CS/HB 159

1	A bill to be entitled
2	An act relating to guaranty associations; amending s.
3	631.52, F.S.; expanding an exemption from the
4	applicability of certain provisions of state law to
5	include workers' compensation claims under employer
6	liability coverage; amending s. 631.54, F.S.; conforming
7	the definition of "account" to changes made by the act;
8	amending s. 631.55, F.S.; revising the separate accounts
9	of the association; amending s. 631.57, F.S.; conforming
10	cross-references; providing a legislative finding and
11	declaration; authorizing insurers to recoup certain
12	assessments levied by the Office of Insurance Regulation
13	by applying certain recoupment factors; deleting
14	provisions relating to classification and payment of
15	emergency assessments; providing guidelines and a
16	methodology for the calculation of recoupment factors for
17	recouping certain assessments; authorizing an insurer to
18	apply a recalculated recoupment factor under certain
19	conditions; providing for the return of excess assessments
20	and recoupment charges; providing that amounts recouped
21	are not premium and not subject to premium taxes, fees, or
22	commissions; requiring that insurers treat failure to pay
23	a recoupment charge as failure to pay the premium;
24	requiring that an insurer file with the office a statement
25	containing certain information within a specified period
26	before applying a recoupment factor to any policies;
27	authorizing an insurer to use a recoupment factor after
28	the expiration of such period; providing that an insurer
29	need submit only one such statement for all lines of
30	business; requiring that an insurer file with the office
31	an accounting report containing certain information within
32	a specified period after the completion of the recoupment
33	process; providing that an insurer need submit only one
34	such report for all lines of business; amending s.
35	631.713, F.S.; expanding the application of certain
36	provisions of state law to certain residents of other
37	states who own certain insurance policies; expanding the
38	list of contracts and policies to which life and health
39	insurance guaranty of payments provisions do not apply;
40	providing for application to coverage under certain
41	structured settlement annuities under certain
42	circumstances; amending s. 631.714, F.S.; revising certain
43	definitions; amending s. 631.717, F.S.; revising a
44	guaranty association's aggregate liability for life
45	insurance and deferred annuity contracts; authorizing an
46	association to issue alternative policies or contracts to
47	certain policies or contracts under certain circumstances;
48	subjecting such alternative policies or contracts to
49	specified requirements; creating s. 631.7295, F.S.;
50	authorizing an association to succeed to the rights of an
51	insolvent insurer arising after an order of liquidation or
52	rehabilitation with regard to certain contracts of
53	reinsurance; requiring that such an association pay all
54	unpaid premiums due under the contract; amending s.
55	631.735, F.S.; specifying that certain advertisement
56	prohibitions do not prohibit certain activities of a
57	licensed insurance agent; amending s. 631.904, F.S.;
58	revising the definition of the term "covered claim";
59	providing an effective date.
60
61	Be It Enacted by the Legislature of the State of Florida:
62
63	Section 1.  Subsection (14) of section 631.52, Florida
64	Statutes, is amended to read:
65	631.52  Scope.-This part shall apply to all kinds of direct
66	insurance, except:
67	(14)  Workers' compensation, including claims under
68	employer liability coverage;
69	Section 2.  Subsection (1) of section 631.54, Florida
70	Statutes, is amended to read:
71	631.54  Definitions.-As used in this part:
72	(1)  "Account" means any one of the three accounts created
73	by s. 631.55.
74	Section 3.  Subsection (2) of section 631.55, Florida
75	Statutes, is amended to read:
76	631.55  Creation of the association.-
77	(2)  For the purposes of administration and assessment, the
78	association shall be divided into two three separate accounts:
79	(a)  The auto liability and account;
80	(b)  The auto physical damage account.; and
81	(b)(c)  The account for all other insurance to which this
82	part applies.
83	Section 4.  Subsection (3) of section 631.57, Florida
84	Statutes, is amended to read:
85	631.57  Powers and duties of the association.-
86	(3)(a)  To the extent necessary to secure the funds for the
87	respective accounts for the payment of covered claims, to pay
88	the reasonable costs to administer the same, and to the extent
89	necessary to secure the funds for the account specified in s.
90	631.55(2)(b)(c) or to retire indebtedness, including, without
91	limitation, the principal, redemption premium, if any, and
92	interest on, and related costs of issuance of, bonds issued
93	under s. 631.695 and the funding of any reserves and other
94	payments required under the bond resolution or trust indenture
95	pursuant to which such bonds have been issued, the office, upon
96	certification of the board of directors, shall levy assessments
97	in the proportion that each insurer's net direct written
98	premiums in this state in the classes protected by the account
99	bears to the total of said net direct written premiums received
100	in this state by all such insurers for the preceding calendar
101	year for the kinds of insurance included within such account.
102	Assessments shall be remitted to and administered by the board
103	of directors in the manner specified by the approved plan. Each
104	insurer so assessed shall have at least 30 days' written notice
105	as to the date the assessment is due and payable. Every
106	assessment shall be made as a uniform percentage applicable to
107	the net direct written premiums of each insurer in the kinds of
108	insurance included within the account in which the assessment is
109	made. The assessments levied against any insurer shall not
110	exceed in any one year more than 2 percent of that insurer's net
111	direct written premiums in this state for the kinds of insurance
112	included within such account during the calendar year next
113	preceding the date of such assessments.
114	(b)  If sufficient funds from such assessments, together
115	with funds previously raised, are not available in any one year
116	in the respective account to make all the payments or
117	reimbursements then owing to insurers, the funds available shall
118	be prorated and the unpaid portion shall be paid as soon
119	thereafter as funds become available.
120	(c)  The Legislature finds and declares that all
121	assessments paid by an insurer or insurer group as a result of a
122	levy by the office, including regular and emergency assessments,
123	constitute advances of funds from the insurer to the
124	association. An insurer may fully recoup such advances by
125	applying a separate recoupment factor to the premium of policies
126	of the same kind, line, or type as were considered by the office
127	in determining the assessment liability of the insurer or
128	insurer group. Assessments shall be included as an appropriate
129	factor in the making of rates.
130	(d)  No state funds of any kind shall be allocated or paid
131	to said association or any of its accounts.
132	(e)1.a.  In addition to assessments otherwise authorized in
133	paragraph (a) and to the extent necessary to secure the funds
134	for the account specified in s. 631.55(2)(b)(c) for the direct
135	payment of covered claims of insurers rendered insolvent by the
136	effects of a hurricane and to pay the reasonable costs to
137	administer such claims, or to retire indebtedness, including,
138	without limitation, the principal, redemption premium, if any,
139	and interest on, and related costs of issuance of, bonds issued
140	under s. 631.695 and the funding of any reserves and other
141	payments required under the bond resolution or trust indenture
142	pursuant to which such bonds have been issued, the office, upon
143	certification of the board of directors, shall levy emergency
144	assessments upon insurers holding a certificate of authority.
145	The emergency assessments payable under this paragraph by any
146	insurer shall not exceed in any single year more than 2 percent
147	of that insurer's direct written premiums, net of refunds, in
148	this state during the preceding calendar year for the kinds of
149	insurance within the account specified in s. 631.55(2)(b)(c).
150	b.  Any emergency assessments authorized under this
151	paragraph shall be levied by the office upon insurers referred
152	to in sub-subparagraph a., upon certification as to the need for
153	such assessments by the board of directors. In the event the
154	board of directors participates in the issuance of bonds in
155	accordance with s. 631.695, emergency assessments shall be
156	levied in each year that bonds issued under s. 631.695 and
157	secured by such emergency assessments are outstanding, in such
158	amounts up to such 2-percent limit as required in order to
159	provide for the full and timely payment of the principal of,
160	redemption premium, if any, and interest on, and related costs
161	of issuance of, such bonds. The emergency assessments provided
162	for in this paragraph are assigned and pledged to the
163	municipality, county, or legal entity issuing bonds under s.
164	631.695 for the benefit of the holders of such bonds, in order
165	to enable such municipality, county, or legal entity to provide
166	for the payment of the principal of, redemption premium, if any,
167	and interest on such bonds, the cost of issuance of such bonds,
168	and the funding of any reserves and other payments required
169	under the bond resolution or trust indenture pursuant to which
170	such bonds have been issued, without the necessity of any
171	further action by the association, the office, or any other
172	party. To the extent bonds are issued under s. 631.695 and the
173	association determines to secure such bonds by a pledge of
174	revenues received from the emergency assessments, such bonds,
175	upon such pledge of revenues, shall be secured by and payable
176	from the proceeds of such emergency assessments, and the
177	proceeds of emergency assessments levied under this paragraph
178	shall be remitted directly to and administered by the trustee or
179	custodian appointed for such bonds.
180	c.  Emergency assessments under this paragraph may be
181	payable in a single payment or, at the option of the
182	association, may be payable in 12 monthly installments with the
183	first installment being due and payable at the end of the month
184	after an emergency assessment is levied and subsequent
185	installments being due not later than the end of each succeeding
186	month.
187	d.  If emergency assessments are imposed, the report
188	required by s. 631.695(7) shall include an analysis of the
189	revenues generated from the emergency assessments imposed under
190	this paragraph.
191	e.  If emergency assessments are imposed, the references in
192	sub-subparagraph (1)(a)3.b. and s. 631.695(2) and (7) to
193	assessments levied under paragraph (a) shall include emergency
194	assessments imposed under this paragraph.
195	2.  In order to ensure that insurers paying emergency
196	assessments levied under this paragraph continue to charge rates
197	that are neither inadequate nor excessive, within 90 days after
198	being notified of such assessments, each insurer that is to be
199	assessed pursuant to this paragraph shall submit a rate filing
200	for coverage included within the account specified in s.
201	631.55(2)(c) and for which rates are required to be filed under
202	s. 627.062. If the filing reflects a rate change that, as a
203	percentage, is equal to the difference between the rate of such
204	assessment and the rate of the previous year's assessment under
205	this paragraph, the filing shall consist of a certification so
206	stating and shall be deemed approved when made. Any rate change
207	of a different percentage shall be subject to the standards and
208	procedures of s. 627.062.
209	2.3.  If In the event the board of directors participates
210	in the issuance of bonds in accordance with s. 631.695, an
211	annual assessment under this paragraph shall continue while the
212	bonds issued with respect to which the assessment was imposed
213	are outstanding, including any bonds the proceeds of which were
214	used to refund bonds issued pursuant to s. 631.695, unless
215	adequate provision has been made for the payment of the bonds in
216	the documents authorizing the issuance of such bonds.
217	3.4.  Emergency assessments under this paragraph are not
218	premium and are not subject to the premium tax, to any fees, or
219	to any commissions. An insurer is liable for all emergency
220	assessments that the insurer collects and shall treat the
221	failure of an insured to pay an emergency assessment as a
222	failure to pay the premium. An insurer is not liable for
223	uncollectible emergency assessments.
224	(f)  The recoupment factor applied to policies in
225	accordance with paragraph (c) shall be selected by the insurer
226	or insurer group so as to provide for the probable recoupment of
227	both regular and emergency assessments over a period of 12
228	months, unless the insurer or insurer group, at its option,
229	elects to recoup the assessment over a longer period. The
230	recoupment factor shall apply to all policies of the same kind,
231	line, or type as were considered by the office in determining
232	the assessment liability of the insurer or insurer group issued
233	or renewed during a 12-month period. If the insurer or insurer
234	group does not collect the full amount of the assessment during
235	one 12-month period, the insurer or insurer group may apply
236	recalculated recoupment factors to policies issued or renewed
237	during one or more succeeding 12-month periods. If, at the end
238	of a 12-month period, the insurer or insurer group has collected
239	from the combined kinds, lines, or types of policies subject to
240	assessment more than the total amount of the assessment paid by
241	the insurer or insurer group, the excess amount shall be
242	disbursed as follows:
243	1.  If the excess amount does not exceed 15 percent of the
244	total assessment paid by the insurer or insurer group, the
245	excess amount shall be remitted to the association within 60
246	days after the end of the 12-month period in which the excess
247	recoupment charges were collected.
248	2.  If the excess amount exceeds 15 percent of the total
249	assessment paid by the insurer or insurer group, the excess
250	amount shall be returned to the insurer's or insurer group's
251	current policyholders by refunds or premium credits. The
252	association shall use any remitted excess recoupment amounts to
253	reduce future assessments.
254	(g)  Amounts recouped under this subsection for assessments
255	levied under paragraph (a) due to insolvencies on or after July
256	1, 2010, are not premium and are not subject to premium taxes,
257	fees, or commissions. However, insurers shall treat the failure
258	of an insured to pay a recoupment charge as a failure to pay the
259	premium.
260	(h)  At least 15 days before applying the recoupment factor
261	to any policies, the insurer or insurer group shall file with
262	the office a statement for informational purposes only setting
263	forth the amount of the recoupment factor and an explanation of
264	how the recoupment factor will be applied. Such statement shall
265	include documentation of the assessment paid by the insurer or
266	insurer group and the arithmetic calculations supporting the
267	recoupment factor. The insurer or insurer group may use the
268	recoupment factor at any time after the expiration of the 15-day
269	period. The insurer or insurer group need submit only one
270	informational statement for all lines of business using the same
271	recoupment factor.
272	(i)  No later than 90 days after the insurer or insurer
273	group has completed the recoupment process, the insurer or
274	insurer group shall file with the office, for information
275	purposes only, a final accounting report documenting the
276	recoupment. The report shall provide the amounts of assessments
277	paid by the insurer or insurer group, the amounts and
278	percentages recouped by year from each affected line of
279	business, and the direct written premium subject to recoupment
280	by year. The insurer or insurer group need submit only one
281	report for all lines of business using the same recoupment
282	factor.
283	Section 5.  Paragraph (b) of subsection (2) of section
284	631.713, Florida Statutes, is amended, paragraphs (n), (o), and
285	(p) are added to subsection (3) of that section, and subsection
286	(5) is added to that section, to read:
287	631.713  Application of part.-
288	(2)  Coverage under this part shall be provided to:
289	(b)  Persons who are owners of or certificateholders under
290	such policies or contracts, and who:
291	1.  Are residents of this state; or
292	2.  Are residents of other states, but only if:
293	a.  The insurers which issued such policies or contracts
294	are domiciled in this state;
295	b.  Such insurers were not licensed never held a license or
296	certificate of authority in the states in which such persons
297	reside at the time specified in a state's guaranty association
298	law as necessary for coverage by that state's association;
299	c.  Such other states have associations similar to the
300	association created by this part; and
301	d.  Such persons are not eligible for coverage by such
302	associations.
303	(3)  This part does not apply to:
304	(n)  A portion of a policy or contract, to the extent that
305	the rate of interest on which the policy or contract is based,
306	or the interest rate, crediting rate, or similar factor
307	determined by use of an index or other external reference stated
308	in the policy or contract employed in calculating returns or
309	changes in value:
310	1.  Averaged over the period of 4 years immediately
311	preceding the date on which the member insurer becomes an
312	impaired or insolvent insurer under this part, whichever is
313	earlier, exceeds the rate of interest determined by subtracting
314	2 percentage points from Moody's Corporate Bond Yield Average
315	averaged for that same 4-year period or for such lesser period
316	if the policy or contract was issued less than 4 years before
317	the member insurer becomes an impaired or insolvent insurer
318	under this part, whichever is earlier; and
319	2.  On and after the date on which the member insurer
320	becomes an impaired or insolvent insurer under this part,
321	whichever is earlier, exceeds the rate of interest determined by
322	subtracting 3 percentage points from the most current version of
323	Moody's Corporate Bond Yield Average.
324	(o)  A portion of a policy or contract to the extent the
325	policy or contract provides for interest or other changes in
326	value to be determined by the use of an index or other external
327	reference stated in the policy or contract, but which has not
328	been credited to the policy or contract, or as to which the
329	policy or contract owner's rights are subject to forfeiture, as
330	of the date the member insurer becomes an impaired or insolvent
331	insurer under this part. However, if the interest or change in
332	value is credited less frequently than annually as determined by
333	using the procedures defined in the policy or contract, interest
334	or change in value shall be credited by using the procedure
335	defined in the policy or contract as if the contractual date of
336	crediting interest or changing values was the date of impairment
337	or insolvency, whichever is earlier, and shall not be subject to
338	forfeiture.
339	(p)  A policy or contract providing any hospital, medical,
340	prescription drug, or other health care benefits pursuant to
341	Medicare Part C or Part D or any regulations issued pursuant to
342	Medicare Part C or Part D.
343	(5)  Notwithstanding any other provisions of this part,
344	this part applies to coverage of a person who is a payee under a
345	structured settlement annuity, or a beneficiary if the payee is
346	deceased, with a coverage limit of $300,000 by the association,
347	if:
348	(a)  The payee is a resident of this state, regardless of
349	where the contract owner resides.
350	(b)  Neither the payee, the beneficiary, nor the contract
351	owner is eligible for coverage by the association of the state
352	in which the contract owner resides.
353	Section 6.  Subsections (6) and (10) of section 631.714,
354	Florida Statutes, are amended to read:
355	631.714  Definitions.-As used in this part, the term:
356	(6)  "Insolvent insurer" means a member insurer authorized
357	to transact insurance in this state, either at the time the
358	policy was issued or when the insured event occurred, and
359	against which an order of liquidation with a finding of
360	insolvency has been entered by a court of competent
361	jurisdiction, if such order has become final by the exhaustion
362	of appellate review.
363	(10)  "Resident" means any person who resides in this state
364	at the time a member insurer is determined to be an impaired or
365	insolvent insurer and to whom contractual obligations are owed
366	by such impaired or insolvent member insurer. A person may be a
367	resident of only one state, which in the case of a person other
368	than an individual shall be the person's principal place of
369	business. Citizens of the United States who are residents of
370	foreign countries or United States possessions, territories, or
371	protectorates that do not have an association similar to the
372	guaranty association created by this part shall be deemed
373	residents of the state of domicile of the insurer issuing the
374	policies or contracts.
375	Section 7.  Subsection (9) of section 631.717, Florida
376	Statutes, is amended, and paragraph (g) is added to subsection
377	(12) of that section, to read:
378	631.717  Powers and duties of the association.-
379	(9)  The association's liability for the contractual
380	obligations of the insolvent insurer shall be as great as, but
381	no greater than, the contractual obligations of the insurer in
382	the absence of such insolvency, unless such obligations are
383	reduced as permitted by subsection (4), but the aggregate
384	liability of the association shall not exceed $100,000 in net
385	cash surrender and net cash withdrawal values for life
386	insurance, $250,000 in net cash surrender and net cash
387	withdrawal values for deferred annuity contracts, or $300,000
388	for all benefits including cash values, with respect to any one
389	life. In no event shall the association be liable for any
390	penalties or interest.
391	(12)
392	(g)  In carrying out its duties in connection with
393	guaranteeing, assuming, or reinsuring policies or contracts
394	under subsections (2) and (3), the association may, subject to
395	approval of the receivership court, issue substitute coverage
396	for a policy or contract that provides an interest rate,
397	crediting rate, or similar factor determined by use of an index
398	or other external reference stated in the policy or contract
399	employed in calculating returns or changes in value by issuing
400	an alternative policy or contract. In lieu of the index or other
401	external reference provided for in the original policy or
402	contract, the alternative policy or contract must provide for a
403	fixed interest rate, payment of dividends with minimum
404	guarantees, or a different method for calculating interest or
405	changes in value. In such case:
406	1.  There is no requirement for evidence of insurability,
407	waiting period, or other exclusion that would not have applied
408	under the replaced policy or contract.
409	2.  The alternative policy or contract shall be
410	substantially similar to the replaced policy or contract in all
411	other material terms.
412	Section 8.  Section 631.7295, Florida Statutes, is created
413	to read:
414	631.7295  Reinsurance.-With respect to covered policies for
415	which the association becomes obligated after an entry of an
416	order of liquidation or rehabilitation, the association may
417	elect to succeed to the rights of the insolvent insurer arising
418	after the order of liquidation or rehabilitation under any
419	contract of reinsurance to which the insolvent insurer was a
420	party, to the extent such contract provides coverage for losses
421	occurring after the date of the order of liquidation or
422	rehabilitation. As a condition to making such election, the
423	association must pay all unpaid premiums due under the contract
424	for coverage relating to periods before and after the date on
425	which the order of liquidation or rehabilitation was entered.
426	Section 9.  Section 631.735, Florida Statutes, is amended
427	to read:
428	631.735  Prohibited advertisement of Florida Life and
429	Health Insurance Guaranty Association Act in sale of insurance.-
430	A No person may not shall make, publish, disseminate, circulate,
431	or place before the public, or cause directly or indirectly to
432	be made, published, disseminated, circulated, or placed before
433	the public, in any newspaper, magazine, or other publication, or
434	in the form of a notice, circular, pamphlet, letter, or poster,
435	or over any radio station or television station, or in any other
436	way, any advertisement, announcement, or statement which uses
437	the existence of the Insurance Guaranty Association of this
438	state for the purpose of sales, solicitation, or inducement to
439	purchase any form of insurance covered by the Florida Life and
440	Health Insurance Guaranty Association Act. However, this section
441	does shall not apply to the Florida Life and Health Insurance
442	Guaranty Association or any other entity that which does not
443	sell or solicit insurance. This section does not prohibit a
444	licensed insurance agent from explaining the existence or
445	function of the association to policyholders, prospects, or
446	applicants for coverage.
447	Section 10.  Subsection (2) of section 631.904, Florida
448	Statutes, is amended to read:
449	631.904  Definitions.-As used in this part, the term:
450	(2)  "Covered claim" means an unpaid claim, including a
451	claim for return of unearned premiums, which arises out of, is
452	within the coverage of, and is not in excess of the applicable
453	limits of, an insurance policy to which this part applies, which
454	policy was issued by an insurer and which claim is made on
455	behalf of a claimant or insured who was a resident of this state
456	at the time of the injury. The term "covered claim" includes
457	unpaid claims under any employer liability coverage of a
458	workers' compensation policy limited to the lesser of $300,000
459	or the limits of the policy. The term "covered claim" does not
460	include any amount sought as a return of premium under any
461	retrospective rating plan; any amount due any reinsurer,
462	insurer, insurance pool, or underwriting association, as
463	subrogation recoveries or otherwise; any claim that would
464	otherwise be a covered claim that has been rejected by any other
465	state guaranty fund on the grounds that the insured's net worth
466	is greater than that allowed under that state's guaranty fund or
467	liquidation law, except this exclusion from the definition of
468	covered claim shall not apply to employers who, prior to April
469	30, 2004, entered into an agreement with the corporation
470	preserving the employer's right to seek coverage of claims
471	rejected by another state's guaranty fund; or any return of
472	premium resulting from a policy that was not in force on the
473	date of the final order of liquidation. Member insurers have no
474	right of subrogation against the insured of any insolvent
475	insurer. This provision shall be applied retroactively to cover
476	claims of an insolvent self-insurance fund resulting from
477	accidents or losses incurred prior to January 1, 1994,
478	regardless of the date the petition in circuit court was filed
479	alleging insolvency and the date the court entered an order
480	appointing a receiver.
481	Section 11.  This act shall take effect July 1, 2010.

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