CS/CS/HB 1171

1	A bill to be entitled
2	An act relating to residential property insurance;
3	amending s. 627.062, F.S.; providing that nonassessable
4	residential property insurance is not subject to
5	determinations as excessive or unfairly discriminatory;
6	providing an exception; preserving the authority of the
7	Office of Insurance Regulation to disapprove rates or rate
8	filings; amending s. 627.351, F.S.; excluding
9	nonassessable residential property insurance policies from
10	aggregate direct written premium for subject lines of
11	business for purposes of calculating certain emergency
12	assessments; excluding nonassessable residential property
13	insurance from subject lines of business; amending s.
14	627.4025, F.S.; defining the terms "assessable residential
15	property insurance" and "nonassessable residential
16	property insurance" for purposes of personal lines
17	residential coverage; creating s. 627.7031, F.S.;
18	authorizing insurers to offer nonassessable residential
19	property insurance policies; providing requirements;
20	prohibiting insurers from purchasing coverage relating to
21	temporary increase in coverage limit options from the
22	Florida Hurricane Catastrophe Fund; specifying a required
23	notice before issuing or nonrenewing policies at certain
24	rates; providing criteria for providing such notice;
25	providing an effective date.
26
27	Be It Enacted by the Legislature of the State of Florida:
28
29	Section 1.  Paragraph (k) is added to subsection (2) of
30	section 627.062, Florida Statutes, to read:
31	627.062  Rate standards.--
32	(2)  As to all such classes of insurance:
33	(k)1.  Notwithstanding any other provision of this section,
34	a rate filing for nonassessable residential property insurance
35	as defined in s. 627.4025(1)(b) is not subject to a
36	determination that the rate is excessive or unfairly
37	discriminatory, except as provided in subparagraph 3.
38	2.  This paragraph does not apply to filings for assessable
39	residential property insurance as defined in s. 627.4025(1)(a).
40	3.  This paragraph does not affect the power of the office
41	to disapprove rates as inadequate or to disapprove a rate filing
42	for the use of a rating factor that is unlawful pursuant to s.
43	626.9541(1).
44
45	The provisions of this subsection shall not apply to workers'
46	compensation and employer's liability insurance and to motor
47	vehicle insurance.
48	Section 2.  Paragraph (b) of subsection (6) of section
49	627.351, Florida Statutes, is amended to read:
50	627.351  Insurance risk apportionment plans.--
51	(6)  CITIZENS PROPERTY INSURANCE CORPORATION.--
52	(b)1.  All insurers authorized to write one or more subject
53	lines of business in this state are subject to assessment by the
54	corporation and, for the purposes of this subsection, are
55	referred to collectively as "assessable insurers." Insurers
56	writing one or more subject lines of business in this state
57	pursuant to part VIII of chapter 626 are not assessable
58	insurers, but insureds who procure one or more subject lines of
59	business in this state pursuant to part VIII of chapter 626 are
60	subject to assessment by the corporation and are referred to
61	collectively as "assessable insureds." An authorized insurer's
62	assessment liability shall begin on the first day of the
63	calendar year following the year in which the insurer was issued
64	a certificate of authority to transact insurance for subject
65	lines of business in this state and shall terminate 1 year after
66	the end of the first calendar year during which the insurer no
67	longer holds a certificate of authority to transact insurance
68	for subject lines of business in this state.
69	2.a.  All revenues, assets, liabilities, losses, and
70	expenses of the corporation shall be divided into three separate
71	accounts as follows:
72	(I)  A personal lines account for personal residential
73	policies issued by the corporation or issued by the Residential
74	Property and Casualty Joint Underwriting Association and renewed
75	by the corporation that provide comprehensive, multiperil
76	coverage on risks that are not located in areas eligible for
77	coverage in the Florida Windstorm Underwriting Association as
78	those areas were defined on January 1, 2002, and for such
79	policies that do not provide coverage for the peril of wind on
80	risks that are located in such areas;
81	(II)  A commercial lines account for commercial residential
82	and commercial nonresidential policies issued by the corporation
83	or issued by the Residential Property and Casualty Joint
84	Underwriting Association and renewed by the corporation that
85	provide coverage for basic property perils on risks that are not
86	located in areas eligible for coverage in the Florida Windstorm
87	Underwriting Association as those areas were defined on January
88	1, 2002, and for such policies that do not provide coverage for
89	the peril of wind on risks that are located in such areas; and
90	(III)  A high-risk account for personal residential
91	policies and commercial residential and commercial
92	nonresidential property policies issued by the corporation or
93	transferred to the corporation that provide coverage for the
94	peril of wind on risks that are located in areas eligible for
95	coverage in the Florida Windstorm Underwriting Association as
96	those areas were defined on January 1, 2002. The corporation may
97	offer policies that provide multiperil coverage and the
98	corporation shall continue to offer policies that provide
99	coverage only for the peril of wind for risks located in areas
100	eligible for coverage in the high-risk account. In issuing
101	multiperil coverage, the corporation may use its approved policy
102	forms and rates for the personal lines account. An applicant or
103	insured who is eligible to purchase a multiperil policy from the
104	corporation may purchase a multiperil policy from an authorized
105	insurer without prejudice to the applicant's or insured's
106	eligibility to prospectively purchase a policy that provides
107	coverage only for the peril of wind from the corporation. An
108	applicant or insured who is eligible for a corporation policy
109	that provides coverage only for the peril of wind may elect to
110	purchase or retain such policy and also purchase or retain
111	coverage excluding wind from an authorized insurer without
112	prejudice to the applicant's or insured's eligibility to
113	prospectively purchase a policy that provides multiperil
114	coverage from the corporation. It is the goal of the Legislature
115	that there would be an overall average savings of 10 percent or
116	more for a policyholder who currently has a wind-only policy
117	with the corporation, and an ex-wind policy with a voluntary
118	insurer or the corporation, and who then obtains a multiperil
119	policy from the corporation. It is the intent of the Legislature
120	that the offer of multiperil coverage in the high-risk account
121	be made and implemented in a manner that does not adversely
122	affect the tax-exempt status of the corporation or
123	creditworthiness of or security for currently outstanding
124	financing obligations or credit facilities of the high-risk
125	account, the personal lines account, or the commercial lines
126	account. The high-risk account must also include quota share
127	primary insurance under subparagraph (c)2. The area eligible for
128	coverage under the high-risk account also includes the area
129	within Port Canaveral, which is bordered on the south by the
130	City of Cape Canaveral, bordered on the west by the Banana
131	River, and bordered on the north by Federal Government property.
132	b.  The three separate accounts must be maintained as long
133	as financing obligations entered into by the Florida Windstorm
134	Underwriting Association or Residential Property and Casualty
135	Joint Underwriting Association are outstanding, in accordance
136	with the terms of the corresponding financing documents. When
137	the financing obligations are no longer outstanding, in
138	accordance with the terms of the corresponding financing
139	documents, the corporation may use a single account for all
140	revenues, assets, liabilities, losses, and expenses of the
141	corporation. Consistent with the requirement of this
142	subparagraph and prudent investment policies that minimize the
143	cost of carrying debt, the board shall exercise its best efforts
144	to retire existing debt or to obtain approval of necessary
145	parties to amend the terms of existing debt, so as to structure
146	the most efficient plan to consolidate the three separate
147	accounts into a single account. By February 1, 2007, the board
148	shall submit a report to the Financial Services Commission, the
149	President of the Senate, and the Speaker of the House of
150	Representatives which includes an analysis of consolidating the
151	accounts, the actions the board has taken to minimize the cost
152	of carrying debt, and its recommendations for executing the most
153	efficient plan.
154	c.  Creditors of the Residential Property and Casualty
155	Joint Underwriting Association and of the accounts specified in
156	sub-sub-subparagraphs a.(I) and (II) may have a claim against,
157	and recourse to, the accounts referred to in sub-sub-
158	subparagraphs a.(I) and (II) and shall have no claim against, or
159	recourse to, the account referred to in sub-sub-subparagraph
160	a.(III). Creditors of the Florida Windstorm Underwriting
161	Association shall have a claim against, and recourse to, the
162	account referred to in sub-sub-subparagraph a.(III) and shall
163	have no claim against, or recourse to, the accounts referred to
164	in sub-sub-subparagraphs a.(I) and (II).
165	d.  Revenues, assets, liabilities, losses, and expenses not
166	attributable to particular accounts shall be prorated among the
167	accounts.
168	e.  The Legislature finds that the revenues of the
169	corporation are revenues that are necessary to meet the
170	requirements set forth in documents authorizing the issuance of
171	bonds under this subsection.
172	f.  No part of the income of the corporation may inure to
173	the benefit of any private person.
174	3.  With respect to a deficit in an account:
175	a.  After accounting for the Citizens policyholder
176	surcharge imposed under sub-subparagraph i., when the remaining
177	projected deficit incurred in a particular calendar year is not
178	greater than 6 percent of the aggregate statewide direct written
179	premium for the subject lines of business for the prior calendar
180	year, the entire deficit shall be recovered through regular
181	assessments of assessable insurers under paragraph (p) and
182	assessable insureds.
183	b.  After accounting for the Citizens policyholder
184	surcharge imposed under sub-subparagraph i., when the remaining
185	projected deficit incurred in a particular calendar year exceeds
186	6 percent of the aggregate statewide direct written premium for
187	the subject lines of business for the prior calendar year, the
188	corporation shall levy regular assessments on assessable
189	insurers under paragraph (p) and on assessable insureds in an
190	amount equal to the greater of 6 percent of the deficit or 6
191	percent of the aggregate statewide direct written premium for
192	the subject lines of business for the prior calendar year. Any
193	remaining deficit shall be recovered through emergency
194	assessments under sub-subparagraph d.
195	c.  Each assessable insurer's share of the amount being
196	assessed under sub-subparagraph a. or sub-subparagraph b. shall
197	be in the proportion that the assessable insurer's direct
198	written premium for the subject lines of business for the year
199	preceding the assessment bears to the aggregate statewide direct
200	written premium for the subject lines of business for that year.
201	The assessment percentage applicable to each assessable insured
202	is the ratio of the amount being assessed under sub-subparagraph
203	a. or sub-subparagraph b. to the aggregate statewide direct
204	written premium for the subject lines of business for the prior
205	year. For purposes of the calculation required by this sub-
206	subparagraph, the term "aggregate statewide direct written
207	premium for the subject lines of business" does not include
208	direct written premium for nonassessable residential property
209	insurance policies as defined in s. 627.4025(1)(b). Assessments
210	levied by the corporation on assessable insurers under sub-
211	subparagraphs a. and b. shall be paid as required by the
212	corporation's plan of operation and paragraph (p). Assessments
213	levied by the corporation on assessable insureds under sub-
214	subparagraphs a. and b. shall be collected by the surplus lines
215	agent at the time the surplus lines agent collects the surplus
216	lines tax required by s. 626.932 and shall be paid to the
217	Florida Surplus Lines Service Office at the time the surplus
218	lines agent pays the surplus lines tax to the Florida Surplus
219	Lines Service Office. Upon receipt of regular assessments from
220	surplus lines agents, the Florida Surplus Lines Service Office
221	shall transfer the assessments directly to the corporation as
222	determined by the corporation.
223	d.  Upon a determination by the board of governors that a
224	deficit in an account exceeds the amount that will be recovered
225	through regular assessments under sub-subparagraph a. or sub-
226	subparagraph b., plus the amount that is expected to be
227	recovered through surcharges under sub-subparagraph i., as to
228	the remaining projected deficit the board shall levy, after
229	verification by the office, emergency assessments, for as many
230	years as necessary to cover the deficits, to be collected by
231	assessable insurers and the corporation and collected from
232	assessable insureds upon issuance or renewal of policies for
233	subject lines of business, excluding National Flood Insurance
234	policies. The amount of the emergency assessment collected in a
235	particular year shall be a uniform percentage of that year's
236	direct written premium for subject lines of business and all
237	accounts of the corporation, excluding National Flood Insurance
238	Program policy premiums, as annually determined by the board and
239	verified by the office. For purposes of the calculation required
240	by this sub-subparagraph, the term "that year's direct written
241	premium for the subject lines of business" does not include
242	direct written premium for nonassessable residential property
243	insurance policies as defined in s. 627.4025(1)(b). The office
244	shall verify the arithmetic calculations involved in the board's
245	determination within 30 days after receipt of the information on
246	which the determination was based. Notwithstanding any other
247	provision of law, the corporation and each assessable insurer
248	that writes subject lines of business shall collect emergency
249	assessments from its policyholders without such obligation being
250	affected by any credit, limitation, exemption, or deferment.
251	Emergency assessments levied by the corporation on assessable
252	insureds shall be collected by the surplus lines agent at the
253	time the surplus lines agent collects the surplus lines tax
254	required by s. 626.932 and shall be paid to the Florida Surplus
255	Lines Service Office at the time the surplus lines agent pays
256	the surplus lines tax to the Florida Surplus Lines Service
257	Office. The emergency assessments so collected shall be
258	transferred directly to the corporation on a periodic basis as
259	determined by the corporation and shall be held by the
260	corporation solely in the applicable account. The aggregate
261	amount of emergency assessments levied for an account under this
262	sub-subparagraph in any calendar year may, at the discretion of
263	the board of governors, be less than but may not exceed the
264	greater of 10 percent of the amount needed to cover the deficit,
265	plus interest, fees, commissions, required reserves, and other
266	costs associated with financing of the original deficit, or 10
267	percent of the aggregate statewide direct written premium for
268	subject lines of business and for all accounts of the
269	corporation for the prior year, plus interest, fees,
270	commissions, required reserves, and other costs associated with
271	financing the deficit.
272	e.  The corporation may pledge the proceeds of assessments,
273	projected recoveries from the Florida Hurricane Catastrophe
274	Fund, other insurance and reinsurance recoverables, policyholder
275	surcharges and other surcharges, and other funds available to
276	the corporation as the source of revenue for and to secure bonds
277	issued under paragraph (p), bonds or other indebtedness issued
278	under subparagraph (c)3., or lines of credit or other financing
279	mechanisms issued or created under this subsection, or to retire
280	any other debt incurred as a result of deficits or events giving
281	rise to deficits, or in any other way that the board determines
282	will efficiently recover such deficits. The purpose of the lines
283	of credit or other financing mechanisms is to provide additional
284	resources to assist the corporation in covering claims and
285	expenses attributable to a catastrophe. As used in this
286	subsection, the term "assessments" includes regular assessments
287	under sub-subparagraph a., sub-subparagraph b., or subparagraph
288	(p)1. and emergency assessments under sub-subparagraph d.
289	Emergency assessments collected under sub-subparagraph d. are
290	not part of an insurer's rates, are not premium, and are not
291	subject to premium tax, fees, or commissions; however, failure
292	to pay the emergency assessment shall be treated as failure to
293	pay premium. The emergency assessments under sub-subparagraph d.
294	shall continue as long as any bonds issued or other indebtedness
295	incurred with respect to a deficit for which the assessment was
296	imposed remain outstanding, unless adequate provision has been
297	made for the payment of such bonds or other indebtedness
298	pursuant to the documents governing such bonds or other
299	indebtedness.
300	f.  As used in this subsection for purposes of any deficit
301	incurred on or after January 25, 2007, the term "subject lines
302	of business" means insurance written by assessable insurers or
303	procured by assessable insureds for all property and casualty
304	lines of business in this state, but not including workers'
305	compensation or medical malpractice and not including any
306	premiums for nonassessable residential property insurance as
307	defined in s. 627.4025(1)(b). As used in this the sub-
308	subparagraph, except as otherwise provided in this sub-
309	subparagraph, the term "property and casualty lines of business"
310	includes all lines of business identified on Form 2, Exhibit of
311	Premiums and Losses, in the annual statement required of
312	authorized insurers by s. 624.424 and any rule adopted under
313	this section, except for those lines identified as accident and
314	health insurance and except for policies written under the
315	National Flood Insurance Program or the Federal Crop Insurance
316	Program. For purposes of this sub-subparagraph, the term
317	"workers' compensation" includes both workers' compensation
318	insurance and excess workers' compensation insurance.
319	g.  The Florida Surplus Lines Service Office shall
320	determine annually the aggregate statewide written premium in
321	subject lines of business procured by assessable insureds and
322	shall report that information to the corporation in a form and
323	at a time the corporation specifies to ensure that the
324	corporation can meet the requirements of this subsection and the
325	corporation's financing obligations.
326	h.  The Florida Surplus Lines Service Office shall verify
327	the proper application by surplus lines agents of assessment
328	percentages for regular assessments and emergency assessments
329	levied under this subparagraph on assessable insureds and shall
330	assist the corporation in ensuring the accurate, timely
331	collection and payment of assessments by surplus lines agents as
332	required by the corporation.
333	i.  If a deficit is incurred in any account in 2008 or
334	thereafter, the board of governors shall levy a Citizens
335	policyholder surcharge against all policyholders of the
336	corporation for a 12-month period, which shall be collected at
337	the time of issuance or renewal of a policy, as a uniform
338	percentage of the premium for the policy of up to 15 percent of
339	such premium, which funds shall be used to offset the deficit.
340	Citizens policyholder surcharges under this sub-subparagraph are
341	not considered premium and are not subject to commissions, fees,
342	or premium taxes. However, failure to pay such surcharges shall
343	be treated as failure to pay premium.
344	j.  If the amount of any assessments or surcharges
345	collected from corporation policyholders, assessable insurers or
346	their policyholders, or assessable insureds exceeds the amount
347	of the deficits, such excess amounts shall be remitted to and
348	retained by the corporation in a reserve to be used by the
349	corporation, as determined by the board of governors and
350	approved by the office, to pay claims or reduce any past,
351	present, or future plan-year deficits or to reduce outstanding
352	debt.
353	Section 3.  Subsection (1) of section 627.4025, Florida
354	Statutes, is amended to read:
355	627.4025  Residential coverage and hurricane coverage
356	defined.--
357	(1)  Residential coverage includes both personal lines
358	residential coverage, which consists of the type of coverage
359	provided by homeowner's, mobile home owner's, dwelling,
360	tenant's, condominium unit owner's, cooperative unit owner's,
361	and similar policies, and commercial lines residential coverage,
362	which consists of the type of coverage provided by condominium
363	association, cooperative association, apartment building, and
364	similar policies, including policies covering the common
365	elements of a homeowners' association. Residential coverage for
366	personal lines and commercial lines as set forth in this section
367	includes policies that provide coverage for particular perils
368	such as windstorm and hurricane or coverage for insurer
369	insolvency or deductibles. Policies providing personal lines
370	residential property insurance coverage as described in this
371	subsection consist of two classes, assessable residential
372	property insurance and nonassessable residential property
373	insurance. For purposes of this subsection, the term:
374	(a)  "Assessable residential property insurance" means
375	personal lines residential property insurance that is subject to
376	deficit assessments by Citizens Property Insurance Corporation
377	under s. 627.351(6).
378	(b)  "Nonassessable residential property insurance" means
379	personal lines residential property insurance that is not
380	subject to deficit assessments by Citizens Property Insurance
381	Corporation under s. 627.351(6).
382	Section 4.  Section 627.7031, Florida Statutes, is created
383	to read:
384	627.7031  Residential property insurance.--
385	(1)  Any insurer may offer nonassessable residential
386	property insurance policies as defined in s. 627.4025(1)(b) if:
387	(a)  The insurer is authorized to write property insurance
388	in this state.
389	(b)  The insurer has, at the time of issuance of the policy
390	or at the time of first renewal at rates established pursuant to
391	s. 627.062(2)(k), surplus as to policyholders equal to or
392	greater than $500 million; or, for insurers with surplus
393	exceeding $150 million but less than $500 million, the insurer's
394	ratio of net written premium to its surplus as to policyholders,
395	as calculated based upon the information in the insurer's most
396	recent annual statement, does not exceed two to one. For
397	purposes of this paragraph, the calculation of net written
398	premium shall consider only reinsurance placed pursuant to s.
399	215.555(4) and with reinsurers or direct insurers that have been
400	given a financial strength rating of "A-minus" or better by A.M.
401	Best Company, or have been given a comparable rating by another
402	rating agency that is generally considered accurate or
403	acceptable.
404	(c)  The insurer may not purchase coverage relating to
405	temporary increase in coverage limit options under s.
406	215.555(17) from the Florida Hurricane Catastrophe Fund.
407	(d)  Before the issuance or renewal of a policy at rates
408	established pursuant to s. 627.062(2)(k), the applicant or
409	insured must be given the following notice, printed in at least
410	12-point boldfaced type:
411
412	THE RATE FOR THIS POLICY IS NOT REGULATED BY THE FLORIDA OFFICE
413	OF INSURANCE REGULATION AND MAY BE HIGHER THAN RATES THAT HAVE
414	BEEN APPROVED BY THAT OFFICE. A RESIDENTIAL PROPERTY INSURANCE
415	POLICY THAT IS SUBJECT TO FULL RATE REGULATION REQUIREMENTS MAY
416	BE AVAILABLE FROM ANOTHER INSURER OR FROM CITIZENS PROPERTY
417	INSURANCE CORPORATION. PLEASE DISCUSS YOUR POLICY OPTIONS WITH
418	AN INSURANCE AGENT.
419
420	(2)  With respect to any renewal of a policy at rates
421	established pursuant to s. 627.062(2)(k), the notice required by
422	paragraph (1)(d) must be given in writing at the time of, but
423	separate from, the renewal notice but may be contained within
424	the same mailing as the renewal notice.
425	Section 5.  This act shall take effect upon becoming a law.

CODING: Words stricken are deletions; words underlined are additions.