HB 1341

1	A bill to be entitled
2	An act relating to property insurance; amending s.
3	624.407, F.S.; revising capital funds requirements for
4	domestic insurers; amending s. 627.062, F.S.; revising
5	separate filing requirements and criteria; providing for
6	application solely to residential property insurance;
7	specifying certain publication responsibilities of the
8	Office of Insurance Regulation; amending s. 627.0621,
9	F.S.; deleting definitions; revising requirements for
10	provision by the office of certain information on the
11	Internet; amending s. 627.0629, F.S.; extending a date
12	requirement for the office to develop and make publicly
13	available hurricane mitigation measure methodologies for
14	insurers; extending a date requirement for the Financial
15	Services Commission to adopt certain rules; amending s.
16	627.351, F.S.; deleting a legislative intent provision;
17	deleting certain reporting requirements of the board of
18	directors of Citizens Property Insurance Corporation;
19	creating s. 627.41335, F.S.; providing legislative intent;
20	providing definitions; providing criteria, requirements,
21	and procedures for changes in insurance policy terms;
22	providing notice form requirements; providing for
23	acceptance of changes in policy terms; providing an
24	exception; amending s. 627.7011, F.S.; revising certain
25	replacement cost requirements for losses for insured
26	dwellings and personal property; repealing s. 627.7065,
27	F.S., relating to a database of information relating to
28	sinkholes; providing an effective date.
29
30	Be It Enacted by the Legislature of the State of Florida:
31
32	Section 1.  Subsection (1) of section 624.407, Florida
33	Statutes, is amended to read:
34	624.407  Capital funds required; new insurers.-
35	(1)  To receive authority to transact any one kind or
36	combinations of kinds of insurance, as defined in part V of this
37	chapter, an insurer applying for its original certificate of
38	authority in this state after the effective date of this section
39	shall possess surplus as to policyholders not less than the
40	greater of:
41	(a)  Five million dollars for a property and casualty
42	insurer, or $2.5 million for any other insurer;
43	(b)  For life insurers, 4 percent of the insurer's total
44	liabilities;
45	(c)  For life and health insurers, 4 percent of the
46	insurer's total liabilities, plus 6 percent of the insurer's
47	liabilities relative to health insurance; or
48	(d)  For all insurers other than life insurers and life and
49	health insurers, 10 percent of the insurer's total liabilities;
50
51	however, a domestic insurer initially licensed after June 1,
52	2020, that transacts residential property insurance shall
53	possess surplus as to policyholders of at least $15 million. A
54	new domestic insurer initially licensed after June 1, 2010, that
55	is a subsidiary or affiliate of an existing domestic property
56	insurer shall possess surplus as to policyholders of $5 million.
57	A domestic insurer that transacts residential property insurance
58	and is a wholly owned subsidiary of an insurer domiciled in any
59	other state shall possess surplus as to policyholders of at
60	least $50 million, but no insurer shall be required under this
61	subsection to have surplus as to policyholders greater than $100
62	million.
63	Section 2.  Paragraph (k) of subsection (2) of section
64	627.062, Florida Statutes, is amended to read:
65	627.062  Rate standards.-
66	(2)  As to all such classes of insurance:
67	(k)1.a.  An insurer may make a separate filing for
68	residential property insurance limited solely to an adjustment
69	of its rates for an inflation trend factor, reinsurance, or
70	financing products to replace reinsurance. For purposes of this
71	paragraph, reinsurance includes private reinsurance and
72	coverages available under costs incurred in the purchase of
73	reinsurance or financing products to replace or finance the
74	payment of the amount covered by the Temporary Increase in
75	Coverage Limits (TICL) portion of the Florida Hurricane
76	Catastrophe Fund, including replacement reinsurance for the TICL
77	reductions made pursuant to s. 215.555(17)(e); the actual cost
78	paid due to the application of the TICL premium factor pursuant
79	to s. 215.555(17)(f); and the actual cost paid due to the
80	application of the cash build-up factor pursuant to s.
81	215.555(5)(b). All costs contained in the filing may not result
82	in an overall premium increase of more than 10 percent for any
83	individual policyholder. Any filing made in accordance with this
84	paragraph is subject to the following criteria if the insurer:
85	a.  Elects to purchase financing products such as a
86	liquidity instrument or line of credit, in which case the cost
87	included in the filing for the liquidity instrument or line of
88	credit may not result in a premium increase exceeding 3 percent
89	for any individual policyholder. All costs contained in the
90	filing may not result in an overall premium increase of more
91	than 10 percent for any individual policyholder.
92	(I)b.  An insurer must include Includes in the filing a
93	copy of all of its reinsurance, liquidity instrument, or line of
94	credit contracts; proof of the billing or payment for the
95	contracts; and the calculation upon which the proposed rate
96	change is based, demonstrating demonstrates that the costs meet
97	the criteria of this section and are not loaded for expenses or
98	profit for the insurer making the filing.
99	(II)c.  A filing must include Includes no other changes to
100	the insurer's its rates in the filing.
101	(III)d.  An insurer has not implemented a rate increase
102	within the 6 months immediately preceding the filing.
103	e.  Does not file for a rate increase under any other
104	paragraph within 6 months after making a filing under this
105	paragraph.
106	f.  that purchases reinsurance or financing products from
107	an affiliate may make a filing under this paragraph affiliated
108	company in compliance with this paragraph does so only if the
109	costs for such reinsurance or financing products are charged at
110	or below charges made for comparable coverage by nonaffiliated
111	reinsurers or financial entities making such coverage or
112	financing products available in this state.
113	b.  Beginning June 1, 2010, the office shall publish an
114	annual informational memorandum to establish an inflation trend
115	factor for residential property insurance representing an
116	estimate of cost increases based on industry-wide data available
117	from the Insurance Services Office or other public source. The
118	inflation trend factor is exempt from the rulemaking
119	requirements of chapter 120, and an insurer is not required to
120	adopt the inflation trend factor. This sub-subparagraph applies
121	only to residential property insurance, and the inflation trend
122	factor may be used in making the filing set forth in this
123	subparagraph.
124	2.  An insurer may only make one filing in any 12-month
125	period under this paragraph.
126	3.  An insurer that elects to implement a rate change under
127	this paragraph must file its rate filing with the office at
128	least 45 days before the effective date of the rate change.
129	After an insurer submits a complete filing that meets all of the
130	requirements of this paragraph, the office has 45 days after the
131	date of the filing to review the rate filing and determine if
132	the rate is excessive, inadequate, or unfairly discriminatory.
133
134	The provisions of this subsection shall not apply to workers'
135	compensation and employer's liability insurance and to motor
136	vehicle insurance.
137	Section 3.  Section 627.0621, Florida Statutes, is amended
138	to read:
139	627.0621  Transparency in rate regulation.-
140	(1)  DEFINITIONS.-As used in this section, the term:
141	(a)  "Rate filing" means any original or amended rate
142	residential property insurance filing.
143	(b)  "Recommendation" means any proposed, preliminary, or
144	final recommendation from an office actuary reviewing a rate
145	filing with respect to the issue of approval or disapproval of
146	the rate filing or with respect to rate indications that the
147	office would consider acceptable.
148	(2)  WEBSITE FOR PUBLIC ACCESS TO RATE FILING INFORMATION.-
149	(1)(a)  With respect to any residential property rate
150	filing, the office shall provide the following information on a
151	publicly accessible Internet website:
152	(a)1.  The overall rate change requested by the insurer.
153	(b)2.  The rate change approved by the office along with
154	all of the actuary's assumptions and recommendations forming the
155	basis of the office's decision.
156	3.  Certification by the office's actuary that, based on
157	the actuary's knowledge, his or her recommendations are
158	consistent with accepted actuarial principles.
159	(2)(b)  For any rate filing, whether or not the filing is
160	subject to a public hearing, the office shall provide on its
161	website a means for any policyholder who may be affected by a
162	proposed rate change to send an e-mail regarding the proposed
163	rate change. Such e-mail must be accessible to the actuary
164	assigned to review the rate filing.
165	Section 4.  Paragraph (b) of subsection (1) of section
166	627.0629, Florida Statutes, is amended to read:
167	627.0629  Residential property insurance; rate filings.-
168	(1)
169	(b)  By February 1, 2013 2011, the Office of Insurance
170	Regulation, in consultation with the Department of Financial
171	Services and the Department of Community Affairs, shall develop
172	and make publicly available a proposed method for insurers to
173	establish discounts, credits, or other rate differentials for
174	hurricane mitigation measures which directly correlate to the
175	numerical rating assigned to a structure pursuant to the uniform
176	home grading scale adopted by the Financial Services Commission
177	pursuant to s. 215.55865, including any proposed changes to the
178	uniform home grading scale. By October 1, 2013 2011, the
179	commission shall adopt rules requiring insurers to make rate
180	filings for residential property insurance which revise
181	insurers' discounts, credits, or other rate differentials for
182	hurricane mitigation measures so that such rate differentials
183	correlate directly to the uniform home grading scale. The rules
184	may include such changes to the uniform home grading scale as
185	the commission determines are necessary, and may specify the
186	minimum required discounts, credits, or other rate
187	differentials. Such rate differentials must be consistent with
188	generally accepted actuarial principles and wind-loss mitigation
189	studies. The rules shall allow a period of at least 2 years
190	after the effective date of the revised mitigation discounts,
191	credits, or other rate differentials for a property owner to
192	obtain an inspection or otherwise qualify for the revised
193	credit, during which time the insurer shall continue to apply
194	the mitigation credit that was applied immediately prior to the
195	effective date of the revised credit. Discounts, credits, and
196	other rate differentials established for rate filings under this
197	paragraph shall supersede, after adoption, the discounts,
198	credits, and other rate differentials included in rate filings
199	under paragraph (a).
200	Section 5.  Paragraphs (y) through (ff) of subsection (6)
201	of section 627.351, Florida Statutes, are amended to read:
202	627.351  Insurance risk apportionment plans.-
203	(6)  CITIZENS PROPERTY INSURANCE CORPORATION.-
204	(y)  It is the intent of the Legislature that the
205	amendments to this subsection enacted in 2002 should, over time,
206	reduce the probable maximum windstorm losses in the residual
207	markets and should reduce the potential assessments to be levied
208	on property insurers and policyholders statewide. In furtherance
209	of this intent:
210	1.  The board shall, on or before February 1 of each year,
211	provide a report to the President of the Senate and the Speaker
212	of the House of Representatives showing the reduction or
213	increase in the 100-year probable maximum loss attributable to
214	wind-only coverages and the quota share program under this
215	subsection combined, as compared to the benchmark 100-year
216	probable maximum loss of the Florida Windstorm Underwriting
217	Association. For purposes of this paragraph, the benchmark 100-
218	year probable maximum loss of the Florida Windstorm Underwriting
219	Association shall be the calculation dated February 2001 and
220	based on November 30, 2000, exposures. In order to ensure
221	comparability of data, the board shall use the same methods for
222	calculating its probable maximum loss as were used to calculate
223	the benchmark probable maximum loss.
224	2.  Beginning December 1, 2010, if the report under
225	subparagraph 1. for any year indicates that the 100-year
226	probable maximum loss attributable to wind-only coverages and
227	the quota share program combined does not reflect a reduction of
228	at least 25 percent from the benchmark, the board shall reduce
229	the boundaries of the high-risk area eligible for wind-only
230	coverages under this subsection in a manner calculated to reduce
231	such probable maximum loss to an amount at least 25 percent
232	below the benchmark.
233	3.  Beginning February 1, 2015, if the report under
234	subparagraph 1. for any year indicates that the 100-year
235	probable maximum loss attributable to wind-only coverages and
236	the quota share program combined does not reflect a reduction of
237	at least 50 percent from the benchmark, the boundaries of the
238	high-risk area eligible for wind-only coverages under this
239	subsection shall be reduced by the elimination of any area that
240	is not seaward of a line 1,000 feet inland from the Intracoastal
241	Waterway.
242	(y)(z)  In enacting the provisions of this section, the
243	Legislature recognizes that both the Florida Windstorm
244	Underwriting Association and the Residential Property and
245	Casualty Joint Underwriting Association have entered into
246	financing arrangements that obligate each entity to service its
247	debts and maintain the capacity to repay funds secured under
248	these financing arrangements. It is the intent of the
249	Legislature that nothing in this section be construed to
250	compromise, diminish, or interfere with the rights of creditors
251	under such financing arrangements. It is further the intent of
252	the Legislature to preserve the obligations of the Florida
253	Windstorm Underwriting Association and Residential Property and
254	Casualty Joint Underwriting Association with regard to
255	outstanding financing arrangements, with such obligations
256	passing entirely and unchanged to the corporation and,
257	specifically, to the applicable account of the corporation. So
258	long as any bonds, notes, indebtedness, or other financing
259	obligations of the Florida Windstorm Underwriting Association or
260	the Residential Property and Casualty Joint Underwriting
261	Association are outstanding, under the terms of the financing
262	documents pertaining to them, the governing board of the
263	corporation shall have and shall exercise the authority to levy,
264	charge, collect, and receive all premiums, assessments,
265	surcharges, charges, revenues, and receipts that the
266	associations had authority to levy, charge, collect, or receive
267	under the provisions of subsection (2) and this subsection,
268	respectively, as they existed on January 1, 2002, to provide
269	moneys, without exercise of the authority provided by this
270	subsection, in at least the amounts, and by the times, as would
271	be provided under those former provisions of subsection (2) or
272	this subsection, respectively, so that the value, amount, and
273	collectability of any assets, revenues, or revenue source
274	pledged or committed to, or any lien thereon securing such
275	outstanding bonds, notes, indebtedness, or other financing
276	obligations will not be diminished, impaired, or adversely
277	affected by the amendments made by this act and to permit
278	compliance with all provisions of financing documents pertaining
279	to such bonds, notes, indebtedness, or other financing
280	obligations, or the security or credit enhancement for them, and
281	any reference in this subsection to bonds, notes, indebtedness,
282	financing obligations, or similar obligations, of the
283	corporation shall include like instruments or contracts of the
284	Florida Windstorm Underwriting Association and the Residential
285	Property and Casualty Joint Underwriting Association to the
286	extent not inconsistent with the provisions of the financing
287	documents pertaining to them.
288	(z)(aa)  The corporation shall not require the securing of
289	flood insurance as a condition of coverage if the insured or
290	applicant executes a form approved by the office affirming that
291	flood insurance is not provided by the corporation and that if
292	flood insurance is not secured by the applicant or insured in
293	addition to coverage by the corporation, the risk will not be
294	covered for flood damage. A corporation policyholder electing
295	not to secure flood insurance and executing a form as provided
296	herein making a claim for water damage against the corporation
297	shall have the burden of proving the damage was not caused by
298	flooding. Notwithstanding other provisions of this subsection,
299	the corporation may deny coverage to an applicant or insured who
300	refuses to execute the form described herein.
301	(aa)(bb)  A salaried employee of the corporation who
302	performs policy administration services subsequent to the
303	effectuation of a corporation policy is not required to be
304	licensed as an agent under the provisions of s. 626.112.
305	(bb)(cc)  By February 1, 2007, the corporation shall submit
306	a report to the President of the Senate, the Speaker of the
307	House of Representatives, the minority party leaders of the
308	Senate and the House of Representatives, and the chairs of the
309	standing committees of the Senate and the House of
310	Representatives having jurisdiction over matters relating to
311	property and casualty insurance. In preparing the report, the
312	corporation shall consult with the Office of Insurance
313	Regulation, the Department of Financial Services, and any other
314	party the corporation determines appropriate. The report must
315	include all findings and recommendations on the feasibility of
316	requiring authorized insurers that issue and service personal
317	and commercial residential policies and commercial
318	nonresidential policies that provide coverage for basic property
319	perils except for the peril of wind to issue and service for a
320	fee personal and commercial residential policies and commercial
321	nonresidential policies providing coverage for the peril of wind
322	issued by the corporation. The report must include:
323	1.  The expense savings to the corporation of issuing and
324	servicing such policies as determined by a cost-benefit
325	analysis.
326	2.  The expenses and liability to authorized insurers
327	associated with issuing and servicing such policies.
328	3.  The effect on service to policyholders of the
329	corporation relating to issuing and servicing such policies.
330	4.  The effect on the producing agent of the corporation of
331	issuing and servicing such policies.
332	5.  Recommendations as to the amount of the fee which
333	should be paid to authorized insurers for issuing and servicing
334	such policies.
335	6.  The effect that issuing and servicing such policies
336	will have on the corporation's number of policies, total insured
337	value, and probable maximum loss.
338	(cc)(dd)  There shall be no liability on the part of, and
339	no cause of action of any nature shall arise against, producing
340	agents of record of the corporation or employees of such agents
341	for insolvency of any take-out insurer.
342	(dd)(ee)  The assets of the corporation may be invested and
343	managed by the State Board of Administration.
344	(ee)(ff)  The office may establish a pilot program to offer
345	optional sinkhole coverage in one or more counties or other
346	territories of the corporation for the purpose of implementing
347	s. 627.706, as amended by s. 30, chapter 2007-1, Laws of
348	Florida. Under the pilot program, the corporation is not
349	required to issue a notice of nonrenewal to exclude sinkhole
350	coverage upon the renewal of existing policies, but may exclude
351	such coverage using a notice of coverage change.
352	Section 6.  Section 627.41335, Florida Statutes, is created
353	to read:
354	627.41335  Notice of change in policy terms.-
355	(1)  The intent of this section is to:
356	(a)  Allow an insurer to make a change in policy terms
357	without nonrenewing policyholders that the insurer wishes to
358	continue insuring.
359	(b)  Alleviate the concern and confusion to the
360	policyholders caused by the required policy nonrenewal for the
361	limited issue when an insurer intends to renew the insurance
362	policy but the new policy contains a change in policy terms.
363	(c)  Encourage policyholders to discuss their coverages
364	with their insurance agent.
365	(2)  As used in this section, the term:
366	(a)  "Change in policy terms" means the modification,
367	addition, or deletion of any term, coverage, duty, or condition
368	from the prior policy. The correction of typographical or
369	scrivener's errors is not a change in policy terms.
370	(b)  "Policy" means a written contract of personal lines
371	insurance or written agreement for or effecting insurance, or
372	the certificate of such insurance, by whatever name called, and
373	includes all clauses, riders, endorsements, and papers which are
374	a part of such insurance. The term "policy" does not include a
375	binder as described in s. 627.420 unless the duration of the
376	binder period exceeds 60 days.
377	(c)  "Renewal" means the issuance and delivery by an
378	insurer of a policy superseding at the end of the policy period
379	a policy previously issued and delivered by the same insurer or
380	the issuance and delivery of a certificate or notice extending
381	the term of a policy beyond its policy period or term. Any
382	policy with a policy period or term of less than 6 months or any
383	policy with no fixed expiration date shall for the purpose of
384	this section be considered as if written for successive policy
385	periods or terms of 6 months.
386	(3)  A renewal policy may contain a change in policy terms.
387	If a renewal policy contains a change in policy terms, the
388	insurer shall give the named insured a written notice of change
389	in policy terms that shall be enclosed with the written notice
390	of renewal premium required by ss. 627.4133 and 627.728.
391	(4)  All forms for a notice of change in policy terms must
392	include:
393	(a)  In bold type no smaller than 14 points a heading that
394	is centered at the top of the notice that states "NOTICE OF
395	CHANGE IN POLICY TERMS."
396	(b)  In bold type no smaller than 12 points the following
397	statement that must be placed below the date and above the
398	salutation:
399
400	YOUR RENEWAL POLICY CONTAINS CHANGES FROM YOUR CURRENT
401	POLICY. YOU SHOULD REVIEW THE CHANGES TO ENSURE THAT YOU
402	UNDERSTAND AND ACCEPT THEM. ENCLOSED IS A COPY OF THE
403	CHANGED POLICY LANGUAGE ALONG WITH A SUMMARY OF THE
404	CHANGES FOR YOU TO REVIEW. IF YOU DECIDE THAT YOU DO NOT
405	WANT TO ACCEPT THE CHANGED POLICY LANGUAGE, PLEASE
406	DISCUSS YOUR INSURANCE COVERAGE OPTIONS WITH YOUR
407	INSURANCE AGENT. PAYMENT OF YOUR RENEWAL PREMIUM WILL BE
408	CONSIDERED YOUR ACCEPTANCE OF THE NEW POLICY TERMS.
409
410	(c)  A summary of the current and revised language that
411	must be contained in the notice.
412	(5)  United States postal proof of mailing or certified or
413	registered mailing of the notice of change in policy terms to
414	the named insured at the address shown in the policy is
415	sufficient proof of notice.
416	(6)  Receipt of payment of the premium for the renewal
417	policy by the insurer shall be deemed to be acceptance of the
418	new policy terms by the named insured.
419	(7)  If an insurer fails to provide the notice of change in
420	policy terms required under this section, the original policy
421	terms shall remain in effect until the next renewal and the
422	proper service of the notice of change in policy terms or until
423	the effective date of replacement coverage obtained by the named
424	insured, whichever occurs first.
425	Section 7.  Subsection (3) of section 627.7011, Florida
426	Statutes, is amended to read:
427	627.7011  Homeowners' policies; offer of replacement cost
428	coverage and law and ordinance coverage.-
429	(3)  In the event of a loss for which a dwelling or
430	personal property is insured on the basis of replacement costs,
431	the insurer shall initially pay only the depreciated value for
432	structure and contents repair or replacement, or shall pay 40
433	percent of the replacement cost value, whichever is higher, and
434	shall thereafter pay the remaining cost for repair or
435	replacement of covered property up to the total replacement cost
436	as the insured submits invoices for completed repairs or
437	replacement of covered property the replacement cost without
438	reservation or holdback of any depreciation in value, whether or
439	not the insured replaces or repairs the dwelling or property.
440	Section 8.  Section 627.7065, Florida Statutes, is
441	repealed.
442	Section 9.  This act shall take effect July 1, 2010.

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