Florida Senate - 2013 COMMITTEE AMENDMENT
Bill No. SB 1262
Barcode 548468
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 (with title amendment)
2
3 Delete everything after the enacting clause
4 and insert:
5 Section 1. Paragraphs (d) and (e) of subsection (2),
6 paragraphs (c) and (d) of subsection (4), and paragraph (b) of
7 subsection (5) of section 215.555, Florida Statutes, are amended
8 to read:
9 215.555 Florida Hurricane Catastrophe Fund.—
10 (2) DEFINITIONS.—As used in this section:
11 (d) “Losses” means all incurred losses under covered
12 policies, including additional living expenses of up to not to
13 exceed 40 percent of the insured value of a residential
14 structure or its contents, loss adjustment expenses, and amounts
15 paid as fees on behalf of or inuring to the benefit of a
16 policyholder. The term does not include:
17 1. Losses for fair rental value, loss of rent or rental
18 income, or business interruption losses;
19 2. Losses under liability coverages;
20 3. Property losses that are proximately caused by any peril
21 other than a covered event, including, but not limited to, fire,
22 theft, flood or rising water, or windstorm that does not
23 constitute a covered event;
24 4. Amounts paid as the result of a voluntary expansion of
25 coverage by the insurer, including, but not limited to, a waiver
26 of an applicable deductible; or
27 5. Amounts paid to reimburse a policyholder for condominium
28 association or homeowners’ association loss assessments or under
29 similar coverages for contractual liabilities;
30 6. Amounts paid as bad faith awards, punitive damage
31 awards, or other court-imposed fines, sanctions, or penalties;
32 7. Amounts in excess of the coverage limits under the
33 covered policy; or
34 8. Allocated or Unallocated loss adjustment expenses.
35 (e) “Retention” means the amount of losses below which an
36 insurer is not entitled to reimbursement from the fund. An
37 insurer’s retention shall be calculated as follows:
38 1. The board shall calculate and report to each insurer the
39 retention multiples for each that year. For the contract year.
40 The beginning June 1, 2005, the retention multiple shall be
41 equal to $4.5 billion divided by the total estimated
42 reimbursement premium for the contract year; for subsequent
43 years, the retention multiple shall be equal to $4.5 billion,
44 adjusted based upon the reported exposure for the contract year
45 occurring 2 years before the particular contract year to reflect
46 the percentage growth in exposure to the fund for covered
47 policies since 2004, divided by the total estimated
48 reimbursement premium for the contract year. Total reimbursement
49 premium for purposes of the calculation under this subparagraph
50 shall be estimated using the assumption that all insurers have
51 selected the 90-percent coverage level. Effective June 1, 2014,
52 the aggregate retention level may not exceed $5 billion.
53 2. The retention multiple as determined under subparagraph
54 1. shall be adjusted to reflect the coverage level elected by
55 the insurer. For insurers electing the 90-percent coverage
56 level, the adjusted retention multiple is 100 percent of the
57 amount determined under subparagraph 1. For insurers electing
58 the 75-percent coverage level, the retention multiple is 120
59 percent of the amount determined under subparagraph 1. For
60 insurers electing the 45-percent coverage level, the adjusted
61 retention multiple is 200 percent of the amount determined under
62 subparagraph 1.
63 3. An insurer shall determine its provisional retention by
64 multiplying its provisional reimbursement premium by the
65 applicable adjusted retention multiple and shall determine its
66 actual retention by multiplying its actual reimbursement premium
67 by the applicable adjusted retention multiple.
68 4. For insurers who experience multiple covered events
69 causing loss during the contract year, beginning June 1, 2005,
70 each insurer’s full retention shall be applied to each of the
71 covered events causing the two largest losses for that insurer.
72 For each other covered event resulting in losses, the insurer’s
73 retention shall be reduced to one-third of the full retention.
74 The reimbursement contract shall provide for the reimbursement
75 of losses for each covered event based on the full retention
76 with adjustments made to reflect the reduced retentions on or
77 after January 1 of the contract year provided the insurer
78 reports its losses as specified in the reimbursement contract.
79 (4) REIMBURSEMENT CONTRACTS.—
80 (c)1. The contract must shall also provide that the
81 obligation of the board with respect to all contracts covering a
82 particular contract year be shall not exceed the actual claims
83 paying capacity of the fund up to a limit of $17 billion for
84 that contract year, unless the board determines that there is
85 sufficient estimated claims-paying capacity to provide $17
86 billion of capacity for the current contract year and an
87 additional $17 billion of capacity for subsequent contract
88 years. If the board makes such a determination, the estimated
89 claims-paying capacity for the particular contract year shall be
90 determined by adding to the $17 billion limit one-half of the
91 fund’s estimated claims-paying capacity in excess of $34
92 billion. However, the dollar growth in the limit may not
93 increase in any year by an amount greater than the dollar growth
94 of the balance of the fund as of December 31, less any premiums
95 or interest attributable to optional coverage, as defined by
96 rule which occurred over the prior calendar year.
97 2. Each January In May and October of the contract year,
98 the board shall publish in the Florida Administrative Register
99 Weekly a statement of the fund’s estimated borrowing capacity
100 and, the fund’s estimated claims-paying capacity, and the
101 projected balance of the fund as of December 31. Upon completing
102 the estimation of the fund’s claims-paying capacity After the
103 end of each calendar year, the board shall notify insurers of
104 the estimated borrowing capacity, estimated claims-paying
105 capacity, and the balance of the fund as of December 31 to
106 provide insurers with data necessary to assist them in
107 determining their retention and projected payout from the fund
108 for loss reimbursement purposes. In conjunction with the
109 development of the premium formula, as provided for in
110 subsection (5), the board shall publish factors or multiples
111 that assist insurers in determining their retention and
112 projected payout for the next contract year. For all regulatory
113 and reinsurance purposes, an insurer may calculate its projected
114 payout from the fund as its share of the total fund premium for
115 the current contract year multiplied by the sum of the projected
116 balance of the fund as of December 31 and the estimated
117 borrowing capacity for that contract year as reported under this
118 subparagraph. The statement must include an estimate for a
119 minimum of 3 years of bonding capacity.
120 (d)1. For purposes of determining potential liability and
121 to aid in the sound administration of the fund, the contract
122 must shall require each insurer to report such insurer’s losses
123 from each covered event on an interim basis, as directed by the
124 board. The contract must shall require the insurer to report to
125 the board by no later than December 31 of each year, and
126 quarterly thereafter, its reimbursable losses from covered
127 events for the year. The contract shall require the board to
128 determine and pay, as soon as practicable after receiving these
129 reports of reimbursable losses, the initial amount of
130 reimbursement due and adjustments to this amount based on later
131 loss information. The adjustments to reimbursement amounts shall
132 require the board to pay, or the insurer to return, amounts
133 reflecting the most recent calculation of losses.
134 2. In determining reimbursements pursuant to this
135 subsection, the contract must shall provide that the board shall
136 pay to each insurer the such insurer’s projected payout, which
137 is the amount of reimbursement it is owed, up to an amount equal
138 to the insurer’s share of the actual premium paid for that
139 contract year, multiplied by the insurer’s share of the limit
140 specified in subparagraph(c)1. actual claims-paying capacity
141 available for that contract year.
142 3. The board may reimburse insurers for amounts up to the
143 published factors or multiples for determining each
144 participating insurer’s retention and projected payout derived
145 as a result of the development of the premium formula in those
146 situations in which the total reimbursement of losses to such
147 insurers would not exceed the estimated claims-paying capacity
148 of the fund. Otherwise, the projected payout factors or
149 multiples shall be reduced uniformly among all insurers to
150 reflect the estimated claims-paying capacity.
151 4. The board shall negotiate a line of credit to reimburse
152 insurers if payments exceed available assets and bonding
153 receipts. The line of credit must be sufficient to cover
154 projected receipts from a minimum of 3 years’ bonding and for
155 second-event catastrophes. The line of credit must be closed by
156 July 1, 2014.
157 (5) REIMBURSEMENT PREMIUMS.—
158 (b) The State Board of Administration shall select an
159 independent consultant to develop a formula for determining the
160 actuarially indicated premium to be paid to the fund. The
161 formula shall specify, for each zip code or other limited
162 geographical area, the amount of premium to be paid by an
163 insurer for each $1,000 of insured value under covered policies
164 in that zip code or other area. In establishing premiums, the
165 board shall consider the coverage elected under paragraph (4)(b)
166 and any factors that tend to enhance the actuarial
167 sophistication of ratemaking for the fund, including
168 deductibles, type of construction, type of coverage provided,
169 relative concentration of risks, and other such factors deemed
170 by the board to be appropriate. The formula must provide for a
171 cash build-up factor. For the 2009-2010 contract year, the
172 factor is 5 percent. For the 2010-2011 contract year, the factor
173 is 10 percent. For the 2011-2012 contract year, the factor is 15
174 percent. For the 2012-2013 contract year, the factor is 20
175 percent. For the 2013-2014 contract year and thereafter, the
176 factor is 25 percent. The formula may provide for a procedure
177 for determining to determine the premiums to be paid by new
178 insurers that begin writing covered policies after the beginning
179 of a contract year, taking into consideration when the insurer
180 starts writing covered policies, the potential exposure of the
181 insurer, the potential exposure of the fund, the administrative
182 costs to the insurer and to the fund, and any other factors
183 deemed appropriate by the board. The formula must be approved by
184 unanimous vote of the board. The board may, at any time, revise
185 the formula pursuant to the procedure provided in this
186 paragraph.
187 Section 2. This act shall take effect July 1, 2013.
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 everything before the enacting clause
192 and insert:
193 A bill to be entitled
194 An act relating to the Florida Hurricane Catastrophe
195 Fund; amending s. 215.555, F.S.; revising definitions
196 for the terms “losses” and “retention”; revising
197 requirements for reimbursement contracts; revising
198 provisions relating to times and circumstances wherein
199 the State Board of Administration publishes certain
200 statements and notices relating to the fund; requiring
201 the board to negotiate a line of credit to reimburse
202 insurers under certain circumstances; deleting a
203 requirement that the formula for determining premiums
204 to be paid to the fund include a cash build-up factor;
205 deleting obsolete provisions; providing an effective
206 date.