Florida Senate - 2013 COMMITTEE AMENDMENT
Bill No. SB 1262
Barcode 398790
LEGISLATIVE ACTION
Senate . House
Comm: FAV .
04/16/2013 .
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The Committee on Banking and Insurance (Ring) recommended the
following:
1 Senate Amendment to Substitute Amendment (588276) (with
2 title amendment)
3
4 Delete lines 5 - 165
5 and insert:
6 Section 1. Paragraphs (d) and (e) of subsection (2),
7 paragraphs (c) and (d) of subsection (4), and paragraph (b) of
8 subsection (5) of section 215.555, Florida Statutes, are amended
9 to read:
10 215.555 Florida Hurricane Catastrophe Fund.—
11 (2) DEFINITIONS.—As used in this section:
12 (d) “Losses” means all incurred losses under covered
13 policies, including additional living expenses of up to not to
14 exceed 40 percent of the insured value of a residential
15 structure or its contents, loss adjustment expenses, and amounts
16 paid as fees on behalf of or inuring to the benefit of a
17 policyholder. The term does not include:
18 1. Losses for fair rental value, loss of rent or rental
19 income, or business interruption losses;
20 2. Losses under liability coverages;
21 3. Property losses that are proximately caused by any peril
22 other than a covered event, including, but not limited to, fire,
23 theft, flood or rising water, or windstorm that does not
24 constitute a covered event;
25 4. Amounts paid as the result of a voluntary expansion of
26 coverage by the insurer, including, but not limited to, a waiver
27 of an applicable deductible; or
28 5. Amounts paid to reimburse a policyholder for condominium
29 association or homeowners’ association loss assessments or under
30 similar coverages for contractual liabilities;
31 6. Amounts paid as bad faith awards, punitive damage
32 awards, or other court-imposed fines, sanctions, or penalties;
33 7. Amounts in excess of the coverage limits under the
34 covered policy; or
35 8. Allocated or Unallocated loss adjustment expenses.
36 (e) “Retention” means the amount of losses below which an
37 insurer is not entitled to reimbursement from the fund. An
38 insurer’s retention shall be calculated as follows:
39 1. The board shall calculate and report to each insurer the
40 retention multiples for each that year. For the contract year.
41 The beginning June 1, 2005, the retention multiple shall be
42 equal to $4.5 billion divided by the total estimated
43 reimbursement premium for the contract year; for subsequent
44 years, the retention multiple shall be equal to $4.5 billion,
45 adjusted based upon the reported exposure for the contract year
46 occurring 2 years before the particular contract year to reflect
47 the percentage growth in exposure to the fund for covered
48 policies since 2004, divided by the total estimated
49 reimbursement premium for the contract year. Total reimbursement
50 premium for purposes of the calculation under this subparagraph
51 shall be estimated using the assumption that all insurers have
52 selected the 90-percent coverage level. Effective June 1, 2014,
53 the aggregate retention level may not exceed $5 billion.
54 2. The retention multiple as determined under subparagraph
55 1. shall be adjusted to reflect the coverage level elected by
56 the insurer. For insurers electing the 90-percent coverage
57 level, the adjusted retention multiple is 100 percent of the
58 amount determined under subparagraph 1. For insurers electing
59 the 75-percent coverage level, the retention multiple is 120
60 percent of the amount determined under subparagraph 1. For
61 insurers electing the 45-percent coverage level, the adjusted
62 retention multiple is 200 percent of the amount determined under
63 subparagraph 1.
64 3. An insurer shall determine its provisional retention by
65 multiplying its provisional reimbursement premium by the
66 applicable adjusted retention multiple and shall determine its
67 actual retention by multiplying its actual reimbursement premium
68 by the applicable adjusted retention multiple.
69 4. For insurers who experience multiple covered events
70 causing loss during the contract year, beginning June 1, 2005,
71 each insurer’s full retention shall be applied to each of the
72 covered events causing the two largest losses for that insurer.
73 For each other covered event resulting in losses, the insurer’s
74 retention shall be reduced to one-third of the full retention.
75 The reimbursement contract shall provide for the reimbursement
76 of losses for each covered event based on the full retention
77 with adjustments made to reflect the reduced retentions on or
78 after January 1 of the contract year provided the insurer
79 reports its losses as specified in the reimbursement contract.
80 (4) REIMBURSEMENT CONTRACTS.—
81 (c)1. The contract must shall also provide that the
82 obligation of the board with respect to all contracts covering a
83 particular contract year be shall not exceed the actual claims
84 paying capacity of the fund up to a limit of $17 billion for
85 that contract year, unless the board determines that there is
86 sufficient estimated claims-paying capacity to provide $17
87 billion of capacity for the current contract year and an
88 additional $17 billion of capacity for subsequent contract
89 years. If the board makes such a determination, the estimated
90 claims-paying capacity for the particular contract year shall be
91 determined by adding to the $17 billion limit one-half of the
92 fund’s estimated claims-paying capacity in excess of $34
93 billion. However, the dollar growth in the limit may not
94 increase in any year by an amount greater than the dollar growth
95 of the balance of the fund as of December 31, less any premiums
96 or interest attributable to optional coverage, as defined by
97 rule which occurred over the prior calendar year.
98 2. Each January In May and October of the contract year,
99 the board shall publish in the Florida Administrative Register
100 Weekly a statement of the fund’s estimated borrowing capacity
101 and, the fund’s estimated claims-paying capacity, and the
102 projected balance of the fund as of December 31. Upon completing
103 the estimation of the fund’s claims-paying capacity After the
104 end of each calendar year, the board shall notify insurers of
105 the estimated borrowing capacity, estimated claims-paying
106 capacity, and the balance of the fund as of December 31 to
107 provide insurers with data necessary to assist them in
108 determining their retention and projected payout from the fund
109 for loss reimbursement purposes. In conjunction with the
110 development of the premium formula, as provided for in
111 subsection (5), the board shall publish factors or multiples
112 that assist insurers in determining their retention and
113 projected payout for the next contract year. For all regulatory
114 and reinsurance purposes, an insurer may calculate its projected
115 payout from the fund as its share of the total fund premium for
116 the current contract year multiplied by the sum of the projected
117 balance of the fund as of December 31 and the estimated
118 borrowing capacity for that contract year as reported under this
119 subparagraph. The statement must include an estimate for a
120 minimum of 3 years of bonding capacity.
121 (d)1. For purposes of determining potential liability and
122 to aid in the sound administration of the fund, the contract
123 must shall require each insurer to report such insurer’s losses
124 from each covered event on an interim basis, as directed by the
125 board. The contract must shall require the insurer to report to
126 the board by no later than December 31 of each year, and
127 quarterly thereafter, its reimbursable losses from covered
128 events for the year. The contract shall require the board to
129 determine and pay, as soon as practicable after receiving these
130 reports of reimbursable losses, the initial amount of
131 reimbursement due and adjustments to this amount based on later
132 loss information. The adjustments to reimbursement amounts shall
133 require the board to pay, or the insurer to return, amounts
134 reflecting the most recent calculation of losses.
135 2. In determining reimbursements pursuant to this
136 subsection, the contract must shall provide that the board shall
137 pay to each insurer the such insurer’s projected payout, which
138 is the amount of reimbursement it is owed, up to an amount equal
139 to the insurer’s share of the actual premium paid for that
140 contract year, multiplied by the insurer’s share of the limit
141 specified in subparagraph(c)1. actual claims-paying capacity
142 available for that contract year.
143 3. The board may reimburse insurers for amounts up to the
144 published factors or multiples for determining each
145 participating insurer’s retention and projected payout derived
146 as a result of the development of the premium formula in those
147 situations in which the total reimbursement of losses to such
148 insurers would not exceed the estimated claims-paying capacity
149 of the fund. Otherwise, the projected payout factors or
150 multiples shall be reduced uniformly among all insurers to
151 reflect the estimated claims-paying capacity.
152 4. The board shall negotiate a line of credit to reimburse
153 insurers if payments exceed available assets and bonding
154 receipts. The line of credit must be sufficient to cover
155 projected receipts from a minimum of 3 years’ bonding and for
156 second-event catastrophes. The line of credit must be closed by
157 July 1, 2014.
158 (5) REIMBURSEMENT PREMIUMS.—
159 (b) The State Board of Administration shall select an
160 independent consultant to develop a formula for determining the
161 actuarially indicated premium to be paid to the fund. The
162 formula shall specify, for each zip code or other limited
163 geographical area, the amount of premium to be paid by an
164 insurer for each $1,000 of insured value under covered policies
165 in that zip code or other area. In establishing premiums, the
166 board shall consider the coverage elected under paragraph (4)(b)
167 and any factors that tend to enhance the actuarial
168 sophistication of ratemaking for the fund, including
169 deductibles, type of construction, type of coverage provided,
170 relative concentration of risks, and other such factors deemed
171 by the board to be appropriate. The formula must provide for a
172 cash build-up factor. For the 2009-2010 contract year, the
173 factor is 5 percent. For the 2010-2011 contract year, the factor
174 is 10 percent. For the 2011-2012 contract year, the factor is 15
175 percent. For the 2012-2013 contract year, the factor is 20
176 percent. For the 2013-2014 contract year and thereafter, the
177 factor is 25 percent. The formula may provide for a procedure
178 for determining to determine the premiums to be paid by new
179 insurers that begin writing covered policies after the beginning
180 of a contract year, taking into consideration when the insurer
181 starts writing covered policies, the potential exposure of the
182 insurer, the potential exposure of the fund, the administrative
183 costs to the insurer and to the fund, and any other factors
184 deemed appropriate by the board. The formula must be approved by
185 unanimous vote of the board. The board may, at any time, revise
186 the formula pursuant to the procedure provided in this
187 paragraph.
188
189 ================= T I T L E A M E N D M E N T ================
190 And the title is amended as follows:
191 Delete lines 173 - 179
192 and insert:
193 An act relating to the Florida Hurricane Catastrophe
194 Fund; amending s. 215.555, F.S.; revising definitions
195 for the terms “losses” and “retention”; revising
196 requirements for reimbursement contracts; revising
197 provisions relating to times and circumstances wherein
198 the State Board of Administration publishes certain
199 statements and notices relating to the fund; requiring
200 the board to negotiate a line of credit to reimburse
201 insurers under certain circumstances; deleting a
202 requirement that the formula for determining premiums
203 to be paid to the fund include a cash build-up factor;
204 deleting obsolete provisions; providing an effective
205 date.