Florida Senate - 2013                        COMMITTEE AMENDMENT
       Bill No. SB 1262
                                Barcode 398790                          
                              LEGISLATIVE ACTION                        
                    Senate             .             House              
                  Comm: FAV            .                                
                  04/16/2013           .                                

       The Committee on Banking and Insurance (Ring) recommended the
    1         Senate Amendment to Substitute Amendment (588276) (with
    2  title amendment)
    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.
   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.
  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.