HB 833

1
A bill to be entitled
2An act relating to the Florida Hurricane Catastrophe
3Fund; amending s. 215.555, F.S.; revising the
4definitions of "retention" and "corporation";
5providing for calculation of an insurer's
6reimbursement premium and retention under the
7reimbursement contract; revising coverage levels
8available under the reimbursement contract; revising
9aggregate coverage limits; providing for the phase-in
10of changes to coverage levels and limits; revising the
11cash build-up factor included in reimbursement
12premiums; providing for phase-in; reducing maximum
13allowable emergency assessments; changing the name of
14the Florida Hurricane Catastrophe Fund Finance
15Corporation; repealing provisions related to temporary
16emergency options for additional coverage; terminating
17the temporary increase in coverage limits option at
18the end of the 2011-2012 contract year; limiting to
19the 2012-2013 contract year provisions relating to the
20TICL options addendum, TICL reimbursement premiums,
21and the claims-paying capacity of the fund, to
22conform; amending s. 627.0629, F.S.; conforming a
23cross-reference; providing an effective date.
24
25Be It Enacted by the Legislature of the State of Florida:
26
27     Section 1.  Paragraphs (e) and (n) of subsection (2),
28paragraphs (b) and (c) of subsection (4), paragraph (b) of
29subsection (5), paragraphs (b) and (d) of subsection (6), and
30subsections (16), (17), and (18) of section 215.555, Florida
31Statutes, are amended to read:
32     215.555  Florida Hurricane Catastrophe Fund.-
33     (2)  DEFINITIONS.-As used in this section:
34     (e)  "Retention" means the amount of losses below which an
35insurer is not entitled to reimbursement from the fund. An
36insurer's retention shall be calculated as follows:
37     1.a.  The board shall calculate and report to each insurer
38the retention multiples for that year.
39     (I)  For the contract year beginning June 1, 2005, the
40retention multiple shall be equal to $4.5 billion divided by the
41total estimated reimbursement premium for the contract year; for
42subsequent years, up to and including the 2012-2013 contract
43year, the retention multiple shall be equal to $4.5 billion,
44adjusted based upon the reported exposure for the contract year
45occurring 2 years before the particular contract year to reflect
46the percentage growth in exposure to the fund for covered
47policies since 2004, divided by the total estimated
48reimbursement premium for the contract year.
49     (II)  For the contract year beginning June 1, 2013, the
50retention multiple shall be equal to $8 billion divided by the
51total estimated reimbursement premium for the contract year. For
52subsequent years, the retention multiple shall be equal to $8
53billion, adjusted based upon the reported exposure for the
54contract year occurring 2 years before the particular contract
55year to reflect the percentage growth in exposure to the fund
56for covered policies since 2011, divided by the total
57reimbursement premium for the contract year.
58     b.  For the 2012-2013 contract year, total reimbursement
59premium for purposes of the calculation under this subparagraph
60shall be estimated using the assumption that all insurers have
61selected the 90-percent coverage level.
62     c.  In order to implement the phase-in of reduced coverage
63levels as provided in paragraph (4)(b), total reimbursement
64premium for purposes of the calculation under this subparagraph
65shall be estimated using the following assumptions:
66     (I)  For the 2013-2014 contract year, the assumption is
67that all insurers have selected the 85-percent coverage level.
68     (II)  For the 2014-2015 contract year, the assumption is
69that all insurers have selected the 80-percent coverage level.
70     (III)  For the 2015-2016 contract year and subsequent
71contract years, the assumption is that all insurers have
72selected the 75-percent coverage level.
73     2.  The retention multiple as determined under subparagraph
741. shall be adjusted to reflect the coverage level elected by
75the insurer.
76     a.  For an insurer electing the maximum coverage level
77available under paragraph (4)(b) for a particular contract year
78For insurers electing the 90-percent coverage level, the
79adjusted retention multiple is 100 percent of the amount
80determined under subparagraph 1.
81     b.  In order to implement the phase-in of reduced coverage
82levels as provided in paragraph (4)(b), for an insurer electing
83a coverage level other than the maximum coverage level, the
84adjusted retention multiple is as follows:
85     (I)  With respect to the 2012-2013 contract year, for an
86insurer For insurers electing the 75-percent coverage level, the
87retention multiple is 90/75ths 120 percent of the amount
88determined under subparagraph 1., and for an insurer For
89insurers electing the 45-percent coverage level, the adjusted
90retention multiple is 90/45ths 200 percent of the amount
91determined under subparagraph 1.
92     (II)  With respect to the 2013-2014 contract year, for an
93insurer electing the 75-percent coverage level, the retention
94multiple is 85/75ths of the amount determined under subparagraph
951., and for an insurer electing the 45-percent coverage level,
96the retention multiple is 85/45ths of the amount determined
97under subparagraph 1.
98     (III)  With respect to the 2014-2015 contract year, for an
99insurer electing the 75-percent coverage level, the retention
100multiple is 80/75ths of the amount determined under subparagraph
1011., and for an insurer electing the 45-percent coverage level,
102the retention multiple is 80/45ths of the amount determined
103under subparagraph 1.
104     (IV)  With respect to the 2015-2016 contract year and
105subsequent contract years, for an insurer electing the 75-
106percent coverage level, the retention multiple is the amount
107determined under subparagraph 1., and for an insurer electing
108the 45-percent coverage level, the retention multiple is
10975/45ths of the amount determined under subparagraph 1.
110     3.  An insurer shall determine its provisional retention by
111multiplying its provisional reimbursement premium by the
112applicable adjusted retention multiple and shall determine its
113actual retention by multiplying its actual reimbursement premium
114by the applicable adjusted retention multiple.
115     4.  For insurers who experience multiple covered events
116causing loss during the contract year, beginning June 1, 2005,
117each insurer's full retention shall be applied to each of the
118covered events causing the two largest losses for that insurer.
119For each other covered event resulting in losses, the insurer's
120retention shall be reduced to one-third of the full retention.
121The reimbursement contract shall provide for the reimbursement
122of losses for each covered event based on the full retention
123with adjustments made to reflect the reduced retentions on or
124after January 1 of the contract year provided the insurer
125reports its losses as specified in the reimbursement contract.
126     (n)  "Corporation" means the State Board of Administration
127Florida Hurricane Catastrophe Fund Finance Corporation created
128in paragraph (6)(d).
129     (4)  REIMBURSEMENT CONTRACTS.-
130     (b)1.a.  The contract shall contain a promise by the board
131to reimburse the insurer for a specified percentage 45 percent,
13275 percent, or 90 percent of its losses from each covered event
133in excess of the insurer's retention, plus 5 percent of the
134reimbursed losses to cover loss adjustment expenses.
135     b.  The available coverage levels are as follows:
136     (I)  For the 2012-2013 contract year, 90 percent, 75
137percent, and 45 percent.
138     (II)  For the 2013-2014 contract year, 85 percent, 75
139percent, and 45 percent.
140     (III)  For the 2014-2015 contract year, 80 percent, 75
141percent, and 45 percent.
142     (IV)  For the 2015-2016 contract year and subsequent
143contract years, 75 percent and 45 percent.
144     2.a.  The insurer must elect one of the percentage coverage
145levels specified in this paragraph and may, upon renewal of a
146reimbursement contract, elect a lower percentage coverage level
147if no revenue bonds issued under subsection (6) after a covered
148event are outstanding, or elect a higher percentage coverage
149level, regardless of whether or not revenue bonds are
150outstanding. All members of an insurer group must elect the same
151percentage coverage level. Any joint underwriting association,
152risk apportionment plan, or other entity created under s.
153627.351 must elect the maximum 90-percent coverage level
154available under subparagraph 1.
155     b.  In order to implement the phase-in of reduced coverage
156levels as provided in subparagraph 1., and notwithstanding any
157provisions of sub-subparagraph a. to the contrary, if revenue
158bonds issued under subsection (6) after a covered event are
159outstanding and the insurer has elected the maximum coverage
160level available under subparagraph 1., the insurer must, upon
161renewal of the reimbursement contract, elect the maximum
162coverage level available under subparagraph 1. for the renewal
163contract year.
164     3.  The contract shall provide that reimbursement amounts
165shall not be reduced by reinsurance paid or payable to the
166insurer from other sources.
167     4.  Notwithstanding any other provision contained in this
168section, the board shall make available to insurers that
169purchased coverage provided by this subparagraph in 2008,
170insurers qualifying as limited apportionment companies under s.
171627.351(6)(c), and insurers that have been approved to
172participate in the Insurance Capital Build-Up Incentive Program
173pursuant to s. 215.5595 a contract or contract addendum that
174provides an additional amount of reimbursement coverage of up to
175$10 million. The premium to be charged for this additional
176reimbursement coverage shall be 50 percent of the additional
177reimbursement coverage provided, which shall include one prepaid
178reinstatement. The minimum retention level that an eligible
179participating insurer must retain associated with this
180additional coverage layer is 30 percent of the insurer's surplus
181as of December 31, 2008, for the 2009-2010 contract year; as of
182December 31, 2009, for the 2010-2011 contract year; and as of
183December 31, 2010, for the 2011-2012 contract year. This
184coverage shall be in addition to all other coverage that may be
185provided under this section. The coverage provided by the fund
186under this subparagraph shall be in addition to the claims-
187paying capacity as defined in subparagraph (c)1., but only with
188respect to those insurers that select the additional coverage
189option and meet the requirements of this subparagraph. The
190claims-paying capacity with respect to all other participating
191insurers and limited apportionment companies that do not select
192the additional coverage option shall be limited to their
193reimbursement premium's proportionate share of the actual
194claims-paying capacity otherwise defined in subparagraph (c)1.
195and as provided for under the terms of the reimbursement
196contract. The optional coverage retention as specified shall be
197accessed before the mandatory coverage under the reimbursement
198contract, but once the limit of coverage selected under this
199option is exhausted, the insurer's retention under the mandatory
200coverage will apply. This coverage will apply and be paid
201concurrently with mandatory coverage. This subparagraph expires
202on May 31, 2012.
203     (c)1.  The contract shall also provide that the obligation
204of the board with respect to all contracts covering a particular
205contract year shall not exceed the actual claims-paying capacity
206of the fund up to the limit specified in this subparagraph.
207     a.  For the 2012-2013 contract year, the limit is $17
208billion.
209     b.  For the 2013-2014 contract year, the limit is $15.5
210billion.
211     c.  For the 2014-2015 contract year, the limit is $14
212billion.
213     d.  For the 2015-2016 contract year and subsequent contract
214years, the limit is $12 billion.
215     e.  For contract years after the 2015-2016 contract year,
216if a limit of $17 billion for that contract year, unless the
217board determines that there is sufficient estimated claims-
218paying capacity to provide $12 $17 billion of capacity for the
219current contract year and an additional $12 $17 billion of
220capacity for subsequent contract years. If the board makes such
221a determination, the estimated claims-paying capacity for the
222particular contract year shall be determined by adding to the
223$12 $17 billion limit one-half of the fund's estimated claims-
224paying capacity in excess of $24 $34 billion. However, the
225dollar growth in the limit may not increase in any year by an
226amount greater than the dollar growth of the balance of the fund
227as of December 31, less any premiums or interest attributable to
228optional coverage, as defined by rule, which occurred over the
229prior calendar year.
230     2.  In May and October of the contract year, the board
231shall publish in the Florida Administrative Weekly a statement
232of the fund's estimated borrowing capacity, the fund's estimated
233claims-paying capacity, and the projected balance of the fund as
234of December 31. After the end of each calendar year, the board
235shall notify insurers of the estimated borrowing capacity,
236estimated claims-paying capacity, and the balance of the fund as
237of December 31 to provide insurers with data necessary to assist
238them in determining their retention and projected payout from
239the fund for loss reimbursement purposes. In conjunction with
240the development of the premium formula, as provided for in
241subsection (5), the board shall publish factors or multiples
242that assist insurers in determining their retention and
243projected payout for the next contract year. For all regulatory
244and reinsurance purposes, an insurer may calculate its projected
245payout from the fund as its share of the total fund premium for
246the current contract year multiplied by the sum of the projected
247balance of the fund as of December 31 and the estimated
248borrowing capacity for that contract year as reported under this
249subparagraph.
250     (5)  REIMBURSEMENT PREMIUMS.-
251     (b)1.  The State Board of Administration shall select an
252independent consultant to develop a formula for determining the
253actuarially indicated premium to be paid to the fund. The
254formula shall specify, for each zip code or other limited
255geographical area, the amount of premium to be paid by an
256insurer for each $1,000 of insured value under covered policies
257in that zip code or other area. In establishing premiums, the
258board shall consider the coverage elected under paragraph (4)(b)
259and any factors that tend to enhance the actuarial
260sophistication of ratemaking for the fund, including
261deductibles, type of construction, type of coverage provided,
262relative concentration of risks, and other such factors deemed
263by the board to be appropriate.
264     2.  The formula must provide for a cash build-up factor as
265specified in this subparagraph. For the 2009-2010 contract year,
266the factor is 5 percent. For the 2010-2011 contract year, the
267factor is 10 percent.
268     a.  For the 2011-2012 contract year, the factor is 15
269percent.
270     b.  For the 2012-2013 contract year, the factor is 20
271percent.
272     c.  For the 2013-2014 contract year and thereafter, the
273factor is 25 percent.
274     d  For the 2014-2015 contract year, the factor is 30
275percent.
276     e.  For the 2015-2016 contract year, the factor is 35
277percent.
278     f.  For the 2016-2017 contract year, the factor is 40
279percent.
280     g.  For the 2017-2018 contract year, the factor is 45
281percent.
282     h.  For the 2018-2019 contract year and subsequent contract
283years, the factor is 50 percent.
284     3.  The formula may provide for a procedure to determine
285the premiums to be paid by new insurers that begin writing
286covered policies after the beginning of a contract year, taking
287into consideration when the insurer starts writing covered
288policies, the potential exposure of the insurer, the potential
289exposure of the fund, the administrative costs to the insurer
290and to the fund, and any other factors deemed appropriate by the
291board. The formula must be approved by unanimous vote of the
292board. The board may, at any time, revise the formula pursuant
293to the procedure provided in this paragraph.
294     (6)  REVENUE BONDS.-
295     (b)  Emergency assessments-
296     1.  If the board determines that the amount of revenue
297produced under subsection (5) is insufficient to fund the
298obligations, costs, and expenses of the fund and the
299corporation, including repayment of revenue bonds and that
300portion of the debt service coverage not met by reimbursement
301premiums, the board shall direct the Office of Insurance
302Regulation to levy, by order, an emergency assessment on direct
303premiums for all property and casualty lines of business in this
304state, including property and casualty business of surplus lines
305insurers regulated under part VIII of chapter 626, but not
306including any workers' compensation premiums or medical
307malpractice premiums. As used in this subsection, the term
308"property and casualty business" includes all lines of business
309identified on Form 2, Exhibit of Premiums and Losses, in the
310annual statement required of authorized insurers by s. 624.424
311and any rule adopted under this section, except for those lines
312identified as accident and health insurance and except for
313policies written under the National Flood Insurance Program. The
314assessment shall be specified as a percentage of direct written
315premium and is subject to annual adjustments by the board in
316order to meet debt obligations. The same percentage shall apply
317to all policies in lines of business subject to the assessment
318issued or renewed during the 12-month period beginning on the
319effective date of the assessment.
320     2.a.  A premium is not subject to an annual assessment
321under this paragraph in excess of 6 percent of premium with
322respect to obligations arising out of losses attributable to any
323one contract year prior to the 2015-2016 contract year, and a
324premium is not subject to an aggregate annual assessment under
325this paragraph in excess of 10 percent of premium if all of the
326losses that generated the obligations were attributable to
327contract years prior to the 2015-2016 contract year. An annual
328assessment under this paragraph shall continue as long as the
329revenue bonds issued with respect to which the assessment was
330imposed are outstanding, including any bonds the proceeds of
331which were used to refund the revenue bonds, unless adequate
332provision has been made for the payment of the bonds under the
333documents authorizing issuance of the bonds.
334     b.  Except as provided in sub-subparagraph a., a premium is
335not subject to an annual assessment under this paragraph in
336excess of 5 percent of premium with respect to obligations
337arising out of losses attributable to any one contract year, and
338a premium is not subject to an aggregate annual assessment under
339this paragraph in excess of 8 percent of premium. An annual
340assessment under this paragraph shall continue as long as the
341revenue bonds issued with respect to which the assessment was
342imposed are outstanding, including any bonds the proceeds of
343which were used to refund the revenue bonds, unless adequate
344provision has been made for the payment of the bonds under the
345documents authorizing issuance of the bonds.
346     3.  Emergency assessments shall be collected from
347policyholders. Emergency assessments shall be remitted by
348insurers as a percentage of direct written premium for the
349preceding calendar quarter as specified in the order from the
350Office of Insurance Regulation. The office shall verify the
351accurate and timely collection and remittance of emergency
352assessments and shall report the information to the board in a
353form and at a time specified by the board. Each insurer
354collecting assessments shall provide the information with
355respect to premiums and collections as may be required by the
356office to enable the office to monitor and verify compliance
357with this paragraph.
358     4.  With respect to assessments of surplus lines premiums,
359each surplus lines agent shall collect the assessment at the
360same time as the agent collects the surplus lines tax required
361by s. 626.932, and the surplus lines agent shall remit the
362assessment to the Florida Surplus Lines Service Office created
363by s. 626.921 at the same time as the agent remits the surplus
364lines tax to the Florida Surplus Lines Service Office. The
365emergency assessment on each insured procuring coverage and
366filing under s. 626.938 shall be remitted by the insured to the
367Florida Surplus Lines Service Office at the time the insured
368pays the surplus lines tax to the Florida Surplus Lines Service
369Office. The Florida Surplus Lines Service Office shall remit the
370collected assessments to the fund or corporation as provided in
371the order levied by the Office of Insurance Regulation. The
372Florida Surplus Lines Service Office shall verify the proper
373application of such emergency assessments and shall assist the
374board in ensuring the accurate and timely collection and
375remittance of assessments as required by the board. The Florida
376Surplus Lines Service Office shall annually calculate the
377aggregate written premium on property and casualty business,
378other than workers' compensation and medical malpractice,
379procured through surplus lines agents and insureds procuring
380coverage and filing under s. 626.938 and shall report the
381information to the board in a form and at a time specified by
382the board.
383     5.a.  Any assessment authority not used for a particular
384contract year may be used for a subsequent contract year. If,
385for a subsequent contract year, the board determines that the
386amount of revenue produced under subsection (5) is insufficient
387to fund the obligations, costs, and expenses of the fund and the
388corporation, including repayment of revenue bonds and that
389portion of the debt service coverage not met by reimbursement
390premiums, the board shall direct the Office of Insurance
391Regulation to levy an emergency assessment up to an amount not
392exceeding the amount of unused assessment authority from a
393previous contract year or years, plus an additional 4 percent,
394if provided that the assessments in the aggregate do not exceed
395the limits specified in subparagraph 2. and all of the losses
396that generated the obligations were attributable to contract
397years prior to the 2015-2016 contract year.
398     b.  Except as provided in sub-subparagraph a., any
399assessment authority not used for a particular contract year may
400be used for a subsequent contract year. If, for a subsequent
401contract year, the board determines that the amount of revenue
402produced under subsection (5) is insufficient to fund the
403obligations, costs, and expenses of the fund and the
404corporation, including repayment of revenue bonds and that
405portion of the debt service coverage not met by reimbursement
406premiums, the board shall direct the Office of Insurance
407Regulation to levy an emergency assessment up to an amount not
408exceeding the amount of unused assessment authority from a
409previous contract year or years, plus an additional 3 percent,
410if the assessments in the aggregate do not exceed the limits
411specified in subparagraph 2.
412     6.  The assessments otherwise payable to the corporation
413under this paragraph shall be paid to the fund unless and until
414the Office of Insurance Regulation and the Florida Surplus Lines
415Service Office have received from the corporation and the fund a
416notice, which shall be conclusive and upon which they may rely
417without further inquiry, that the corporation has issued bonds
418and the fund has no agreements in effect with local governments
419under paragraph (c). On or after the date of the notice and
420until the date the corporation has no bonds outstanding, the
421fund shall have no right, title, or interest in or to the
422assessments, except as provided in the fund's agreement with the
423corporation.
424     7.  Emergency assessments are not premium and are not
425subject to the premium tax, to the surplus lines tax, to any
426fees, or to any commissions. An insurer is liable for all
427assessments that it collects and must treat the failure of an
428insured to pay an assessment as a failure to pay the premium. An
429insurer is not liable for uncollectible assessments.
430     8.  When an insurer is required to return an unearned
431premium, it shall also return any collected assessment
432attributable to the unearned premium. A credit adjustment to the
433collected assessment may be made by the insurer with regard to
434future remittances that are payable to the fund or corporation,
435but the insurer is not entitled to a refund.
436     9.  When a surplus lines insured or an insured who has
437procured coverage and filed under s. 626.938 is entitled to the
438return of an unearned premium, the Florida Surplus Lines Service
439Office shall provide a credit or refund to the agent or such
440insured for the collected assessment attributable to the
441unearned premium prior to remitting the emergency assessment
442collected to the fund or corporation.
443     10.  The exemption of medical malpractice insurance
444premiums from emergency assessments under this paragraph is
445repealed May 31, 2013, and medical malpractice insurance
446premiums shall be subject to emergency assessments attributable
447to loss events occurring in the contract years commencing on
448June 1, 2013.
449     (d)  State Board of Administration Florida Hurricane
450Catastrophe Fund Finance Corporation.-
451     1.  In addition to the findings and declarations in
452subsection (1), the Legislature also finds and declares that:
453     a.  The public benefits corporation created under this
454paragraph will provide a mechanism necessary for the cost-
455effective and efficient issuance of bonds. This mechanism will
456eliminate unnecessary costs in the bond issuance process,
457thereby increasing the amounts available to pay reimbursement
458for losses to property sustained as a result of hurricane
459damage.
460     b.  The purpose of such bonds is to fund reimbursements
461through the Florida Hurricane Catastrophe Fund to pay for the
462costs of construction, reconstruction, repair, restoration, and
463other costs associated with damage to properties of
464policyholders of covered policies due to the occurrence of a
465hurricane.
466     c.  The efficacy of the financing mechanism will be
467enhanced by the corporation's ownership of the assessments, by
468the insulation of the assessments from possible bankruptcy
469proceedings, and by covenants of the state with the
470corporation's bondholders.
471     2.a.  There is created a public benefits corporation, which
472is an instrumentality of the state, to be known as the State
473Board of Administration Florida Hurricane Catastrophe Fund
474Finance Corporation.
475     b.  The corporation shall operate under a five-member board
476of directors consisting of the Governor or a designee, the Chief
477Financial Officer or a designee, the Attorney General or a
478designee, the director of the Division of Bond Finance of the
479State Board of Administration, and the Chief Operating Officer
480senior employee of the State Board of Administration responsible
481for operations of the Florida Hurricane Catastrophe Fund.
482     c.  The corporation has all of the powers of corporations
483under chapter 607 and under chapter 617, subject only to the
484provisions of this subsection.
485     d.  The corporation may issue bonds and engage in such
486other financial transactions as are necessary to provide
487sufficient funds to achieve the purposes of this section.
488     e.  The corporation may invest in any of the investments
489authorized under s. 215.47.
490     f.  There shall be no liability on the part of, and no
491cause of action shall arise against, any board members or
492employees of the corporation for any actions taken by them in
493the performance of their duties under this paragraph.
494     3.a.  In actions under chapter 75 to validate any bonds
495issued by the corporation, the notice required by s. 75.06 shall
496be published only in Leon County and in two newspapers of
497general circulation in the state, and the complaint and order of
498the court shall be served only on the State Attorney of the
499Second Judicial Circuit.
500     b.  The state hereby covenants with holders of bonds of the
501corporation that the state will not repeal or abrogate the power
502of the board to direct the Office of Insurance Regulation to
503levy the assessments and to collect the proceeds of the revenues
504pledged to the payment of such bonds as long as any such bonds
505remain outstanding unless adequate provision has been made for
506the payment of such bonds pursuant to the documents authorizing
507the issuance of such bonds.
508     4.  The bonds of the corporation are not a debt of the
509state or of any political subdivision, and neither the state nor
510any political subdivision is liable on such bonds. The
511corporation does not have the power to pledge the credit, the
512revenues, or the taxing power of the state or of any political
513subdivision. The credit, revenues, or taxing power of the state
514or of any political subdivision shall not be deemed to be
515pledged to the payment of any bonds of the corporation.
516     5.a.  The property, revenues, and other assets of the
517corporation; the transactions and operations of the corporation
518and the income from such transactions and operations; and all
519bonds issued under this paragraph and interest on such bonds are
520exempt from taxation by the state and any political subdivision,
521including the intangibles tax under chapter 199 and the income
522tax under chapter 220. This exemption does not apply to any tax
523imposed by chapter 220 on interest, income, or profits on debt
524obligations owned by corporations other than the State Board of
525Administration Florida Hurricane Catastrophe Fund Finance
526Corporation.
527     b.  All bonds of the corporation shall be and constitute
528legal investments without limitation for all public bodies of
529this state; for all banks, trust companies, savings banks,
530savings associations, savings and loan associations, and
531investment companies; for all administrators, executors,
532trustees, and other fiduciaries; for all insurance companies and
533associations and other persons carrying on an insurance
534business; and for all other persons who are now or may hereafter
535be authorized to invest in bonds or other obligations of the
536state and shall be and constitute eligible securities to be
537deposited as collateral for the security of any state, county,
538municipal, or other public funds. This sub-subparagraph shall be
539considered as additional and supplemental authority and shall
540not be limited without specific reference to this sub-
541subparagraph.
542     6.  The corporation and its corporate existence shall
543continue until terminated by law; however, no such law shall
544take effect as long as the corporation has bonds outstanding
545unless adequate provision has been made for the payment of such
546bonds pursuant to the documents authorizing the issuance of such
547bonds. Upon termination of the existence of the corporation, all
548of its rights and properties in excess of its obligations shall
549pass to and be vested in the state.
550     7.  The State Board of Administration Finance Corporation
551is for all purposes the successor to the Florida Hurricane
552Catastrophe Fund Finance Corporation.
553     (16)  TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL COVERAGE.-
554     (a)  Findings and intent.-
555     1.  The Legislature finds that:
556     a.  Because of temporary disruptions in the market for
557catastrophic reinsurance, many property insurers were unable to
558procure reinsurance for the 2006 hurricane season with an
559attachment point below the insurers' respective Florida
560Hurricane Catastrophe Fund attachment points, were unable to
561procure sufficient amounts of such reinsurance, or were able to
562procure such reinsurance only by incurring substantially higher
563costs than in prior years.
564     b.  The reinsurance market problems were responsible, at
565least in part, for substantial premium increases to many
566consumers and increases in the number of policies issued by the
567Citizens Property Insurance Corporation.
568     c.  It is likely that the reinsurance market disruptions
569will not significantly abate prior to the 2007 hurricane season.
570     2.  It is the intent of the Legislature to create a
571temporary emergency program, applicable to the 2007, 2008, and
5722009 hurricane seasons, to address these market disruptions and
573enable insurers, at their option, to procure additional coverage
574from the Florida Hurricane Catastrophe Fund.
575     (b)  Applicability of other provisions of this section.-All
576provisions of this section and the rules adopted under this
577section apply to the program created by this subsection unless
578specifically superseded by this subsection.
579     (c)  Optional coverage.-For the contract year commencing
580June 1, 2007, and ending May 31, 2008, the contract year
581commencing June 1, 2008, and ending May 31, 2009, and the
582contract year commencing June 1, 2009, and ending May 31, 2010,
583the board shall offer for each of such years the optional
584coverage as provided in this subsection.
585     (d)  Additional definitions.-As used in this subsection,
586the term:
587     1.  "TEACO options" means the temporary emergency
588additional coverage options created under this subsection.
589     2.  "TEACO insurer" means an insurer that has opted to
590obtain coverage under the TEACO options in addition to the
591coverage provided to the insurer under its reimbursement
592contract.
593     3.  "TEACO reimbursement premium" means the premium charged
594by the fund for coverage provided under the TEACO options.
595     4.  "TEACO retention" means the amount of losses below
596which a TEACO insurer is not entitled to reimbursement from the
597fund under the TEACO option selected. A TEACO insurer's
598retention options shall be calculated as follows:
599     a.  The board shall calculate and report to each TEACO
600insurer the TEACO retention multiples. There shall be three
601TEACO retention multiples for defining coverage. Each multiple
602shall be calculated by dividing $3 billion, $4 billion, or $5
603billion by the total estimated mandatory FHCF reimbursement
604premium assuming all insurers selected the 90-percent coverage
605level.
606     b.  The TEACO retention multiples as determined under sub-
607subparagraph a. shall be adjusted to reflect the coverage level
608elected by the insurer. For insurers electing the 90-percent
609coverage level, the adjusted retention multiple is 100 percent
610of the amount determined under sub-subparagraph a. For insurers
611electing the 75-percent coverage level, the retention multiple
612is 120 percent of the amount determined under sub-subparagraph
613a. For insurers electing the 45-percent coverage level, the
614adjusted retention multiple is 200 percent of the amount
615determined under sub-subparagraph a.
616     c.  An insurer shall determine its provisional TEACO
617retention by multiplying its estimated mandatory FHCF
618reimbursement premium by the applicable adjusted TEACO retention
619multiple and shall determine its actual TEACO retention by
620multiplying its actual mandatory FHCF reimbursement premium by
621the applicable adjusted TEACO retention multiple.
622     d.  For TEACO insurers who experience multiple covered
623events causing loss during the contract year, the insurer's full
624TEACO retention shall be applied to each of the covered events
625causing the two largest losses for that insurer. For other
626covered events resulting in losses, the TEACO option does not
627apply and the insurer's retention shall be one-third of the full
628retention as calculated under paragraph (2)(e).
629     5.  "TEACO addendum" means an addendum to the reimbursement
630contract reflecting the obligations of the fund and TEACO
631insurers under the program created by this subsection.
632     6.  "FHCF" means the Florida Hurricane Catastrophe Fund.
633     (e)  TEACO addendum.-
634     1.  The TEACO addendum shall provide for reimbursement of
635TEACO insurers for covered events occurring during the contract
636year, in exchange for the TEACO reimbursement premium paid into
637the fund under paragraph (f). Any insurer writing covered
638policies has the option of choosing to accept the TEACO addendum
639for any of the 3 contract years that the coverage is offered.
640     2.  The TEACO addendum shall contain a promise by the board
641to reimburse the TEACO insurer for 45 percent, 75 percent, or 90
642percent of its losses from each covered event in excess of the
643insurer's TEACO retention, plus 5 percent of the reimbursed
644losses to cover loss adjustment expenses. The percentage shall
645be the same as the coverage level selected by the insurer under
646paragraph (4)(b).
647     3.  The TEACO addendum shall provide that reimbursement
648amounts shall not be reduced by reinsurance paid or payable to
649the insurer from other sources.
650     4.  The TEACO addendum shall also provide that the
651obligation of the board with respect to all TEACO addenda shall
652not exceed an amount equal to two times the difference between
653the industry retention level calculated under paragraph (2)(e)
654and the $3 billion, $4 billion, or $5 billion industry TEACO
655retention level options actually selected, but in no event may
656the board's obligation exceed the actual claims-paying capacity
657of the fund plus the additional capacity created in paragraph
658(g). If the actual claims-paying capacity and the additional
659capacity created under paragraph (g) fall short of the board's
660obligations under the reimbursement contract, each insurer's
661share of the fund's capacity shall be prorated based on the
662premium an insurer pays for its mandatory reimbursement coverage
663and the premium paid for its optional TEACO coverage as each
664such premium bears to the total premiums paid to the fund times
665the available capacity.
666     5.  The priorities, schedule, and method of reimbursements
667under the TEACO addendum shall be the same as provided under
668subsection (4).
669     6.  A TEACO insurer's maximum reimbursement for a single
670event shall be equal to the product of multiplying its mandatory
671FHCF premium by the difference between its FHCF retention
672multiple and its TEACO retention multiple under the TEACO option
673selected and by the coverage selected under paragraph (4)(b),
674plus an additional 5 percent for loss adjustment expenses. A
675TEACO insurer's maximum reimbursement under the TEACO option
676selected for a TEACO insurer's two largest events shall be twice
677its maximum reimbursement for a single event.
678     (f)  TEACO reimbursement premiums.-
679     1.  Each TEACO insurer shall pay to the fund, in the manner
680and at the time provided in the reimbursement contract for
681payment of reimbursement premiums, a TEACO reimbursement premium
682calculated as specified in this paragraph.
683     2.  The insurer's TEACO reimbursement premium associated
684with the $3 billion retention option shall be equal to 85
685percent of a TEACO insurer's maximum reimbursement for a single
686event as calculated under subparagraph (e)6. The TEACO
687reimbursement premium associated with the $4 billion retention
688option shall be equal to 80 percent of a TEACO insurer's maximum
689reimbursement for a single event as calculated under
690subparagraph (e)6. The TEACO premium associated with the $5
691billion retention option shall be equal to 75 percent of a TEACO
692insurer's maximum reimbursement for a single event as calculated
693under subparagraph (e)6.
694     (g)  Effect on claims-paying capacity of the fund.-For the
695contract term commencing June 1, 2007, the contract year
696commencing June 1, 2008, and the contract term beginning June 1,
6972009, the program created by this subsection shall increase the
698claims-paying capacity of the fund as provided in subparagraph
699(4)(c)1. by an amount equal to two times the difference between
700the industry retention level calculated under paragraph (2)(e)
701and the $3 billion industry TEACO retention level specified in
702sub-subparagraph (d)4.a. The additional capacity shall apply
703only to the additional coverage provided by the TEACO option and
704shall not otherwise affect any insurer's reimbursement from the
705fund.
706     (16)(17)  TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS.-
707     (a)  Findings and intent.-
708     1.  The Legislature finds that:
709     a.  Because of temporary disruptions in the market for
710catastrophic reinsurance, many property insurers were unable to
711procure sufficient amounts of reinsurance for the 2006 hurricane
712season or were able to procure such reinsurance only by
713incurring substantially higher costs than in prior years.
714     b.  The reinsurance market problems were responsible, at
715least in part, for substantial premium increases to many
716consumers and increases in the number of policies issued by
717Citizens Property Insurance Corporation.
718     c.  It is likely that the reinsurance market disruptions
719will not significantly abate prior to the 2007 hurricane season.
720     2.  It is the intent of the Legislature to create options
721for insurers to purchase a temporary increased coverage limit
722above the statutorily determined limit in subparagraph (4)(c)1.,
723applicable for the 2007, 2008, 2009, 2010, 2011, 2012, and 2013
724hurricane season seasons, to address market disruptions and
725enable insurers, at their option, to procure additional coverage
726from the Florida Hurricane Catastrophe Fund.
727     (b)  Applicability of other provisions of this section.-All
728provisions of this section and the rules adopted under this
729section apply to the coverage created by this subsection unless
730specifically superseded by provisions in this subsection.
731     (c)  Optional coverage.-For the 2009-2010, 2010-2011, 2011-
7322012, 2012-2013, and 2013-2014 contract year years, the board
733shall offer, for each of such years, the optional coverage as
734provided in this subsection.
735     (d)  Additional definitions.-As used in this subsection,
736the term:
737     1.  "FHCF" means Florida Hurricane Catastrophe Fund.
738     2.  "FHCF reimbursement premium" means the premium paid by
739an insurer for its coverage as a mandatory participant in the
740FHCF, but does not include additional premiums for optional
741coverages.
742     3.  "Payout multiple" means the number or multiple created
743by dividing the statutorily defined claims-paying capacity as
744determined in subparagraph (4)(c)1. by the aggregate
745reimbursement premiums paid by all insurers estimated or
746projected as of calendar year-end.
747     4.  "TICL" means the temporary increase in coverage limit.
748     5.  "TICL options" means the temporary increase in coverage
749options created under this subsection.
750     6.  "TICL insurer" means an insurer that has opted to
751obtain coverage under the TICL options addendum in addition to
752the coverage provided to the insurer under its FHCF
753reimbursement contract.
754     7.  "TICL reimbursement premium" means the premium charged
755by the fund for coverage provided under the TICL option.
756     8.  "TICL coverage multiple" means the coverage multiple
757when multiplied by an insurer's reimbursement premium that
758defines the temporary increase in coverage limit.
759     9.  "TICL coverage" means the coverage for an insurer's
760losses above the insurer's statutorily determined claims-paying
761capacity based on the claims-paying limit in subparagraph
762(4)(c)1., which an insurer selects as its temporary increase in
763coverage from the fund under the TICL options selected. A TICL
764insurer's increased coverage limit options shall be calculated
765as follows:
766     a.  The board shall calculate and report to each TICL
767insurer the TICL coverage multiples based on 12 options for
768increasing the insurer's FHCF coverage limit. Each TICL coverage
769multiple shall be calculated by dividing $1 billion, $2 billion,
770$3 billion, $4 billion, $5 billion, $6 billion, $7 billion, $8
771billion, $9 billion, $10 billion, $11 billion, or $12 billion by
772the total estimated aggregate FHCF reimbursement premiums for
773the 2007-2008 contract year, and the 2008-2009 contract year.
774     b.  For the 2009-2010 contract year, the board shall
775calculate and report to each TICL insurer the TICL coverage
776multiples based on 10 options for increasing the insurer's FHCF
777coverage limit. Each TICL coverage multiple shall be calculated
778by dividing $1 billion, $2 billion, $3 billion, $4 billion, $5
779billion, $6 billion, $7 billion, $8 billion, $9 billion, and $10
780billion by the total estimated aggregate FHCF reimbursement
781premiums for the 2009-2010 contract year.
782     c.  For the 2010-2011 contract year, the board shall
783calculate and report to each TICL insurer the TICL coverage
784multiples based on eight options for increasing the insurer's
785FHCF coverage limit. Each TICL coverage multiple shall be
786calculated by dividing $1 billion, $2 billion, $3 billion, $4
787billion, $5 billion, $6 billion, $7 billion, and $8 billion by
788the total estimated aggregate FHCF reimbursement premiums for
789the contract year.
790     d.  For the 2011-2012 contract year, the board shall
791calculate and report to each TICL insurer the TICL coverage
792multiples based on six options for increasing the insurer's FHCF
793coverage limit. Each TICL coverage multiple shall be calculated
794by dividing $1 billion, $2 billion, $3 billion, $4 billion, $5
795billion, and $6 billion by the total estimated aggregate FHCF
796reimbursement premiums for the 2011-2012 contract year.
797     a.e.  For the 2012-2013 contract year, the board shall
798calculate and report to each TICL insurer the TICL coverage
799multiples based on four options for increasing the insurer's
800FHCF coverage limit. Each TICL coverage multiple shall be
801calculated by dividing $1 billion, $2 billion, $3 billion, and
802$4 billion by the total estimated aggregate FHCF reimbursement
803premiums for the 2012-2013 contract year.
804     f.  For the 2013-2014 contract year, the board shall
805calculate and report to each TICL insurer the TICL coverage
806multiples based on two options for increasing the insurer's FHCF
807coverage limit. Each TICL coverage multiple shall be calculated
808by dividing $1 billion and $2 billion by the total estimated
809aggregate FHCF reimbursement premiums for the 2013-2014 contract
810year.
811     b.g.  The TICL insurer's increased coverage shall be the
812FHCF reimbursement premium multiplied by the TICL coverage
813multiple. In order to determine an insurer's total limit of
814coverage, an insurer shall add its TICL coverage multiple to its
815payout multiple. The total shall represent a number that, when
816multiplied by an insurer's FHCF reimbursement premium for a
817given reimbursement contract year, defines an insurer's total
818limit of FHCF reimbursement coverage for that reimbursement
819contract year.
820     10.  "TICL options addendum" means an addendum to the
821reimbursement contract reflecting the obligations of the fund
822and insurers selecting an option to increase an insurer's FHCF
823coverage limit.
824     (e)  TICL options addendum.-
825     1.  The TICL options addendum shall provide for
826reimbursement of TICL insurers for covered events occurring
827during the 2009-2010, 2010-2011, 2011-2012, 2012-2013, and 2013-
8282014 contract year years in exchange for the TICL reimbursement
829premium paid into the fund under paragraph (f) based on the TICL
830coverage available and selected for each respective contract
831year. Any insurer writing covered policies has the option of
832selecting an increased limit of coverage under the TICL options
833addendum and shall select such coverage at the time that it
834executes the FHCF reimbursement contract.
835     2.  The TICL addendum shall contain a promise by the board
836to reimburse the TICL insurer for 45 percent, 75 percent, or 90
837percent of its losses from each covered event in excess of the
838insurer's retention, plus 5 percent of the reimbursed losses to
839cover loss adjustment expenses. The percentage shall be the same
840as the coverage level selected by the insurer under paragraph
841(4)(b).
842     3.  The TICL addendum shall provide that reimbursement
843amounts shall not be reduced by reinsurance paid or payable to
844the insurer from other sources.
845     4.  The priorities, schedule, and method of reimbursements
846under the TICL addendum shall be the same as provided under
847subsection (4).
848     (f)  TICL reimbursement premiums.-Each TICL insurer shall
849pay to the fund, in the manner and at the time provided in the
850reimbursement contract for payment of reimbursement premiums, a
851TICL reimbursement premium determined as specified in subsection
852(5), except that a cash build-up factor does not apply to the
853TICL reimbursement premiums. However, the TICL reimbursement
854premium shall be increased in the 2009-2010 contract year by a
855factor of two, in the 2010-2011 contract year by a factor of
856three, in the 2011-2012 contract year by a factor of four, in
857the 2012-2013 contract year by a factor of five, and in the
8582013-2014 contract year by a factor of six.
859     (g)  Effect on claims-paying capacity of the fund.-For the
8602009-2010, 2010-2011, 2011-2012, 2012-2013, and 2013-2014
861contract year years, the program created by this subsection
862shall increase the claims-paying capacity of the fund as
863provided in subparagraph (4)(c)1. by an amount not to exceed $4
864$12 billion and shall depend on the TICL coverage options
865available and selected for the specified contract year and the
866number of insurers that select the TICL optional coverage. The
867additional capacity shall apply only to the additional coverage
868provided under the TICL options and shall not otherwise affect
869any insurer's reimbursement from the fund if the insurer chooses
870not to select the temporary option to increase its limit of
871coverage under the FHCF.
872     (17)(18)  FACILITATION OF INSURERS' PRIVATE CONTRACT
873NEGOTIATIONS BEFORE THE START OF THE HURRICANE SEASON.-
874     (a)  In addition to the legislative findings and intent
875provided elsewhere in this section, the Legislature finds that:
876     1.a.  Because a regular session of the Legislature begins
877approximately 3 months before the start of a contract year and
878ends approximately 1 month before the start of a contract year,
879participants in the fund always face the possibility that
880legislative actions will change the coverage provided or offered
881by the fund with only a few days or weeks of advance notice.
882     b.  The timing issues described in sub-subparagraph a. can
883create uncertainties and disadvantages for the residential
884property insurers that are required to participate in the fund
885when such insurers negotiate for the procurement of private
886reinsurance or other sources of capital.
887     c.  Providing participating insurers with a greater degree
888of certainty regarding the coverage provided or offered by the
889fund and more time to negotiate for the procurement of private
890reinsurance or other sources of capital will enable the
891residential property insurance market to operate with greater
892stability.
893     d.  Increased stability in the residential property
894insurance market serves a primary purpose of the fund and
895benefits Florida consumers by enabling insurers to operate more
896economically. In years when reinsurance and capital markets are
897experiencing a capital shortage, the last-minute rush by
898insurers only weeks before the start of the hurricane season to
899procure adequate coverage in order to meet their capital
900requirements can result in higher costs that are passed on to
901Florida consumers. However, if more time is available,
902residential property insurers should experience greater
903competition for their business with a corresponding beneficial
904effect for Florida consumers.
905     2.  It is the intent of the Legislature to provide insurers
906with the terms and conditions of the reimbursement contract well
907in advance of the insurers' need to finalize their procurement
908of private reinsurance or other sources of capital, and thereby
909improve insurers' negotiating position with reinsurers and other
910sources of capital.
911     3.  It is also the intent of the Legislature that the board
912publish the fund's maximum statutory limit of coverage and the
913fund's total retention early enough that residential property
914insurers can have the opportunity to better estimate their
915coverage from the fund.
916     (b)  The board shall adopt the reimbursement contract for a
917particular contract year by February 1 of the immediately
918preceding contract year. However, the reimbursement contract
919shall be adopted as soon as possible in advance of the 2010-2011
920contract year.
921     (c)  Insurers writing covered policies shall execute the
922reimbursement contract by March 1 of the immediately preceding
923contract year, and the contract shall have an effective date as
924defined in paragraph (2)(o).
925     (d)  The board shall publish in the Florida Administrative
926Weekly the maximum statutory adjusted capacity for the mandatory
927coverage for a particular contract year, the maximum statutory
928coverage for any optional coverage for the particular contract
929year, and the aggregate fund retention used to calculate
930individual insurer's retention multiples for the particular
931contract year no later than January 1 of the immediately
932preceding contract year.
933     Section 2.  Subsection (5) of section 627.0629, Florida
934Statutes, is amended to read:
935     627.0629  Residential property insurance; rate filings.-
936     (5)  In order to provide an appropriate transition period,
937an insurer may implement an approved rate filing for residential
938property insurance over a period of years. Such insurer must
939provide an informational notice to the office setting out its
940schedule for implementation of the phased-in rate filing. The
941insurer may include in its rate the actual cost of private
942market reinsurance that corresponds to available coverage of the
943Temporary Increase in Coverage Limits, TICL, from the Florida
944Hurricane Catastrophe Fund. The insurer may also include the
945cost of reinsurance to replace the TICL reduction implemented
946pursuant to s. 215.555(16)(d)9 s. 215.555(17)(d)9. However, this
947cost for reinsurance may not include any expense or profit load
948or result in a total annual base rate increase in excess of 10
949percent.
950     Section 3.  This act shall take effect upon becoming a law.


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