CS for CS for SB's 2860 & 1196 First Engrossed

20082860e1

A bill to be entitled

An act relating to insurance; amending s. 215.5595, F.S.;

revising legislative findings with respect to the

Insurance Capital Build-Up Incentive Program and the

appropriation of state funds for surplus notes issued by

residential property insurers; revising the conditions and

requirements for providing funds to insurers under the

program; requiring a commitment by the insurer to meet

minimum premium-to-surplus writing ratios for residential

property insurance, for taking policies out of Citizens

Property Insurance Corporation, and for maintaining

certain surplus and reinsurance; establishing deadlines

for insurers to apply for funds; authorizing the State

Board of Administration to charge a late fee for payment

of remittances; requiring the board to submit semiannual

reports to the Legislature regarding the program;

providing that amendments made by the act do not affect

the terms of surplus notes approved prior to a specified

date, but authorizing the board and an insurer to

renegotiate such terms consistent with such amendments;

requiring the board to transfer to Citizens Property

Insurance Corporation any funds that have not been

reserved for insurers approved to receive such funds under

the program, from the funds that were appropriated from

Citizens; requiring the board to transfer to Citizens

interest and principal payments to Citizens Property

Insurance Corporation for surplus note funded from

appropriations from Citizens; requiring Citizens to

deposit such funds into accounts from which appropriations

were made; amending s. 542.20, F.S.; subjecting the

business of insurance to the Florida Antitrust Act;

limiting enforcement to actions by the Attorney General or

a state attorney; providing exceptions; amending s.

624.3161, F.S.; authorizing the Office of Insurance

Regulation to require an insurer to file its claims

handling practices and procedures as a public record based

on findings of a market conduct examination; amending s.

624.4211, F.S.; increasing the maximum amounts of

administrative fines that may be imposed upon an insurer

by the Office of Insurance Regulation for nonwillful and

willful violations of an order or rule of the office or

any provision of the Florida Insurance Code; authorizing

the office to impose a fine for each day of noncompliance

up to a maximum amount; providing factors to consider when

determining the amount of the fine; creating s. 624.4213,

F.S.; specifying requirements for submission of a document

or information to the Office of Insurance Regulation or

the Department of Financial Services in order for a person

to claim that the document is a trade secret; requiring

each page or portion to be labeled as a trade secret and

be separated from non-trade secret material; requiring the

submitting party to include an affidavit certifying

certain information about the documents claimed to be

trade secrets; requiring the office or department to

notify persons who submit trade secret documents of any

public-records request and the opportunity to file a court

action to bar disclosure; specifying conditions for the

office to retain or release such documents; requiring an

award of attorney's fees against a person who certified a

document as trade secret if a court or administrative

tribunal finds that the document is not a trade secret;

creating s. 624.4305, F.S.; requiring that an insurer

planning to nonrenew more than a specified number of

residential property insurance polices notify the Office

of Insurance Regulation and obtain approval for such

nonrenewals; specifying procedures for issuance of such

notice; prohibiting the office from approving a nonrenewal

plan unless it determines that the insurer has met certain

conditions; prohibiting the office from requiring certain

actions; limiting the ability of the office to disapprove

or restrict nonrenewal of certain policies under certain

conditions; amending s. 626.9521, F.S.; increasing the

maximum fines that may be imposed by the office or

department for nonwillful and willful violations of state

law regarding unfair methods of competition and unfair or

deceptive acts or practices related to insurance; amending

s. 626.9541, F.S.; prohibiting an insurer from considering

certain factors when evaluating or adjusting a property

insurance claim; prohibiting an insurer from failing to

pay undisputed amounts of benefits owed under a property

insurance policy within a certain period; amending s.

627.062, F.S.; requiring that an insurer seeking a rate

for property insurance that is greater than the rate most

recently approved by the Office of Insurance Regulation

make a "file and use" filing for all such rate filings

made after a specified date; revising the factors the

office must consider in reviewing a rate filing;

prohibiting the Office of Insurance Regulation from

disapproving as excessive a rate solely because the

insurer obtained reinsurance covering a specified probably

maximum loss; allowing the office to disapprove a rate as

excessive within 1 year after the rate has been approved

under certain conditions related to nonrenewal of policies

by the insurer; requiring the Division of Administrative

Hearings to expedite a hearing request by an insurer and

for the administrative law judge to commence the hearing

within a specified time; establishing time limits for

entry of a recommended order, for parties to submit

written exceptions, and for the office to enter a final

100

order, subject to waiver by all parties; authorizing an

101

insurer to request an expedited appellate review pursuant

102

to the Florida Rules of Appellate Procedure; expressing

103

legislative intent for an expedited appellate review;

104

requiring an administrative law judge in a hearing on an

105

insurance rate to grant a continuance if requested by a

106

party due to receiving additional information that was not

107

previously available; deleting provisions relating to the

108

submission of a disputed rate filing, other than a rate

109

filing for medical malpractice insurance, to an

110

arbitration panel in lieu of an administrative hearing if

111

the rate is filed before a specified date; requiring

112

certain officers and the chief actuary of a property

113

insurer to certify certain information as part of a rate

114

filing, subject to the penalty of perjury; amending s.

115

627.0613, F.S.; deleting cross-references to conform to

116

changes made by the act; amending s. 627.0628, F.S.;

117

requiring that with respect to rate filings, insurers must

118

use actuarial methods or models found to be accurate or

119

reliable by the Florida Commission on Hurricane Loss

120

Projection Methodology; deleting the requirement for the

121

Office of Insurance Regulation and the Consumer Advocate

122

to have access to all assumptions of a hurricane loss

123

model in order for a model that has been found to be

124

accurate and reliable by the Florida Commission on

125

Hurricane Loss Projection Methodology to be admissible in

126

a rate proceeding; deleting cross-references to conform to

127

changes made by the act; amending s. 627.0629, F.S.;

128

requiring that the Office of Insurance Regulation develop

129

and make publicly available before a specified deadline a

130

proposed method for insurers to establish windstorm

131

mitigation premium discounts that correlate to the uniform

132

home rating scale; requiring that the Financial Services

133

Commission adopt rules before a specified deadline;

134

requiring insurers to make rate filings pursuant to such

135

method; authorizing the commission to make changes by rule

136

to the uniform home grading scale and specify by rule the

137

minimum required discounts, credits, or other rate

138

differentials; requiring that such rate differentials be

139

consistent with generally accepted actuarial principles

140

and wind loss mitigation studies; amending s. 627.351,

141

F.S., relating to Citizens Property Insurance Corporation;

142

deleting a provision to conform to changes made in the

143

act; deleting provisions defining the terms "homestead

144

property" and "nonhomestead property"; deleting a

145

provision providing for the classification of certain

146

dwellings as "nonhomestead property"; deleting provisions

147

making dwellings and condominium units that have a

148

replacement cost above a specified value ineligible for

149

coverage after a specified date; deleting requirements for

150

certain properties to meeting building code plus

151

requirements as a condition of eligibility for coverage by

152

the corporation; requiring certain structures to have

153

opening protections as a condition of eligibility for

154

coverage after a specified date; requiring that the

155

corporation cease issuance of new wind-only coverage

156

beginning on a specified date; deleting outdated

157

provisions requiring the corporation to submit a report

158

for approval of offering multiperil coverage; revising

159

threshold amounts of deficits incurred in a calendar year

160

on which the decision to levy assessments and the types of

161

such assessments are based; revising the formula used to

162

calculate shares of assessments owed by certain assessable

163

insureds; requiring that the board of governors make

164

certain determinations before levying emergency

165

assessments; providing the board of governors with

166

discretion to set the amount of an emergency assessment

167

within specified limits; requiring the board of governors

168

to levy a Citizens policyholder surcharge under certain

169

conditions; deleting a provision requiring the levy of an

170

immediate assessment against certain policyholders under

171

such conditions; requiring that funds collected from the

172

levy of such surcharges be used for certain purposes;

173

providing that such surcharges are not considered premium

174

and are not subject to commissions, fees, or premium

175

taxes; requiring that the failure to pay such surcharges

176

be treated as failure to pay premium; requiring that the

177

amount of any assessment or surcharge which exceeds the

178

amount of deficits be remitted to and used by the

179

corporation for specified purposes; deleting provisions

180

requiring that the plan of operation of the corporation

181

provide for the levy of a Citizens policyholder surcharge

182

if regular deficit assessments are levied as a result of

183

deficits in certain accounts; deleting provisions related

184

to the calculation, classification, and nonpayment of such

185

surcharge; requiring that the corporation make an annual

186

filing for each personal or commercial line of business it

187

writes, beginning on a specified date; limiting the

188

overall average statewide premium increase and the

189

increase for an individual policyholder to a specified

190

amount for rates established for certain policies during a

191

specified period; deleting a provision requiring an

192

insurer to purchase bonds that remain unsold; requiring

193

the corporation to make its database of policies available

194

to prospective take-out insurers under certain conditions;

195

requiring the corporation to require agents to accept or

196

decline appointment for any policy selected; requiring the

197

corporation to notify the policyholder of certain

198

information if an insurer selected his or her policy for a

199

take-out offer but the policyholder's agent refused to be

200

appointed; deleting provisions requiring the corporation

201

to make certain confidential underwriting and claims files

202

available to agents to conform to changes made by the act

203

relating to ineligibility of certain dwellings; amending

204

s. 627.4133, F.S.; increasing the required time period for

205

an insurer to notify a policyholder of cancellation or

206

nonrenewal of a personal lines or commercial residential

207

property insurance policy; making conforming changes;

208

creating s. 627.714, F.S.; requiring that personal lines

209

residential policies be guaranteed renewable for a

210

specified period if the dwelling meets certain

211

requirements for wind-borne debris protection; creating s.

212

689.262, F.S.; requiring a purchaser of residential

213

property to be presented with the windstorm mitigation

214

rating of the structure; authorizing the Financial

215

Services Commission to adopt rules; amending s. 817.2341,

216

F.S.; providing for criminal penalties to be imposed under

217

certain conditions against any person who willfully files

218

a materially false or misleading rate filing; requiring

219

Citizens Property Insurance Corporation to transfer funds

220

to the General Revenue Fund if the losses due to a

221

hurricane do not exceed a specified amount; requiring the

222

board of governors of Citizens Property Insurance

223

Corporation to make a reasonable estimate of such losses

224

by a certain date; making nonrecurring appropriations for

225

purposes of the Insurance Capital Build-Up Incentive

226

Program established pursuant to s. 215.5595, F.S., as

227

amended by the act; authorizing costs and fees to be paid

228

from funds appropriated, subject to specified limitations;

229

providing effective dates.

230

231

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

232

233

Section 1. Section 215.5595, Florida Statutes, is amended

234

to read:

235

215.5595 Insurance Capital Build-Up Incentive Program.--

236

(1) Upon entering the 2008 2006 hurricane season, the

237

Legislature finds that:

238

(a) The losses in Florida from eight hurricanes in 2004 and

239

2005 have seriously strained the resources of both the voluntary

240

insurance market and the public sector mechanisms of Citizens

241

Property Insurance Corporation and the Florida Hurricane

242

Catastrophe Fund.

243

(b) Private reinsurance is much less available and at a

244

significantly greater cost to residential property insurers as

245

compared to 1 year ago, particularly for amounts below the

246

insurer's retention or retained losses that must be paid before

247

reimbursement is provided by the Florida Hurricane Catastrophe

248

Fund.

249

250

the insolvency of certain insurers may be imminent.

251

(d) Hurricane forecast experts predict that the 2006

252

hurricane season will be an active hurricane season and that the

253

Atlantic and Gulf Coast regions face an active hurricane cycle of

254

10 to 20 years or longer.

255

(b)(e) Citizens Property Insurance Corporation has over 1.2

256

million policies in force, has the largest market share of any

257

insurer writing residential property insurer in the state, and

258

faces the threat of a catastrophic loss that The number of

259

cancellations or nonrenewals of residential property insurance

260

policies is expected to increase and the number of new

261

residential policies written in the voluntary market are likely

262

to decrease, causing increased policy growth and exposure to the

263

state insurer of last resort, Citizens Property Insurance

264

Corporation, and threatening to increase the deficit of the

265

corporation, currently estimated to be over $1.7 billion. This

266

deficit must be funded by assessments against insurers and

267

policyholders, unless otherwise funded by the state.

268

(c)(f) Policyholders are subject to high increased premiums

269

and assessments that are increasingly making such coverage

270

unaffordable and that may force policyholders to sell their homes

271

and even leave the state.

272

(d)(g) The increased risk to the public sector and private

273

sector continues to pose poses a serious threat to the economy of

274

this state, particularly the building and financing of

275

residential structures, and existing mortgages may be placed in

276

default.

277

(h) The losses from 2004 and 2005, combined with the

278

expectation that the increase in hurricane activity will continue

279

for the foreseeable future, have caused both insurers and

280

reinsurers to limit the capital they are willing to commit to

281

covering the hurricane risk in Florida; attracting new capital to

282

the Florida market is a critical priority; and providing a low-

283

cost source of capital would enable insurers to write additional

284

residential property insurance coverage and act to mitigate

285

premium increases.

286

(e)(i) Appropriating state funds to be exchanged for used

287

as surplus notes issued by for residential property insurers,

288

under conditions requiring the insurer to contribute additional

289

private sector capital and to write a minimum level of premiums

290

for residential hurricane coverage, is a valid and important

291

public purpose.

292

(f) Extending the Insurance Capital Build-up Incentive

293

Program will provide an incentive for investors to commit

294

additional capital to Florida's residential insurance market.

295

(2) The purpose of this section is to provide funds in

296

exchange for surplus notes to be issued by to new or existing

297

authorized residential property insurers under the Insurance

298

Capital Build-Up Incentive Program administered by the State

299

Board of Administration, under the following conditions:

300

(a) The amount of state funds provided in exchange for a

301

the surplus note to for any insurer or insurer group, other than

302

an insurer writing only manufactured housing policies, may not

303

exceed $25 million or 20 percent of the total amount of funds

304

appropriated for available under the program, whichever is

305

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

306

insurer group writing residential property insurance covering

307

only manufactured housing may not exceed $7 million.

308

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

309

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

310

note and must apply to the board by October 1, 2008 July 1, 2006.

311

If an insurer applies after July 1, 2006, but before June 1,

312

2007, the amount of the surplus note is limited to one-half of

313

the new capital that the insurer contributes to its surplus,

314

except that an insurer writing only manufactured housing policies

315

is eligible to receive a surplus note of up to $7 million. For

316

purposes of this section, new capital must be in the form of cash

317

or cash equivalents as specified in s. 625.012(1).

318

319

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

320

residential property insurance covering only manufactured

321

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

322

must total at least $14 million for insurers writing only

323

residential property insurance covering manufactured housing

324

policies as provided in paragraph (a).

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(d) The insurer must commit to increase its writings of

326

residential property insurance, including the peril of wind, and

327

to meet meeting a minimum writing ratio of net written premium to

328

surplus of at least 1:1 for the first year after receiving the

329

state funds, 1.5:1 for the second year, and 2:1 for the remaining

330

term of the surplus note. Alternatively, the insurer must meet a

331

minimum writing ratio of gross written premium to surplus of at

332

least 3:1 for the first year after receiving the state funds,

333

4.5:1 for the second year, and 6:1 for the remaining term of the

334

surplus note. The writing ratios, which shall be determined by

335

the Office of Insurance Regulation and certified quarterly to the

336

board. For this purpose, the term "premium" "net written premium"

337

means net written premium for residential property insurance in

338

Florida, including the peril of wind, and "surplus" refers to the

339

amount of the state funds provided to the insurer in exchange for

340

the surplus note plus the amount of new capital contributed by

341

the insurer in order to obtain the state funds the entire surplus

342

of the insurer. The insurer must also commit to writing at least

343

15 percent of its net or gross written premium for new policies,

344

not including renewal premiums, for policies taken out of

345

Citizens Property Insurance Corporation, during each of the first

346

3 years after receiving the state funds in exchange for the

347

surplus note, which shall be determined by the Office of

348

Insurance Regulation and certified annually to the board. The

349

removal of such policies must result in a reduction in the

350

probable maximum loss in the account from which the policies are

351

removed. The insurer must also commit to maintaining a level of

352

surplus and reinsurance sufficient to cover in excess of its 1-

353

in-100 year probable maximum loss, as determined by a hurricane

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loss model accepted by the Florida Commission on Hurricane Loss

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Projection Methodology, which shall be determined by the Office

356

of Insurance Regulation and certified annually the board. If the

357

board determines that the insurer has failed to meet any of the

358

requirements of this paragraph required ratio is not maintained

359

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

360

interest rate, accelerate the repayment of interest and

361

principal, or shorten the term of the surplus note, subject to

362

approval by the Commissioner of Insurance of payments by the

363

insurer of principal and interest as provided in paragraph (f).

364

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

365

may approve an application by an insurer for funds in exchange

366

for issuance of a surplus note, unless the board determines that

367

the financial condition of the insurer and its business plan for

368

writing residential property insurance in Florida places an

369

unreasonably high level of financial risk to the state of

370

nonpayment in full of the interest and principal. The board shall

371

consult with the Office of Insurance Regulation and may contract

372

with independent financial and insurance consultants in making

373

this determination.

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

375

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

376

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

377

Treasury Bond rate, require the payment only of interest during

378

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

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the board. The board may charge late fees up to 5 percent for

380

late payments or other late remittances. Payment of principal, or

381

interest, or late fees by the insurer on the surplus note must be

382

approved by the Commissioner of Insurance, who shall approve such

383

payment unless the commissioner determines that such payment will

384

substantially impair the financial condition of the insurer. If

385

such a determination is made, the commissioner shall approve such

386

payment that will not substantially impair the financial

387

condition of the insurer.

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

389

limited to the amount appropriated by the Legislature for this

390

purpose. If the amount of surplus notes requested by insurers

391

exceeds the amount of funds available, the board may prioritize

392

insurers that are eligible and approved, with priority for

393

funding given to insurers writing only manufactured housing

394

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

395

financial strength of the insurer, the viability of its proposed

396

business plan for writing additional residential property

397

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

398

residential property insurance market. Between insurers writing

399

residential property insurance covering manufactured housing,

400

priority shall be given to the insurer writing the highest

401

percentage of its policies covering manufactured housing.

402

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

403

for the program and establish dates for insurers to apply for

404

surplus notes from such allocation which are earlier than the

405

dates established in paragraph (b).

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

407

manufactured housing insurer that is eligible for a surplus note

408

under this section shall meet the premium to surplus ratio

409

provisions of s. 624.4095.

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

411

manufactured housing policies" includes:

412

1. A Florida domiciled insurer that begins writing personal

413

lines residential manufactured housing policies in Florida after

414

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

415

Citizens Property Insurance Corporation without accepting a

416

bonus, provided at least 25 percent of its policies cover

417

manufactured housing. Such an insurer may count any funds above

418

the minimum capital and surplus requirement that were contributed

419

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

420

section.

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2. A Florida domiciled insurer that writes at least 40

422

percent of its policies covering manufactured housing in Florida.

423

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

424

(a) "Board" means the State Board of Administration.

425

(b) "Program" means the Insurance Capital Build-Up

426

Incentive Program established by this section.

427

(4) The state funds provided to the insurer in exchange for

428

the A surplus note provided to an insurer pursuant to this

429

section are is considered borrowed surplus an asset of the

430

insurer pursuant to s. 628.401 s. 625.012.

431

(5) If an insurer that receives funds in exchange for

432

issuance of a surplus note pursuant to this section is rendered

433

insolvent, the state is a class 3 creditor pursuant to s. 631.271

434

for the unpaid principal and interest on the surplus note.

435

(6) The board shall adopt rules prescribing the procedures,

436

administration, and criteria for approving the applications of

437

insurers to receive funds in exchange for issuance of surplus

438

notes pursuant to this section, which may be adopted pursuant to

439

the procedures for emergency rules of chapter 120. Otherwise,

440

actions and determinations by the board pursuant to this section

441

are exempt from chapter 120.

442

(7) The board shall invest and reinvest the funds

443

appropriated for the program in accordance with s. 215.47 and

444

consistent with board policy.

445

(8) The board shall semiannually submit a report to the

446

President of the Senate and the Speaker of the House of

447

Representatives on February 1 and August 1 as to the results of

448

the program and each insurer's compliance with the terms of its

449

surplus note.

450

(9) The amendments to this section enacted in 2008 do not

451

affect the terms or conditions of the surplus notes that were

452

approved prior to January 1, 2008. However, the board may

453

renegotiate the terms of any surplus note issued by an insurer

454

prior to January 2008 under this program upon the agreement of

455

the insurer and the board and consistent with the requirements of

456

this section as amended in 2008.

457

(10) On January 15, 2009, the State Board of Administration

458

shall transfer to Citizens Property Insurance Corporation any

459

funds that have not been committed or reserved for insurers

460

approved to receive such funds under the program, from the funds

461

that were appropriated from Citizens Property Insurance

462

Corporation in 2008-2009 for such purposes. Beginning July 1,

463

2009, and each quarter thereafter, the State Board of

464

Administration shall transfer any interest earned prior to

465

issuance of any surplus notes, interest paid, and principal

466

repaid to the state for any surplus notes issued by the program

467

after December 1, 2008, to the Citizens Property Insurance

468

Corporation. Such transfers shall be in the proportion that

469

surplus notes were funded from 2008-2009 appropriations from

470

Citizens Property Insurance Corporation and shall be made until

471

principal or interest is no longer due to the state on surplus

472

notes funded from such appropriations. Citizens Property

473

Insurance Corporation shall deposit the transferred funds into

474

each of its accounts in the proportion that moneys were

475

transferred out of those accounts to the General Revenue Fund in

476

December 2008.

477

Section 2. Section 542.20, Florida Statutes, is amended to

478

read:

479

542.20 Exemptions.--

480

(1) Any activity or conduct exempt under Florida statutory

481

or common law or exempt from the provisions of the antitrust laws

482

of the United States is exempt from the provisions of this

483

chapter, except as provided in subsection (2).

484

(2)(a) The business of insurance is subject to the

485

provisions of this chapter. As applied to the business of

486

insurance, any legal action to seek penalties or damages for

487

violations or to otherwise enforce the provisions of this chapter

488

shall be brought only by the Attorney General or a state

489

attorney, as provided in this chapter, and another party may not

490

bring suit against a person engaged in the business of insurance,

491

notwithstanding any other provision of this chapter.

492

(b) This chapter does not prohibit a rating organization or

493

advisory organization from collecting claims, loss, or expense

494

data from insurers and filing rates or advisory rates with the

495

Office of Insurance Regulation, and does not prohibit any person

496

from engaging in acts expressly allowed by the Florida Insurance

497

Code, including, but not limited to, those listed in s. 627.314.

498

Section 3. Subsection (6) is added to section 624.3161,

499

Florida Statutes, to read:

500

624.3161 Market conduct examinations.--

501

(6) Based on the findings of a market conduct examination

502

that an insurer has exhibited a pattern or practice of willful

503

violations of an unfair insurance trade practice related to

504

claims-handling which caused harm to policyholders, as prohibited

505

by s. 626.9541(1)(i), the office may require an insurer to file

506

its claims-handling practices and procedures related to that line

507

of insurance with the office for review and inspection, to be

508

held by the office for the following 36-month period. Such

509

claims-handling practices and procedures are public records and

510

are not trade secrets or otherwise exempt from the provisions of

511

s. 119.07(1). As used in this section, "claims-handling practices

512

and procedures" are any policies, guidelines, rules, protocols,

513

standard operating procedures, instructions, or directives that

514

govern or guide how and the manner in which an insured's claims

515

for benefits under any policy will be processed.

516

Section 4. Subsections (2) and (3) of section 624.4211,

517

Florida Statutes, are amended, and subsections (5) and (6) are

518

added to that section, to read:

519

624.4211 Administrative fine in lieu of suspension or

520

revocation.--

521

(2) With respect to any nonwillful violation, such fine may

522

shall not exceed $25,000 $2,500 per violation. In no event shall

523

such fine exceed an aggregate amount equal to 1 percent of the

524

insurer's surplus, as determined by the most recent financial

525

statements filed with the office, of $10,000 for all nonwillful

526

violations arising out of the same action. If When an insurer

527

discovers a nonwillful violation, the insurer shall correct the

528

violation and, if restitution is due, make restitution to all

529

affected persons. Such restitution shall include interest at 12

530

percent per year from either the date of the violation or the

531

date of inception of the affected person's policy, at the

532

insurer's option. The restitution may be a credit against future

533

premiums due provided that the interest accumulates shall

534

accumulate until the premiums are due. If the amount of

535

restitution due to any person is $50 or more and the insurer

536

wishes to credit it against future premiums, it shall notify such

537

person that she or he may receive a check instead of a credit. If

538

the credit is on a policy that which is not renewed, the insurer

539

shall pay the restitution to the person to whom it is due.

540

(3) With respect to any knowing and willful violation of a

541

lawful order or rule of the office or commission or a provision

542

of this code, the office may impose a fine upon the insurer in an

543

amount not to exceed $100,000 $20,000 for each such violation. In

544

no event shall such fine exceed an aggregate amount equal to 5

545

percent of the insurer's surplus, as determined by the most

546

recent financial statements filed with the office, of $100,000

547

for all knowing and willful violations arising out of the same

548

action. In addition to such fines, the such insurer shall make

549

restitution when due in accordance with the provisions of

550

subsection (2).

551

(5) The office may impose an administrative fine for each

552

day the insurer is not in compliance with the Florida Insurance

553

Code up to a maximum of $25,000 per violation per day, beginning

554

with the 10th day of noncompliance, not to exceed an aggregate

555

amount equal to 5 percent of the insurer's surplus, as determined

556

by the most recent financial statements filed with the office.

557

This aggregate cap includes all fines imposed by the office under

558

this section.

559

(6) In determining the amount of the fine, the office shall

560

consider:

561

(a) The degree of consumer harm caused or potentially

562

caused by the violation;

563

(b) Whether the violation constitutes an immediate danger

564

to the public;

565

566

to past violations by the insurer;

567

(d) The effect on the solvency of the insurer;

568

(e) The premium volume of the insurer; and

569

(f) The effect that fining the insurer will have on the

570

insurer's compliance with the Florida Insurance Code.

571

Section 5. Section 624.4213, Florida Statutes, is created

572

to read:

573

624.4213 Trade secret documents.--

574

(1) If any person who is required to submit documents or

575

other information to the office or department pursuant to the

576

Insurance Code or by rule or order of the office, department, or

577

commission claims that such submission contains a trade secret,

578

such person may file with the office or department a notice of

579

trade secret as provided in this section. Failure to do so

580

constitutes a waiver of any claim by such person that the

581

document or information is a trade secret.

582

(a) Each page of such document or specific portion of a

583

document claimed to be a trade secret must be clearly marked as

584

"trade secret."

585

(b) All material marked as a trade secret must be separated

586

from all non-trade secret material, such as being submitted in a

587

separate envelope clearly marked as "trade secret."

588

589

department, the submitting party must include an affidavit

590

certifying under oath to the truth of the following statements

591

concerning all documents or information that are claimed to be

592

trade secrets:

593

1. [I consider/My company considers] this information a

594

trade secret that has value and provides an advantage or an

595

opportunity to obtain an advantage over those who do not know or

596

use it.

597

2. [I have/My company has] taken measures to prevent the

598

disclosure of the information to anyone other that those who have

599

been selected to have access for limited purposes, and [I

600

intend/my company intends] to continue to take such measures.

601

3. The information is not, and has not been, reasonably

602

obtainable without [my/our] consent by other persons by use of

603

legitimate means.

604

4. The information is not publicly available elsewhere.

605

(2) If the office or department receives a public-records

606

request for a document or information that is marked and

607

certified as a trade secret, the office or department shall

608

promptly notify the person that certified the document as a trade

609

secret. The notice shall inform such person that he or she or his

610

or her company has 30 days following receipt of such notice to

611

file an action in circuit court seeking a determination whether

612

the document in question contains trade secrets and an order

613

barring public disclosure of the document. If that person or

614

company files an action within 30 days after receipt of notice of

615

the public-records request, the office or department may not

616

release the documents pending the outcome of the legal action.

617

The failure to file an action within 30 days constitutes a waiver

618

of any claim of confidentiality and the office or department

619

shall release the document as requested.

620

(3) If a court or administrative tribunal finds that any

621

document or information certified as a trade secret, submitted to

622

the office or department under this section, and subsequently

623

requested by a third party is not a trade secret, the company or

624

the person certifying such document or information as a trade

625

secret is liable for an award of reasonable attorney's fees and

626

costs to the third party seeking access to such documents and to

627

the office or department.

628

(4) The office or department may disclose a trade secret,

629

together with the claim that it is a trade secret, to an officer

630

or employee of another governmental agency whose use of the trade

631

secret is within the scope of his or her employment.

632

Section 6. Section 624.4305, Florida Statutes, is created to

633

read:

634

624.4305 Nonrenewal of residential property insurance

635

policies.--

636

(1) Any insurer planning to nonrenew more than 10,000

637

residential property insurance policies in this state within a

638

12-month period shall give notice in writing to the Office of

639

Insurance Regulation 90 days before the issuance of any notices

640

of nonrenewal. The notice provided to the office must set forth

641

the insurer's reasons for such action, the effective dates of

642

nonrenewal, and any arrangements made for other insurers to offer

643

coverage to affected policyholders.

644

(2) An insurer may not issue a notice of nonrenewal to

645

policyholders unless the office approves or fails to disapprove

646

the nonrenewal plan within 90 days after the date on which it

647

receives the notice from the insurer. The office may not approve

648

the plan unless it finds that the insurer has staggered the

649

nonrenewals over a reasonable period relative to the number of

650

nonrenewals, or has made arrangements for offers of replacement

651

coverage. The office may not require that the effective dates of

652

nonrenewal be staggered over a period longer than 24 months

653

unless the insurer is nonrenewing more than 100,000 policies, in

654

which case the office may not require that the effective dates of

655

nonrenewal be staggered over a period longer than 36 months. If

656

the insurer has arranged for an offer of coverage to be made to

657

an affected policyholder by an authorized insurer, the office may

658

not restrict or disapprove the nonrenewal of such policy beyond

659

what is required by law.

660

Section 7. Subsection (2) of section 626.9521, Florida

661

Statutes, is amended to read:

662

626.9521 Unfair methods of competition and unfair or

663

deceptive acts or practices prohibited; penalties.--

664

(2) Any person who violates any provision of this part

665

shall be subject to a fine in an amount not greater than $25,000

666

$2,500 for each nonwillful violation and not greater than

667

$100,000 $20,000 for each willful violation. Fines under this

668

subsection imposed against an insurer may not exceed an aggregate

669

amount equal to 1 percent of the insurer's surplus of $10,000 for

670

all nonwillful violations arising out of the same action or an

671

aggregate amount equal to 5 percent of the insurer's surplus of

672

$100,000 for all willful violations arising out of the same

673

action, as surplus is determined by the insurer's most recent

674

financial statements filed with the office. The fines authorized

675

by this subsection may be imposed in addition to any other

676

applicable penalty.

677

Section 8. Paragraph (i) of subsection (1) of section

678

626.9541, Florida Statutes, is amended to read:

679

626.9541 Unfair methods of competition and unfair or

680

deceptive acts or practices defined.--

681

(1) UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE

682

ACTS.--The following are defined as unfair methods of competition

683

and unfair or deceptive acts or practices:

684

(i) Unfair claim settlement practices.--

685

1. Attempting to settle claims on the basis of an

686

application, when serving as a binder or intended to become a

687

part of the policy, or any other material document that is which

688

was altered without notice to, or knowledge or consent of, the

689

insured;

690

2. A material misrepresentation made to an insured or any

691

other person having an interest in the proceeds payable under a

692

such contract or policy, for the purpose and with the intent of

693

effecting settlement of such claims, loss, or damage under such

694

contract or policy on less favorable terms than those provided

695

in, and contemplated by, the such contract or policy; or

696

3. Committing or performing with such frequency as to

697

indicate a general business practice any of the following:

698

a. Failing to adopt and implement standards for the proper

699

investigation of claims.;

700

b. Misrepresenting pertinent facts or insurance policy

701

provisions relating to coverages at issue.;

702

c. Failing to acknowledge and act promptly upon

703

communications with respect to claims.;

704

d. Denying claims without conducting reasonable

705

investigations based upon available information.;

706

e. Failing to affirm or deny full or partial coverage of

707

claims, and, as to partial coverage, the dollar amount or extent

708

of coverage, or failing to provide a written statement that the

709

claim is being investigated, upon the written request of the

710

insured within 30 days after proof-of-loss statements have been

711

completed.;

712

f. Failing to promptly provide a reasonable explanation in

713

writing to the insured of the basis in the insurance policy, in

714

relation to the facts or applicable law, for denial of a claim or

715

for the offer of a compromise settlement.;

716

g. Failing to promptly notify the insured of any additional

717

information necessary for the processing of a claim.; or

718

h. Failing to clearly explain the nature of the requested

719

information and the reasons why such information is necessary.

720

4. Giving consideration to the age, race, income level,

721

education, credit score, or any other personal characteristic of

722

a policyholder when evaluating, adjusting, settling, or

723

attempting to settle a property insurance claim; or

724

5. Failing to pay undisputed amounts of partial or full

725

benefits owed under first-party property insurance policies

726

within 90 days after determining the amounts of partial or full

727

benefits and agreeing to coverage.

728

Section 9. Paragraphs (a), (b), and (g) of subsection (2),

729

and subsections (6) and (9) of section 627.062, Florida Statutes,

730

are amended to read:

731

627.062 Rate standards.--

732

(2) As to all such classes of insurance:

733

(a) Insurers or rating organizations shall establish and

734

use rates, rating schedules, or rating manuals to allow the

735

insurer a reasonable rate of return on such classes of insurance

736

written in this state. A copy of rates, rating schedules, rating

737

manuals, premium credits or discount schedules, and surcharge

738

schedules, and changes thereto, shall be filed with the office

739

under one of the following procedures except as provided in

740

subparagraph 3.:

741

1. If the filing is made at least 90 days before the

742

proposed effective date and the filing is not implemented during

743

the office's review of the filing and any proceeding and judicial

744

review, then such filing shall be considered a "file and use"

745

filing. In such case, the office shall finalize its review by

746

issuance of a notice of intent to approve or a notice of intent

747

to disapprove within 90 days after receipt of the filing. The

748

notice of intent to approve and the notice of intent to

749

disapprove constitute agency action for purposes of the

750

Administrative Procedure Act. Requests for supporting

751

information, requests for mathematical or mechanical corrections,

752

or notification to the insurer by the office of its preliminary

753

findings shall not toll the 90-day period during any such

754

proceedings and subsequent judicial review. The rate shall be

755

deemed approved if the office does not issue a notice of intent

756

to approve or a notice of intent to disapprove within 90 days

757

after receipt of the filing.

758

2. If the filing is not made in accordance with the

759

provisions of subparagraph 1., such filing shall be made as soon

760

as practicable, but no later than 30 days after the effective

761

date, and shall be considered a "use and file" filing. An insurer

762

making a "use and file" filing is potentially subject to an order

763

by the office to return to policyholders portions of rates found

764

to be excessive, as provided in paragraph (h).

765

3. For all property insurance filings made or submitted

766

after January 25, 2007, but before December 31, 2008, an insurer

767

seeking a rate that is greater than the rate most recently

768

approved by the office shall make a "file and use" filing. This

769

subparagraph applies to property insurance only. For purposes of

770

this subparagraph, motor vehicle collision and comprehensive

771

coverages are not considered to be property coverages.

772

(b) Upon receiving a rate filing, the office shall review

773

the rate filing to determine if a rate is excessive, inadequate,

774

or unfairly discriminatory. In making that determination, the

775

office shall, in accordance with generally accepted and

776

reasonable actuarial techniques, consider the following factors:

777

1. Past and prospective loss experience within and without

778

this state.

779

2. Past and prospective expenses.

780

3. The degree of competition among insurers for the risk

781

insured.

782

4. Investment income reasonably expected by the insurer,

783

consistent with the insurer's investment practices, from

784

investable premiums anticipated in the filing, plus any other

785

expected income from currently invested assets representing the

786

amount expected on unearned premium reserves and loss reserves.

787

The commission may adopt rules using utilizing reasonable

788

techniques of actuarial science and economics to specify the

789

manner in which insurers shall calculate investment income

790

attributable to such classes of insurance written in this state

791

and the manner in which such investment income shall be used to

792

calculate in the calculation of insurance rates. Such manner

793

shall contemplate allowances for an underwriting profit factor

794

and full consideration of investment income which produce a

795

reasonable rate of return; however, investment income from

796

invested surplus may shall not be considered.

797

5. The reasonableness of the judgment reflected in the

798

filing.

799

6. Dividends, savings, or unabsorbed premium deposits

800

allowed or returned to Florida policyholders, members, or

801

subscribers.

802

7. The adequacy of loss reserves.

803

8. The cost of reinsurance. The office shall not disapprove

804

a rate as excessive solely due to the insurer having obtained

805

catastrophic reinsurance to cover the insurer's estimated 250-

806

year probable maximum loss or any lower level of loss.

807

9. Trend factors, including trends in actual losses per

808

insured unit for the insurer making the filing.

809

10. Conflagration and catastrophe hazards, if applicable.

810

11. Projected hurricane losses, if applicable, which must

811

be estimated using a model or method found to be acceptable or

812

reliable by the Florida Commission on Hurricane Loss Projection

813

Methodology, and as further provided in s. 627.0628.

814

12.11. A reasonable margin for underwriting profit and

815

contingencies. For that portion of the rate covering the risk of

816

hurricanes and other catastrophic losses for which the insurer

817

has not purchased reinsurance and has exposed its capital and

818

surplus to such risk, the office must approve a rating factor

819

that provides the insurer a reasonable rate of return that is

820

commensurate with such risk.

821

13.12. The cost of medical services, if applicable.

822

14.13. Other relevant factors which impact upon the

823

frequency or severity of claims or upon expenses.

824

(g) The office may at any time review a rate, rating

825

schedule, rating manual, or rate change; the pertinent records of

826

the insurer; and market conditions. If the office finds on a

827

preliminary basis that a rate may be excessive, inadequate, or

828

unfairly discriminatory, the office shall initiate proceedings to

829

disapprove the rate and shall so notify the insurer. However, the

830

office may not disapprove as excessive any rate for which it has

831

given final approval or which has been deemed approved for a

832

period of 1 year after the effective date of the filing unless

833

the office finds that a material misrepresentation or material

834

error was made by the insurer or was contained in the filing, or

835

unless the insurer has nonrenewed a number or percentage of

836

policies which the office determines may result in the insurer

837

having an excessive rate. Upon being so notified, the insurer or

838

rating organization shall, within 60 days, file with the office

839

all information which, in the belief of the insurer or

840

organization, proves the reasonableness, adequacy, and fairness

841

of the rate or rate change. The office shall issue a notice of

842

intent to approve or a notice of intent to disapprove pursuant to

843

the procedures of paragraph (a) within 90 days after receipt of

844

the insurer's initial response. In such instances and in any

845

administrative proceeding relating to the legality of the rate,

846

the insurer or rating organization shall carry the burden of

847

proof by a preponderance of the evidence to show that the rate is

848

not excessive, inadequate, or unfairly discriminatory. After the

849

office notifies an insurer that a rate may be excessive,

850

inadequate, or unfairly discriminatory, unless the office

851

withdraws the notification, the insurer shall not alter the rate

852

except to conform with the office's notice until the earlier of

853

120 days after the date the notification was provided or 180 days

854

after the date of the implementation of the rate. The office may,

855

subject to chapter 120, disapprove without the 60-day

856

notification any rate increase filed by an insurer within the

857

prohibited time period or during the time that the legality of

858

the increased rate is being contested.

859

860

The provisions of this subsection shall not apply to workers'

861

compensation and employer's liability insurance and to motor

862

vehicle insurance.

863

(6)(a) If an insurer requests an administrative hearing

864

pursuant to s. 120.57 related to a rate filing under this

865

section, the director of the Division of Administrative Hearings

866

shall expedite the hearing and assign an administrative law judge

867

who shall commence the hearing within 30 days after the receipt

868

of the formal request and shall enter a recommended order within

869

30 days after the hearing or within 30 days after receipt of the

870

hearing transcript by the administrative law judge, whichever is

871

later. Each party shall be allowed 10 days in which to submit

872

written exceptions to the recommended order. The office shall

873

enter a final order within 30 days after the entry of the

874

recommended order. The provisions of this paragraph may be waived

875

upon stipulation of all parties.

876

(b) Upon entry of a final order, the insurer may request a

877

expedited appellate review pursuant to the Florida Rules of

878

Appellate Procedure. It is the intent of the Legislature that the

879

First District Court of Appeal grant an insurer's request for an

880

expedited appellate review.

881

882

additional information related to a rate filing, other than

883

expert opinion, is offered or presented by the insurer to justify

884

the rate, or offered or presented by the office to challenge the

885

rate, which was not received by the other party prior to the date

886

that the office issues a notice of intent to disapprove the

887

filing, the administrative law judge shall grant a continuance of

888

at least 30 days if requested by the party that had not

889

previously received the information. After any action with

890

respect to a rate filing that constitutes agency action for

891

purposes of the Administrative Procedure Act, except for a rate

892

filing for medical malpractice, an insurer may, in lieu of

893

demanding a hearing under s. 120.57, require arbitration of the

894

rate filing. However, the arbitration option provision in this

895

subsection does not apply to a rate filing that is made on or

896

after the effective date of this act until January 1, 2009.

897

Arbitration shall be conducted by a board of arbitrators

898

consisting of an arbitrator selected by the office, an arbitrator

899

selected by the insurer, and an arbitrator selected jointly by

900

the other two arbitrators. Each arbitrator must be certified by

901

the American Arbitration Association. A decision is valid only

902

upon the affirmative vote of at least two of the arbitrators. No

903

arbitrator may be an employee of any insurance regulator or

904

regulatory body or of any insurer, regardless of whether or not

905

the employing insurer does business in this state. The office and

906

the insurer must treat the decision of the arbitrators as the

907

final approval of a rate filing. Costs of arbitration shall be

908

paid by the insurer.

909

(b) Arbitration under this subsection shall be conducted

910

pursuant to the procedures specified in ss. 682.06-682.10. Either

911

party may apply to the circuit court to vacate or modify the

912

decision pursuant to s. 682.13 or s. 682.14. The commission shall

913

adopt rules for arbitration under this subsection, which rules

914

may not be inconsistent with the arbitration rules of the

915

American Arbitration Association as of January 1, 1996.

916

917

waives all rights to challenge the action of the office under the

918

Administrative Procedure Act or any other provision of law;

919

however, such rights are restored to the insurer if the

920

arbitrators fail to render a decision within 90 days after

921

initiation of the arbitration process.

922

(9)(a) Effective March 1, 2007, The chief executive officer

923

or chief financial officer of a property insurer and the chief

924

actuary of a property insurer must certify under oath and subject

925

to the penalty of perjury, on a form approved by the commission,

926

the following information, which must accompany a rate filing:

927

1. The signing officer and actuary have reviewed the rate

928

filing;

929

2. Based on the signing officer's and actuary's knowledge,

930

the rate filing does not contain any untrue statement of a

931

material fact or omit to state a material fact necessary in order

932

to make the statements made, in light of the circumstances under

933

which such statements were made, not misleading;

934

3. Based on the signing officer's and actuary's knowledge,

935

the information and other factors described in paragraph (2)(b),

936

including, but not limited to, investment income, fairly present

937

in all material respects the basis of the rate filing for the

938

periods presented in the filing; and

939

4. Based on the signing officer's and actuary's knowledge,

940

the rate filing reflects all premium savings that are reasonably

941

expected to result from legislative enactments and are in

942

accordance with generally accepted and reasonable actuarial

943

techniques;.

944

5. Based on the signing officer's and actuary's knowledge,

945

the actuary responsible for preparing the rate filing reviewed

946

the rate indications used by the office in approving the

947

insurer's last rate filing, if made available to the insurer for

948

review, and identified factors used in the current rate filing

949

which are inconsistent with the factors used by the office in

950

developing such rate indications; and

951

6. Based on the signing officer's and actuary's knowledge,

952

the number and type of policies that the insurer intends to

953

nonrenew during the year following the proposed effective date of

954

the rate filing, and that the rate filing reflects the reduced

955

risk of loss associated with such nonrenewals.

956

(b) A signing officer or actuary knowingly making a false

957

certification under this subsection commits a violation of s.

958

626.9541(1)(e) and is subject to the penalties under s. 626.9521.

959

960

and actuary shall result in the rate filing being disapproved

961

without prejudice to be refiled.

962

(d) The commission may adopt rules and forms pursuant to

963

ss. 120.536(1) and 120.54 to administer this subsection.

964

Section 10. Subsection (1) of section 627.0613, Florida

965

Statutes, is amended to read:

966

627.0613 Consumer advocate.--The Chief Financial Officer

967

must appoint a consumer advocate who must represent the general

968

public of the state before the department and the office. The

969

consumer advocate must report directly to the Chief Financial

970

Officer, but is not otherwise under the authority of the

971

department or of any employee of the department. The consumer

972

advocate has such powers as are necessary to carry out the duties

973

of the office of consumer advocate, including, but not limited

974

to, the powers to:

975

(1) Recommend to the department or office, by petition, the

976

commencement of any proceeding or action; appear in any

977

proceeding or action before the department or office; or appear

978

in any proceeding before the Division of Administrative Hearings

979

or arbitration panel specified in s. 627.062(6) relating to

980

subject matter under the jurisdiction of the department or

981

office.

982

Section 11. Paragraph (c) of subsection (1) and paragraph

983

984

amended to read:

985

627.0628 Florida Commission on Hurricane Loss Projection

986

Methodology; public records exemption; public meetings

987

exemption.--

988

(1) LEGISLATIVE FINDINGS AND INTENT.--

989

990

Florida Commission on Hurricane Loss Projection Methodology as a

991

panel of experts to provide the most actuarially sophisticated

992

guidelines and standards for projection of hurricane losses

993

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

994

further intent of the Legislature that such standards and

995

guidelines must be used by the State Board of Administration in

996

developing reimbursement premium rates for the Florida Hurricane

997

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

998

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

999

in which such standards and guidelines were applied by the

1000

insurer was erroneous, as shown by a preponderance of the

1001

evidence.

1002

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

1003

1004

insurer must may employ and may not modify or adjust actuarial

1005

methods, principles, standards, models, or output ranges found by

1006

the commission to be accurate or reliable in determining to

1007

determine hurricane loss factors used for use in a rate filing

1008

and in determining probable maximum loss levels for reinsurance

1009

costs included in a rate filing under s. 627.062. Such findings

1010

and factors are admissible and relevant in consideration of a

1011

rate filing by the office or in any arbitration or administrative

1012

or judicial review only if the office and the consumer advocate

1013

appointed pursuant to s. 627.0613 have access to all of the

1014

assumptions and factors that were used in developing the

1015

actuarial methods, principles, standards, models, or output

1016

ranges, and are not precluded from disclosing such information in

1017

a rate proceeding. In any rate hearing under s. 120.57 or in any

1018

arbitration proceeding under s. 627.062(6), the hearing officer,

1019

judge, or arbitration panel may determine whether the office and

1020

the consumer advocate were provided with access to all of the

1021

assumptions and factors that were used in developing the

1022

actuarial methods, principles, standards, models, or output

1023

ranges and to determine their admissibility.

1024

Section 12. Subsection (1) of section 627.0629, Florida

1025

Statutes, is amended to read:

1026

627.0629 Residential property insurance; rate filings.--

1027

(1)(a) It is the intent of the Legislature that insurers

1028

must provide savings to consumers who install or implement

1029

windstorm damage mitigation techniques, alterations, or solutions

1030

to their properties to prevent windstorm losses. A rate filing

1031

for residential property insurance must include actuarially

1032

reasonable discounts, credits, or other rate differentials, or

1033

appropriate reductions in deductibles, for properties on which

1034

fixtures or construction techniques demonstrated to reduce the

1035

amount of loss in a windstorm have been installed or implemented.

1036

The fixtures or construction techniques shall include, but not be

1037

limited to, fixtures or construction techniques which enhance

1038

roof strength, roof covering performance, roof-to-wall strength,

1039

wall-to-floor-to-foundation strength, opening protection, and

1040

window, door, and skylight strength. Credits, discounts, or other

1041

rate differentials, or appropriate reductions in deductibles, for

1042

fixtures and construction techniques which meet the minimum

1043

requirements of the Florida Building Code must be included in the

1044

rate filing. All insurance companies must make a rate filing

1045

which includes the credits, discounts, or other rate

1046

differentials or reductions in deductibles by February 28, 2003.

1047

By July 1, 2007, the office shall reevaluate the discounts,

1048

credits, other rate differentials, and appropriate reductions in

1049

deductibles for fixtures and construction techniques that meet

1050

the minimum requirements of the Florida Building Code, based upon

1051

actual experience or any other loss relativity studies available

1052

to the office. The office shall determine the discounts, credits,

1053

other rate differentials, and appropriate reductions in

1054

deductibles that reflect the full actuarial value of such

1055

revaluation, which may be used by insurers in rate filings.

1056

(b) By February 1, 2009, the Office of Insurance

1057

Regulation, in consultation with the Department of Financial

1058

Services and the Department of Community Affairs, shall develop

1059

and make publicly available a proposed method for insurers to

1060

establish discounts, credits, or other rate differentials for

1061

hurricane mitigation measures which directly correlate to the

1062

numerical rating assigned to a structure pursuant to the uniform

1063

home grading scale adopted by the Financial Services Commission

1064

pursuant to s. 215.55865, including any proposed changes to the

1065

uniform home grading scale. By October 1, 2009, the commission

1066

shall adopt rules requiring insurers to make rate filings for

1067

residential property insurance which revise insurers' discounts,

1068

credits, or other rate differentials for hurricane mitigation

1069

measures so that such rate differentials correlate directly to

1070

the uniform home grading scale. The rules may include such

1071

changes to the uniform home grading scale as the commission

1072

determines are necessary, and may specify the minimum required

1073

discounts, credits, or other rate differentials. Such rate

1074

differentials must be consistent with generally accepted

1075

actuarial principles and wind-loss mitigation studies. The rules

1076

shall allow a period of at least 2 years after the effective date

1077

of the revised mitigation discounts, credits, or other rate

1078

differentials for a property owner to obtain an inspection or

1079

otherwise qualify for the revised credit, during which time the

1080

insurer shall continue to apply the mitigation credit that was

1081

applied immediately prior to the effective date of the revised

1082

credit.

1083

Section 13. Paragraph (b) of subsection (2) and paragraphs

1084

(a), (b), (c), (m), (p), (dd), (ee), and (ff) of subsection (6)

1085

of section 627.351, Florida Statutes, are amended to read:

1086

627.351 Insurance risk apportionment plans.--

1087

(2) WINDSTORM INSURANCE RISK APPORTIONMENT.--

1088

(b) The department shall require all insurers holding a

1089

certificate of authority to transact property insurance on a

1090

direct basis in this state, other than joint underwriting

1091

associations and other entities formed pursuant to this section,

1092

to provide windstorm coverage to applicants from areas determined

1093

to be eligible pursuant to paragraph (c) who in good faith are

1094

entitled to, but are unable to procure, such coverage through

1095

ordinary means; or it shall adopt a reasonable plan or plans for

1096

the equitable apportionment or sharing among such insurers of

1097

windstorm coverage, which may include formation of an association

1098

for this purpose. As used in this subsection, the term "property

1099

insurance" means insurance on real or personal property, as

1100

defined in s. 624.604, including insurance for fire, industrial

1101

fire, allied lines, farmowners multiperil, homeowners'

1102

multiperil, commercial multiperil, and mobile homes, and

1103

including liability coverages on all such insurance, but

1104

excluding inland marine as defined in s. 624.607(3) and excluding

1105

vehicle insurance as defined in s. 624.605(1)(a) other than

1106

insurance on mobile homes used as permanent dwellings. The

1107

department shall adopt rules that provide a formula for the

1108

recovery and repayment of any deferred assessments.

1109

1. For the purpose of this section, properties eligible for

1110

such windstorm coverage are defined as dwellings, buildings, and

1111

other structures, including mobile homes which are used as

1112

dwellings and which are tied down in compliance with mobile home

1113

tie-down requirements prescribed by the Department of Highway

1114

Safety and Motor Vehicles pursuant to s. 320.8325, and the

1115

contents of all such properties. An applicant or policyholder is

1116

eligible for coverage only if an offer of coverage cannot be

1117

obtained by or for the applicant or policyholder from an admitted

1118

insurer at approved rates.

1119

2.a.(I) All insurers required to be members of such

1120

association shall participate in its writings, expenses, and

1121

losses. Surplus of the association shall be retained for the

1122

payment of claims and shall not be distributed to the member

1123

insurers. Such participation by member insurers shall be in the

1124

proportion that the net direct premiums of each member insurer

1125

written for property insurance in this state during the preceding

1126

calendar year bear to the aggregate net direct premiums for

1127

property insurance of all member insurers, as reduced by any

1128

credits for voluntary writings, in this state during the

1129

preceding calendar year. For the purposes of this subsection, the

1130

term "net direct premiums" means direct written premiums for

1131

property insurance, reduced by premium for liability coverage and

1132

for the following if included in allied lines: rain and hail on

1133

growing crops; livestock; association direct premiums booked;

1134

National Flood Insurance Program direct premiums; and similar

1135

deductions specifically authorized by the plan of operation and

1136

approved by the department. A member's participation shall begin

1137

on the first day of the calendar year following the year in which

1138

it is issued a certificate of authority to transact property

1139

insurance in the state and shall terminate 1 year after the end

1140

of the calendar year during which it no longer holds a

1141

certificate of authority to transact property insurance in the

1142

state. The commissioner, after review of annual statements, other

1143

reports, and any other statistics that the commissioner deems

1144

necessary, shall certify to the association the aggregate direct

1145

premiums written for property insurance in this state by all

1146

member insurers.

1147

(II) Effective July 1, 2002, the association shall operate

1148

subject to the supervision and approval of a board of governors

1149

who are the same individuals that have been appointed by the

1150

Treasurer to serve on the board of governors of the Citizens

1151

Property Insurance Corporation.

1152

(III) The plan of operation shall provide a formula whereby

1153

a company voluntarily providing windstorm coverage in affected

1154

areas will be relieved wholly or partially from apportionment of

1155

a regular assessment pursuant to sub-sub-subparagraph d.(I) or

1156

sub-sub-subparagraph d.(II).

1157

(IV) A company which is a member of a group of companies

1158

under common management may elect to have its credits applied on

1159

a group basis, and any company or group may elect to have its

1160

credits applied to any other company or group.

1161

(V) There shall be no credits or relief from apportionment

1162

to a company for emergency assessments collected from its

1163

policyholders under sub-sub-subparagraph d.(III).

1164

(VI) The plan of operation may also provide for the award

1165

of credits, for a period not to exceed 3 years, from a regular

1166

assessment pursuant to sub-sub-subparagraph d.(I) or sub-sub-

1167

subparagraph d.(II) as an incentive for taking policies out of

1168

the Residential Property and Casualty Joint Underwriting

1169

Association. In order to qualify for the exemption under this

1170

sub-sub-subparagraph, the take-out plan must provide that at

1171

least 40 percent of the policies removed from the Residential

1172

Property and Casualty Joint Underwriting Association cover risks

1173

located in Dade, Broward, and Palm Beach Counties or at least 30

1174

percent of the policies so removed cover risks located in Dade,

1175

Broward, and Palm Beach Counties and an additional 50 percent of

1176

the policies so removed cover risks located in other coastal

1177

counties, and must also provide that no more than 15 percent of

1178

the policies so removed may exclude windstorm coverage. With the

1179

approval of the department, the association may waive these

1180

geographic criteria for a take-out plan that removes at least the

1181

lesser of 100,000 Residential Property and Casualty Joint

1182

Underwriting Association policies or 15 percent of the total

1183

number of Residential Property and Casualty Joint Underwriting

1184

Association policies, provided the governing board of the

1185

Residential Property and Casualty Joint Underwriting Association

1186

certifies that the take-out plan will materially reduce the

1187

Residential Property and Casualty Joint Underwriting

1188

Association's 100-year probable maximum loss from hurricanes.

1189

With the approval of the department, the board may extend such

1190

credits for an additional year if the insurer guarantees an

1191

additional year of renewability for all policies removed from the

1192

Residential Property and Casualty Joint Underwriting Association,

1193

or for 2 additional years if the insurer guarantees 2 additional

1194

years of renewability for all policies removed from the

1195

Residential Property and Casualty Joint Underwriting Association.

1196

b. Assessments to pay deficits in the association under

1197

this subparagraph shall be included as an appropriate factor in

1198

the making of rates as provided in s. 627.3512.

1199

c. The Legislature finds that the potential for unlimited

1200

deficit assessments under this subparagraph may induce insurers

1201

to attempt to reduce their writings in the voluntary market, and

1202

that such actions would worsen the availability problems that the

1203

association was created to remedy. It is the intent of the

1204

Legislature that insurers remain fully responsible for paying

1205

regular assessments and collecting emergency assessments for any

1206

deficits of the association; however, it is also the intent of

1207

the Legislature to provide a means by which assessment

1208

liabilities may be amortized over a period of years.

1209

d.(I) When the deficit incurred in a particular calendar

1210

year is 10 percent or less of the aggregate statewide direct

1211

written premium for property insurance for the prior calendar

1212

year for all member insurers, the association shall levy an

1213

assessment on member insurers in an amount equal to the deficit.

1214

(II) When the deficit incurred in a particular calendar

1215

year exceeds 10 percent of the aggregate statewide direct written

1216

premium for property insurance for the prior calendar year for

1217

all member insurers, the association shall levy an assessment on

1218

member insurers in an amount equal to the greater of 10 percent

1219

of the deficit or 10 percent of the aggregate statewide direct

1220

written premium for property insurance for the prior calendar

1221

year for member insurers. Any remaining deficit shall be

1222

recovered through emergency assessments under sub-sub-

1223

subparagraph (III).

1224

(III) Upon a determination by the board of directors that a

1225

deficit exceeds the amount that will be recovered through regular

1226

assessments on member insurers, pursuant to sub-sub-subparagraph

1227

(I) or sub-sub-subparagraph (II), the board shall levy, after

1228

verification by the department, emergency assessments to be

1229

collected by member insurers and by underwriting associations

1230

created pursuant to this section which write property insurance,

1231

upon issuance or renewal of property insurance policies other

1232

than National Flood Insurance policies in the year or years

1233

following levy of the regular assessments. The amount of the

1234

emergency assessment collected in a particular year shall be a

1235

uniform percentage of that year's direct written premium for

1236

property insurance for all member insurers and underwriting

1237

associations, excluding National Flood Insurance policy premiums,

1238

as annually determined by the board and verified by the

1239

department. The department shall verify the arithmetic

1240

calculations involved in the board's determination within 30 days

1241

after receipt of the information on which the determination was

1242

based. Notwithstanding any other provision of law, each member

1243

insurer and each underwriting association created pursuant to

1244

this section shall collect emergency assessments from its

1245

policyholders without such obligation being affected by any

1246

credit, limitation, exemption, or deferment. The emergency

1247

assessments so collected shall be transferred directly to the

1248

association on a periodic basis as determined by the association.

1249

The aggregate amount of emergency assessments levied under this

1250

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

1251

greater of 10 percent of the amount needed to cover the original

1252

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

1253

other costs associated with financing of the original deficit, or

1254

10 percent of the aggregate statewide direct written premium for

1255

property insurance written by member insurers and underwriting

1256

associations for the prior year, plus interest, fees,

1257

commissions, required reserves, and other costs associated with

1258

financing the original deficit. The board may pledge the proceeds

1259

of the emergency assessments under this sub-sub-subparagraph as

1260

the source of revenue for bonds, to retire any other debt

1261

incurred as a result of the deficit or events giving rise to the

1262

deficit, or in any other way that the board determines will

1263

efficiently recover the deficit. The emergency assessments under

1264

this sub-sub-subparagraph shall continue as long as any bonds

1265

issued or other indebtedness incurred with respect to a deficit

1266

for which the assessment was imposed remain outstanding, unless

1267

adequate provision has been made for the payment of such bonds or

1268

other indebtedness pursuant to the document governing such bonds

1269

or other indebtedness. Emergency assessments collected under this

1270

sub-sub-subparagraph are not part of an insurer's rates, are not

1271

premium, and are not subject to premium tax, fees, or

1272

commissions; however, failure to pay the emergency assessment

1273

shall be treated as failure to pay premium.

1274

(IV) Each member insurer's share of the total regular

1275

assessments under sub-sub-subparagraph (I) or sub-sub-

1276

subparagraph (II) shall be in the proportion that the insurer's

1277

net direct premium for property insurance in this state, for the

1278

year preceding the assessment bears to the aggregate statewide

1279

net direct premium for property insurance of all member insurers,

1280

as reduced by any credits for voluntary writings for that year.

1281

(V) If regular deficit assessments are made under sub-sub-

1282

subparagraph (I) or sub-sub-subparagraph (II), or by the

1283

Residential Property and Casualty Joint Underwriting Association

1284

under sub-subparagraph (6)(b)3.a. or sub-subparagraph (6)(b)3.b.,

1285

the association shall levy upon the association's policyholders,

1286

as part of its next rate filing, or by a separate rate filing

1287

solely for this purpose, a market equalization surcharge in a

1288

percentage equal to the total amount of such regular assessments

1289

divided by the aggregate statewide direct written premium for

1290

property insurance for member insurers for the prior calendar

1291

year. Market equalization surcharges under this sub-sub-

1292

subparagraph are not considered premium and are not subject to

1293

commissions, fees, or premium taxes; however, failure to pay a

1294

market equalization surcharge shall be treated as failure to pay

1295

premium.

1296

e. The governing body of any unit of local government, any

1297

residents of which are insured under the plan, may issue bonds as

1298

defined in s. 125.013 or s. 166.101 to fund an assistance

1299

program, in conjunction with the association, for the purpose of

1300

defraying deficits of the association. In order to avoid needless

1301

and indiscriminate proliferation, duplication, and fragmentation

1302

of such assistance programs, any unit of local government, any

1303

residents of which are insured by the association, may provide

1304

for the payment of losses, regardless of whether or not the

1305

losses occurred within or outside of the territorial jurisdiction

1306

of the local government. Revenue bonds may not be issued until

1307

validated pursuant to chapter 75, unless a state of emergency is

1308

declared by executive order or proclamation of the Governor

1309

pursuant to s. 252.36 making such findings as are necessary to

1310

determine that it is in the best interests of, and necessary for,

1311

the protection of the public health, safety, and general welfare

1312

of residents of this state and the protection and preservation of

1313

the economic stability of insurers operating in this state, and

1314

declaring it an essential public purpose to permit certain

1315

municipalities or counties to issue bonds as will provide relief

1316

to claimants and policyholders of the association and insurers

1317

responsible for apportionment of plan losses. Any such unit of

1318

local government may enter into such contracts with the

1319

association and with any other entity created pursuant to this

1320

subsection as are necessary to carry out this paragraph. Any

1321

bonds issued under this sub-subparagraph shall be payable from

1322

and secured by moneys received by the association from

1323

assessments under this subparagraph, and assigned and pledged to

1324

or on behalf of the unit of local government for the benefit of

1325

the holders of such bonds. The funds, credit, property, and

1326

taxing power of the state or of the unit of local government

1327

shall not be pledged for the payment of such bonds. If any of the

1328

bonds remain unsold 60 days after issuance, the department shall

1329

require all insurers subject to assessment to purchase the bonds,

1330

which shall be treated as admitted assets; each insurer shall be

1331

required to purchase that percentage of the unsold portion of the

1332

bond issue that equals the insurer's relative share of assessment

1333

liability under this subsection. An insurer shall not be required

1334

to purchase the bonds to the extent that the department

1335

determines that the purchase would endanger or impair the

1336

solvency of the insurer. The authority granted by this sub-

1337

subparagraph is additional to any bonding authority granted by

1338

subparagraph 6.

1339

3. The plan shall also provide that any member with a

1340

surplus as to policyholders of $20 million or less writing 25

1341

percent or more of its total countrywide property insurance

1342

premiums in this state may petition the department, within the

1343

first 90 days of each calendar year, to qualify as a limited

1344

apportionment company. The apportionment of such a member company

1345

in any calendar year for which it is qualified shall not exceed

1346

its gross participation, which shall not be affected by the

1347

formula for voluntary writings. In no event shall a limited

1348

apportionment company be required to participate in any

1349

apportionment of losses pursuant to sub-sub-subparagraph 2.d.(I)

1350

or sub-sub-subparagraph 2.d.(II) in the aggregate which exceeds

1351

$50 million after payment of available plan funds in any calendar

1352

year. However, a limited apportionment company shall collect from

1353

its policyholders any emergency assessment imposed under sub-sub-

1354

subparagraph 2.d.(III). The plan shall provide that, if the

1355

department determines that any regular assessment will result in

1356

an impairment of the surplus of a limited apportionment company,

1357

the department may direct that all or part of such assessment be

1358

deferred. However, there shall be no limitation or deferment of

1359

an emergency assessment to be collected from policyholders under

1360

sub-sub-subparagraph 2.d.(III).

1361

4. The plan shall provide for the deferment, in whole or in

1362

part, of a regular assessment of a member insurer under sub-sub-

1363

subparagraph 2.d.(I) or sub-sub-subparagraph 2.d.(II), but not

1364

for an emergency assessment collected from policyholders under

1365

sub-sub-subparagraph 2.d.(III), if, in the opinion of the

1366

commissioner, payment of such regular assessment would endanger

1367

or impair the solvency of the member insurer. In the event a

1368

regular assessment against a member insurer is deferred in whole

1369

or in part, the amount by which such assessment is deferred may

1370

be assessed against the other member insurers in a manner

1371

consistent with the basis for assessments set forth in sub-sub-

1372

subparagraph 2.d.(I) or sub-sub-subparagraph 2.d.(II).

1373

5.a. The plan of operation may include deductibles and

1374

rules for classification of risks and rate modifications

1375

consistent with the objective of providing and maintaining funds

1376

sufficient to pay catastrophe losses.

1377

b. The association may require arbitration of a rate filing

1378

under s. 627.062(6). It is the intent of the Legislature that the

1379

rates for coverage provided by the association be actuarially

1380

sound and not competitive with approved rates charged in the

1381

admitted voluntary market such that the association functions as

1382

a residual market mechanism to provide insurance only when the

1383

insurance cannot be procured in the voluntary market. The plan of

1384

operation shall provide a mechanism to assure that, beginning no

1385

later than January 1, 1999, the rates charged by the association

1386

for each line of business are reflective of approved rates in the

1387

voluntary market for hurricane coverage for each line of business

1388

in the various areas eligible for association coverage.

1389

c. The association shall provide for windstorm coverage on

1390

residential properties in limits up to $10 million for commercial

1391

lines residential risks and up to $1 million for personal lines

1392

residential risks. If coverage with the association is sought for

1393

a residential risk valued in excess of these limits, coverage

1394

shall be available to the risk up to the replacement cost or

1395

actual cash value of the property, at the option of the insured,

1396

if coverage for the risk cannot be located in the authorized

1397

market. The association must accept a commercial lines

1398

residential risk with limits above $10 million or a personal

1399

lines residential risk with limits above $1 million if coverage

1400

is not available in the authorized market. The association may

1401

write coverage above the limits specified in this subparagraph

1402

with or without facultative or other reinsurance coverage, as the

1403

association determines appropriate.

1404

d. The plan of operation must provide objective criteria

1405

and procedures, approved by the department, to be uniformly

1406

applied for all applicants in determining whether an individual

1407

risk is so hazardous as to be uninsurable. In making this

1408

determination and in establishing the criteria and procedures,

1409

the following shall be considered:

1410

(I) Whether the likelihood of a loss for the individual

1411

risk is substantially higher than for other risks of the same

1412

class; and

1413

(II) Whether the uncertainty associated with the individual

1414

risk is such that an appropriate premium cannot be determined.

1415

1416

The acceptance or rejection of a risk by the association pursuant

1417

to such criteria and procedures must be construed as the private

1418

placement of insurance, and the provisions of chapter 120 do not

1419

apply.

1420

e. If the risk accepts an offer of coverage through the

1421

market assistance program or through a mechanism established by

1422

the association, either before the policy is issued by the

1423

association or during the first 30 days of coverage by the

1424

association, and the producing agent who submitted the

1425

application to the association is not currently appointed by the

1426

insurer, the insurer shall:

1427

(I) Pay to the producing agent of record of the policy, for

1428

the first year, an amount that is the greater of the insurer's

1429

usual and customary commission for the type of policy written or

1430

a fee equal to the usual and customary commission of the

1431

association; or

1432

(II) Offer to allow the producing agent of record of the

1433

policy to continue servicing the policy for a period of not less

1434

than 1 year and offer to pay the agent the greater of the

1435

insurer's or the association's usual and customary commission for

1436

the type of policy written.

1437

1438

If the producing agent is unwilling or unable to accept

1439

appointment, the new insurer shall pay the agent in accordance

1440

with sub-sub-subparagraph (I). Subject to the provisions of s.

1441

627.3517, the policies issued by the association must provide

1442

that if the association obtains an offer from an authorized

1443

insurer to cover the risk at its approved rates under either a

1444

standard policy including wind coverage or, if consistent with

1445

the insurer's underwriting rules as filed with the department, a

1446

basic policy including wind coverage, the risk is no longer

1447

eligible for coverage through the association. Upon termination

1448

of eligibility, the association shall provide written notice to

1449

the policyholder and agent of record stating that the association

1450

policy must be canceled as of 60 days after the date of the

1451

notice because of the offer of coverage from an authorized

1452

insurer. Other provisions of the insurance code relating to

1453

cancellation and notice of cancellation do not apply to actions

1454

under this sub-subparagraph.

1455

f. When the association enters into a contractual agreement

1456

for a take-out plan, the producing agent of record of the

1457

association policy is entitled to retain any unearned commission

1458

on the policy, and the insurer shall:

1459

(I) Pay to the producing agent of record of the association

1460

policy, for the first year, an amount that is the greater of the

1461

insurer's usual and customary commission for the type of policy

1462

written or a fee equal to the usual and customary commission of

1463

the association; or

1464

(II) Offer to allow the producing agent of record of the

1465

association policy to continue servicing the policy for a period

1466

of not less than 1 year and offer to pay the agent the greater of

1467

the insurer's or the association's usual and customary commission

1468

for the type of policy written.

1469

1470

If the producing agent is unwilling or unable to accept

1471

appointment, the new insurer shall pay the agent in accordance

1472

with sub-sub-subparagraph (I).

1473

6.a. The plan of operation may authorize the formation of a

1474

private nonprofit corporation, a private nonprofit unincorporated

1475

association, a partnership, a trust, a limited liability company,

1476

or a nonprofit mutual company which may be empowered, among other

1477

things, to borrow money by issuing bonds or by incurring other

1478

indebtedness and to accumulate reserves or funds to be used for

1479

the payment of insured catastrophe losses. The plan may authorize

1480

all actions necessary to facilitate the issuance of bonds,

1481

including the pledging of assessments or other revenues.

1482

b. Any entity created under this subsection, or any entity

1483

formed for the purposes of this subsection, may sue and be sued,

1484

may borrow money; issue bonds, notes, or debt instruments; pledge

1485

or sell assessments, market equalization surcharges and other

1486

surcharges, rights, premiums, contractual rights, projected

1487

recoveries from the Florida Hurricane Catastrophe Fund, other

1488

reinsurance recoverables, and other assets as security for such

1489

bonds, notes, or debt instruments; enter into any contracts or

1490

agreements necessary or proper to accomplish such borrowings; and

1491

take other actions necessary to carry out the purposes of this

1492

subsection. The association may issue bonds or incur other

1493

indebtedness, or have bonds issued on its behalf by a unit of

1494

local government pursuant to subparagraph (6)(p)2., in the

1495

absence of a hurricane or other weather-related event, upon a

1496

determination by the association subject to approval by the

1497

department that such action would enable it to efficiently meet

1498

the financial obligations of the association and that such

1499

financings are reasonably necessary to effectuate the

1500

requirements of this subsection. Any such entity may accumulate

1501

reserves and retain surpluses as of the end of any association

1502

year to provide for the payment of losses incurred by the

1503

association during that year or any future year. The association

1504

shall incorporate and continue the plan of operation and articles

1505

of agreement in effect on the effective date of chapter 76-96,

1506

Laws of Florida, to the extent that it is not inconsistent with

1507

chapter 76-96, and as subsequently modified consistent with

1508

chapter 76-96. The board of directors and officers currently

1509

serving shall continue to serve until their successors are duly

1510

qualified as provided under the plan. The assets and obligations

1511

of the plan in effect immediately prior to the effective date of

1512

chapter 76-96 shall be construed to be the assets and obligations

1513

of the successor plan created herein.

1514

c. In recognition of s. 10, Art. I of the State

1515

Constitution, prohibiting the impairment of obligations of

1516

contracts, it is the intent of the Legislature that no action be

1517

taken whose purpose is to impair any bond indenture or financing

1518

agreement or any revenue source committed by contract to such

1519

bond or other indebtedness issued or incurred by the association

1520

or any other entity created under this subsection.

1521

7. On such coverage, an agent's remuneration shall be that

1522

amount of money payable to the agent by the terms of his or her

1523

contract with the company with which the business is placed.

1524

However, no commission will be paid on that portion of the

1525

premium which is in excess of the standard premium of that

1526

company.

1527

8. Subject to approval by the department, the association

1528

may establish different eligibility requirements and operational

1529

procedures for any line or type of coverage for any specified

1530

eligible area or portion of an eligible area if the board

1531

determines that such changes to the eligibility requirements and

1532

operational procedures are justified due to the voluntary market

1533

being sufficiently stable and competitive in such area or for

1534

such line or type of coverage and that consumers who, in good

1535

faith, are unable to obtain insurance through the voluntary

1536

market through ordinary methods would continue to have access to

1537

coverage from the association. When coverage is sought in

1538

connection with a real property transfer, such requirements and

1539

procedures shall not provide for an effective date of coverage

1540

later than the date of the closing of the transfer as established

1541

by the transferor, the transferee, and, if applicable, the

1542

lender.

1543

9. Notwithstanding any other provision of law:

1544

a. The pledge or sale of, the lien upon, and the security

1545

interest in any rights, revenues, or other assets of the

1546

association created or purported to be created pursuant to any

1547

financing documents to secure any bonds or other indebtedness of

1548

the association shall be and remain valid and enforceable,

1549

notwithstanding the commencement of and during the continuation

1550

of, and after, any rehabilitation, insolvency, liquidation,

1551

bankruptcy, receivership, conservatorship, reorganization, or

1552

similar proceeding against the association under the laws of this

1553

state or any other applicable laws.

1554

b. No such proceeding shall relieve the association of its

1555

obligation, or otherwise affect its ability to perform its

1556

obligation, to continue to collect, or levy and collect,

1557

assessments, market equalization or other surcharges, projected

1558

recoveries from the Florida Hurricane Catastrophe Fund,

1559

reinsurance recoverables, or any other rights, revenues, or other

1560

assets of the association pledged.

1561

c. Each such pledge or sale of, lien upon, and security

1562

interest in, including the priority of such pledge, lien, or

1563

security interest, any such assessments, emergency assessments,

1564

market equalization or renewal surcharges, projected recoveries

1565

from the Florida Hurricane Catastrophe Fund, reinsurance

1566

recoverables, or other rights, revenues, or other assets which

1567

are collected, or levied and collected, after the commencement of

1568

and during the pendency of or after any such proceeding shall

1569

continue unaffected by such proceeding.

1570

d. As used in this subsection, the term "financing

1571

documents" means any agreement, instrument, or other document now

1572

existing or hereafter created evidencing any bonds or other

1573

indebtedness of the association or pursuant to which any such

1574

bonds or other indebtedness has been or may be issued and

1575

pursuant to which any rights, revenues, or other assets of the

1576

association are pledged or sold to secure the repayment of such

1577

bonds or indebtedness, together with the payment of interest on

1578

such bonds or such indebtedness, or the payment of any other

1579

obligation of the association related to such bonds or

1580

indebtedness.

1581

e. Any such pledge or sale of assessments, revenues,

1582

contract rights or other rights or assets of the association

1583

shall constitute a lien and security interest, or sale, as the

1584

case may be, that is immediately effective and attaches to such

1585

assessments, revenues, contract, or other rights or assets,

1586

whether or not imposed or collected at the time the pledge or

1587

sale is made. Any such pledge or sale is effective, valid,

1588

binding, and enforceable against the association or other entity

1589

making such pledge or sale, and valid and binding against and

1590

superior to any competing claims or obligations owed to any other

1591

person or entity, including policyholders in this state,

1592

asserting rights in any such assessments, revenues, contract, or

1593

other rights or assets to the extent set forth in and in

1594

accordance with the terms of the pledge or sale contained in the

1595

applicable financing documents, whether or not any such person or

1596

entity has notice of such pledge or sale and without the need for

1597

any physical delivery, recordation, filing, or other action.

1598

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

1599

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

1600

or its agents or employees, agents or employees of the

1601

association, members of the board of directors of the

1602

association, or the department or its representatives, for any

1603

action taken by them in the performance of their duties or

1604

responsibilities under this subsection. Such immunity does not

1605

apply to actions for breach of any contract or agreement

1606

pertaining to insurance, or any willful tort.

1607

(6) CITIZENS PROPERTY INSURANCE CORPORATION.--

1608

(a)1. It is the public purpose of this subsection to ensure

1609

the existence of an orderly market for property insurance for

1610

Floridians and Florida businesses. The Legislature finds that

1611

private insurers are unwilling or unable to provide affordable

1612

property insurance coverage in this state to the extent sought

1613

and needed. The absence of affordable property insurance

1614

threatens the public health, safety, and welfare and likewise

1615

threatens the economic health of the state. The state therefore

1616

has a compelling public interest and a public purpose to assist

1617

in assuring that property in the state is insured and that it is

1618

insured at affordable rates so as to facilitate the remediation,

1619

reconstruction, and replacement of damaged or destroyed property

1620

in order to reduce or avoid the negative effects otherwise

1621

resulting to the public health, safety, and welfare, to the

1622

economy of the state, and to the revenues of the state and local

1623

governments which are needed to provide for the public welfare.

1624

It is necessary, therefore, to provide affordable property

1625

insurance to applicants who are in good faith entitled to procure

1626

insurance through the voluntary market but are unable to do so.

1627

The Legislature intends by this subsection that affordable

1628

property insurance be provided and that it continue to be

1629

provided, as long as necessary, through Citizens Property

1630

Insurance Corporation, a government entity that is an integral

1631

part of the state, and that is not a private insurance company.

1632

To that end, Citizens Property Insurance Corporation shall strive

1633

to increase the availability of affordable property insurance in

1634

this state, while achieving efficiencies and economies, and while

1635

providing service to policyholders, applicants, and agents which

1636

is no less than the quality generally provided in the voluntary

1637

market, for the achievement of the foregoing public purposes.

1638

Because it is essential for this government entity to have the

1639

maximum financial resources to pay claims following a

1640

catastrophic hurricane, it is the intent of the Legislature that

1641

Citizens Property Insurance Corporation continue to be an

1642

integral part of the state and that the income of the corporation

1643

be exempt from federal income taxation and that interest on the

1644

debt obligations issued by the corporation be exempt from federal

1645

income taxation.

1646

2. The Residential Property and Casualty Joint Underwriting

1647

Association originally created by this statute shall be known, as

1648

of July 1, 2002, as the Citizens Property Insurance Corporation.

1649

The corporation shall provide insurance for residential and

1650

commercial property, for applicants who are in good faith

1651

entitled, but are unable, to procure insurance through the

1652

voluntary market. The corporation shall operate pursuant to a

1653

plan of operation approved by order of the Financial Services

1654

Commission. The plan is subject to continuous review by the

1655

commission. The commission may, by order, withdraw approval of

1656

all or part of a plan if the commission determines that

1657

conditions have changed since approval was granted and that the

1658

purposes of the plan require changes in the plan. The corporation

1659

shall continue to operate pursuant to the plan of operation

1660

approved by the Office of Insurance Regulation until October 1,

1661

2006. For the purposes of this subsection, residential coverage

1662

includes both personal lines residential coverage, which consists

1663

of the type of coverage provided by homeowner's, mobile home

1664

owner's, dwelling, tenant's, condominium unit owner's, and

1665

similar policies, and commercial lines residential coverage,

1666

which consists of the type of coverage provided by condominium

1667

association, apartment building, and similar policies.

1668

3. For the purposes of this subsection, the term "homestead

1669

property" means:

1670

a. Property that has been granted a homestead exemption

1671

under chapter 196;

1672

b. Property for which the owner has a current, written

1673

lease with a renter for a term of at least 7 months and for which

1674

the dwelling is insured by the corporation for $200,000 or less;

1675

c. An owner-occupied mobile home or manufactured home, as

1676

defined in s. 320.01, which is permanently affixed to real

1677

property, is owned by a Florida resident, and has been granted a

1678

homestead exemption under chapter 196 or, if the owner does not

1679

own the real property, the owner certifies that the mobile home

1680

or manufactured home is his or her principal place of residence;

1681

d. Tenant's coverage;

1682

e. Commercial lines residential property; or

1683

f. Any county, district, or municipal hospital; a hospital

1684

licensed by any not-for-profit corporation qualified under s.

1685

501(c)(3) of the United States Internal Revenue Code; or a

1686

continuing care retirement community that is certified under

1687

chapter 651 and that receives an exemption from ad valorem taxes

1688

under chapter 196.

1689

4. For the purposes of this subsection, the term

1690

"nonhomestead property" means property that is not homestead

1691

property.

1692

5. Effective January 1, 2009, a personal lines residential

1693

structure that has a dwelling replacement cost of $1 million or

1694

more, or a single condominium unit that has a combined dwelling

1695

and content replacement cost of $1 million or more is not

1696

eligible for coverage by the corporation. Such dwellings insured

1697

by the corporation on December 31, 2008, may continue to be

1698

covered by the corporation until the end of the policy term.

1699

However, such dwellings that are insured by the corporation and

1700

become ineligible for coverage due to the provisions of this

1701

subparagraph may reapply and obtain coverage in the high-risk

1702

account and be considered "nonhomestead property" if the property

1703

owner provides the corporation with a sworn affidavit from one or

1704

more insurance agents, on a form provided by the corporation,

1705

stating that the agents have made their best efforts to obtain

1706

coverage and that the property has been rejected for coverage by

1707

at least one authorized insurer and at least three surplus lines

1708

insurers. If such conditions are met, the dwelling may be insured

1709

by the corporation for up to 3 years, after which time the

1710

dwelling is ineligible for coverage. The office shall approve the

1711

method used by the corporation for valuing the dwelling

1712

replacement cost for the purposes of this subparagraph. If a

1713

policyholder is insured by the corporation prior to being

1714

determined to be ineligible pursuant to this subparagraph and

1715

such policyholder files a lawsuit challenging the determination,

1716

the policyholder may remain insured by the corporation until the

1717

conclusion of the litigation.

1718

6. For properties constructed on or after January 1, 2009,

1719

the corporation may not insure any property located within 2,500

1720

feet landward of the coastal construction control line created

1721

pursuant to s. 161.053 unless the property meets the requirements

1722

of the code-plus building standards developed by the Florida

1723

Building Commission.

1724

3.7. It is the intent of the Legislature that

1725

policyholders, applicants, and agents of the corporation receive

1726

service and treatment of the highest possible level but never

1727

less than that generally provided in the voluntary market. It

1728

also is intended that the corporation be held to service

1729

standards no less than those applied to insurers in the voluntary

1730

market by the office with respect to responsiveness, timeliness,

1731

customer courtesy, and overall dealings with policyholders,

1732

applicants, or agents of the corporation.

1733

4.8. Effective January 1, 2009, a personal lines

1734

residential structure that is located in the "wind-borne debris

1735

region," as defined in s. 1609.2, International Building Code

1736

(2006), and that has an insured value on the structure of

1737

$750,000 or more is not eligible for coverage by the corporation

1738

unless the structure has opening protections as required under

1739

the Florida Building Code for a newly constructed residential

1740

structure in that area. A residential structure shall be deemed

1741

to comply with the requirements of this subparagraph if it has

1742

shutters or opening protections on all openings and if such

1743

opening protections complied with the Florida Building Code at

1744

the time they were installed. Effective January 1, 2011, the

1745

requirements of this subparagraph apply to a personal lines

1746

residential structure that is located in the wind-borne debris

1747

region and that has an insured value on the structure of $500,000

1748

or more.

1749

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

1750

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

1751

corporation and, for the purposes of this subsection, are

1752

referred to collectively as "assessable insurers." Insurers

1753

writing one or more subject lines of business in this state

1754

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

1755

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

1756

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

1757

assessment by the corporation and are referred to collectively as

1758

"assessable insureds." An authorized insurer's assessment

1759

liability shall begin on the first day of the calendar year

1760

following the year in which the insurer was issued a certificate

1761

of authority to transact insurance for subject lines of business

1762

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

1763

first calendar year during which the insurer no longer holds a

1764

certificate of authority to transact insurance for subject lines

1765

of business in this state.

1766

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

1767

expenses of the corporation shall be divided into three separate

1768

accounts as follows:

1769

(I) A personal lines account for personal residential

1770

policies issued by the corporation or issued by the Residential

1771

Property and Casualty Joint Underwriting Association and renewed

1772

by the corporation that provide comprehensive, multiperil

1773

coverage on risks that are not located in areas eligible for

1774

coverage in the Florida Windstorm Underwriting Association as

1775

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

1776

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

1777

risks that are located in such areas;

1778

(II) A commercial lines account for commercial residential

1779

and commercial nonresidential policies issued by the corporation

1780

or issued by the Residential Property and Casualty Joint

1781

Underwriting Association and renewed by the corporation that

1782

provide coverage for basic property perils on risks that are not

1783

located in areas eligible for coverage in the Florida Windstorm

1784

Underwriting Association as those areas were defined on January

1785

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

1786

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

1787

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

1788

and commercial residential and commercial nonresidential property

1789

policies issued by the corporation or transferred to the

1790

corporation that provide coverage for the peril of wind on risks

1791

that are located in areas eligible for coverage in the Florida

1792

Windstorm Underwriting Association as those areas were defined on

1793

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

1794

the Financial Services Commission and Legislative Budget

1795

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

1796

earlier than March 31, 2007, The corporation shall may offer

1797

policies that provide multiperil coverage and the corporation

1798

shall continue to offer policies that provide coverage only for

1799

the peril of wind for risks located in areas eligible for

1800

coverage in the high-risk account. Beginning July 1, 2008, the

1801

corporation may not issue new policies that provide coverage only

1802

for the peril of wind, but may continue to renew such policies

1803

that were in force on that date. In issuing multiperil coverage,

1804

the corporation may use its approved policy forms and rates for

1805

the personal lines account. An applicant or insured who is

1806

eligible to purchase a multiperil policy from the corporation may

1807

purchase a multiperil policy from an authorized insurer without

1808

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

1809

prospectively purchase a policy that provides coverage only for

1810

the peril of wind from the corporation prior to July 1, 2008. An

1811

applicant or insured who is eligible for a corporation policy

1812

that provides coverage only for the peril of wind may elect to

1813

purchase or retain such policy and also purchase or retain

1814

coverage excluding wind from an authorized insurer without

1815

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

1816

prospectively purchase a policy that provides multiperil coverage

1817

from the corporation. It is the goal of the Legislature that

1818

there would be an overall average savings of 10 percent or more

1819

for a policyholder who currently has a wind-only policy with the

1820

corporation, and an ex-wind policy with a voluntary insurer or

1821

the corporation, and who then obtains a multiperil policy from

1822

the corporation. It is the intent of the Legislature that the

1823

offer of multiperil coverage in the high-risk account be made and

1824

implemented in a manner that does not adversely affect the tax-

1825

exempt status of the corporation or creditworthiness of or

1826

security for currently outstanding financing obligations or

1827

credit facilities of the high-risk account, the personal lines

1828

account, or the commercial lines account. By March 1, 2007, the

1829

corporation shall prepare and submit for approval by the

1830

Financial Services Commission and Legislative Budget Commission a

1831

report detailing the corporation's business plan for issuing

1832

multiperil coverage in the high-risk account. The business plan

1833

shall be approved or disapproved within 30 days after receipt, as

1834

submitted or modified and resubmitted by the corporation. The

1835

business plan must include: the impact of such multiperil

1836

coverage on the corporation's financial resources, the impact of

1837

such multiperil coverage on the corporation's tax-exempt status,

1838

the manner in which the corporation plans to implement the

1839

processing of applications and policy forms for new and existing

1840

policyholders, the impact of such multiperil coverage on the

1841

corporation's ability to deliver customer service at the high

1842

level required by this subsection, the ability of the corporation

1843

to process claims, the ability of the corporation to quote and

1844

issue policies, the impact of such multiperil coverage on the

1845

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

1846

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

1847

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

1848

must also include quota share primary insurance under

1849

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

1850

risk account also includes the area within Port Canaveral, which

1851

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

1852

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

1853

Federal Government property.

1854

b. The three separate accounts must be maintained as long

1855

as financing obligations entered into by the Florida Windstorm

1856

Underwriting Association or Residential Property and Casualty

1857

Joint Underwriting Association are outstanding, in accordance

1858

with the terms of the corresponding financing documents. When the

1859

financing obligations are no longer outstanding, in accordance

1860

with the terms of the corresponding financing documents, the

1861

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

1862

liabilities, losses, and expenses of the corporation. Consistent

1863

with the requirement of this subparagraph and prudent investment

1864

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

1865

exercise its best efforts to retire existing debt or to obtain

1866

approval of necessary parties to amend the terms of existing

1867

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

1868

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

1869

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

1870

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

1871

House of Representatives which includes an analysis of

1872

consolidating the accounts, the actions the board has taken to

1873

minimize the cost of carrying debt, and its recommendations for

1874

executing the most efficient plan.

1875

c. Creditors of the Residential Property and Casualty Joint

1876

Underwriting Association and of the accounts specified in sub-

1877

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

1878

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

1879

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

1880

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

1881

Creditors of the Florida Windstorm Underwriting Association shall

1882

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

1883

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

1884

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

1885

a.(I) and (II).

1886

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

1887

attributable to particular accounts shall be prorated among the

1888

accounts.

1889

e. The Legislature finds that the revenues of the

1890

corporation are revenues that are necessary to meet the

1891

requirements set forth in documents authorizing the issuance of

1892

bonds under this subsection.

1893

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

1894

the benefit of any private person.

1895

3. With respect to a deficit in an account:

1896

a. When the deficit incurred in a particular calendar year

1897

is not greater than 8 10 percent of the aggregate statewide

1898

direct written premium for the subject lines of business for the

1899

prior calendar year, the entire deficit shall be recovered

1900

through regular assessments of assessable insurers under

1901

paragraph (p) and assessable insureds.

1902

b. When the deficit incurred in a particular calendar year

1903

exceeds 8 10 percent of the aggregate statewide direct written

1904

premium for the subject lines of business for the prior calendar

1905

year, the corporation shall levy regular assessments on

1906

assessable insurers under paragraph (p) and on assessable

1907

insureds in an amount equal to the greater of 8 10 percent of the

1908

deficit or 8 10 percent of the aggregate statewide direct written

1909

premium for the subject lines of business for the prior calendar

1910

year. Any remaining deficit shall be recovered through emergency

1911

assessments under sub-subparagraph d.

1912

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

1913

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

1914

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

1915

premium for the subject lines of business for the year preceding

1916

the assessment bears to the aggregate statewide direct written

1917

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

1918

assessment percentage applicable to each assessable insured is

1919

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

1920

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

1921

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

1922

Assessments levied by the corporation on assessable insurers

1923

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

1924

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

1925

notwithstanding any other provision of this subsection, the

1926

aggregate amount of a regular assessment for a deficit incurred

1927

in a particular calendar year shall be reduced by the estimated

1928

amount to be received by the corporation from the Citizens

1929

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

1930

collected or estimated to be collected from the assessment on

1931

Citizens policyholders pursuant to sub-subparagraph i.

1932

Assessments levied by the corporation on assessable insureds

1933

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

1934

surplus lines agent at the time the surplus lines agent collects

1935

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

1936

the Florida Surplus Lines Service Office at the time the surplus

1937

lines agent pays the surplus lines tax to the Florida Surplus

1938

Lines Service Office. Upon receipt of regular assessments from

1939

surplus lines agents, the Florida Surplus Lines Service Office

1940

shall transfer the assessments directly to the corporation as

1941

determined by the corporation.

1942

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

1943

deficit in an account exceeds the amount that will be recovered

1944

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

1945

subparagraph b., plus the amount that is expected to be recovered

1946

through surcharges under sub-subparagraph i., as to the remaining

1947

projected deficit the board shall levy, after verification by the

1948

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

1949

cover the deficits, to be collected by assessable insurers and

1950

the corporation and collected from assessable insureds upon

1951

issuance or renewal of policies for subject lines of business,

1952

excluding National Flood Insurance policies. The amount of the

1953

emergency assessment collected in a particular year shall be a

1954

uniform percentage of that year's direct written premium for

1955

subject lines of business and all accounts of the corporation,

1956

excluding National Flood Insurance Program policy premiums, as

1957

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

1958

office shall verify the arithmetic calculations involved in the

1959

board's determination within 30 days after receipt of the

1960

information on which the determination was based. Notwithstanding

1961

any other provision of law, the corporation and each assessable

1962

insurer that writes subject lines of business shall collect

1963

emergency assessments from its policyholders without such

1964

obligation being affected by any credit, limitation, exemption,

1965

or deferment. Emergency assessments levied by the corporation on

1966

assessable insureds shall be collected by the surplus lines agent

1967

at the time the surplus lines agent collects the surplus lines

1968

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

1969

Surplus Lines Service Office at the time the surplus lines agent

1970

pays the surplus lines tax to the Florida Surplus Lines Service

1971

Office. The emergency assessments so collected shall be

1972

transferred directly to the corporation on a periodic basis as

1973

determined by the corporation and shall be held by the

1974

corporation solely in the applicable account. The aggregate

1975

amount of emergency assessments levied for an account under this

1976

sub-subparagraph in any calendar year may, at the discretion of

1977

the board of governors, be less than but may not exceed the

1978

greater of 10 percent of the amount needed to cover the original

1979

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

1980

other costs associated with financing of the original deficit, or

1981

10 percent of the aggregate statewide direct written premium for

1982

subject lines of business and for all accounts of the corporation

1983

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

1984

reserves, and other costs associated with financing the original

1985

deficit.

1986

e. The corporation may pledge the proceeds of assessments,

1987

projected recoveries from the Florida Hurricane Catastrophe Fund,

1988

other insurance and reinsurance recoverables, policyholder

1989

surcharges and other surcharges, and other funds available to the

1990

corporation as the source of revenue for and to secure bonds

1991

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

1992

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

1993

mechanisms issued or created under this subsection, or to retire

1994

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

1995

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

1996

will efficiently recover such deficits. The purpose of the lines

1997

of credit or other financing mechanisms is to provide additional

1998

resources to assist the corporation in covering claims and

1999

expenses attributable to a catastrophe. As used in this

2000

subsection, the term "assessments" includes regular assessments

2001

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

2002

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

2003

Emergency assessments collected under sub-subparagraph d. are not

2004

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

2005

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

2006

emergency assessment shall be treated as failure to pay premium.

2007

The emergency assessments under sub-subparagraph d. shall

2008

continue as long as any bonds issued or other indebtedness

2009

incurred with respect to a deficit for which the assessment was

2010

imposed remain outstanding, unless adequate provision has been

2011

made for the payment of such bonds or other indebtedness pursuant

2012

to the documents governing such bonds or other indebtedness.

2013

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

2014

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

2015

business" means insurance written by assessable insurers or

2016

procured by assessable insureds for all property and casualty

2017

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

2018

compensation or medical malpractice. As used in the sub-

2019

subparagraph, the term "property and casualty lines of business"

2020

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

2021

Premiums and Losses, in the annual statement required of

2022

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

2023

section, except for those lines identified as accident and health

2024

insurance and except for policies written under the National

2025

Flood Insurance Program or the Federal Crop Insurance Program.

2026

For purposes of this sub-subparagraph, the term "workers'

2027

compensation" includes both workers' compensation insurance and

2028

excess workers' compensation insurance.

2029

g. The Florida Surplus Lines Service Office shall determine

2030

annually the aggregate statewide written premium in subject lines

2031

of business procured by assessable insureds and shall report that

2032

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

2033

corporation specifies to ensure that the corporation can meet the

2034

requirements of this subsection and the corporation's financing

2035

obligations.

2036

h. The Florida Surplus Lines Service Office shall verify

2037

the proper application by surplus lines agents of assessment

2038

percentages for regular assessments and emergency assessments

2039

levied under this subparagraph on assessable insureds and shall

2040

assist the corporation in ensuring the accurate, timely

2041

collection and payment of assessments by surplus lines agents as

2042

required by the corporation.

2043

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

2044

thereafter, the board of governors shall levy a Citizens

2045

policyholder surcharge an immediate assessment against the

2046

premium of each nonhomestead property policyholder in all

2047

accounts of the corporation, as a uniform percentage of the

2048

premium of the policy of up to 10 percent of such premium, which

2049

funds shall be used to offset the deficit. If this assessment is

2050

insufficient to eliminate the deficit, the board of governors

2051

shall levy an additional assessment against all policyholders of

2052

the corporation for a 12-month period, which shall be collected

2053

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

2054

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

2055

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

2056

deficit and reduce the amount of the regular assessment as

2057

provided in sub-subparagraphs a. and b. Citizens policyholder

2058

surcharges under this sub-subparagraph are not considered premium

2059

and are not subject to commissions, fees, or premium taxes.

2060

However, failure to pay such surcharges shall be treated as

2061

failure to pay premium.

2062

j. If the amount of any assessments or surcharges collected

2063

from corporation policyholders, assessable insurers or their

2064

policyholders, or assessable insureds exceeds the amount of the

2065

deficits, such excess amounts shall be remitted to and retained

2066

by the corporation in a reserve to be used by the corporation, as

2067

determined by the board of governors and approved by the office,

2068

to pay claims or reduce any past, present, or future plan-year

2069

deficits or to reduce outstanding debt. The board of governors

2070

shall maintain separate accounting records that consolidate data

2071

for nonhomestead properties, including, but not limited to,

2072

number of policies, insured values, premiums written, and losses.

2073

The board of governors shall annually report to the office and

2074

the Legislature a summary of such data.

2075

2076

1. Must provide for adoption of residential property and

2077

casualty insurance policy forms and commercial residential and

2078

nonresidential property insurance forms, which forms must be

2079

approved by the office prior to use. The corporation shall adopt

2080

the following policy forms:

2081

a. Standard personal lines policy forms that are

2082

comprehensive multiperil policies providing full coverage of a

2083

residential property equivalent to the coverage provided in the

2084

private insurance market under an HO-3, HO-4, or HO-6 policy.

2085

b. Basic personal lines policy forms that are policies

2086

similar to an HO-8 policy or a dwelling fire policy that provide

2087

coverage meeting the requirements of the secondary mortgage

2088

market, but which coverage is more limited than the coverage

2089

under a standard policy.

2090

c. Commercial lines residential and nonresidential policy

2091

forms that are generally similar to the basic perils of full

2092

coverage obtainable for commercial residential structures and

2093

commercial nonresidential structures in the admitted voluntary

2094

market.

2095

d. Personal lines and commercial lines residential property

2096

insurance forms that cover the peril of wind only. The forms are

2097

applicable only to residential properties located in areas

2098

eligible for coverage under the high-risk account referred to in

2099

sub-subparagraph (b)2.a.

2100

e. Commercial lines nonresidential property insurance forms

2101

that cover the peril of wind only. The forms are applicable only

2102

to nonresidential properties located in areas eligible for

2103

coverage under the high-risk account referred to in sub-

2104

subparagraph (b)2.a.

2105

f. The corporation may adopt variations of the policy forms

2106

listed in sub-subparagraphs a.-e. that contain more restrictive

2107

coverage.

2108

2.a. Must provide that the corporation adopt a program in

2109

which the corporation and authorized insurers enter into quota

2110

share primary insurance agreements for hurricane coverage, as

2111

defined in s. 627.4025(2)(a), for eligible risks, and adopt

2112

property insurance forms for eligible risks which cover the peril

2113

of wind only. As used in this subsection, the term:

2114

(I) "Quota share primary insurance" means an arrangement in

2115

which the primary hurricane coverage of an eligible risk is

2116

provided in specified percentages by the corporation and an

2117

authorized insurer. The corporation and authorized insurer are

2118

each solely responsible for a specified percentage of hurricane

2119

coverage of an eligible risk as set forth in a quota share

2120

primary insurance agreement between the corporation and an

2121

authorized insurer and the insurance contract. The responsibility

2122

of the corporation or authorized insurer to pay its specified

2123

percentage of hurricane losses of an eligible risk, as set forth

2124

in the quota share primary insurance agreement, may not be

2125

altered by the inability of the other party to the agreement to

2126

pay its specified percentage of hurricane losses. Eligible risks

2127

that are provided hurricane coverage through a quota share

2128

primary insurance arrangement must be provided policy forms that

2129

set forth the obligations of the corporation and authorized

2130

insurer under the arrangement, clearly specify the percentages of

2131

quota share primary insurance provided by the corporation and

2132

authorized insurer, and conspicuously and clearly state that

2133

neither the authorized insurer nor the corporation may be held

2134

responsible beyond its specified percentage of coverage of

2135

hurricane losses.

2136

(II) "Eligible risks" means personal lines residential and

2137

commercial lines residential risks that meet the underwriting

2138

criteria of the corporation and are located in areas that were

2139

eligible for coverage by the Florida Windstorm Underwriting

2140

Association on January 1, 2002.

2141

b. The corporation may enter into quota share primary

2142

insurance agreements with authorized insurers at corporation

2143

coverage levels of 90 percent and 50 percent.

2144

c. If the corporation determines that additional coverage

2145

levels are necessary to maximize participation in quota share

2146

primary insurance agreements by authorized insurers, the

2147

corporation may establish additional coverage levels. However,

2148

the corporation's quota share primary insurance coverage level

2149

may not exceed 90 percent.

2150

d. Any quota share primary insurance agreement entered into

2151

between an authorized insurer and the corporation must provide

2152

for a uniform specified percentage of coverage of hurricane

2153

losses, by county or territory as set forth by the corporation

2154

board, for all eligible risks of the authorized insurer covered

2155

under the quota share primary insurance agreement.

2156

e. Any quota share primary insurance agreement entered into

2157

between an authorized insurer and the corporation is subject to

2158

review and approval by the office. However, such agreement shall

2159

be authorized only as to insurance contracts entered into between

2160

an authorized insurer and an insured who is already insured by

2161

the corporation for wind coverage.

2162

f. For all eligible risks covered under quota share primary

2163

insurance agreements, the exposure and coverage levels for both

2164

the corporation and authorized insurers shall be reported by the

2165

corporation to the Florida Hurricane Catastrophe Fund. For all

2166

policies of eligible risks covered under quota share primary

2167

insurance agreements, the corporation and the authorized insurer

2168

shall maintain complete and accurate records for the purpose of

2169

exposure and loss reimbursement audits as required by Florida

2170

Hurricane Catastrophe Fund rules. The corporation and the

2171

authorized insurer shall each maintain duplicate copies of policy

2172

declaration pages and supporting claims documents.

2173

g. The corporation board shall establish in its plan of

2174

operation standards for quota share agreements which ensure that

2175

there is no discriminatory application among insurers as to the

2176

terms of quota share agreements, pricing of quota share

2177

agreements, incentive provisions if any, and consideration paid

2178

for servicing policies or adjusting claims.

2179

h. The quota share primary insurance agreement between the

2180

corporation and an authorized insurer must set forth the specific

2181

terms under which coverage is provided, including, but not

2182

limited to, the sale and servicing of policies issued under the

2183

agreement by the insurance agent of the authorized insurer

2184

producing the business, the reporting of information concerning

2185

eligible risks, the payment of premium to the corporation, and

2186

arrangements for the adjustment and payment of hurricane claims

2187

incurred on eligible risks by the claims adjuster and personnel

2188

of the authorized insurer. Entering into a quota sharing

2189

insurance agreement between the corporation and an authorized

2190

insurer shall be voluntary and at the discretion of the

2191

authorized insurer.

2192

3. May provide that the corporation may employ or otherwise

2193

contract with individuals or other entities to provide

2194

administrative or professional services that may be appropriate

2195

to effectuate the plan. The corporation shall have the power to

2196

borrow funds, by issuing bonds or by incurring other

2197

indebtedness, and shall have other powers reasonably necessary to

2198

effectuate the requirements of this subsection, including,

2199

without limitation, the power to issue bonds and incur other

2200

indebtedness in order to refinance outstanding bonds or other

2201

indebtedness. The corporation may, but is not required to, seek

2202

judicial validation of its bonds or other indebtedness under

2203

chapter 75. The corporation may issue bonds or incur other

2204

indebtedness, or have bonds issued on its behalf by a unit of

2205

local government pursuant to subparagraph (p)2., in the absence

2206

of a hurricane or other weather-related event, upon a

2207

determination by the corporation, subject to approval by the

2208

office, that such action would enable it to efficiently meet the

2209

financial obligations of the corporation and that such financings

2210

are reasonably necessary to effectuate the requirements of this

2211

subsection. The corporation is authorized to take all actions

2212

needed to facilitate tax-free status for any such bonds or

2213

indebtedness, including formation of trusts or other affiliated

2214

entities. The corporation shall have the authority to pledge

2215

assessments, projected recoveries from the Florida Hurricane

2216

Catastrophe Fund, other reinsurance recoverables, market

2217

equalization and other surcharges, and other funds available to

2218

the corporation as security for bonds or other indebtedness. In

2219

recognition of s. 10, Art. I of the State Constitution,

2220

prohibiting the impairment of obligations of contracts, it is the

2221

intent of the Legislature that no action be taken whose purpose

2222

is to impair any bond indenture or financing agreement or any

2223

revenue source committed by contract to such bond or other

2224

indebtedness.

2225

4.a. Must require that the corporation operate subject to

2226

the supervision and approval of a board of governors consisting

2227

of eight individuals who are residents of this state, from

2228

different geographical areas of this state. The Governor, the

2229

Chief Financial Officer, the President of the Senate, and the

2230

Speaker of the House of Representatives shall each appoint two

2231

members of the board. At least one of the two members appointed

2232

by each appointing officer must have demonstrated expertise in

2233

insurance. The Chief Financial Officer shall designate one of the

2234

appointees as chair. All board members serve at the pleasure of

2235

the appointing officer. All members of the board of governors are

2236

subject to removal at will by the officers who appointed them.

2237

All board members, including the chair, must be appointed to

2238

serve for 3-year terms beginning annually on a date designated by

2239

the plan. Any board vacancy shall be filled for the unexpired

2240

term by the appointing officer. The Chief Financial Officer shall

2241

appoint a technical advisory group to provide information and

2242

advice to the board of governors in connection with the board's

2243

duties under this subsection. The executive director and senior

2244

managers of the corporation shall be engaged by the board and

2245

serve at the pleasure of the board. Any executive director

2246

appointed on or after July 1, 2006, is subject to confirmation by

2247

the Senate. The executive director is responsible for employing

2248

other staff as the corporation may require, subject to review and

2249

concurrence by the board.

2250

b. The board shall create a Market Accountability Advisory

2251

Committee to assist the corporation in developing awareness of

2252

its rates and its customer and agent service levels in

2253

relationship to the voluntary market insurers writing similar

2254

coverage. The members of the advisory committee shall consist of

2255

the following 11 persons, one of whom must be elected chair by

2256

the members of the committee: four representatives, one appointed

2257

by the Florida Association of Insurance Agents, one by the

2258

Florida Association of Insurance and Financial Advisors, one by

2259

the Professional Insurance Agents of Florida, and one by the

2260

Latin American Association of Insurance Agencies; three

2261

representatives appointed by the insurers with the three highest

2262

voluntary market share of residential property insurance business

2263

in the state; one representative from the Office of Insurance

2264

Regulation; one consumer appointed by the board who is insured by

2265

the corporation at the time of appointment to the committee; one

2266

representative appointed by the Florida Association of Realtors;

2267

and one representative appointed by the Florida Bankers

2268

Association. All members must serve for 3-year terms and may

2269

serve for consecutive terms. The committee shall report to the

2270

corporation at each board meeting on insurance market issues

2271

which may include rates and rate competition with the voluntary

2272

market; service, including policy issuance, claims processing,

2273

and general responsiveness to policyholders, applicants, and

2274

agents; and matters relating to depopulation.

2275

5. Must provide a procedure for determining the eligibility

2276

of a risk for coverage, as follows:

2277

a. Subject to the provisions of s. 627.3517, with respect

2278

to personal lines residential risks, if the risk is offered

2279

coverage from an authorized insurer at the insurer's approved

2280

rate under either a standard policy including wind coverage or,

2281

if consistent with the insurer's underwriting rules as filed with

2282

the office, a basic policy including wind coverage, for a new

2283

application to the corporation for coverage, the risk is not

2284

eligible for any policy issued by the corporation unless the

2285

premium for coverage from the authorized insurer is more than 15

2286

percent greater than the premium for comparable coverage from the

2287

corporation. If the risk is not able to obtain any such offer,

2288

the risk is eligible for either a standard policy including wind

2289

coverage or a basic policy including wind coverage issued by the

2290

corporation; however, if the risk could not be insured under a

2291

standard policy including wind coverage regardless of market

2292

conditions, the risk shall be eligible for a basic policy

2293

including wind coverage unless rejected under subparagraph 9.

2294

However, with regard to a policyholder of the corporation or a

2295

policyholder removed from the corporation through an assumption

2296

agreement until the end of the assumption period, the

2297

policyholder remains eligible for coverage from the corporation

2298

regardless of any offer of coverage from an authorized insurer or

2299

surplus lines insurer. The corporation shall determine the type

2300

of policy to be provided on the basis of objective standards

2301

specified in the underwriting manual and based on generally

2302

accepted underwriting practices.

2303

(I) If the risk accepts an offer of coverage through the

2304

market assistance plan or an offer of coverage through a

2305

mechanism established by the corporation before a policy is

2306

issued to the risk by the corporation or during the first 30 days

2307

of coverage by the corporation, and the producing agent who

2308

submitted the application to the plan or to the corporation is

2309

not currently appointed by the insurer, the insurer shall:

2310

(A) Pay to the producing agent of record of the policy, for

2311

the first year, an amount that is the greater of the insurer's

2312

usual and customary commission for the type of policy written or

2313

a fee equal to the usual and customary commission of the

2314

corporation; or

2315

(B) Offer to allow the producing agent of record of the

2316

policy to continue servicing the policy for a period of not less

2317

than 1 year and offer to pay the agent the greater of the

2318

insurer's or the corporation's usual and customary commission for

2319

the type of policy written.

2320

2321

If the producing agent is unwilling or unable to accept

2322

appointment, the new insurer shall pay the agent in accordance

2323

with sub-sub-sub-subparagraph (A).

2324

(II) When the corporation enters into a contractual

2325

agreement for a take-out plan, the producing agent of record of

2326

the corporation policy is entitled to retain any unearned

2327

commission on the policy, and the insurer shall:

2328

(A) Pay to the producing agent of record of the corporation

2329

policy, for the first year, an amount that is the greater of the

2330

insurer's usual and customary commission for the type of policy

2331

written or a fee equal to the usual and customary commission of

2332

the corporation; or

2333

(B) Offer to allow the producing agent of record of the

2334

corporation policy to continue servicing the policy for a period

2335

of not less than 1 year and offer to pay the agent the greater of

2336

the insurer's or the corporation's usual and customary commission

2337

for the type of policy written.

2338

2339

If the producing agent is unwilling or unable to accept

2340

appointment, the new insurer shall pay the agent in accordance

2341

with sub-sub-sub-subparagraph (A).

2342

b. With respect to commercial lines residential risks, for

2343

a new application to the corporation for coverage, if the risk is

2344

offered coverage under a policy including wind coverage from an

2345

authorized insurer at its approved rate, the risk is not eligible

2346

for any policy issued by the corporation unless the premium for

2347

coverage from the authorized insurer is more than 15 percent

2348

greater than the premium for comparable coverage from the

2349

corporation. If the risk is not able to obtain any such offer,

2350

the risk is eligible for a policy including wind coverage issued

2351

by the corporation. However, with regard to a policyholder of the

2352

corporation or a policyholder removed from the corporation

2353

through an assumption agreement until the end of the assumption

2354

period, the policyholder remains eligible for coverage from the

2355

corporation regardless of any offer of coverage from an

2356

authorized insurer or surplus lines insurer.

2357

(I) If the risk accepts an offer of coverage through the

2358

market assistance plan or an offer of coverage through a

2359

mechanism established by the corporation before a policy is

2360

issued to the risk by the corporation or during the first 30 days

2361

of coverage by the corporation, and the producing agent who

2362

submitted the application to the plan or the corporation is not

2363

currently appointed by the insurer, the insurer shall:

2364

(A) Pay to the producing agent of record of the policy, for

2365

the first year, an amount that is the greater of the insurer's

2366

usual and customary commission for the type of policy written or

2367

a fee equal to the usual and customary commission of the

2368

corporation; or

2369

(B) Offer to allow the producing agent of record of the

2370

policy to continue servicing the policy for a period of not less

2371

than 1 year and offer to pay the agent the greater of the

2372

insurer's or the corporation's usual and customary commission for

2373

the type of policy written.

2374

2375

If the producing agent is unwilling or unable to accept

2376

appointment, the new insurer shall pay the agent in accordance

2377

with sub-sub-sub-subparagraph (A).

2378

(II) When the corporation enters into a contractual

2379

agreement for a take-out plan, the producing agent of record of

2380

the corporation policy is entitled to retain any unearned

2381

commission on the policy, and the insurer shall:

2382

(A) Pay to the producing agent of record of the corporation

2383

policy, for the first year, an amount that is the greater of the

2384

insurer's usual and customary commission for the type of policy

2385

written or a fee equal to the usual and customary commission of

2386

the corporation; or

2387

(B) Offer to allow the producing agent of record of the

2388

corporation policy to continue servicing the policy for a period

2389

of not less than 1 year and offer to pay the agent the greater of

2390

the insurer's or the corporation's usual and customary commission

2391

for the type of policy written.

2392

2393

If the producing agent is unwilling or unable to accept

2394

appointment, the new insurer shall pay the agent in accordance

2395

with sub-sub-sub-subparagraph (A).

2396

c. For purposes of determining comparable coverage under

2397

sub-subparagraphs a. and b., the comparison shall be based on

2398

those forms and coverages that are reasonably comparable. The

2399

corporation may rely on a determination of comparable coverage

2400

and premium made by the producing agent who submits the

2401

application to the corporation, made in the agent's capacity as

2402

the corporation's agent. A comparison may be made solely of the

2403

premium with respect to the main building or structure only on

2404

the following basis: the same coverage A or other building

2405

limits; the same percentage hurricane deductible that applies on

2406

an annual basis or that applies to each hurricane for commercial

2407

residential property; the same percentage of ordinance and law

2408

coverage, if the same limit is offered by both the corporation

2409

and the authorized insurer; the same mitigation credits, to the

2410

extent the same types of credits are offered both by the

2411

corporation and the authorized insurer; the same method for loss

2412

payment, such as replacement cost or actual cash value, if the

2413

same method is offered both by the corporation and the authorized

2414

insurer in accordance with underwriting rules; and any other form

2415

or coverage that is reasonably comparable as determined by the

2416

board. If an application is submitted to the corporation for

2417

wind-only coverage in the high-risk account, the premium for the

2418

corporation's wind-only policy plus the premium for the ex-wind

2419

policy that is offered by an authorized insurer to the applicant

2420

shall be compared to the premium for multiperil coverage offered

2421

by an authorized insurer, subject to the standards for comparison

2422

specified in this subparagraph. If the corporation or the

2423

applicant requests from the authorized insurer a breakdown of the

2424

premium of the offer by types of coverage so that a comparison

2425

may be made by the corporation or its agent and the authorized

2426

insurer refuses or is unable to provide such information, the

2427

corporation may treat the offer as not being an offer of coverage

2428

from an authorized insurer at the insurer's approved rate.

2429

6. Must include rules for classifications of risks and

2430

rates therefor.

2431

7. Must provide that if premium and investment income for

2432

an account attributable to a particular calendar year are in

2433

excess of projected losses and expenses for the account

2434

attributable to that year, such excess shall be held in surplus

2435

in the account. Such surplus shall be available to defray

2436

deficits in that account as to future years and shall be used for

2437

that purpose prior to assessing assessable insurers and

2438

assessable insureds as to any calendar year.

2439

8. Must provide objective criteria and procedures to be

2440

uniformly applied for all applicants in determining whether an

2441

individual risk is so hazardous as to be uninsurable. In making

2442

this determination and in establishing the criteria and

2443

procedures, the following shall be considered:

2444

a. Whether the likelihood of a loss for the individual risk

2445

is substantially higher than for other risks of the same class;

2446

and

2447

b. Whether the uncertainty associated with the individual

2448

risk is such that an appropriate premium cannot be determined.

2449

2450

The acceptance or rejection of a risk by the corporation shall be

2451

construed as the private placement of insurance, and the

2452

provisions of chapter 120 shall not apply.

2453

9. Must provide that the corporation shall make its best

2454

efforts to procure catastrophe reinsurance at reasonable rates,

2455

to cover its projected 100-year probable maximum loss as

2456

determined by the board of governors.

2457

10. Must provide that in the event of regular deficit

2458

assessments under sub-subparagraph (b)3.a. or sub-subparagraph

2459

(b)3.b., in the personal lines account, the commercial lines

2460

residential account, or the high-risk account, the corporation

2461

shall levy upon corporation policyholders in its next rate

2462

filing, or by a separate rate filing solely for this purpose, a

2463

Citizens policyholder surcharge arising from a regular assessment

2464

in such account in a percentage equal to the total amount of such

2465

regular assessments divided by the aggregate statewide direct

2466

written premium for subject lines of business for the prior

2467

calendar year. For purposes of calculating the Citizens

2468

policyholder surcharge to be levied under this subparagraph, the

2469

total amount of the regular assessment to which this surcharge is

2470

related shall be determined as set forth in subparagraph (b)3.,

2471

without deducting the estimated Citizens policyholder surcharge.

2472

Citizens policyholder surcharges under this subparagraph are not

2473

considered premium and are not subject to commissions, fees, or

2474

premium taxes; however, failure to pay a market equalization

2475

surcharge shall be treated as failure to pay premium.

2476

10.11. The policies issued by the corporation must provide

2477

that, if the corporation or the market assistance plan obtains an

2478

offer from an authorized insurer to cover the risk at its

2479

approved rates, the risk is no longer eligible for renewal

2480

through the corporation, except as otherwise provided in this

2481

subsection.

2482

11.12. Corporation policies and applications must include a

2483

notice that the corporation policy could, under this section, be

2484

replaced with a policy issued by an authorized insurer that does

2485

not provide coverage identical to the coverage provided by the

2486

corporation. The notice shall also specify that acceptance of

2487

corporation coverage creates a conclusive presumption that the

2488

applicant or policyholder is aware of this potential.

2489

12.13. May establish, subject to approval by the office,

2490

different eligibility requirements and operational procedures for

2491

any line or type of coverage for any specified county or area if

2492

the board determines that such changes to the eligibility

2493

requirements and operational procedures are justified due to the

2494

voluntary market being sufficiently stable and competitive in

2495

such area or for such line or type of coverage and that consumers

2496

who, in good faith, are unable to obtain insurance through the

2497

voluntary market through ordinary methods would continue to have

2498

access to coverage from the corporation. When coverage is sought

2499

in connection with a real property transfer, such requirements

2500

and procedures shall not provide for an effective date of

2501

coverage later than the date of the closing of the transfer as

2502

established by the transferor, the transferee, and, if

2503

applicable, the lender.

2504

13.14. Must provide that, with respect to the high-risk

2505

account, any assessable insurer with a surplus as to

2506

policyholders of $25 million or less writing 25 percent or more

2507

of its total countrywide property insurance premiums in this

2508

state may petition the office, within the first 90 days of each

2509

calendar year, to qualify as a limited apportionment company. A

2510

regular assessment levied by the corporation on a limited

2511

apportionment company for a deficit incurred by the corporation

2512

for the high-risk account in 2006 or thereafter may be paid to

2513

the corporation on a monthly basis as the assessments are

2514

collected by the limited apportionment company from its insureds

2515

pursuant to s. 627.3512, but the regular assessment must be paid

2516

in full within 12 months after being levied by the corporation. A

2517

limited apportionment company shall collect from its

2518

policyholders any emergency assessment imposed under sub-

2519

subparagraph (b)3.d. The plan shall provide that, if the office

2520

determines that any regular assessment will result in an

2521

impairment of the surplus of a limited apportionment company, the

2522

office may direct that all or part of such assessment be deferred

2523

as provided in subparagraph (p)4. However, there shall be no

2524

limitation or deferment of an emergency assessment to be

2525

collected from policyholders under sub-subparagraph (b)3.d.

2526

14.15. Must provide that the corporation appoint as its

2527

licensed agents only those agents who also hold an appointment as

2528

defined in s. 626.015(3) with an insurer who at the time of the

2529

agent's initial appointment by the corporation is authorized to

2530

write and is actually writing personal lines residential property

2531

coverage, commercial residential property coverage, or commercial

2532

nonresidential property coverage within the state.

2533

15.16. Must provide, by July 1, 2007, a premium payment

2534

plan option to its policyholders which allows at a minimum for

2535

quarterly and semiannual payment of premiums. A monthly payment

2536

plan may, but is not required to, be offered.

2537

16.17. Must limit coverage on mobile homes or manufactured

2538

homes built prior to 1994 to actual cash value of the dwelling

2539

rather than replacement costs of the dwelling.

2540

17.18. May provide such limits of coverage as the board

2541

determines, consistent with the requirements of this subsection.

2542

18.19. May require commercial property to meet specified

2543

hurricane mitigation construction features as a condition of

2544

eligibility for coverage.

2545

(m)1. Rates for coverage provided by the corporation shall

2546

be actuarially sound and subject to the requirements of s.

2547

627.062, except as otherwise provided in this paragraph. The

2548

corporation shall file its recommended rates with the office at

2549

least annually. The corporation shall provide any additional

2550

information regarding the rates which the office requires. The

2551

office shall consider the recommendations of the board and issue

2552

a final order establishing the rates for the corporation within

2553

45 days after the recommended rates are filed. The corporation

2554

may not pursue an administrative challenge or judicial review of

2555

the final order of the office.

2556

2. In addition to the rates otherwise determined pursuant

2557

to this paragraph, the corporation shall impose and collect an

2558

amount equal to the premium tax provided for in s. 624.509 to

2559

augment the financial resources of the corporation.

2560

3. After the public hurricane loss-projection model under

2561

s. 627.06281 has been found to be accurate and reliable by the

2562

Florida Commission on Hurricane Loss Projection Methodology, that

2563

model shall serve as the minimum benchmark for determining the

2564

windstorm portion of the corporation's rates. This subparagraph

2565

does not require or allow the corporation to adopt rates lower

2566

than the rates otherwise required or allowed by this paragraph.

2567

4. The rate filings for the corporation which were approved

2568

by the office and which took effect January 1, 2007, are

2569

rescinded, except for those rates that were lowered. As soon as

2570

possible, the corporation shall begin using the lower rates that

2571

were in effect on December 31, 2006, and shall provide refunds to

2572

policyholders who have paid higher rates as a result of that rate

2573

filing. The rates in effect on December 31, 2006, shall remain in

2574

effect for the 2007 and 2008 calendar years except for any rate

2575

change that results in a lower rate. The next rate change that

2576

may increase rates shall take effect January 1, 2009, pursuant to

2577

a new rate filing recommended by the corporation and established

2578

by the office, subject to the requirements of this paragraph.

2579

5.a. Beginning on January 15, 2009, and each year

2580

thereafter, the corporation must make a recommended actuarially

2581

sound rate filing for each personal and commercial line of

2582

business it writes, to be effective no earlier than July 1, 2009.

2583

b. For the 36-month period beginning with the effective

2584

date for each of the rate filings made by the corporation on

2585

January 15, 2009, the rates established by the office for the

2586

corporation for its personal residential multiperil policies, its

2587

commercial residential multiperil policies, and its commercial

2588

nonresidential multiperil policies may not result in an overall

2589

average statewide premium increase of more than 5 percent or an

2590

increase for any single policyholder of more than 5 percent,

2591

during the first 12-month period, and may not result in an

2592

overall average statewide premium increase of more than 10

2593

percent, or an increase for any single policyholder of more than

2594

10 percent, during each of the two subsequent 12-month periods,

2595

excluding coverage changes and surcharges.

2596

c. For the 36-month period beginning with the effective

2597

date for the rate filings made by the corporation on January 15,

2598

2009, the rates established by the office for the corporation for

2599

its personal residential wind-only policies, its commercial

2600

residential wind-only policies, and its commercial nonresidential

2601

wind-only policies may not result in an overall average statewide

2602

premium increase of more than 10 percent, or an increase for any

2603

single policyholder of more than 10 percent, during the first 12-

2604

month period, and may not result in an overall average statewide

2605

premium increase of more than 10 percent, or an increase for any

2606

single policyholder of more than 10 percent, during each of the

2607

two subsequent 12-month periods, excluding coverage changes and

2608

surcharges.

2609

(p)1. The corporation shall certify to the office its needs

2610

for annual assessments as to a particular calendar year, and for

2611

any interim assessments that it deems to be necessary to sustain

2612

operations as to a particular year pending the receipt of annual

2613

assessments. Upon verification, the office shall approve such

2614

certification, and the corporation shall levy such annual or

2615

interim assessments. Such assessments shall be prorated as

2616

provided in paragraph (b). The corporation shall take all

2617

reasonable and prudent steps necessary to collect the amount of

2618

assessment due from each assessable insurer, including, if

2619

prudent, filing suit to collect such assessment. If the

2620

corporation is unable to collect an assessment from any

2621

assessable insurer, the uncollected assessments shall be levied

2622

as an additional assessment against the assessable insurers and

2623

any assessable insurer required to pay an additional assessment

2624

as a result of such failure to pay shall have a cause of action

2625

against such nonpaying assessable insurer. Assessments shall be

2626

included as an appropriate factor in the making of rates. The

2627

failure of a surplus lines agent to collect and remit any regular

2628

or emergency assessment levied by the corporation is considered

2629

to be a violation of s. 626.936 and subjects the surplus lines

2630

agent to the penalties provided in that section.

2631

2. The governing body of any unit of local government, any

2632

residents of which are insured by the corporation, may issue

2633

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

2634

fund an assistance program, in conjunction with the corporation,

2635

for the purpose of defraying deficits of the corporation. In

2636

order to avoid needless and indiscriminate proliferation,

2637

duplication, and fragmentation of such assistance programs, any

2638

unit of local government, any residents of which are insured by

2639

the corporation, may provide for the payment of losses,

2640

regardless of whether or not the losses occurred within or

2641

outside of the territorial jurisdiction of the local government.

2642

Revenue bonds under this subparagraph may not be issued until

2643

validated pursuant to chapter 75, unless a state of emergency is

2644

declared by executive order or proclamation of the Governor

2645

pursuant to s. 252.36 making such findings as are necessary to

2646

determine that it is in the best interests of, and necessary for,

2647

the protection of the public health, safety, and general welfare

2648

of residents of this state and declaring it an essential public

2649

purpose to permit certain municipalities or counties to issue

2650

such bonds as will permit relief to claimants and policyholders

2651

of the corporation. Any such unit of local government may enter

2652

into such contracts with the corporation and with any other

2653

entity created pursuant to this subsection as are necessary to

2654

carry out this paragraph. Any bonds issued under this

2655

subparagraph shall be payable from and secured by moneys received

2656

by the corporation from emergency assessments under sub-

2657

subparagraph (b)3.d., and assigned and pledged to or on behalf of

2658

the unit of local government for the benefit of the holders of

2659

such bonds. The funds, credit, property, and taxing power of the

2660

state or of the unit of local government shall not be pledged for

2661

the payment of such bonds. If any of the bonds remain unsold 60

2662

days after issuance, the office shall require all insurers

2663

subject to assessment to purchase the bonds, which shall be

2664

treated as admitted assets; each insurer shall be required to

2665

purchase that percentage of the unsold portion of the bond issue

2666

that equals the insurer's relative share of assessment liability

2667

under this subsection. An insurer shall not be required to

2668

purchase the bonds to the extent that the office determines that

2669

the purchase would endanger or impair the solvency of the

2670

insurer.

2671

3.a. The corporation shall adopt one or more programs

2672

subject to approval by the office for the reduction of both new

2673

and renewal writings in the corporation. Beginning January 1,

2674

2008, any program the corporation adopts for the payment of

2675

bonuses to an insurer for each risk the insurer removes from the

2676

corporation shall comply with s. 627.3511(2) and may not exceed

2677

the amount referenced in s. 627.3511(2) for each risk removed.

2678

The corporation may consider any prudent and not unfairly

2679

discriminatory approach to reducing corporation writings, and may

2680

adopt a credit against assessment liability or other liability

2681

that provides an incentive for insurers to take risks out of the

2682

corporation and to keep risks out of the corporation by

2683

maintaining or increasing voluntary writings in counties or areas

2684

in which corporation risks are highly concentrated and a program

2685

to provide a formula under which an insurer voluntarily taking

2686

risks out of the corporation by maintaining or increasing

2687

voluntary writings will be relieved wholly or partially from

2688

assessments under sub-subparagraphs (b)3.a. and b. However, any

2689

"take-out bonus" or payment to an insurer must be conditioned on

2690

the property being insured for at least 5 years by the insurer,

2691

unless canceled or nonrenewed by the policyholder. If the policy

2692

is canceled or nonrenewed by the policyholder before the end of

2693

the 5-year period, the amount of the take-out bonus must be

2694

prorated for the time period the policy was insured. When the

2695

corporation enters into a contractual agreement for a take-out

2696

plan, the producing agent of record of the corporation policy is

2697

entitled to retain any unearned commission on such policy, and

2698

the insurer shall either:

2699

(I) Pay to the producing agent of record of the policy, for

2700

the first year, an amount which is the greater of the insurer's

2701

usual and customary commission for the type of policy written or

2702

a policy fee equal to the usual and customary commission of the

2703

corporation; or

2704

(II) Offer to allow the producing agent of record of the

2705

policy to continue servicing the policy for a period of not less

2706

than 1 year and offer to pay the agent the insurer's usual and

2707

customary commission for the type of policy written. If the

2708

producing agent is unwilling or unable to accept appointment by

2709

the new insurer, the new insurer shall pay the agent in

2710

accordance with sub-sub-subparagraph (I).

2711

b. Any credit or exemption from regular assessments adopted

2712

under this subparagraph shall last no longer than the 3 years

2713

following the cancellation or expiration of the policy by the

2714

corporation. With the approval of the office, the board may

2715

extend such credits for an additional year if the insurer

2716

guarantees an additional year of renewability for all policies

2717

removed from the corporation, or for 2 additional years if the

2718

insurer guarantees 2 additional years of renewability for all

2719

policies so removed.

2720

c. There shall be no credit, limitation, exemption, or

2721

deferment from emergency assessments to be collected from

2722

policyholders pursuant to sub-subparagraph (b)3.d.

2723

d. Subject to the execution of the confidentiality

2724

agreement required by paragraph (w), the corporation shall make

2725

its database of policies available to prospective take-out

2726

insurers considering underwriting a risk insured by the

2727

corporation, without categorically eliminating policies from

2728

eligibility for removal. The corporation may not instruct or

2729

encourage prospective take-out insurers to avoid the selection of

2730

policies for which the agent has disapproved policy removals. The

2731

corporation must require agents to accept or decline appointment

2732

or a contract with the insurer for any policy selected and, in

2733

the case of a declination, must notify the policyholder that an

2734

insurer, identified by name, selected his or her policy for a

2735

take-out offer, but that the policyholder's agent did not accept

2736

an appointment or contract with the insurer. The notice must also

2737

provide the policyholder with the take-out insurer's contact

2738

information so that the policyholder may contact the company

2739

directly and make his or her own determination of whether to seek

2740

coverage from the take-out insurer.

2741

4. The plan shall provide for the deferment, in whole or in

2742

part, of the assessment of an assessable insurer, other than an

2743

emergency assessment collected from policyholders pursuant to

2744

sub-subparagraph (b)3.d., if the office finds that payment of the

2745

assessment would endanger or impair the solvency of the insurer.

2746

In the event an assessment against an assessable insurer is

2747

deferred in whole or in part, the amount by which such assessment

2748

is deferred may be assessed against the other assessable insurers

2749

in a manner consistent with the basis for assessments set forth

2750

in paragraph (b).

2751

5. Effective July 1, 2007, in order to evaluate the costs

2752

and benefits of approved take-out plans, if the corporation pays

2753

a bonus or other payment to an insurer for an approved take-out

2754

plan, it shall maintain a record of the address or such other

2755

identifying information on the property or risk removed in order

2756

to track if and when the property or risk is later insured by the

2757

corporation.

2758

6. Any policy taken out, assumed, or removed from the

2759

corporation is, as of the effective date of the take-out,

2760

assumption, or removal, direct insurance issued by the insurer

2761

and not by the corporation, even if the corporation continues to

2762

service the policies. This subparagraph applies to policies of

2763

the corporation and not policies taken out, assumed, or removed

2764

from any other entity.

2765

(dd)1. For policies subject to nonrenewal as a result of

2766

the risk being no longer eligible for coverage due to being

2767

valued at $1 million or more, the corporation shall, directly or

2768

through the market assistance plan, make information from

2769

confidential underwriting and claims files of policyholders

2770

available only to licensed general lines agents who register with

2771

the corporation to receive such information according to the

2772

following procedures:

2773

2. By August 1, 2006, the corporation shall provide such

2774

policyholders who are not eligible for renewal the opportunity to

2775

request in writing, within 30 days after the notification is

2776

sent, that information from their confidential underwriting and

2777

claims files not be released to licensed general lines agents

2778

registered pursuant to this paragraph.

2779

3. By August 1, 2006, the corporation shall make available

2780

to licensed general lines agents the registration procedures to

2781

be used to obtain confidential information from underwriting and

2782

claims files for such policies not eligible for renewal. As a

2783

condition of registration, the corporation shall require the

2784

licensed general lines agent to attest that the agent has the

2785

experience and relationships with authorized or surplus lines

2786

carriers to attempt to offer replacement coverage for such

2787

policies.

2788

4. By September 1, 2006, the corporation shall make

2789

available through a secured website to licensed general lines

2790

agents registered pursuant to this paragraph application, rating,

2791

loss history, mitigation, and policy type information relating to

2792

such policies not eligible for renewal and for which the

2793

policyholder has not requested the corporation withhold such

2794

information. The registered licensed general lines agent may use

2795

such information to contact and assist the policyholder in

2796

securing replacement policies, and the agent may disclose to the

2797

policyholder that such information was obtained from the

2798

corporation.

2799

(dd)(ee) The assets of the corporation may be invested and

2800

managed by the State Board of Administration.

2801

(ee)(ff) The office may establish a pilot program to offer

2802

optional sinkhole coverage in one or more counties or other

2803

territories of the corporation for the purpose of implementing s.

2804

627.706, as amended by s. 30, chapter 2007-1, Laws of Florida.

2805

Under the pilot program, the corporation is not required to issue

2806

a notice of nonrenewal to exclude sinkhole coverage upon the

2807

renewal of existing policies, but may exclude such coverage using

2808

a notice of coverage change.

2809

Section 14. Paragraph (b) of subsection (2) of section

2810

627.4133, Florida Statutes, is amended to read:

2811

(2) With respect to any personal lines or commercial

2812

residential property insurance policy, including, but not limited

2813

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

2814

condominium association, condominium unit owner's, apartment

2815

building, or other policy covering a residential structure or its

2816

contents:

2817

(b) The insurer shall give the named insured written notice

2818

of nonrenewal, cancellation, or termination at least 180 100 days

2819

prior to the effective date of the nonrenewal, cancellation, or

2820

termination. However, the insurer shall give at least 100 days'

2821

written notice, or written notice by June 1, whichever is

2822

earlier, for any nonrenewal, cancellation, or termination that

2823

would be effective between June 1 and November 30. The notice

2824

must include the reason or reasons for the nonrenewal,

2825

cancellation, or termination, except that:

2826

1. When cancellation is for nonpayment of premium, at least

2827

10 days' written notice of cancellation accompanied by the reason

2828

therefor shall be given. As used in this subparagraph, the term

2829

"nonpayment of premium" means failure of the named insured to

2830

discharge when due any of her or his obligations in connection

2831

with the payment of premiums on a policy or any installment of

2832

such premium, whether the premium is payable directly to the

2833

insurer or its agent or indirectly under any premium finance plan

2834

or extension of credit, or failure to maintain membership in an

2835

organization if such membership is a condition precedent to

2836

insurance coverage. "Nonpayment of premium" also means the

2837

failure of a financial institution to honor an insurance

2838

applicant's check after delivery to a licensed agent for payment

2839

of a premium, even if the agent has previously delivered or

2840

transferred the premium to the insurer. If a dishonored check

2841

represents the initial premium payment, the contract and all

2842

contractual obligations shall be void ab initio unless the

2843

nonpayment is cured within the earlier of 5 days after actual

2844

notice by certified mail is received by the applicant or 15 days

2845

after notice is sent to the applicant by certified mail or

2846

registered mail, and if the contract is void, any premium

2847

received by the insurer from a third party shall be refunded to

2848

that party in full.

2849

2. When such cancellation or termination occurs during the

2850

first 90 days during which the insurance is in force and the

2851

insurance is canceled or terminated for reasons other than

2852

nonpayment of premium, at least 20 days' written notice of

2853

cancellation or termination accompanied by the reason therefor

2854

shall be given except where there has been a material

2855

misstatement or misrepresentation or failure to comply with the

2856

underwriting requirements established by the insurer.

2857

3. The requirement for providing written notice of

2858

nonrenewal by June 1 of any nonrenewal that would be effective

2859

between June 1 and November 30 does not apply to the following

2860

situations, but the insurer remains subject to the requirement to

2861

provide such notice at least 100 days prior to the effective date

2862

of nonrenewal:

2863

a. A policy that is nonrenewed due to a revision in the

2864

coverage for sinkhole losses and catastrophic ground cover

2865

collapse pursuant to s. 627.730, as amended by s. 30, chapter

2866

2007-1, Laws of Florida.

2867

b. A policy that is nonrenewed by Citizens Property

2868

Insurance Corporation, pursuant to s. 627.351(6), for a policy

2869

that has been assumed by an authorized insurer offering

2870

replacement or renewal coverage to the policyholder.

2871

2872

After the policy has been in effect for 90 days, the policy shall

2873

not be canceled by the insurer except when there has been a

2874

material misstatement, a nonpayment of premium, a failure to

2875

comply with underwriting requirements established by the insurer

2876

within 90 days of the date of effectuation of coverage, or a

2877

substantial change in the risk covered by the policy or when the

2878

cancellation is for all insureds under such policies for a given

2879

class of insureds. This paragraph does not apply to individually

2880

rated risks having a policy term of less than 90 days.

2881

Section 15. Effective January 1, 2009, and applicable to

2882

policies issued or renewed on or after that date, section

2883

627.714, Florida Statutes, is created to read:

2884

627.714 Guaranteed renewability for mitigated homes.--A

2885

personal lines residential insurance policy shall be guaranteed

2886

renewable for at least 3 years if the dwelling has been built or

2887

retrofitted to meet the wind-borne-debris protection requirements

2888

of the Florida Building Code which apply to the wind-borne debris

2889

region as defined in the Florida Building Code. This requirement

2890

applies only for one 3-year period after the policy is issued or

2891

first renewed after the dwelling has been built or retrofitted to

2892

meet the wind-borne-debris protection requirements.

2893

Section 16. Effective January 1, 2011, section 689.262,

2894

Florida Statutes, is created to read:

2895

689.262 Sale of residential property; disclosure of

2896

windstorm mitigation rating.--A purchaser of residential property

2897

must be informed of the windstorm mitigation rating of the

2898

structure, based on the uniform home grading scale adopted

2899

pursuant to s. 215.55865. The rating must be included in the

2900

contract for sale or as a separate document attached to the

2901

contract for sale. The Financial Services Commission may adopt

2902

rules, consistent with other state laws, to administer this

2903

section, including the form of the disclosure and the

2904

requirements for the windstorm mitigation inspection or report

2905

that is required for purposes of determining the rating.

2906

Section 17. Effective October 1, 2008, subsection (1) of

2907

section 817.2341, Florida Statutes, is amended to read:

2908

817.2341 False or misleading statements or supporting

2909

documents; penalty.--

2910

(1) Any person who willfully files with the department or

2911

office, or who willfully signs for filing with the department or

2912

office, a materially false or materially misleading financial

2913

statement or document in support of such statement required by

2914

law or rule, or a materially false or materially misleading rate

2915

filing, with intent to deceive and with knowledge that the

2916

statement or document is materially false or materially

2917

misleading, commits a felony of the third degree, punishable as

2918

provided in s. 775.082, s. 775.083, or s. 775.084.

2919

Section 18. (1) By December 15, 2008, Citizens Property

2920

Insurance Corporation shall transfer $250 million to the General

2921

Revenue Fund by transferring an amount from the Personal Lines

2922

Account and the Commercial Lines Account, as defined in s.

2923

627.351(6), Florida Statutes, in proportion to the surplus of

2924

each account, if the combined losses in the Personal Lines

2925

Account and the Commercial Lines Account from one or more named

2926

hurricanes in 2008 do not exceed $750 million. The board of

2927

governors of Citizens Property Insurance Corporation must make a

2928

reasonable estimate of such losses on or after December 1, 2008,

2929

and no later than December 14, 2008, using generally accepted

2930

actuarial and accounting practices, recognizing that audited

2931

financial statements will not yet be available and that all

2932

losses will have not been reported or developed.

2933

(2) If Citizens Property Insurance Corporation transfers

2934

$250 million to General Revenue as provided in subsection (1),

2935

effective December 15, 2008, and for the 2008-2009 fiscal year,

2936

the sum of $250 million is appropriated from the General Revenue

2937

Fund on a nonrecurring basis to the State Board of Administration

2938

for purposes of the Insurance Capital Build-Up Incentive Program

2939

established pursuant to s. 215.5595, Florida Statutes, as amended

2940

by this act. Costs and fees incurred by the board in

2941

administering this program, including fees for investment

2942

services, shall be paid from funds appropriated by the

2943

Legislature for this program, but are limited to 1 percent of the

2944

amount appropriated. Notwithstanding the provisions of s.

2945

216.301, Florida Statutes, to the contrary, the unexpended

2946

balance of this appropriation shall not revert to the General

2947

Revenue Fund until June 30, 2009.

2948

Section 19. Except as otherwise expressly provided in this

2949

act, this act shall take effect July 1, 2008.

CODING: Words stricken are deletions; words underlined are additions.