Florida Senate - 2013                        COMMITTEE AMENDMENT
       Bill No. SB 1262
                                Barcode 548468                          
                              LEGISLATIVE ACTION                        
                    Senate             .             House              
                  Comm: FAV            .                                
                  04/16/2013           .                                

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