HB 715

1	A bill to be entitled
2	An act relating to the Citizens Property Insurance
3	Corporation; amending s. 627.351, F.S.; revising plan of
4	operation requirements for basic personal lines policy
5	forms to specify no limitations on replacement costs or
6	coverage amounts for certain dwellings; providing an
7	effective date.
8
9	Be It Enacted by the Legislature of the State of Florida:
10
11	Section 1.  Paragraph (c) of subsection (6) of section
12	627.351, Florida Statutes, is amended to read:
13	627.351  Insurance risk apportionment plans.--
14	(6)  CITIZENS PROPERTY INSURANCE CORPORATION.--
15	(c)  The plan of operation of the corporation:
16	1.  Must provide for adoption of residential property and
17	casualty insurance policy forms and commercial residential and
18	nonresidential property insurance forms, which forms must be
19	approved by the office prior to use. The corporation shall adopt
20	the following policy forms:
21	a.  Standard personal lines policy forms that are
22	comprehensive multiperil policies providing full coverage of a
23	residential property equivalent to the coverage provided in the
24	private insurance market under an HO-3, HO-4, or HO-6 policy.
25	b.  Basic personal lines policy forms that are policies
26	similar to an HO-8 policy or a dwelling fire policy that provide
27	coverage meeting the requirements of the secondary mortgage
28	market with no limitation on replacement cost or coverage amount
29	for owner-occupied dwellings, including builder's risk, but
30	which coverage is more limited than the coverage under a
31	standard policy.
32	c.  Commercial lines residential and nonresidential policy
33	forms that are generally similar to the basic perils of full
34	coverage obtainable for commercial residential structures and
35	commercial nonresidential structures in the admitted voluntary
36	market.
37	d.  Personal lines and commercial lines residential
38	property insurance forms that cover the peril of wind only. The
39	forms are applicable only to residential properties located in
40	areas eligible for coverage under the high-risk account referred
41	to in sub-subparagraph (b)2.a.
42	e.  Commercial lines nonresidential property insurance
43	forms that cover the peril of wind only. The forms are
44	applicable only to nonresidential properties located in areas
45	eligible for coverage under the high-risk account referred to in
46	sub-subparagraph (b)2.a.
47	f.  The corporation may adopt variations of the policy
48	forms listed in sub-subparagraphs a.-e. that contain more
49	restrictive coverage.
50	2.a.  Must provide that the corporation adopt a program in
51	which the corporation and authorized insurers enter into quota
52	share primary insurance agreements for hurricane coverage, as
53	defined in s. 627.4025(2)(a), for eligible risks, and adopt
54	property insurance forms for eligible risks which cover the
55	peril of wind only. As used in this subsection, the term:
56	(I)  "Quota share primary insurance" means an arrangement
57	in which the primary hurricane coverage of an eligible risk is
58	provided in specified percentages by the corporation and an
59	authorized insurer. The corporation and authorized insurer are
60	each solely responsible for a specified percentage of hurricane
61	coverage of an eligible risk as set forth in a quota share
62	primary insurance agreement between the corporation and an
63	authorized insurer and the insurance contract. The
64	responsibility of the corporation or authorized insurer to pay
65	its specified percentage of hurricane losses of an eligible
66	risk, as set forth in the quota share primary insurance
67	agreement, may not be altered by the inability of the other
68	party to the agreement to pay its specified percentage of
69	hurricane losses. Eligible risks that are provided hurricane
70	coverage through a quota share primary insurance arrangement
71	must be provided policy forms that set forth the obligations of
72	the corporation and authorized insurer under the arrangement,
73	clearly specify the percentages of quota share primary insurance
74	provided by the corporation and authorized insurer, and
75	conspicuously and clearly state that neither the authorized
76	insurer nor the corporation may be held responsible beyond its
77	specified percentage of coverage of hurricane losses.
78	(II)  "Eligible risks" means personal lines residential and
79	commercial lines residential risks that meet the underwriting
80	criteria of the corporation and are located in areas that were
81	eligible for coverage by the Florida Windstorm Underwriting
82	Association on January 1, 2002.
83	b.  The corporation may enter into quota share primary
84	insurance agreements with authorized insurers at corporation
85	coverage levels of 90 percent and 50 percent.
86	c.  If the corporation determines that additional coverage
87	levels are necessary to maximize participation in quota share
88	primary insurance agreements by authorized insurers, the
89	corporation may establish additional coverage levels. However,
90	the corporation's quota share primary insurance coverage level
91	may not exceed 90 percent.
92	d.  Any quota share primary insurance agreement entered
93	into between an authorized insurer and the corporation must
94	provide for a uniform specified percentage of coverage of
95	hurricane losses, by county or territory as set forth by the
96	corporation board, for all eligible risks of the authorized
97	insurer covered under the quota share primary insurance
98	agreement.
99	e.  Any quota share primary insurance agreement entered
100	into between an authorized insurer and the corporation is
101	subject to review and approval by the office. However, such
102	agreement shall be authorized only as to insurance contracts
103	entered into between an authorized insurer and an insured who is
104	already insured by the corporation for wind coverage.
105	f.  For all eligible risks covered under quota share
106	primary insurance agreements, the exposure and coverage levels
107	for both the corporation and authorized insurers shall be
108	reported by the corporation to the Florida Hurricane Catastrophe
109	Fund. For all policies of eligible risks covered under quota
110	share primary insurance agreements, the corporation and the
111	authorized insurer shall maintain complete and accurate records
112	for the purpose of exposure and loss reimbursement audits as
113	required by Florida Hurricane Catastrophe Fund rules. The
114	corporation and the authorized insurer shall each maintain
115	duplicate copies of policy declaration pages and supporting
116	claims documents.
117	g.  The corporation board shall establish in its plan of
118	operation standards for quota share agreements which ensure that
119	there is no discriminatory application among insurers as to the
120	terms of quota share agreements, pricing of quota share
121	agreements, incentive provisions if any, and consideration paid
122	for servicing policies or adjusting claims.
123	h.  The quota share primary insurance agreement between the
124	corporation and an authorized insurer must set forth the
125	specific terms under which coverage is provided, including, but
126	not limited to, the sale and servicing of policies issued under
127	the agreement by the insurance agent of the authorized insurer
128	producing the business, the reporting of information concerning
129	eligible risks, the payment of premium to the corporation, and
130	arrangements for the adjustment and payment of hurricane claims
131	incurred on eligible risks by the claims adjuster and personnel
132	of the authorized insurer. Entering into a quota sharing
133	insurance agreement between the corporation and an authorized
134	insurer shall be voluntary and at the discretion of the
135	authorized insurer.
136	3.  May provide that the corporation may employ or
137	otherwise contract with individuals or other entities to provide
138	administrative or professional services that may be appropriate
139	to effectuate the plan. The corporation shall have the power to
140	borrow funds, by issuing bonds or by incurring other
141	indebtedness, and shall have other powers reasonably necessary
142	to effectuate the requirements of this subsection, including,
143	without limitation, the power to issue bonds and incur other
144	indebtedness in order to refinance outstanding bonds or other
145	indebtedness. The corporation may, but is not required to, seek
146	judicial validation of its bonds or other indebtedness under
147	chapter 75. The corporation may issue bonds or incur other
148	indebtedness, or have bonds issued on its behalf by a unit of
149	local government pursuant to subparagraph (p)2., in the absence
150	of a hurricane or other weather-related event, upon a
151	determination by the corporation, subject to approval by the
152	office, that such action would enable it to efficiently meet the
153	financial obligations of the corporation and that such
154	financings are reasonably necessary to effectuate the
155	requirements of this subsection. The corporation is authorized
156	to take all actions needed to facilitate tax-free status for any
157	such bonds or indebtedness, including formation of trusts or
158	other affiliated entities. The corporation shall have the
159	authority to pledge assessments, projected recoveries from the
160	Florida Hurricane Catastrophe Fund, other reinsurance
161	recoverables, market equalization and other surcharges, and
162	other funds available to the corporation as security for bonds
163	or other indebtedness. In recognition of s. 10, Art. I of the
164	State Constitution, prohibiting the impairment of obligations of
165	contracts, it is the intent of the Legislature that no action be
166	taken whose purpose is to impair any bond indenture or financing
167	agreement or any revenue source committed by contract to such
168	bond or other indebtedness.
169	4.a.  Must require that the corporation operate subject to
170	the supervision and approval of a board of governors consisting
171	of eight individuals who are residents of this state, from
172	different geographical areas of this state. The Governor, the
173	Chief Financial Officer, the President of the Senate, and the
174	Speaker of the House of Representatives shall each appoint two
175	members of the board. At least one of the two members appointed
176	by each appointing officer must have demonstrated expertise in
177	insurance. The Chief Financial Officer shall designate one of
178	the appointees as chair. All board members serve at the pleasure
179	of the appointing officer. All members of the board of governors
180	are subject to removal at will by the officers who appointed
181	them. All board members, including the chair, must be appointed
182	to serve for 3-year terms beginning annually on a date
183	designated by the plan. Any board vacancy shall be filled for
184	the unexpired term by the appointing officer. The Chief
185	Financial Officer shall appoint a technical advisory group to
186	provide information and advice to the board of governors in
187	connection with the board's duties under this subsection. The
188	executive director and senior managers of the corporation shall
189	be engaged by the board and serve at the pleasure of the board.
190	Any executive director appointed on or after July 1, 2006, is
191	subject to confirmation by the Senate. The executive director is
192	responsible for employing other staff as the corporation may
193	require, subject to review and concurrence by the board.
194	b.  The board shall create a Market Accountability Advisory
195	Committee to assist the corporation in developing awareness of
196	its rates and its customer and agent service levels in
197	relationship to the voluntary market insurers writing similar
198	coverage. The members of the advisory committee shall consist of
199	the following 11 persons, one of whom must be elected chair by
200	the members of the committee: four representatives, one
201	appointed by the Florida Association of Insurance Agents, one by
202	the Florida Association of Insurance and Financial Advisors, one
203	by the Professional Insurance Agents of Florida, and one by the
204	Latin American Association of Insurance Agencies; three
205	representatives appointed by the insurers with the three highest
206	voluntary market share of residential property insurance
207	business in the state; one representative from the Office of
208	Insurance Regulation; one consumer appointed by the board who is
209	insured by the corporation at the time of appointment to the
210	committee; one representative appointed by the Florida
211	Association of Realtors; and one representative appointed by the
212	Florida Bankers Association. All members must serve for 3-year
213	terms and may serve for consecutive terms. The committee shall
214	report to the corporation at each board meeting on insurance
215	market issues which may include rates and rate competition with
216	the voluntary market; service, including policy issuance, claims
217	processing, and general responsiveness to policyholders,
218	applicants, and agents; and matters relating to depopulation.
219	5.  Must provide a procedure for determining the
220	eligibility of a risk for coverage, as follows:
221	a.  Subject to the provisions of s. 627.3517, with respect
222	to personal lines residential risks, if the risk is offered
223	coverage from an authorized insurer at the insurer's approved
224	rate under either a standard policy including wind coverage or,
225	if consistent with the insurer's underwriting rules as filed
226	with the office, a basic policy including wind coverage, for a
227	new application to the corporation for coverage, the risk is not
228	eligible for any policy issued by the corporation unless the
229	premium for coverage from the authorized insurer is more than 15
230	percent greater than the premium for comparable coverage from
231	the corporation. If the risk is not able to obtain any such
232	offer, the risk is eligible for either a standard policy
233	including wind coverage or a basic policy including wind
234	coverage issued by the corporation; however, if the risk could
235	not be insured under a standard policy including wind coverage
236	regardless of market conditions, the risk shall be eligible for
237	a basic policy including wind coverage unless rejected under
238	subparagraph 8. However, with regard to a policyholder of the
239	corporation or a policyholder removed from the corporation
240	through an assumption agreement until the end of the assumption
241	period, the policyholder remains eligible for coverage from the
242	corporation regardless of any offer of coverage from an
243	authorized insurer or surplus lines insurer. The corporation
244	shall determine the type of policy to be provided on the basis
245	of objective standards specified in the underwriting manual and
246	based on generally accepted underwriting practices.
247	(I)  If the risk accepts an offer of coverage through the
248	market assistance plan or an offer of coverage through a
249	mechanism established by the corporation before a policy is
250	issued to the risk by the corporation or during the first 30
251	days of coverage by the corporation, and the producing agent who
252	submitted the application to the plan or to the corporation is
253	not currently appointed by the insurer, the insurer shall:
254	(A)  Pay to the producing agent of record of the policy,
255	for the first year, an amount that is the greater of the
256	insurer's usual and customary commission for the type of policy
257	written or a fee equal to the usual and customary commission of
258	the corporation; or
259	(B)  Offer to allow the producing agent of record of the
260	policy to continue servicing the policy for a period of not less
261	than 1 year and offer to pay the agent the greater of the
262	insurer's or the corporation's usual and customary commission
263	for the type of policy written.
264
265	If the producing agent is unwilling or unable to accept
266	appointment, the new insurer shall pay the agent in accordance
267	with sub-sub-sub-subparagraph (A).
268	(II)  When the corporation enters into a contractual
269	agreement for a take-out plan, the producing agent of record of
270	the corporation policy is entitled to retain any unearned
271	commission on the policy, and the insurer shall:
272	(A)  Pay to the producing agent of record of the
273	corporation policy, for the first year, an amount that is the
274	greater of the insurer's usual and customary commission for the
275	type of policy written or a fee equal to the usual and customary
276	commission of the corporation; or
277	(B)  Offer to allow the producing agent of record of the
278	corporation policy to continue servicing the policy for a period
279	of not less than 1 year and offer to pay the agent the greater
280	of the insurer's or the corporation's usual and customary
281	commission for the type of policy written.
282
283	If the producing agent is unwilling or unable to accept
284	appointment, the new insurer shall pay the agent in accordance
285	with sub-sub-sub-subparagraph (A).
286	b.  With respect to commercial lines residential risks, for
287	a new application to the corporation for coverage, if the risk
288	is offered coverage under a policy including wind coverage from
289	an authorized insurer at its approved rate, the risk is not
290	eligible for any policy issued by the corporation unless the
291	premium for coverage from the authorized insurer is more than 15
292	percent greater than the premium for comparable coverage from
293	the corporation. If the risk is not able to obtain any such
294	offer, the risk is eligible for a policy including wind coverage
295	issued by the corporation. However, with regard to a
296	policyholder of the corporation or a policyholder removed from
297	the corporation through an assumption agreement until the end of
298	the assumption period, the policyholder remains eligible for
299	coverage from the corporation regardless of any offer of
300	coverage from an authorized insurer or surplus lines insurer.
301	(I)  If the risk accepts an offer of coverage through the
302	market assistance plan or an offer of coverage through a
303	mechanism established by the corporation before a policy is
304	issued to the risk by the corporation or during the first 30
305	days of coverage by the corporation, and the producing agent who
306	submitted the application to the plan or the corporation is not
307	currently appointed by the insurer, the insurer shall:
308	(A)  Pay to the producing agent of record of the policy,
309	for the first year, an amount that is the greater of the
310	insurer's usual and customary commission for the type of policy
311	written or a fee equal to the usual and customary commission of
312	the corporation; or
313	(B)  Offer to allow the producing agent of record of the
314	policy to continue servicing the policy for a period of not less
315	than 1 year and offer to pay the agent the greater of the
316	insurer's or the corporation's usual and customary commission
317	for the type of policy written.
318
319	If the producing agent is unwilling or unable to accept
320	appointment, the new insurer shall pay the agent in accordance
321	with sub-sub-sub-subparagraph (A).
322	(II)  When the corporation enters into a contractual
323	agreement for a take-out plan, the producing agent of record of
324	the corporation policy is entitled to retain any unearned
325	commission on the policy, and the insurer shall:
326	(A)  Pay to the producing agent of record of the
327	corporation policy, for the first year, an amount that is the
328	greater of the insurer's usual and customary commission for the
329	type of policy written or a fee equal to the usual and customary
330	commission of the corporation; or
331	(B)  Offer to allow the producing agent of record of the
332	corporation policy to continue servicing the policy for a period
333	of not less than 1 year and offer to pay the agent the greater
334	of the insurer's or the corporation's usual and customary
335	commission for the type of policy written.
336
337	If the producing agent is unwilling or unable to accept
338	appointment, the new insurer shall pay the agent in accordance
339	with sub-sub-sub-subparagraph (A).
340	c.  For purposes of determining comparable coverage under
341	sub-subparagraphs a. and b., the comparison shall be based on
342	those forms and coverages that are reasonably comparable. The
343	corporation may rely on a determination of comparable coverage
344	and premium made by the producing agent who submits the
345	application to the corporation, made in the agent's capacity as
346	the corporation's agent. A comparison may be made solely of the
347	premium with respect to the main building or structure only on
348	the following basis: the same coverage A or other building
349	limits; the same percentage hurricane deductible that applies on
350	an annual basis or that applies to each hurricane for commercial
351	residential property; the same percentage of ordinance and law
352	coverage, if the same limit is offered by both the corporation
353	and the authorized insurer; the same mitigation credits, to the
354	extent the same types of credits are offered both by the
355	corporation and the authorized insurer; the same method for loss
356	payment, such as replacement cost or actual cash value, if the
357	same method is offered both by the corporation and the
358	authorized insurer in accordance with underwriting rules; and
359	any other form or coverage that is reasonably comparable as
360	determined by the board. If an application is submitted to the
361	corporation for wind-only coverage in the high-risk account, the
362	premium for the corporation's wind-only policy plus the premium
363	for the ex-wind policy that is offered by an authorized insurer
364	to the applicant shall be compared to the premium for multiperil
365	coverage offered by an authorized insurer, subject to the
366	standards for comparison specified in this subparagraph. If the
367	corporation or the applicant requests from the authorized
368	insurer a breakdown of the premium of the offer by types of
369	coverage so that a comparison may be made by the corporation or
370	its agent and the authorized insurer refuses or is unable to
371	provide such information, the corporation may treat the offer as
372	not being an offer of coverage from an authorized insurer at the
373	insurer's approved rate.
374	6.  Must include rules for classifications of risks and
375	rates therefor.
376	7.  Must provide that if premium and investment income for
377	an account attributable to a particular calendar year are in
378	excess of projected losses and expenses for the account
379	attributable to that year, such excess shall be held in surplus
380	in the account. Such surplus shall be available to defray
381	deficits in that account as to future years and shall be used
382	for that purpose prior to assessing assessable insurers and
383	assessable insureds as to any calendar year.
384	8.  Must provide objective criteria and procedures to be
385	uniformly applied for all applicants in determining whether an
386	individual risk is so hazardous as to be uninsurable. In making
387	this determination and in establishing the criteria and
388	procedures, the following shall be considered:
389	a.  Whether the likelihood of a loss for the individual
390	risk is substantially higher than for other risks of the same
391	class; and
392	b.  Whether the uncertainty associated with the individual
393	risk is such that an appropriate premium cannot be determined.
394
395	The acceptance or rejection of a risk by the corporation shall
396	be construed as the private placement of insurance, and the
397	provisions of chapter 120 shall not apply.
398	9.  Must provide that the corporation shall make its best
399	efforts to procure catastrophe reinsurance at reasonable rates,
400	to cover its projected 100-year probable maximum loss as
401	determined by the board of governors.
402	10.  The policies issued by the corporation must provide
403	that, if the corporation or the market assistance plan obtains
404	an offer from an authorized insurer to cover the risk at its
405	approved rates, the risk is no longer eligible for renewal
406	through the corporation, except as otherwise provided in this
407	subsection.
408	11.  Corporation policies and applications must include a
409	notice that the corporation policy could, under this section, be
410	replaced with a policy issued by an authorized insurer that does
411	not provide coverage identical to the coverage provided by the
412	corporation. The notice shall also specify that acceptance of
413	corporation coverage creates a conclusive presumption that the
414	applicant or policyholder is aware of this potential.
415	12.  May establish, subject to approval by the office,
416	different eligibility requirements and operational procedures
417	for any line or type of coverage for any specified county or
418	area if the board determines that such changes to the
419	eligibility requirements and operational procedures are
420	justified due to the voluntary market being sufficiently stable
421	and competitive in such area or for such line or type of
422	coverage and that consumers who, in good faith, are unable to
423	obtain insurance through the voluntary market through ordinary
424	methods would continue to have access to coverage from the
425	corporation. When coverage is sought in connection with a real
426	property transfer, such requirements and procedures shall not
427	provide for an effective date of coverage later than the date of
428	the closing of the transfer as established by the transferor,
429	the transferee, and, if applicable, the lender.
430	13.  Must provide that, with respect to the high-risk
431	account, any assessable insurer with a surplus as to
432	policyholders of $25 million or less writing 25 percent or more
433	of its total countrywide property insurance premiums in this
434	state may petition the office, within the first 90 days of each
435	calendar year, to qualify as a limited apportionment company. A
436	regular assessment levied by the corporation on a limited
437	apportionment company for a deficit incurred by the corporation
438	for the high-risk account in 2006 or thereafter may be paid to
439	the corporation on a monthly basis as the assessments are
440	collected by the limited apportionment company from its insureds
441	pursuant to s. 627.3512, but the regular assessment must be paid
442	in full within 12 months after being levied by the corporation.
443	A limited apportionment company shall collect from its
444	policyholders any emergency assessment imposed under sub-
445	subparagraph (b)3.d. The plan shall provide that, if the office
446	determines that any regular assessment will result in an
447	impairment of the surplus of a limited apportionment company,
448	the office may direct that all or part of such assessment be
449	deferred as provided in subparagraph (p)4. However, there shall
450	be no limitation or deferment of an emergency assessment to be
451	collected from policyholders under sub-subparagraph (b)3.d.
452	14.  Must provide that the corporation appoint as its
453	licensed agents only those agents who also hold an appointment
454	as defined in s. 626.015(3) with an insurer who at the time of
455	the agent's initial appointment by the corporation is authorized
456	to write and is actually writing personal lines residential
457	property coverage, commercial residential property coverage, or
458	commercial nonresidential property coverage within the state.
459	15.  Must provide, by July 1, 2007, a premium payment plan
460	option to its policyholders which allows at a minimum for
461	quarterly and semiannual payment of premiums. A monthly payment
462	plan may, but is not required to, be offered.
463	16.  Must limit coverage on mobile homes or manufactured
464	homes built prior to 1994 to actual cash value of the dwelling
465	rather than replacement costs of the dwelling.
466	17.  May provide such limits of coverage as the board
467	determines, consistent with the requirements of this subsection.
468	18.  May require commercial property to meet specified
469	hurricane mitigation construction features as a condition of
470	eligibility for coverage.
471	Section 2.  This act shall take effect July 1, 2009.

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