Florida Senate - 2010 SB 2104
By Senator Bennett
21-01507-10 20102104__
1 A bill to be entitled
2 An act relating to Citizens Property Insurance
3 Corporation; amending s. 627.351, F.S.; revising
4 legislative intent; requiring that the corporation
5 achieve actuarially sound rates on or before a
6 specified date; requiring that the corporation take
7 certain actions to achieve actuarially sound rates;
8 providing requirements for the determination of
9 actuarially sound rates; requiring that the
10 corporation file a plan of withdrawal on or before a
11 specified date if it does not achieve actuarially
12 sound rates by a specified deadline; establishing
13 criteria for actuarially sound rates; prohibiting the
14 Office of Insurance Regulation from having authority
15 with respect to the corporation’s rates; authorizing a
16 policyholder to challenge his or her premium in
17 accordance with specified provisions of state law;
18 prohibiting a challenge to the rates of the
19 corporation; amending s. 624.430, F.S.; prohibiting
20 the Office of Insurance Regulation from denying the
21 corporation’s plan of withdrawal; providing an
22 effective date.
23
24 Be It Enacted by the Legislature of the State of Florida:
25
26 Section 1. Paragraphs (a) and (n) of subsection (6) of
27 section 627.351, Florida Statutes, are amended to read:
28 627.351 Insurance risk apportionment plans.—
29 (6) CITIZENS PROPERTY INSURANCE CORPORATION.—
30 (a)1. It is the public purpose of this subsection to ensure
31 the existence of an orderly market for property insurance for
32 Floridians and Florida businesses. The Legislature finds that
33 private insurers are unwilling or unable to provide affordable
34 property insurance coverage in this state to the extent sought
35 and needed. The absence of affordable property insurance
36 threatens the public health, safety, and welfare and likewise
37 threatens the economic health of the state. The state therefore
38 has a compelling public interest and a public purpose to assist
39 in assuring that property in the state is insured and that it is
40 insured at affordable rates so as to facilitate the remediation,
41 reconstruction, and replacement of damaged or destroyed property
42 in order to reduce or avoid the negative effects otherwise
43 resulting to the public health, safety, and welfare, to the
44 economy of the state, and to the revenues of the state and local
45 governments which are needed to provide for the public welfare.
46 It is necessary, therefore, to allow the Citizens Property
47 Insurance Corporation to be restored to its prior status as an
48 insurer of last resort and to allow the corporation to develop
49 actuarially sound rates over a period of time so that it can pay
50 claims promptly and fulfill its statutory obligations. To that
51 end, Citizens Property Insurance Corporation shall achieve
52 actuarially sound rates within the time period specified in this
53 subsection or must file a plan to withdraw from the state
54 pursuant to the requirements in s. 624.430 provide affordable
55 property insurance to applicants who are in good faith entitled
56 to procure insurance through the voluntary market but are unable
57 to do so. The Legislature intends by this subsection that
58 affordable property insurance be provided and that it continue
59 to be provided, as long as necessary, through Citizens Property
60 Insurance Corporation, a government entity that is an integral
61 part of the state, and that is not a private insurance company.
62 To that end, Citizens Property Insurance Corporation shall
63 strive to increase the availability of affordable property
64 insurance in this state, while achieving efficiencies and
65 economies, and while providing service to policyholders,
66 applicants, and agents which is no less than the quality
67 generally provided in the voluntary market, for the achievement
68 of the foregoing public purposes. Because it is essential for
69 this government entity to have the maximum financial resources
70 to pay claims following a catastrophic hurricane, it is the
71 intent of the Legislature that Citizens Property Insurance
72 Corporation be allowed to achieve actuarially sound rates so
73 that it can continue to be an integral part of the state and
74 that the income of the corporation be exempt from federal income
75 taxation and that interest on the debt obligations issued by the
76 corporation be exempt from federal income taxation.
77 2. The Residential Property and Casualty Joint Underwriting
78 Association originally created by this statute shall be known,
79 as of July 1, 2002, as the Citizens Property Insurance
80 Corporation. The corporation shall provide insurance for
81 residential and commercial property, for applicants who are in
82 good faith entitled, but are unable, to procure insurance
83 through the voluntary market. The corporation shall operate
84 pursuant to a plan of operation approved by order of the
85 Financial Services Commission. The plan is subject to continuous
86 review by the commission. The commission may, by order, withdraw
87 approval of all or part of a plan if the commission determines
88 that conditions have changed since approval was granted and that
89 the purposes of the plan require changes in the plan. The
90 corporation shall continue to operate pursuant to the plan of
91 operation approved by the Office of Insurance Regulation until
92 October 1, 2006. For the purposes of this subsection,
93 residential coverage includes both personal lines residential
94 coverage, which consists of the type of coverage provided by
95 homeowner’s, mobile home owner’s, dwelling, tenant’s,
96 condominium unit owner’s, and similar policies, and commercial
97 lines residential coverage, which consists of the type of
98 coverage provided by condominium association, apartment
99 building, and similar policies.
100 3. Effective January 1, 2009, a personal lines residential
101 structure that has a dwelling replacement cost of $2 million or
102 more, or a single condominium unit that has a combined dwelling
103 and content replacement cost of $2 million or more is not
104 eligible for coverage by the corporation. Such dwellings insured
105 by the corporation on December 31, 2008, may continue to be
106 covered by the corporation until the end of the policy term.
107 However, such dwellings that are insured by the corporation and
108 become ineligible for coverage due to the provisions of this
109 subparagraph may reapply and obtain coverage if the property
110 owner provides the corporation with a sworn affidavit from one
111 or more insurance agents, on a form provided by the corporation,
112 stating that the agents have made their best efforts to obtain
113 coverage and that the property has been rejected for coverage by
114 at least one authorized insurer and at least three surplus lines
115 insurers. If such conditions are met, the dwelling may be
116 insured by the corporation for up to 3 years, after which time
117 the dwelling is ineligible for coverage. The office shall
118 approve the method used by the corporation for valuing the
119 dwelling replacement cost for the purposes of this subparagraph.
120 If a policyholder is insured by the corporation prior to being
121 determined to be ineligible pursuant to this subparagraph and
122 such policyholder files a lawsuit challenging the determination,
123 the policyholder may remain insured by the corporation until the
124 conclusion of the litigation.
125 4. It is the intent of the Legislature that policyholders,
126 applicants, and agents of the corporation receive service and
127 treatment of the highest possible level but never less than that
128 generally provided in the voluntary market. It also is intended
129 that the corporation be held to service standards no less than
130 those applied to insurers in the voluntary market by the office
131 with respect to responsiveness, timeliness, customer courtesy,
132 and overall dealings with policyholders, applicants, or agents
133 of the corporation.
134 5. Effective January 1, 2009, a personal lines residential
135 structure that is located in the “wind-borne debris region,” as
136 defined in s. 1609.2, International Building Code (2006), and
137 that has an insured value on the structure of $750,000 or more
138 is not eligible for coverage by the corporation unless the
139 structure has opening protections as required under the Florida
140 Building Code for a newly constructed residential structure in
141 that area. A residential structure shall be deemed to comply
142 with the requirements of this subparagraph if it has shutters or
143 opening protections on all openings and if such opening
144 protections complied with the Florida Building Code at the time
145 they were installed.
146 (n)1. As of January 1, 2016, the rates of the corporation
147 shall be actuarially sound as provided in this paragraph. If the
148 corporation does not achieve actuarially sound rates on or
149 before January 1, 2016, it must file a plan of withdrawal
150 pursuant to s. 624.430 by July 1, 2016.
151 2. In order to achieve actuarially sound rates by January
152 1, 2016, the corporation shall phase in rate changes over a 5
153 year period beginning January 1, 2011, such that the gap between
154 the then-current rates and the rates required to achieve
155 actuarial soundness decreases by approximately 20 percent each
156 year over the 5-year period. During the 5-year period, rate
157 decreases are permitted to the extent that they are actuarially
158 sound and phased in during that period.
159 3. In determining the actuarial soundness of its rates, the
160 corporation:
161 a. May consider the applicable generally accepted and
162 reasonable actuarial techniques as enumerated in s.
163 627.062(2)(b)1., 2., 4., 5., 7., 9., 10., 11., 12., and 14.,
164 (e)1., 3., 4., 5., and 6., (j), and (5).
165 b. Shall include in its rates the following factors for the
166 cost of reinsurance to cover its projected 100-year probable
167 maximum loss:
168 (I) The actual cost of reinsurance purchased from the
169 Florida Hurricane Catastrophe Fund or in the private reinsurance
170 market; and
171 (II) The presumed cost of reinsurance not purchased which
172 reflects the market value of future corporation assessments
173 against corporation and noncorporation policyholders.
174 c. May use one or more models found to be accurate and
175 reliable by the Florida Commission on Hurricane Loss Projection
176 Methodology.
177 4. The office shall have no authority with respect to the
178 rates of the corporation.
179 5. A policyholder may challenge his or her premium as
180 provided in s. 627.371. The rates of the corporation may not be
181 challenged. Rates for coverage provided by the corporation shall
182 be actuarially sound and subject to the requirements of s.
183 627.062, except as otherwise provided in this paragraph. The
184 corporation shall file its recommended rates with the office at
185 least annually. The corporation shall provide any additional
186 information regarding the rates which the office requires. The
187 office shall consider the recommendations of the board and issue
188 a final order establishing the rates for the corporation within
189 45 days after the recommended rates are filed. The corporation
190 may not pursue an administrative challenge or judicial review of
191 the final order of the office.
192 6.2. In addition to the rates otherwise determined pursuant
193 to this paragraph, the corporation shall impose and collect an
194 amount equal to the premium tax provided for in s. 624.509 to
195 augment the financial resources of the corporation.
196 3. After the public hurricane loss-projection model under
197 s. 627.06281 has been found to be accurate and reliable by the
198 Florida Commission on Hurricane Loss Projection Methodology,
199 that model shall serve as the minimum benchmark for determining
200 the windstorm portion of the corporation’s rates. This
201 subparagraph does not require or allow the corporation to adopt
202 rates lower than the rates otherwise required or allowed by this
203 paragraph.
204 4. The rate filings for the corporation which were approved
205 by the office and which took effect January 1, 2007, are
206 rescinded, except for those rates that were lowered. As soon as
207 possible, the corporation shall begin using the lower rates that
208 were in effect on December 31, 2006, and shall provide refunds
209 to policyholders who have paid higher rates as a result of that
210 rate filing. The rates in effect on December 31, 2006, shall
211 remain in effect for the 2007 and 2008 calendar years except for
212 any rate change that results in a lower rate. The next rate
213 change that may increase rates shall take effect pursuant to a
214 new rate filing recommended by the corporation and established
215 by the office, subject to the requirements of this paragraph.
216 5. Beginning on July 15, 2009, and each year thereafter,
217 the corporation must make a recommended actuarially sound rate
218 filing for each personal and commercial line of business it
219 writes, to be effective no earlier than January 1, 2010.
220 6. Beginning on or after January 1, 2010, and
221 notwithstanding the board’s recommended rates and the office’s
222 final order regarding the corporation’s filed rates under
223 subparagraph 1., the corporation shall implement a rate increase
224 each year which does not exceed 10 percent for any single policy
225 issued by the corporation, excluding coverage changes and
226 surcharges.
227 7. The corporation may also implement an increase to
228 reflect the effect on the corporation of the cash buildup factor
229 pursuant to s. 215.555(5)(b).
230 8. The corporation’s implementation of rates as prescribed
231 in subparagraph 6. shall cease for any line of business written
232 by the corporation upon the corporation’s implementation of
233 actuarially sound rates. Thereafter, the corporation shall
234 annually make a recommended actuarially sound rate filing for
235 each commercial and personal line of business the corporation
236 writes.
237 Section 2. Present subsection (9) of section 624.430,
238 Florida Statutes, is renumbered as subsection (10), and a new
239 subsection (9) is added to that section, to read:
240 624.430 Withdrawal of insurer or discontinuance of writing
241 certain kinds or lines of insurance.—
242 (9) The office may not deny Citizens Property Insurance
243 Corporation’s plan of withdrawal as described in s.
244 627.351(6)(n).
245 Section 3. This act shall take effect July 1, 2010.