Florida Senate - 2009 SENATOR AMENDMENT
Bill No. CS for CS for SB 1950
Barcode 618962
LEGISLATIVE ACTION
Senate . House
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Floor: WD/2R .
04/27/2009 04:42 PM .
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Senators Fasano, Crist, Storms, and Lynn moved the following:
1 Senate Amendment (with title amendment)
2
3 Delete lines 1003 - 1231
4 and insert:
5 3. For all residential property insurance filings made or
6 submitted after January 25, 2007, but before December 31, 2012
7 2009, an insurer seeking a rate that is greater than the rate
8 most recently approved by the office shall make a “file and use”
9 filing. For purposes of this subparagraph, motor vehicle
10 collision and comprehensive coverages are not considered to be
11 property coverages.
12 (b) Upon receiving a rate filing, the office shall review
13 the rate filing to determine if a rate is excessive, inadequate,
14 or unfairly discriminatory. In making that determination, the
15 office shall, in accordance with generally accepted and
16 reasonable actuarial techniques, consider the following factors:
17 1. Past and prospective loss experience within and without
18 this state.
19 2. Past and prospective expenses.
20 3. The degree of competition among insurers for the risk
21 insured.
22 4. Investment income reasonably expected by the insurer,
23 consistent with the insurer’s investment practices, from
24 investable premiums anticipated in the filing, plus any other
25 expected income from currently invested assets representing the
26 amount expected on unearned premium reserves and loss reserves.
27 The commission may adopt rules using reasonable techniques of
28 actuarial science and economics to specify the manner in which
29 insurers shall calculate investment income attributable to such
30 classes of insurance written in this state and the manner in
31 which such investment income shall be used to calculate
32 insurance rates. Such manner shall contemplate allowances for an
33 underwriting profit factor and full consideration of investment
34 income which produce a reasonable rate of return; however,
35 investment income from invested surplus may not be considered.
36 5. The reasonableness of the judgment reflected in the
37 filing.
38 6. Dividends, savings, or unabsorbed premium deposits
39 allowed or returned to Florida policyholders, members, or
40 subscribers.
41 7. The adequacy of loss reserves.
42 8. The cost of reinsurance. The office shall not disapprove
43 a rate as excessive solely due to the insurer having obtained
44 catastrophic reinsurance to cover the insurer’s estimated 250
45 year probable maximum loss or any lower level of loss.
46 9. Trend factors, including trends in actual losses per
47 insured unit for the insurer making the filing.
48 10. Conflagration and catastrophe hazards, if applicable.
49 11. Projected hurricane losses, if applicable, which must
50 be estimated using a model or method found to be acceptable or
51 reliable by the Florida Commission on Hurricane Loss Projection
52 Methodology, and as further provided in s. 627.0628.
53 12. A reasonable margin for underwriting profit and
54 contingencies.
55 13. The cost of medical services, if applicable.
56 14. Other relevant factors which impact upon the frequency
57 or severity of claims or upon expenses.
58 (c) In the case of fire insurance rates, consideration
59 shall be given to the availability of water supplies and the
60 experience of the fire insurance business during a period of not
61 less than the most recent 5-year period for which such
62 experience is available.
63 (d) If conflagration or catastrophe hazards are given
64 consideration by an insurer in its rates or rating plan,
65 including surcharges and discounts, the insurer shall establish
66 a reserve for that portion of the premium allocated to such
67 hazard and shall maintain the premium in a catastrophe reserve.
68 Any removal of such premiums from the reserve for purposes other
69 than paying claims associated with a catastrophe or purchasing
70 reinsurance for catastrophes shall be subject to approval of the
71 office. Any ceding commission received by an insurer purchasing
72 reinsurance for catastrophes shall be placed in the catastrophe
73 reserve.
74 (e) After consideration of the rate factors provided in
75 paragraphs (b), (c), and (d), a rate may be found by the office
76 to be excessive, inadequate, or unfairly discriminatory based
77 upon the following standards:
78 1. Rates shall be deemed excessive if they are likely to
79 produce a profit from Florida business that is unreasonably high
80 in relation to the risk involved in the class of business or if
81 expenses are unreasonably high in relation to services rendered.
82 2. Rates shall be deemed excessive if, among other things,
83 the rate structure established by a stock insurance company
84 provides for replenishment of surpluses from premiums, when the
85 replenishment is attributable to investment losses.
86 3. Rates shall be deemed inadequate if they are clearly
87 insufficient, together with the investment income attributable
88 to them, to sustain projected losses and expenses in the class
89 of business to which they apply.
90 4. A rating plan, including discounts, credits, or
91 surcharges, shall be deemed unfairly discriminatory if it fails
92 to clearly and equitably reflect consideration of the
93 policyholder’s participation in a risk management program
94 adopted pursuant to s. 627.0625.
95 5. A rate shall be deemed inadequate as to the premium
96 charged to a risk or group of risks if discounts or credits are
97 allowed which exceed a reasonable reflection of expense savings
98 and reasonably expected loss experience from the risk or group
99 of risks.
100 6. A rate shall be deemed unfairly discriminatory as to a
101 risk or group of risks if the application of premium discounts,
102 credits, or surcharges among such risks does not bear a
103 reasonable relationship to the expected loss and expense
104 experience among the various risks.
105 (f) In reviewing a rate filing, the office may require the
106 insurer to provide at the insurer’s expense all information
107 necessary to evaluate the condition of the company and the
108 reasonableness of the filing according to the criteria
109 enumerated in this section.
110 (g) The office may at any time review a rate, rating
111 schedule, rating manual, or rate change; the pertinent records
112 of the insurer; and market conditions. If the office finds on a
113 preliminary basis that a rate may be excessive, inadequate, or
114 unfairly discriminatory, the office shall initiate proceedings
115 to disapprove the rate and shall so notify the insurer. However,
116 the office may not disapprove as excessive any rate for which it
117 has given final approval or which has been deemed approved for a
118 period of 1 year after the effective date of the filing unless
119 the office finds that a material misrepresentation or material
120 error was made by the insurer or was contained in the filing.
121 Upon being so notified, the insurer or rating organization
122 shall, within 60 days, file with the office all information
123 which, in the belief of the insurer or organization, proves the
124 reasonableness, adequacy, and fairness of the rate or rate
125 change. The office shall issue a notice of intent to approve or
126 a notice of intent to disapprove pursuant to the procedures of
127 paragraph (a) within 90 days after receipt of the insurer’s
128 initial response. In such instances and in any administrative
129 proceeding relating to the legality of the rate, the insurer or
130 rating organization shall carry the burden of proof by a
131 preponderance of the evidence to show that the rate is not
132 excessive, inadequate, or unfairly discriminatory. After the
133 office notifies an insurer that a rate may be excessive,
134 inadequate, or unfairly discriminatory, unless the office
135 withdraws the notification, the insurer shall not alter the rate
136 except to conform with the office’s notice until the earlier of
137 120 days after the date the notification was provided or 180
138 days after the date of the implementation of the rate. The
139 office may, subject to chapter 120, disapprove without the 60
140 day notification any rate increase filed by an insurer within
141 the prohibited time period or during the time that the legality
142 of the increased rate is being contested.
143 (h) In the event the office finds that a rate or rate
144 change is excessive, inadequate, or unfairly discriminatory, the
145 office shall issue an order of disapproval specifying that a new
146 rate or rate schedule which responds to the findings of the
147 office be filed by the insurer. The office shall further order,
148 for any “use and file” filing made in accordance with
149 subparagraph (a)2., that premiums charged each policyholder
150 constituting the portion of the rate above that which was
151 actuarially justified be returned to such policyholder in the
152 form of a credit or refund. If the office finds that an
153 insurer’s rate or rate change is inadequate, the new rate or
154 rate schedule filed with the office in response to such a
155 finding shall be applicable only to new or renewal business of
156 the insurer written on or after the effective date of the
157 responsive filing.
158 (i) Except as otherwise specifically provided in this
159 chapter, the office shall not prohibit any insurer, including
160 any residual market plan or joint underwriting association, from
161 paying acquisition costs based on the full amount of premium, as
162 defined in s. 627.403, applicable to any policy, or prohibit any
163 such insurer from including the full amount of acquisition costs
164 in a rate filing.
165 (j) With respect to residential property insurance rate
166 filings, the rate filing must account for mitigation measures
167 undertaken by policyholders to reduce hurricane losses.
168 (k)1. An insurer may make a separate filing limited solely
169 to an adjustment of its rates for reinsurance or financing costs
170 to replace or finance payment of amounts covered by the Florida
171 Hurricane Catastrophe Fund if:
172 a. Reinsurance costs contained in the filing do not result
173 in an overall premium increase of more than 10 percent for any
174 individual policyholder. If the insurer elects to purchase a
175 liquidity instrument or line of credit instead of reinsurance,
176 the cost included in the filing for the liquidity instrument or
177 line of credit may not result in a premium increase exceeding 3
178 percent for any individual policyholder;
179 b. The insurer includes in the filing a copy of all of its
180 reinsurance, liquidity instrument, or line of credit contracts;
181 proof of the billing or payment for the contracts; and the
182 calculations upon which the proposed rate changes are based
183 demonstrating that the costs meet the criteria of this section
184 and are not loaded for expenses or profit;
185 c. The insurer makes no other changes to its rates; and
186 d. The insurer has not implemented an increase in its rate
187 within the 6 months immediately preceding the filing.
188 2. An insurer making a filing pursuant to this paragraph is
189 not eligible to file for any additional rate increase for the
190 same business for at least 12 months after implementation of the
191 limited filing.
192 3. This paragraph does not limit the authority of the
193 office to disapprove the rate filing as excessive, inadequate,
194 or unfairly discriminatory. All other standards of the rating
195 law apply, including the standard of reasonableness.
196 4. This paragraph does not apply to rate filings for any
197 insurance other than residential property insurance.
198
199 The provisions of this subsection do shall not apply to workers’
200 compensation and employer’s liability insurance and to motor
201 vehicle insurance.
202 (5) With respect to a rate filing involving coverage of the
203 type for which the insurer is required to pay a reimbursement
204 premium to the Florida Hurricane Catastrophe Fund, the insurer
205 may fully recoup in its property insurance premiums any
206 reimbursement premiums paid to the Florida Hurricane Catastrophe
207 Fund, together with reasonable costs of other reinsurance, but
208 except as otherwise provided in this section, may not recoup
209 reinsurance costs that duplicate coverage provided by the
210 Florida Hurricane Catastrophe Fund. An insurer may not recoup
211 more than 1 year of reimbursement premium at a time. Any under
212 recoupment from the prior year may be added to the following
213 year’s reimbursement premium and any over-recoupment shall be
214 subtracted from the following year’s reimbursement premium.
215
216 ================= T I T L E A M E N D M E N T ================
217 And the title is amended as follows:
218 Delete lines 45 - 50
219 and insert:
220 627.062, F.S.; extending the period for which an
221 insurer seeking a residential property insurance rate
222 that is greater than the rate most recently approved
223 by the Office of Insurance Regulation must make a
224 “file and use” filing; authorizing an insurer to make
225 a separate filing limited solely to an adjustment of
226 its rates for reinsurance or financing costs to
227 replace or finance payment of amounts covered by the
228 Florida Hurricane Catastrophe Fund under certain
229 circumstances; providing that certain insurers are not
230 eligible to file for certain additional rate increases
231 during a specified period after implementation of a
232 limited filing; preserving the authority of the office
233 to disapprove a rate filing as excessive, inadequate,
234 or unfairly discriminatory; providing for the
235 applicability of certain provisions of state law;
236 amending s. 627.0621, F.S.;