates the program policies the insurer had been |
| 585 | administering, and such policies remain in effect until their |
| 586 | expiration date unless terminated for some other cause. The |
| 587 | insurer shall continue to have a duty to administer such |
| 588 | policies unless the program makes other arrangements for the |
| 589 | administration of such policies. |
| 590 | (f) Ratemaking.-- |
| 591 | 1. The board shall select an independent consultant to |
| 592 | recommend to the board a rate plan for program coverage. |
| 593 | 2.a. Program rates must be as close as possible to |
| 594 | actuarially indicated rates, taking into account the state's |
| 595 | need to restore or maintain affordability of property insurance |
| 596 | coverage for property owners and the cost of reinsurance and |
| 597 | other risk-transfer mechanisms. |
| 598 | b. Except as otherwise provided in this paragraph, rates |
| 599 | may not be excessive, inadequate, or unfairly discriminatory |
| 600 | within the meaning provided in s. 627.062 and must provide the |
| 601 | mitigation discounts and other loss-prevention incentives |
| 602 | specified in s. 627.0629. |
| 603 | c. In the aggregate, the rates must generate premium |
| 604 | revenue equal to or greater than the statewide average annual |
| 605 | insured windstorm loss, based on an average of all models |
| 606 | currently determined to meet the standards and guidelines of the |
| 607 | Florida Commission on Hurricane Loss Projection Methodology plus |
| 608 | expenses. |
| 609 | d. If the board determines that the cash balance of the |
| 610 | fund, net of the proceeds of any pre-event debt instruments, is |
| 611 | less than $1 billion, the board may add to the rates determined |
| 612 | under this subparagraph a rapid cash buildup premium surcharge |
| 613 | of not more than 25 percent. |
| 614 | 3. Annually, after a public hearing, the board shall adopt |
| 615 | a rate plan pursuant to this paragraph. A rate plan takes effect |
| 616 | upon its approval by the unanimous vote of all members of the |
| 617 | board or at a later date specified in the rate plan and remains |
| 618 | in effect until the effective date of a subsequently adopted |
| 619 | rate plan. |
| 620 | 4. The rate plan recommended to or adopted by the board is |
| 621 | not subject to any other regulatory review or approval. The rate |
| 622 | plan as adopted is final agency action for purposes of chapter |
| 623 | 120 and is subject to judicial review in the manner provided in |
| 624 | s. 120.68, except judicial review must be sought in the District |
| 625 | Court of Appeal, First District, regardless of where any party |
| 626 | resides. |
| 627 | (g) Reinsurance; annual report.-- |
| 628 | 1. The program may procure reinsurance or other financial |
| 629 | alternatives at any loss level. |
| 630 | 2. The program shall annually engage in negotiations to |
| 631 | procure reinsurance or other financial alternatives to transfer |
| 632 | some or all of the risk of loss in excess of the program's 100- |
| 633 | year probable maximum loss. |
| 634 | 3.a. The program shall annually procure reinsurance or |
| 635 | other financial alternatives to transfer at least 50 percent of |
| 636 | the risk of loss between the program's 50-year probable maximum |
| 637 | loss and the program's 100-year probable maximum loss. The board |
| 638 | may structure such reinsurance and other financial alternatives |
| 639 | in such layer or layers, and with such percentages of retained |
| 640 | liability in a particular layer, as the board deems appropriate. |
| 641 | b. The program shall annually procure reinsurance or other |
| 642 | financial alternatives to transfer at least the first 50 percent |
| 643 | of the risk of loss between the program's 100-year probable |
| 644 | maximum loss and the program's 250-year probable maximum loss. |
| 645 | c. The board may, with respect to any year, waive or |
| 646 | modify the requirements of this subparagraph only if the board |
| 647 | finds, after a public hearing and by a unanimous vote of all |
| 648 | members of the board, that transferring risk as required by this |
| 649 | subparagraph would not be a cost-effective means of reducing the |
| 650 | potential assessment liability of property owners. |
| 651 | 4. The board shall provide an annual report to the |
| 652 | President of the Senate and the Speaker of the House of |
| 653 | Representatives describing the state of the market for |
| 654 | reinsurance and other risk-transfer mechanisms, summarizing |
| 655 | negotiations for reinsurance and other financial alternatives to |
| 656 | transfer program risk, and explaining the program's actions with |
| 657 | regard to reinsurance and other financial alternatives. |
| 658 | (h) Personal lines residential windstorm coverage issued |
| 659 | by nonparticipating insurers.--Windstorm coverage under a |
| 660 | personal lines residential property insurance policy issued by |
| 661 | an insurer that is not a participating insurer is subject to s. |
| 662 | 627.062, except that the rates for such coverage may be |
| 663 | disapproved only if they are inadequate or unfairly |
| 664 | discriminatory. |
| 665 | (i) Transition.--It is the intent of the Legislature that |
| 666 | participating insurers continue to provide windstorm coverage to |
| 667 | their existing policyholders under policies providing personal |
| 668 | lines residential property insurance coverage until the first |
| 669 | renewal date on or after June 1, 2009, at which time the |
| 670 | windstorm coverage shall be provided under a program policy. For |
| 671 | that purpose, a participating insurer remains eligible for |
| 672 | coverage under subsection (4) during the contract year beginning |
| 673 | June 1, 2009, to the extent the participating insurer has in |
| 674 | force policies defined as covered policies under subsection (2). |
| 675 | The replacement of windstorm coverage under a participating |
| 676 | insurer's policy providing personal lines residential property |
| 677 | insurance coverage with windstorm coverage under a program |
| 678 | policy does not constitute a cancellation or nonrenewal for |
| 679 | purposes of s. 627.4133 or any other purposes under the |
| 680 | Insurance Code. With respect to noncommercial residential |
| 681 | property insurance policy renewals taking effect on or after |
| 682 | June 1, 2009, and before June 1, 2010, the notice of renewal |
| 683 | premium shall include a notice, in a form specified by the |
| 684 | board, that, as of the policy renewal date, windstorm coverage |
| 685 | will be provided under a program policy administered by the |
| 686 | insurer and coverage for other perils will be provided under a |
| 687 | residential property insurance policy issued by the insurer. |
| 688 | Section 23. State Board of Administration; implementation |
| 689 | of the Florida Windstorm Insurance Program.--No later than |
| 690 | January 1, 2009, the State Board of Administration shall adopt |
| 691 | all contract forms, rules, standards, policy forms, mitigation |
| 692 | discounts, and rates required to implement the Florida Windstorm |
| 693 | Insurance Program created by s. 215.555, Florida Statutes, as |
| 694 | amended by this act. |
| 695 | Section 24. Paragraph (gg) is added to subsection (6) of |
| 696 | section 627.351, Florida Statutes, to read: |
| 697 | 627.351 Insurance risk apportionment plans.-- |
| 698 | (6) CITIZENS PROPERTY INSURANCE CORPORATION.-- |
| 699 | (gg) Notwithstanding any provision of this subsection or |
| 700 | s. 627.3517: |
| 701 | 1. On or after June 1, 2009, the corporation may not issue |
| 702 | or renew any personal lines residential property insurance |
| 703 | policy providing windstorm-only coverage. |
| 704 | 2.a. In order to facilitate the transfer of policies of |
| 705 | the corporation from the corporation to the competitive market |
| 706 | and in order to provide a capital contribution to the Florida |
| 707 | Windstorm Insurance Program, the corporation shall offer |
| 708 | insurers the opportunity to bid on the right to provide |
| 709 | nonwindstorm coverage to current personal lines residential |
| 710 | policyholders of the corporation, to take effect on the |
| 711 | policyholder's first renewal date on or after June 1, 2009, or |
| 712 | through an assumption agreement effective on or after June 1, |
| 713 | 2009. |
| 714 | b. The corporation shall prepare blocks of business that |
| 715 | are balanced as to geographic location and insured value and |
| 716 | shall offer the blocks of business at auction beginning no later |
| 717 | than October 1, 2008. The insurer that prevails in the auction |
| 718 | shall have an exclusive right to enter into an assumption |
| 719 | agreement with the corporation under which the participating |
| 720 | insurer assumes the nonwindstorm coverage for the remainder of |
| 721 | the policy term and the Florida Windstorm Insurance Program |
| 722 | assumes the windstorm coverage for the remainder of the policy |
| 723 | term. If an assumption occurs, any renewal shall be at the |
| 724 | participating insurer's rates as to the nonwindstorm coverage |
| 725 | and the Florida Windstorm Insurance Program rates as to the |
| 726 | windstorm coverage. Any assumptions under this sub-subparagraph |
| 727 | must take effect no later than May 31, 2010. |
| 728 | c. The provisions of s. 627.3517 do not apply to any offer |
| 729 | to replace coverage by the corporation with personal lines |
| 730 | residential property insurance coverage provided by a |
| 731 | participating insurer as defined in s. 215.555(18), including |
| 732 | any assumption under this subparagraph. |
| 733 | d. The corporation shall transfer all proceeds of the |
| 734 | auctions to the Florida Hurricane Catastrophe Fund, which shall |
| 735 | treat the proceeds as a capital contribution for the benefit of |
| 736 | the Florida Windstorm Insurance Program. |
| 737 | 3. Effective June 1, 2009, the corporation may not issue |
| 738 | or renew a policy providing personal lines residential property |
| 739 | insurance coverage if the owner of the property has received an |
| 740 | offer of coverage from a participating insurer as defined in s. |
| 741 | 215.555(18), provided the participating insurer has provided the |
| 742 | corporation with notice of the offer of coverage at least 30 |
| 743 | days prior to the renewal date or expected issuance date of the |
| 744 | corporation's policy. |
| 745 | 4. No later than December 31, 2010, the corporation shall |
| 746 | transfer to the Florida Hurricane Catastrophe Fund an additional |
| 747 | capital contribution for the benefit of the Florida Windstorm |
| 748 | Insurance Program. The contribution shall consist of the |
| 749 | corporation's surplus as to policyholders, multiplied by a |
| 750 | ratio: |
| 751 | a. The numerator of which is the total structural insured |
| 752 | value as of June 1, 2010, for risks covered by all policies |
| 753 | issued by the corporation; and |
| 754 | b. The denominator of which is the total structural |
| 755 | insured value as of June 1, 2009, for risks covered by all |
| 756 | policies issued by the corporation. |
| 757 | Section 25. Effective June 1, 2009, subsection (1) of |
| 758 | section 627.712, Florida Statutes, is amended to read: |
| 759 | 627.712 Residential windstorm coverage required; |
| 760 | availability of exclusions for windstorm or contents.-- |
| 761 | (1) Effective upon the date of issuance of the policy or |
| 762 | the date of the first renewal on or after June 1, 2009, an |
| 763 | insurer issuing or renewing a residential property insurance |
| 764 | policy must provide windstorm coverage as part of the policy |
| 765 | issued by the insurer or under a separate policy issued by the |
| 766 | Florida Windstorm Insurance Program under s. 215.555 and |
| 767 | administered by the insurer. This subsection does not apply with |
| 768 | respect to risks that are eligible for wind-only coverage from |
| 769 | Citizens Property Insurance Corporation under s. 627.351(6). |
| 770 |
|
| 771 | ----------------------------------------------------- |
| 772 | T I T L E A M E N D M E N T |
| 773 | Remove line 2652 and insert: |
| 774 | certain structures; amending s. 215.555, F.S.; providing |
| 775 | additional legislative findings; revising certain definitions; |
| 776 | providing for application of the Florida Hurricane Catastrophe |
| 777 | Fund to costs of the Florida Windstorm Insurance Program; |
| 778 | revising certain reimbursement contract board obligation |
| 779 | limitations; providing for future expiration of certain |
| 780 | limitations; revising legislative findings and declarations |
| 781 | relating to revenue bonds; providing for application to coverage |
| 782 | of costs of property damage under policies issued under the |
| 783 | Florida Windstorm Insurance Program; revising emergency |
| 784 | assessment requirement provisions to include application to |
| 785 | policies issued under the Florida Windstorm Insurance Program; |
| 786 | providing for future expiration of certain provisions; creating |
| 787 | the Florida Windstorm Insurance Program within the Florida |
| 788 | Hurricane Catastrophe Fund; providing a purpose; providing |
| 789 | definitions; providing requirements for coverage, standards, and |
| 790 | policy forms under the program; providing limitations; providing |
| 791 | for administration of the program by the State Board of |
| 792 | Administration; requiring the board to adopt rules; providing an |
| 793 | eligibility limitation on certain properties' participation in |
| 794 | the program; providing requirements for insurers participating |
| 795 | in the program; providing contract requirements; providing for |
| 796 | participating insurer compliance audits; specifying powers and |
| 797 | duties of the program; providing claims payment requirements; |
| 798 | providing for payment of certain insurer's costs and expenses; |
| 799 | providing for penalties for insurers for certain actions; |
| 800 | specifying absence of liability for certain actions; providing |
| 801 | for effect of termination of an insurer's participation; |
| 802 | specifying ratemaking requirements; authorizing the board to add |
| 803 | a rapid cash buildup premium surcharge to rates under certain |
| 804 | circumstances; requiring the board to adopt a rate plan; |
| 805 | providing requirements for procuring reinsurance; authorizing |
| 806 | the board to waive or modify certain reinsurance requirements; |
| 807 | requiring an annual report to the Legislature; requiring |
| 808 | windstorm coverage under certain insurance policies issued by |
| 809 | certain insurers to be subject to certain rate standards |
| 810 | requirements; providing transitional requirements; specifying |
| 811 | requirements for the board in implementing the program; amending |
| 812 | s. 627.351, F.S.; prohibiting the Citizens Property Insurance |
| 813 | Corporation from issuing or renewing certain windstorm-only |
| 814 | insurance policies after a certain date; providing requirements |
| 815 | for transfer of policies of the corporation to the program; |
| 816 | providing for transfer of certain proceeds and funds to the |
| 817 | Florida Hurricane Catastrophe Fund for certain purposes; |
| 818 | amending s. 627.712, F.S.; revising windstorm coverage |
| 819 | requirements for insurers; providing effective dates. |