Florida Senate - 2010 SB 876 By Senator Bennett 21-00469C-10 2010876__ 1 A bill to be entitled 2 An act relating to residential property insurance; 3 amending s. 627.062, F.S.; authorizing certain 4 insurers to use a rate different from otherwise 5 applicable filed rates; prohibiting the consideration 6 of certain policies when making a specified 7 calculation; preserving the authority of the Office of 8 Insurance Regulation to disapprove rates as inadequate 9 or disapprove a rate filing for using certain rating 10 factors; authorizing the office to direct an insurer 11 to make a specified type of rate filing under certain 12 circumstances; amending s. 627.351, F.S.; providing 13 requirements for attachment and payment of the 14 Citizens policyholder surcharge; prohibiting the 15 corporation from levying certain regular assessments 16 until after levying the full amount of a Citizens 17 policyholder surcharge; requiring the corporation’s 18 plan of operation to require agents to obtain an 19 acknowledgement of potential surcharge and assessment 20 liability from applicants and policyholders; requiring 21 the corporation to permanently retain a copy of such 22 acknowledgments; specifying that the acknowledgement 23 creates a conclusive presumption of understanding and 24 acceptance by the policyholder; creating s. 627.7031, 25 F.S.; authorizing certain insurers to offer or renew 26 policies at rates established under certain 27 circumstances; prohibiting certain insurers from 28 purchasing TICL option coverage from the Florida 29 Hurricane Catastrophe Fund under certain 30 circumstances; requiring that certain policies contain 31 a specified rate notice; requiring insurers to offer 32 applicants or insureds an estimate of the premium for 33 a policy from Citizens Property Insurance Corporation 34 reflecting similar coverage, limits, and deductibles; 35 requiring applicants or insureds to provide a signed 36 premium comparison acknowledgement; specifying 37 criteria for insurer compliance with certain 38 requirements; specifying acknowledgement contents; 39 requiring insurers and agents to retain a copy of the 40 acknowledgement for a specified time; specifying a 41 presumption created by a signed acknowledgement; 42 specifying types of residential property insurance 43 policies that are not eligible for certain rates or 44 subject to other requirements; requiring written 45 notice of certain nonrenewals; preserving insurer 46 authority to cancel policies; specifying a criterion 47 for what constitutes an offer to renew a policy; 48 providing an effective date. 49 50 Be It Enacted by the Legislature of the State of Florida: 51 52 Section 1. Paragraph (l) is added to subsection (2) of 53 section 627.062, Florida Statutes, to read: 54 627.062 Rate standards.— 55 (2) As to all such classes of insurance: 56 (l)1. An insurer complying with the requirements of s. 57 627.7031 may use a rate for residential property insurance, as 58 defined in s. 627.4025, different from the otherwise applicable 59 filed rate as provided in this paragraph. 60 2. Policies subject to this paragraph may not be counted in 61 the calculation under s. 627.171(2). 62 3. Such rates shall be filed with the office as a separate 63 filing. 64 4. This paragraph does not affect the authority of the 65 office to disapprove a rate as inadequate or to disapprove a 66 rate filing for charging any insured or applicant a higher 67 premium solely because of the insured’s or applicant’s race, 68 color, creed, marital status, sex, or national origin. Upon 69 finding that an insurer has used any such factor in charging an 70 insured or applicant a higher premium, the office may direct the 71 insurer to make a new filing for a new rate that does not use 72 such factor. 73 74 The provisions of this subsection shall not apply to workers’ 75 compensation and employer’s liability insurance and to motor 76 vehicle insurance. 77 Section 2. Paragraphs (g) through (ff) of subsection (6) of 78 section 627.351, Florida Statutes, are redesignated as 79 paragraphs (f) through (ee), respectively, present paragraph (f) 80 of that subsection is redesignated as paragraph (ff), and 81 paragraphs (b) and (c) of subsection (6) of section 627.351, 82 Florida Statutes, are amended to read: 83 627.351 Insurance risk apportionment plans.— 84 (6) CITIZENS PROPERTY INSURANCE CORPORATION.— 85 (b)1. All insurers authorized to write one or more subject 86 lines of business in this state are subject to assessment by the 87 corporation and, for the purposes of this subsection, are 88 referred to collectively as “assessable insurers.” Insurers 89 writing one or more subject lines of business in this state 90 pursuant to part VIII of chapter 626 are not assessable 91 insurers, but insureds who procure one or more subject lines of 92 business in this state pursuant to part VIII of chapter 626 are 93 subject to assessment by the corporation and are referred to 94 collectively as “assessable insureds.” An authorized insurer’s 95 assessment liability shall begin on the first day of the 96 calendar year following the year in which the insurer was issued 97 a certificate of authority to transact insurance for subject 98 lines of business in this state and shall terminate 1 year after 99 the end of the first calendar year during which the insurer no 100 longer holds a certificate of authority to transact insurance 101 for subject lines of business in this state. 102 2.a. All revenues, assets, liabilities, losses, and 103 expenses of the corporation shall be divided into three separate 104 accounts as follows: 105 (I) A personal lines account for personal residential 106 policies issued by the corporation or issued by the Residential 107 Property and Casualty Joint Underwriting Association and renewed 108 by the corporation that provide comprehensive, multiperil 109 coverage on risks that are not located in areas eligible for 110 coverage in the Florida Windstorm Underwriting Association as 111 those areas were defined on January 1, 2002, and for such 112 policies that do not provide coverage for the peril of wind on 113 risks that are located in such areas; 114 (II) A commercial lines account for commercial residential 115 and commercial nonresidential policies issued by the corporation 116 or issued by the Residential Property and Casualty Joint 117 Underwriting Association and renewed by the corporation that 118 provide coverage for basic property perils on risks that are not 119 located in areas eligible for coverage in the Florida Windstorm 120 Underwriting Association as those areas were defined on January 121 1, 2002, and for such policies that do not provide coverage for 122 the peril of wind on risks that are located in such areas; and 123 (III) A high-risk account for personal residential policies 124 and commercial residential and commercial nonresidential 125 property policies issued by the corporation or transferred to 126 the corporation that provide coverage for the peril of wind on 127 risks that are located in areas eligible for coverage in the 128 Florida Windstorm Underwriting Association as those areas were 129 defined on January 1, 2002. The corporation may offer policies 130 that provide multiperil coverage and the corporation shall 131 continue to offer policies that provide coverage only for the 132 peril of wind for risks located in areas eligible for coverage 133 in the high-risk account. In issuing multiperil coverage, the 134 corporation may use its approved policy forms and rates for the 135 personal lines account. An applicant or insured who is eligible 136 to purchase a multiperil policy from the corporation may 137 purchase a multiperil policy from an authorized insurer without 138 prejudice to the applicant’s or insured’s eligibility to 139 prospectively purchase a policy that provides coverage only for 140 the peril of wind from the corporation. An applicant or insured 141 who is eligible for a corporation policy that provides coverage 142 only for the peril of wind may elect to purchase or retain such 143 policy and also purchase or retain coverage excluding wind from 144 an authorized insurer without prejudice to the applicant’s or 145 insured’s eligibility to prospectively purchase a policy that 146 provides multiperil coverage from the corporation. It is the 147 goal of the Legislature that there would be an overall average 148 savings of 10 percent or more for a policyholder who currently 149 has a wind-only policy with the corporation, and an ex-wind 150 policy with a voluntary insurer or the corporation, and who then 151 obtains a multiperil policy from the corporation. It is the 152 intent of the Legislature that the offer of multiperil coverage 153 in the high-risk account be made and implemented in a manner 154 that does not adversely affect the tax-exempt status of the 155 corporation or creditworthiness of or security for currently 156 outstanding financing obligations or credit facilities of the 157 high-risk account, the personal lines account, or the commercial 158 lines account. The high-risk account must also include quota 159 share primary insurance under subparagraph (c)2. The area 160 eligible for coverage under the high-risk account also includes 161 the area within Port Canaveral, which is bordered on the south 162 by the City of Cape Canaveral, bordered on the west by the 163 Banana River, and bordered on the north by Federal Government 164 property. 165 b. The three separate accounts must be maintained as long 166 as financing obligations entered into by the Florida Windstorm 167 Underwriting Association or Residential Property and Casualty 168 Joint Underwriting Association are outstanding, in accordance 169 with the terms of the corresponding financing documents. When 170 the financing obligations are no longer outstanding, in 171 accordance with the terms of the corresponding financing 172 documents, the corporation may use a single account for all 173 revenues, assets, liabilities, losses, and expenses of the 174 corporation. Consistent with the requirement of this 175 subparagraph and prudent investment policies that minimize the 176 cost of carrying debt, the board shall exercise its best efforts 177 to retire existing debt or to obtain approval of necessary 178 parties to amend the terms of existing debt, so as to structure 179 the most efficient plan to consolidate the three separate 180 accounts into a single account. By February 1, 2007, the board 181 shall submit a report to the Financial Services Commission, the 182 President of the Senate, and the Speaker of the House of 183 Representatives which includes an analysis of consolidating the 184 accounts, the actions the board has taken to minimize the cost 185 of carrying debt, and its recommendations for executing the most 186 efficient plan. 187 c. Creditors of the Residential Property and Casualty Joint 188 Underwriting Association and of the accounts specified in sub 189 sub-subparagraphs a.(I) and (II) may have a claim against, and 190 recourse to, the accounts referred to in sub-sub-subparagraphs 191 a.(I) and (II) and shall have no claim against, or recourse to, 192 the account referred to in sub-sub-subparagraph a.(III). 193 Creditors of the Florida Windstorm Underwriting Association 194 shall have a claim against, and recourse to, the account 195 referred to in sub-sub-subparagraph a.(III) and shall have no 196 claim against, or recourse to, the accounts referred to in sub 197 sub-subparagraphs a.(I) and (II). 198 d. Revenues, assets, liabilities, losses, and expenses not 199 attributable to particular accounts shall be prorated among the 200 accounts. 201 e. The Legislature finds that the revenues of the 202 corporation are revenues that are necessary to meet the 203 requirements set forth in documents authorizing the issuance of 204 bonds under this subsection. 205 f. No part of the income of the corporation may inure to 206 the benefit of any private person. 207 3. With respect to a deficit in an account: 208 a. After accounting for the Citizens policyholder surcharge 209 imposed under sub-subparagraph i., when the remaining projected 210 deficit incurred in a particular calendar year is not greater 211 than 6 percent of the aggregate statewide direct written premium 212 for the subject lines of business for the prior calendar year, 213 the entire deficit shall be recovered through regular 214 assessments of assessable insurers under paragraph (p) and 215 assessable insureds. 216 b. After accounting for the Citizens policyholder surcharge 217 imposed under sub-subparagraph i., when the remaining projected 218 deficit incurred in a particular calendar year exceeds 6 percent 219 of the aggregate statewide direct written premium for the 220 subject lines of business for the prior calendar year, the 221 corporation shall levy regular assessments on assessable 222 insurers under paragraph (p) and on assessable insureds in an 223 amount equal to the greater of 6 percent of the deficit or 6 224 percent of the aggregate statewide direct written premium for 225 the subject lines of business for the prior calendar year. Any 226 remaining deficit shall be recovered through emergency 227 assessments under sub-subparagraph d. 228 c. Each assessable insurer’s share of the amount being 229 assessed under sub-subparagraph a. or sub-subparagraph b. shall 230 be in the proportion that the assessable insurer’s direct 231 written premium for the subject lines of business for the year 232 preceding the assessment bears to the aggregate statewide direct 233 written premium for the subject lines of business for that year. 234 The assessment percentage applicable to each assessable insured 235 is the ratio of the amount being assessed under sub-subparagraph 236 a. or sub-subparagraph b. to the aggregate statewide direct 237 written premium for the subject lines of business for the prior 238 year. Assessments levied by the corporation on assessable 239 insurers under sub-subparagraphs a. and b. shall be paid as 240 required by the corporation’s plan of operation and paragraph 241 (p). Assessments levied by the corporation on assessable 242 insureds under sub-subparagraphs a. and b. shall be collected by 243 the surplus lines agent at the time the surplus lines agent 244 collects the surplus lines tax required by s. 626.932 and shall 245 be paid to the Florida Surplus Lines Service Office at the time 246 the surplus lines agent pays the surplus lines tax to the 247 Florida Surplus Lines Service Office. Upon receipt of regular 248 assessments from surplus lines agents, the Florida Surplus Lines 249 Service Office shall transfer the assessments directly to the 250 corporation as determined by the corporation. 251 d. Upon a determination by the board of governors that a 252 deficit in an account exceeds the amount that will be recovered 253 through regular assessments under sub-subparagraph a. or sub 254 subparagraph b., plus the amount that is expected to be 255 recovered through surcharges under sub-subparagraph i., as to 256 the remaining projected deficit the board shall levy, after 257 verification by the office, emergency assessments, for as many 258 years as necessary to cover the deficits, to be collected by 259 assessable insurers and the corporation and collected from 260 assessable insureds upon issuance or renewal of policies for 261 subject lines of business, excluding National Flood Insurance 262 policies. The amount of the emergency assessment collected in a 263 particular year shall be a uniform percentage of that year’s 264 direct written premium for subject lines of business and all 265 accounts of the corporation, excluding National Flood Insurance 266 Program policy premiums, as annually determined by the board and 267 verified by the office. The office shall verify the arithmetic 268 calculations involved in the board’s determination within 30 269 days after receipt of the information on which the determination 270 was based. Notwithstanding any other provision of law, the 271 corporation and each assessable insurer that writes subject 272 lines of business shall collect emergency assessments from its 273 policyholders without such obligation being affected by any 274 credit, limitation, exemption, or deferment. Emergency 275 assessments levied by the corporation on assessable insureds 276 shall be collected by the surplus lines agent at the time the 277 surplus lines agent collects the surplus lines tax required by 278 s. 626.932 and shall be paid to the Florida Surplus Lines 279 Service Office at the time the surplus lines agent pays the 280 surplus lines tax to the Florida Surplus Lines Service Office. 281 The emergency assessments so collected shall be transferred 282 directly to the corporation on a periodic basis as determined by 283 the corporation and shall be held by the corporation solely in 284 the applicable account. The aggregate amount of emergency 285 assessments levied for an account under this sub-subparagraph in 286 any calendar year may, at the discretion of the board of 287 governors, be less than but may not exceed the greater of 10 288 percent of the amount needed to cover the deficit, plus 289 interest, fees, commissions, required reserves, and other costs 290 associated with financing of the original deficit, or 10 percent 291 of the aggregate statewide direct written premium for subject 292 lines of business and for all accounts of the corporation for 293 the prior year, plus interest, fees, commissions, required 294 reserves, and other costs associated with financing the deficit. 295 e. The corporation may pledge the proceeds of assessments, 296 projected recoveries from the Florida Hurricane Catastrophe 297 Fund, other insurance and reinsurance recoverables, policyholder 298 surcharges and other surcharges, and other funds available to 299 the corporation as the source of revenue for and to secure bonds 300 issued under paragraph (p), bonds or other indebtedness issued 301 under subparagraph (c)3., or lines of credit or other financing 302 mechanisms issued or created under this subsection, or to retire 303 any other debt incurred as a result of deficits or events giving 304 rise to deficits, or in any other way that the board determines 305 will efficiently recover such deficits. The purpose of the lines 306 of credit or other financing mechanisms is to provide additional 307 resources to assist the corporation in covering claims and 308 expenses attributable to a catastrophe. As used in this 309 subsection, the term “assessments” includes regular assessments 310 under sub-subparagraph a., sub-subparagraph b., or subparagraph 311 (p)1. and emergency assessments under sub-subparagraph d. 312 Emergency assessments collected under sub-subparagraph d. are 313 not part of an insurer’s rates, are not premium, and are not 314 subject to premium tax, fees, or commissions; however, failure 315 to pay the emergency assessment shall be treated as failure to 316 pay premium. The emergency assessments under sub-subparagraph d. 317 shall continue as long as any bonds issued or other indebtedness 318 incurred with respect to a deficit for which the assessment was 319 imposed remain outstanding, unless adequate provision has been 320 made for the payment of such bonds or other indebtedness 321 pursuant to the documents governing such bonds or other 322 indebtedness. 323 f. As used in this subsection for purposes of any deficit 324 incurred on or after January 25, 2007, the term “subject lines 325 of business” means insurance written by assessable insurers or 326 procured by assessable insureds for all property and casualty 327 lines of business in this state, but not including workers’ 328 compensation or medical malpractice. As used in the sub 329 subparagraph, the term “property and casualty lines of business” 330 includes all lines of business identified on Form 2, Exhibit of 331 Premiums and Losses, in the annual statement required of 332 authorized insurers by s. 624.424 and any rule adopted under 333 this section, except for those lines identified as accident and 334 health insurance and except for policies written under the 335 National Flood Insurance Program or the Federal Crop Insurance 336 Program. For purposes of this sub-subparagraph, the term 337 “workers’ compensation” includes both workers’ compensation 338 insurance and excess workers’ compensation insurance. 339 g. The Florida Surplus Lines Service Office shall determine 340 annually the aggregate statewide written premium in subject 341 lines of business procured by assessable insureds and shall 342 report that information to the corporation in a form and at a 343 time the corporation specifies to ensure that the corporation 344 can meet the requirements of this subsection and the 345 corporation’s financing obligations. 346 h. The Florida Surplus Lines Service Office shall verify 347 the proper application by surplus lines agents of assessment 348 percentages for regular assessments and emergency assessments 349 levied under this subparagraph on assessable insureds and shall 350 assist the corporation in ensuring the accurate, timely 351 collection and payment of assessments by surplus lines agents as 352 required by the corporation. 353 i.(I) If a deficit is incurred in any account in 2008 or 354 thereafter, the board of governors shall levy a Citizens 355 policyholder surcharge against all policyholders of the 356 corporation. 357 (II) The policyholder’s liability for the Citizens 358 policyholder surcharge attaches on the date of the order levying 359 the surcharge or upon the initial issuance of a policy within 360 the first 12 months after the date of the order. The Citizens 361 policyholder surcharge is payable upon cancellation or 362 termination of the policy, upon renewal of the policy, or upon 363 issuance of a new policy within the first 12 months after the 364 date of the levy. 365 (III) The Citizens policyholder surchargefor a 12-month366period, whichshall be leviedcollected at the time of issuance367or renewal of a policy,as a uniform percentage of the premium 368 for the policy of up to 15 percent of such premium, which funds 369 shall be used to offset the deficit. 370 (IV) The corporation may not levy any regular assessments 371 under paragraph (q) pursuant to sub-subparagraph a. or sub 372 subparagraph b. with respect to a particular year’s deficit 373 until the corporation has first levied a Citizens policyholder 374 surcharge under this sub-subparagraph in the full amount 375 authorized by this sub-subparagraph. 376 (V) Citizens policyholder surcharges under this sub 377 subparagraph are not considered premium and are not subject to 378 commissions, fees, or premium taxes. However, failure to pay 379 such surcharges shall be treated as failure to pay premium. 380 j. If the amount of any assessments or surcharges collected 381 from corporation policyholders, assessable insurers or their 382 policyholders, or assessable insureds exceeds the amount of the 383 deficits, such excess amounts shall be remitted to and retained 384 by the corporation in a reserve to be used by the corporation, 385 as determined by the board of governors and approved by the 386 office, to pay claims or reduce any past, present, or future 387 plan-year deficits or to reduce outstanding debt. 388 (c) The plan of operation of the corporation: 389 1. Must provide for adoption of residential property and 390 casualty insurance policy forms and commercial residential and 391 nonresidential property insurance forms, which forms must be 392 approved by the office prior to use. The corporation shall adopt 393 the following policy forms: 394 a. Standard personal lines policy forms that are 395 comprehensive multiperil policies providing full coverage of a 396 residential property equivalent to the coverage provided in the 397 private insurance market under an HO-3, HO-4, or HO-6 policy. 398 b. Basic personal lines policy forms that are policies 399 similar to an HO-8 policy or a dwelling fire policy that provide 400 coverage meeting the requirements of the secondary mortgage 401 market, but which coverage is more limited than the coverage 402 under a standard policy. 403 c. Commercial lines residential and nonresidential policy 404 forms that are generally similar to the basic perils of full 405 coverage obtainable for commercial residential structures and 406 commercial nonresidential structures in the admitted voluntary 407 market. 408 d. Personal lines and commercial lines residential property 409 insurance forms that cover the peril of wind only. The forms are 410 applicable only to residential properties located in areas 411 eligible for coverage under the high-risk account referred to in 412 sub-subparagraph (b)2.a. 413 e. Commercial lines nonresidential property insurance forms 414 that cover the peril of wind only. The forms are applicable only 415 to nonresidential properties located in areas eligible for 416 coverage under the high-risk account referred to in sub 417 subparagraph (b)2.a. 418 f. The corporation may adopt variations of the policy forms 419 listed in sub-subparagraphs a.-e. that contain more restrictive 420 coverage. 421 2.a. Must provide that the corporation adopt a program in 422 which the corporation and authorized insurers enter into quota 423 share primary insurance agreements for hurricane coverage, as 424 defined in s. 627.4025(2)(a), for eligible risks, and adopt 425 property insurance forms for eligible risks which cover the 426 peril of wind only. As used in this subsection, the term: 427 (I) “Quota share primary insurance” means an arrangement in 428 which the primary hurricane coverage of an eligible risk is 429 provided in specified percentages by the corporation and an 430 authorized insurer. The corporation and authorized insurer are 431 each solely responsible for a specified percentage of hurricane 432 coverage of an eligible risk as set forth in a quota share 433 primary insurance agreement between the corporation and an 434 authorized insurer and the insurance contract. The 435 responsibility of the corporation or authorized insurer to pay 436 its specified percentage of hurricane losses of an eligible 437 risk, as set forth in the quota share primary insurance 438 agreement, may not be altered by the inability of the other 439 party to the agreement to pay its specified percentage of 440 hurricane losses. Eligible risks that are provided hurricane 441 coverage through a quota share primary insurance arrangement 442 must be provided policy forms that set forth the obligations of 443 the corporation and authorized insurer under the arrangement, 444 clearly specify the percentages of quota share primary insurance 445 provided by the corporation and authorized insurer, and 446 conspicuously and clearly state that neither the authorized 447 insurer nor the corporation may be held responsible beyond its 448 specified percentage of coverage of hurricane losses. 449 (II) “Eligible risks” means personal lines residential and 450 commercial lines residential risks that meet the underwriting 451 criteria of the corporation and are located in areas that were 452 eligible for coverage by the Florida Windstorm Underwriting 453 Association on January 1, 2002. 454 b. The corporation may enter into quota share primary 455 insurance agreements with authorized insurers at corporation 456 coverage levels of 90 percent and 50 percent. 457 c. If the corporation determines that additional coverage 458 levels are necessary to maximize participation in quota share 459 primary insurance agreements by authorized insurers, the 460 corporation may establish additional coverage levels. However, 461 the corporation’s quota share primary insurance coverage level 462 may not exceed 90 percent. 463 d. Any quota share primary insurance agreement entered into 464 between an authorized insurer and the corporation must provide 465 for a uniform specified percentage of coverage of hurricane 466 losses, by county or territory as set forth by the corporation 467 board, for all eligible risks of the authorized insurer covered 468 under the quota share primary insurance agreement. 469 e. Any quota share primary insurance agreement entered into 470 between an authorized insurer and the corporation is subject to 471 review and approval by the office. However, such agreement shall 472 be authorized only as to insurance contracts entered into 473 between an authorized insurer and an insured who is already 474 insured by the corporation for wind coverage. 475 f. For all eligible risks covered under quota share primary 476 insurance agreements, the exposure and coverage levels for both 477 the corporation and authorized insurers shall be reported by the 478 corporation to the Florida Hurricane Catastrophe Fund. For all 479 policies of eligible risks covered under quota share primary 480 insurance agreements, the corporation and the authorized insurer 481 shall maintain complete and accurate records for the purpose of 482 exposure and loss reimbursement audits as required by Florida 483 Hurricane Catastrophe Fund rules. The corporation and the 484 authorized insurer shall each maintain duplicate copies of 485 policy declaration pages and supporting claims documents. 486 g. The corporation board shall establish in its plan of 487 operation standards for quota share agreements which ensure that 488 there is no discriminatory application among insurers as to the 489 terms of quota share agreements, pricing of quota share 490 agreements, incentive provisions if any, and consideration paid 491 for servicing policies or adjusting claims. 492 h. The quota share primary insurance agreement between the 493 corporation and an authorized insurer must set forth the 494 specific terms under which coverage is provided, including, but 495 not limited to, the sale and servicing of policies issued under 496 the agreement by the insurance agent of the authorized insurer 497 producing the business, the reporting of information concerning 498 eligible risks, the payment of premium to the corporation, and 499 arrangements for the adjustment and payment of hurricane claims 500 incurred on eligible risks by the claims adjuster and personnel 501 of the authorized insurer. Entering into a quota sharing 502 insurance agreement between the corporation and an authorized 503 insurer shall be voluntary and at the discretion of the 504 authorized insurer. 505 3. May provide that the corporation may employ or otherwise 506 contract with individuals or other entities to provide 507 administrative or professional services that may be appropriate 508 to effectuate the plan. The corporation shall have the power to 509 borrow funds, by issuing bonds or by incurring other 510 indebtedness, and shall have other powers reasonably necessary 511 to effectuate the requirements of this subsection, including, 512 without limitation, the power to issue bonds and incur other 513 indebtedness in order to refinance outstanding bonds or other 514 indebtedness. The corporation may, but is not required to, seek 515 judicial validation of its bonds or other indebtedness under 516 chapter 75. The corporation may issue bonds or incur other 517 indebtedness, or have bonds issued on its behalf by a unit of 518 local government pursuant to subparagraph (p)2., in the absence 519 of a hurricane or other weather-related event, upon a 520 determination by the corporation, subject to approval by the 521 office, that such action would enable it to efficiently meet the 522 financial obligations of the corporation and that such 523 financings are reasonably necessary to effectuate the 524 requirements of this subsection. The corporation is authorized 525 to take all actions needed to facilitate tax-free status for any 526 such bonds or indebtedness, including formation of trusts or 527 other affiliated entities. The corporation shall have the 528 authority to pledge assessments, projected recoveries from the 529 Florida Hurricane Catastrophe Fund, other reinsurance 530 recoverables, market equalization and other surcharges, and 531 other funds available to the corporation as security for bonds 532 or other indebtedness. In recognition of s. 10, Art. I of the 533 State Constitution, prohibiting the impairment of obligations of 534 contracts, it is the intent of the Legislature that no action be 535 taken whose purpose is to impair any bond indenture or financing 536 agreement or any revenue source committed by contract to such 537 bond or other indebtedness. 538 4.a. Must require that the corporation operate subject to 539 the supervision and approval of a board of governors consisting 540 of eight individuals who are residents of this state, from 541 different geographical areas of this state. The Governor, the 542 Chief Financial Officer, the President of the Senate, and the 543 Speaker of the House of Representatives shall each appoint two 544 members of the board. At least one of the two members appointed 545 by each appointing officer must have demonstrated expertise in 546 insurance. The Chief Financial Officer shall designate one of 547 the appointees as chair. All board members serve at the pleasure 548 of the appointing officer. All members of the board of governors 549 are subject to removal at will by the officers who appointed 550 them. All board members, including the chair, must be appointed 551 to serve for 3-year terms beginning annually on a date 552 designated by the plan. However, for the first term beginning on 553 or after July 1, 2009, each appointing officer shall appoint one 554 member of the board for a 2-year term and one member for a 3 555 year term. Any board vacancy shall be filled for the unexpired 556 term by the appointing officer. The Chief Financial Officer 557 shall appoint a technical advisory group to provide information 558 and advice to the board of governors in connection with the 559 board’s duties under this subsection. The executive director and 560 senior managers of the corporation shall be engaged by the board 561 and serve at the pleasure of the board. Any executive director 562 appointed on or after July 1, 2006, is subject to confirmation 563 by the Senate. The executive director is responsible for 564 employing other staff as the corporation may require, subject to 565 review and concurrence by the board. 566 b. The board shall create a Market Accountability Advisory 567 Committee to assist the corporation in developing awareness of 568 its rates and its customer and agent service levels in 569 relationship to the voluntary market insurers writing similar 570 coverage. The members of the advisory committee shall consist of 571 the following 11 persons, one of whom must be elected chair by 572 the members of the committee: four representatives, one 573 appointed by the Florida Association of Insurance Agents, one by 574 the Florida Association of Insurance and Financial Advisors, one 575 by the Professional Insurance Agents of Florida, and one by the 576 Latin American Association of Insurance Agencies; three 577 representatives appointed by the insurers with the three highest 578 voluntary market share of residential property insurance 579 business in the state; one representative from the Office of 580 Insurance Regulation; one consumer appointed by the board who is 581 insured by the corporation at the time of appointment to the 582 committee; one representative appointed by the Florida 583 Association of Realtors; and one representative appointed by the 584 Florida Bankers Association. All members must serve for 3-year 585 terms and may serve for consecutive terms. The committee shall 586 report to the corporation at each board meeting on insurance 587 market issues which may include rates and rate competition with 588 the voluntary market; service, including policy issuance, claims 589 processing, and general responsiveness to policyholders, 590 applicants, and agents; and matters relating to depopulation. 591 5. Must provide a procedure for determining the eligibility 592 of a risk for coverage, as follows: 593 a. Subject to the provisions of s. 627.3517, with respect 594 to personal lines residential risks, if the risk is offered 595 coverage from an authorized insurer at the insurer’s approved 596 rate under either a standard policy including wind coverage or, 597 if consistent with the insurer’s underwriting rules as filed 598 with the office, a basic policy including wind coverage, for a 599 new application to the corporation for coverage, the risk is not 600 eligible for any policy issued by the corporation unless the 601 premium for coverage from the authorized insurer is more than 15 602 percent greater than the premium for comparable coverage from 603 the corporation. If the risk is not able to obtain any such 604 offer, the risk is eligible for either a standard policy 605 including wind coverage or a basic policy including wind 606 coverage issued by the corporation; however, if the risk could 607 not be insured under a standard policy including wind coverage 608 regardless of market conditions, the risk shall be eligible for 609 a basic policy including wind coverage unless rejected under 610 subparagraph 8. However, with regard to a policyholder of the 611 corporation or a policyholder removed from the corporation 612 through an assumption agreement until the end of the assumption 613 period, the policyholder remains eligible for coverage from the 614 corporation regardless of any offer of coverage from an 615 authorized insurer or surplus lines insurer. The corporation 616 shall determine the type of policy to be provided on the basis 617 of objective standards specified in the underwriting manual and 618 based on generally accepted underwriting practices. 619 (I) If the risk accepts an offer of coverage through the 620 market assistance plan or an offer of coverage through a 621 mechanism established by the corporation before a policy is 622 issued to the risk by the corporation or during the first 30 623 days of coverage by the corporation, and the producing agent who 624 submitted the application to the plan or to the corporation is 625 not currently appointed by the insurer, the insurer shall: 626 (A) Pay to the producing agent of record of the policy, for 627 the first year, an amount that is the greater of the insurer’s 628 usual and customary commission for the type of policy written or 629 a fee equal to the usual and customary commission of the 630 corporation; or 631 (B) Offer to allow the producing agent of record of the 632 policy to continue servicing the policy for a period of not less 633 than 1 year and offer to pay the agent the greater of the 634 insurer’s or the corporation’s usual and customary commission 635 for the type of policy written. 636 637 If the producing agent is unwilling or unable to accept 638 appointment, the new insurer shall pay the agent in accordance 639 with sub-sub-sub-subparagraph (A). 640 (II) When the corporation enters into a contractual 641 agreement for a take-out plan, the producing agent of record of 642 the corporation policy is entitled to retain any unearned 643 commission on the policy, and the insurer shall: 644 (A) Pay to the producing agent of record of the corporation 645 policy, for the first year, an amount that is the greater of the 646 insurer’s usual and customary commission for the type of policy 647 written or a fee equal to the usual and customary commission of 648 the corporation; or 649 (B) Offer to allow the producing agent of record of the 650 corporation policy to continue servicing the policy for a period 651 of not less than 1 year and offer to pay the agent the greater 652 of the insurer’s or the corporation’s usual and customary 653 commission for the type of policy written. 654 655 If the producing agent is unwilling or unable to accept 656 appointment, the new insurer shall pay the agent in accordance 657 with sub-sub-sub-subparagraph (A). 658 b. With respect to commercial lines residential risks, for 659 a new application to the corporation for coverage, if the risk 660 is offered coverage under a policy including wind coverage from 661 an authorized insurer at its approved rate, the risk is not 662 eligible for any policy issued by the corporation unless the 663 premium for coverage from the authorized insurer is more than 15 664 percent greater than the premium for comparable coverage from 665 the corporation. If the risk is not able to obtain any such 666 offer, the risk is eligible for a policy including wind coverage 667 issued by the corporation. However, with regard to a 668 policyholder of the corporation or a policyholder removed from 669 the corporation through an assumption agreement until the end of 670 the assumption period, the policyholder remains eligible for 671 coverage from the corporation regardless of any offer of 672 coverage from an authorized insurer or surplus lines insurer. 673 (I) If the risk accepts an offer of coverage through the 674 market assistance plan or an offer of coverage through a 675 mechanism established by the corporation before a policy is 676 issued to the risk by the corporation or during the first 30 677 days of coverage by the corporation, and the producing agent who 678 submitted the application to the plan or the corporation is not 679 currently appointed by the insurer, the insurer shall: 680 (A) Pay to the producing agent of record of the policy, for 681 the first year, an amount that is the greater of the insurer’s 682 usual and customary commission for the type of policy written or 683 a fee equal to the usual and customary commission of the 684 corporation; or 685 (B) Offer to allow the producing agent of record of the 686 policy to continue servicing the policy for a period of not less 687 than 1 year and offer to pay the agent the greater of the 688 insurer’s or the corporation’s usual and customary commission 689 for the type of policy written. 690 691 If the producing agent is unwilling or unable to accept 692 appointment, the new insurer shall pay the agent in accordance 693 with sub-sub-sub-subparagraph (A). 694 (II) When the corporation enters into a contractual 695 agreement for a take-out plan, the producing agent of record of 696 the corporation policy is entitled to retain any unearned 697 commission on the policy, and the insurer shall: 698 (A) Pay to the producing agent of record of the corporation 699 policy, for the first year, an amount that is the greater of the 700 insurer’s usual and customary commission for the type of policy 701 written or a fee equal to the usual and customary commission of 702 the corporation; or 703 (B) Offer to allow the producing agent of record of the 704 corporation policy to continue servicing the policy for a period 705 of not less than 1 year and offer to pay the agent the greater 706 of the insurer’s or the corporation’s usual and customary 707 commission for the type of policy written. 708 709 If the producing agent is unwilling or unable to accept 710 appointment, the new insurer shall pay the agent in accordance 711 with sub-sub-sub-subparagraph (A). 712 c. For purposes of determining comparable coverage under 713 sub-subparagraphs a. and b., the comparison shall be based on 714 those forms and coverages that are reasonably comparable. The 715 corporation may rely on a determination of comparable coverage 716 and premium made by the producing agent who submits the 717 application to the corporation, made in the agent’s capacity as 718 the corporation’s agent. A comparison may be made solely of the 719 premium with respect to the main building or structure only on 720 the following basis: the same coverage A or other building 721 limits; the same percentage hurricane deductible that applies on 722 an annual basis or that applies to each hurricane for commercial 723 residential property; the same percentage of ordinance and law 724 coverage, if the same limit is offered by both the corporation 725 and the authorized insurer; the same mitigation credits, to the 726 extent the same types of credits are offered both by the 727 corporation and the authorized insurer; the same method for loss 728 payment, such as replacement cost or actual cash value, if the 729 same method is offered both by the corporation and the 730 authorized insurer in accordance with underwriting rules; and 731 any other form or coverage that is reasonably comparable as 732 determined by the board. If an application is submitted to the 733 corporation for wind-only coverage in the high-risk account, the 734 premium for the corporation’s wind-only policy plus the premium 735 for the ex-wind policy that is offered by an authorized insurer 736 to the applicant shall be compared to the premium for multiperil 737 coverage offered by an authorized insurer, subject to the 738 standards for comparison specified in this subparagraph. If the 739 corporation or the applicant requests from the authorized 740 insurer a breakdown of the premium of the offer by types of 741 coverage so that a comparison may be made by the corporation or 742 its agent and the authorized insurer refuses or is unable to 743 provide such information, the corporation may treat the offer as 744 not being an offer of coverage from an authorized insurer at the 745 insurer’s approved rate. 746 6. Must include rules for classifications of risks and 747 rates therefor. 748 7. Must provide that if premium and investment income for 749 an account attributable to a particular calendar year are in 750 excess of projected losses and expenses for the account 751 attributable to that year, such excess shall be held in surplus 752 in the account. Such surplus shall be available to defray 753 deficits in that account as to future years and shall be used 754 for that purpose prior to assessing assessable insurers and 755 assessable insureds as to any calendar year. 756 8. Must provide objective criteria and procedures to be 757 uniformly applied for all applicants in determining whether an 758 individual risk is so hazardous as to be uninsurable. In making 759 this determination and in establishing the criteria and 760 procedures, the following shall be considered: 761 a. Whether the likelihood of a loss for the individual risk 762 is substantially higher than for other risks of the same class; 763 and 764 b. Whether the uncertainty associated with the individual 765 risk is such that an appropriate premium cannot be determined. 766 767 The acceptance or rejection of a risk by the corporation shall 768 be construed as the private placement of insurance, and the 769 provisions of chapter 120 shall not apply. 770 9. Must provide that the corporation shall make its best 771 efforts to procure catastrophe reinsurance at reasonable rates, 772 to cover its projected 100-year probable maximum loss as 773 determined by the board of governors. 774 10. The policies issued by the corporation must provide 775 that, if the corporation or the market assistance plan obtains 776 an offer from an authorized insurer to cover the risk at its 777 approved rates, the risk is no longer eligible for renewal 778 through the corporation, except as otherwise provided in this 779 subsection. 780 11. Corporation policies and applications must include a 781 notice that the corporation policy could, under this section, be 782 replaced with a policy issued by an authorized insurer that does 783 not provide coverage identical to the coverage provided by the 784 corporation. The notice shall also specify that acceptance of 785 corporation coverage creates a conclusive presumption that the 786 applicant or policyholder is aware of this potential. 787 12. May establish, subject to approval by the office, 788 different eligibility requirements and operational procedures 789 for any line or type of coverage for any specified county or 790 area if the board determines that such changes to the 791 eligibility requirements and operational procedures are 792 justified due to the voluntary market being sufficiently stable 793 and competitive in such area or for such line or type of 794 coverage and that consumers who, in good faith, are unable to 795 obtain insurance through the voluntary market through ordinary 796 methods would continue to have access to coverage from the 797 corporation. When coverage is sought in connection with a real 798 property transfer, such requirements and procedures shall not 799 provide for an effective date of coverage later than the date of 800 the closing of the transfer as established by the transferor, 801 the transferee, and, if applicable, the lender. 802 13. Must provide that, with respect to the high-risk 803 account, any assessable insurer with a surplus as to 804 policyholders of $25 million or less writing 25 percent or more 805 of its total countrywide property insurance premiums in this 806 state may petition the office, within the first 90 days of each 807 calendar year, to qualify as a limited apportionment company. A 808 regular assessment levied by the corporation on a limited 809 apportionment company for a deficit incurred by the corporation 810 for the high-risk account in 2006 or thereafter may be paid to 811 the corporation on a monthly basis as the assessments are 812 collected by the limited apportionment company from its insureds 813 pursuant to s. 627.3512, but the regular assessment must be paid 814 in full within 12 months after being levied by the corporation. 815 A limited apportionment company shall collect from its 816 policyholders any emergency assessment imposed under sub 817 subparagraph (b)3.d. The plan shall provide that, if the office 818 determines that any regular assessment will result in an 819 impairment of the surplus of a limited apportionment company, 820 the office may direct that all or part of such assessment be 821 deferred as provided in subparagraph (p)4. However, there shall 822 be no limitation or deferment of an emergency assessment to be 823 collected from policyholders under sub-subparagraph (b)3.d. 824 14. Must provide that the corporation appoint as its 825 licensed agents only those agents who also hold an appointment 826 as defined in s. 626.015(3) with an insurer who at the time of 827 the agent’s initial appointment by the corporation is authorized 828 to write and is actually writing personal lines residential 829 property coverage, commercial residential property coverage, or 830 commercial nonresidential property coverage within the state. 831 15. Must provide, by July 1, 2007, a premium payment plan 832 option to its policyholders which allows at a minimum for 833 quarterly and semiannual payment of premiums. A monthly payment 834 plan may, but is not required to, be offered. 835 16. Must limit coverage on mobile homes or manufactured 836 homes built prior to 1994 to actual cash value of the dwelling 837 rather than replacement costs of the dwelling. 838 17. May provide such limits of coverage as the board 839 determines, consistent with the requirements of this subsection. 840 18. May require commercial property to meet specified 841 hurricane mitigation construction features as a condition of 842 eligibility for coverage. 843 19.a. Shall require the agent to obtain from any applicant 844 for coverage the following acknowledgement, signed by the 845 applicant, and shall require the agent of record to obtain the 846 following acknowledgment from each corporation policyholder, 847 signed by the policyholder, prior to the policy’s first renewal 848 after the effective date of this act: 849 850 ACKNOWLEDGEMENT OF POTENTIAL SURCHARGE AND ASSESSMENT 851 LIABILITY: 852 1. I UNDERSTAND, AS A CITIZENS PROPERTY INSURANCE 853 CORPORATION POLICYHOLDER, THAT IF THE CORPORATION 854 SUSTAINS A DEFICIT AS A RESULT OF HURRICANE LOSSES OR 855 FOR ANY OTHER REASON, MY POLICY COULD BE SUBJECT TO 856 CITIZENS POLICYHOLDER SURCHARGES, WHICH WOULD BE DUE 857 AND PAYABLE UPON RENEWAL, CANCELLATION, OR TERMINATION 858 OF THE POLICY, AND THAT THE SURCHARGES COULD BE AS 859 HIGH AS 15 PERCENT OF MY PREMIUM FOR DEFICITS IN EACH 860 OF THREE CITIZENS ACCOUNTS, OR A DIFFERENT AMOUNT AS 861 ESTABLISHED BY THE FLORIDA LEGISLATURE. 862 2. I ALSO UNDERSTAND THAT I MAY BE SUBJECT TO 863 EMERGENCY ASSESSMENTS TO THE SAME EXTENT AS 864 POLICYHOLDERS OF OTHER INSURANCE COMPANIES. 865 866 b. The corporation shall permanently maintain a signed copy 867 of the signed acknowledgement required by this subparagraph, and 868 the agent may also retain a copy. 869 c. The signed acknowledgement form creates a conclusive 870 presumption that the policyholder understood and accepted his or 871 her potential surcharge and assessment liability as a Citizens 872 policyholder. 873 Section 3. Section 627.7031, Florida Statutes, is created 874 to read: 875 627.7031 Residential property insurance option.— 876 (1) An insurer holding a certificate of authority to write 877 property insurance in this state may offer or renew policies at 878 rates established in accordance with s. 627.062(2)(l), subject 879 to all of the requirements and prohibitions of this section. 880 (2) An insurer offering or renewing policies at rates 881 established in accordance with s. 627.062(2)(l) may not purchase 882 coverage from the Florida Hurricane Catastrophe Fund under the 883 temporary increase in coverage limit option under s. 884 215.555(17). 885 (3)(a) Before the effective date of a newly issued or 886 renewal policy at rates established in accordance with s. 887 627.062(2)(l), the applicant or insured must be given the 888 following notice, printed in at least 12-point boldfaced type: 889 890 THE RATE FOR THIS POLICY IS NOT SUBJECT TO FULL RATE 891 REGULATION BY THE FLORIDA OFFICE OF INSURANCE REGULATION AND MAY 892 BE HIGHER THAN RATES APPROVED BY THAT OFFICE. A RESIDENTIAL 893 PROPERTY POLICY SUBJECT TO FULL RATE REGULATION REQUIREMENTS MAY 894 BE AVAILABLE FROM THIS INSURER, ANOTHER INSURER, OR CITIZENS 895 PROPERTY INSURANCE CORPORATION. PLEASE DISCUSS YOUR POLICY 896 OPTIONS WITH AN INSURANCE AGENT WHO CAN PROVIDE A CITIZENS 897 QUOTE. YOU MAY WISH TO VIEW THE OFFICE OF INSURANCE REGULATION’S 898 WEBSITE AT WWW.SHOPANDCOMPARERATES.COM FOR MORE INFORMATION 899 ABOUT CHOICES AVAILABLE TO YOU. 900 901 (b) For policies renewed at a rate established in 902 accordance with s. 627.062(2)(l), the notice described in 903 paragraph (a) must be provided in writing at the same time as 904 the renewal notice on a document separate from the renewal 905 notice, but may be contained within the same mailing as the 906 renewal notice. 907 (4) Before the effective date of a newly issued policy at 908 rates established in accordance with s. 627.062(2)(l), or before 909 the effective date of the first renewal at rates established in 910 accordance with s. 627.062(2)(l) of a policy originally issued 911 before the effective date of this section, the applicant or 912 insured must: 913 (a) Be provided or offered, for comparison purposes, an 914 estimate of the premium for a policy from Citizens Property 915 Insurance Corporation reflecting substantially similar 916 coverages, limits, and deductibles to the extent available. 917 (b) Provide the insurer or agent with a signed copy of the 918 following acknowledgement form, which must be retained by the 919 insurer or agent for at least 3 years. If the acknowledgement 920 form is signed by the insured or if the insured remits payment 921 in the amount of the rate established in accordance with s. 922 627.062(2)(l) after being mailed or otherwise provided the 923 acknowledgement form specified in this paragraph, and after 924 being mailed, otherwise provided, or offered the comparison 925 specified in paragraph (a), an insurer renewing a policy at such 926 rate shall be deemed to comply with this section, and it is 927 presumed that the insured has been informed and understands the 928 information contained in the comparison and acknowledgement 929 forms: 930 931 ACKNOWLEDGEMENT 932 1. I HAVE REVIEWED THE REQUIRED DISCLOSURES AND THE 933 REQUIRED PREMIUM COMPARISON. 934 2. I UNDERSTAND THAT THE RATE FOR THIS RESIDENTIAL PROPERTY 935 INSURANCE POLICY IS NOT SUBJECT TO FULL RATE REGULATION BY THE 936 FLORIDA OFFICE OF INSURANCE REGULATION AND MAY BE HIGHER THAN 937 RATES APPROVED BY THAT OFFICE. 938 3. I UNDERSTAND THAT A RESIDENTIAL PROPERTY INSURANCE 939 POLICY SUBJECT TO FULL RATE REGULATION REQUIREMENTS MAY BE 940 AVAILABLE FROM CITIZENS PROPERTY INSURANCE CORPORATION. 941 4. I UNDERSTAND THAT THE FLORIDA OFFICE OF INSURANCE 942 REGULATION’S WEBSITE WWW.SHOPANDCOMPARERATES.COM CONTAINS 943 RESIDENTIAL PROPERTY INSURANCE RATE COMPARISON INFORMATION. 944 5. I UNDERSTAND THAT IF CITIZENS PROPERTY INSURANCE 945 CORPORATION INCURS A DEFICIT BECAUSE OF HURRICANE LOSSES OR 946 OTHER LOSSES, I MAY BE REQUIRED TO PAY AN ASSESSMENT BASED UPON 947 THE PREMIUM FOR THIS POLICY AND THAT A POLICYHOLDER OF CITIZENS 948 PROPERTY INSURANCE CORPORATION MAY BE REQUIRED TO PAY A 949 DIFFERENT ASSESSMENT. 950 951 (5) The following types of residential property insurance 952 policies are not eligible for rates established in accordance 953 with s. 627.062(2)(l) and are not subject to the other 954 provisions of this section: 955 (a) Residential property insurance policies that exclude 956 coverage for the perils of windstorm or hurricane. 957 (b) Residential property insurance policies that are 958 subject to a consent decree, agreement, understanding, or other 959 arrangement between the insurer and the office relating to rates 960 or premiums for policies removed from Citizens Property 961 Insurance Corporation. 962 (6) Notwithstanding s. 627.4133, an insurer that has issued 963 a policy under this section shall provide the named insured 964 written notice of nonrenewal at least 180 days before the 965 effective date of the nonrenewal as to subsequent nonrenewals. 966 However, this subsection does not prohibit an insurer from 967 cancelling a policy as permitted under s. 627.4133. The offer of 968 a policy at rates authorized by this section constitutes an 969 offer to renew the policy at the rates specified in the offer 970 and does not constitute a nonrenewal. 971 Section 4. This act shall take effect January 1, 2011.