Florida Senate - 2014                        COMMITTEE AMENDMENT
       Bill No. CS for CS for SB 542
       
       
       
       
       
       
                                Ì823760$Î823760                         
       
                              LEGISLATIVE ACTION                        
                    Senate             .             House              
                  Comm: RCS            .                                
                  03/11/2014           .                                
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       following:
       
    1         Senate Amendment (with title amendment)
    2  
    3         Delete everything after the enacting clause
    4  and insert:
    5         Section 1. Paragraph (b) of subsection (2) of section
    6  627.062, Florida Statutes, is amended to read:
    7         627.062 Rate standards.—
    8         (2) As to all such classes of insurance:
    9         (b) Upon receiving a rate filing, the office shall review
   10  the filing to determine if a rate is excessive, inadequate, or
   11  unfairly discriminatory. In making that determination, the
   12  office shall, in accordance with generally accepted and
   13  reasonable actuarial techniques, consider the following factors:
   14         1. Past and prospective loss experience within and without
   15  this state.
   16         2. Past and prospective expenses.
   17         3. The degree of competition among insurers for the risk
   18  insured.
   19         4. Investment income reasonably expected by the insurer,
   20  consistent with the insurer’s investment practices, from
   21  investable premiums anticipated in the filing, plus any other
   22  expected income from currently invested assets representing the
   23  amount expected on unearned premium reserves and loss reserves.
   24  The commission may adopt rules using reasonable techniques of
   25  actuarial science and economics to specify the manner in which
   26  insurers calculate investment income attributable to classes of
   27  insurance written in this state and the manner in which
   28  investment income is used to calculate insurance rates. Such
   29  manner must contemplate allowances for an underwriting profit
   30  factor and full consideration of investment income that produce
   31  which produce a reasonable rate of return; however, investment
   32  income from invested surplus may not be considered.
   33         5. The reasonableness of the judgment reflected in the
   34  filing.
   35         6. Dividends, savings, or unabsorbed premium deposits
   36  allowed or returned to Florida policyholders, members, or
   37  subscribers in this state.
   38         7. The adequacy of loss reserves.
   39         8. The cost of reinsurance. The office may not disapprove a
   40  rate as excessive solely due to the insurer having obtained
   41  catastrophic reinsurance to cover the insurer’s estimated 250
   42  year probable maximum loss or any lower level of loss.
   43         9. Trend factors, including trends in actual losses per
   44  insured unit for the insurer making the filing.
   45         10. Conflagration and catastrophe hazards, if applicable.
   46         11. Projected hurricane losses, if applicable, which must
   47  be estimated using a model or method found to be acceptable or
   48  reliable by the Florida Commission on Hurricane Loss Projection
   49  Methodology, and as further provided in s. 627.0628.
   50         12. Projected flood losses, if applicable, which may be
   51  estimated using a model, a method, or an average of models or
   52  methods determined to be acceptable or reliable by the Florida
   53  Commission on Hurricane Loss Projection Methodology, and as
   54  further provided in s. 627.0628.
   55         13.12. A reasonable margin for underwriting profit and
   56  contingencies.
   57         14.13. The cost of medical services, if applicable.
   58         15.14. Other relevant factors that affect the frequency or
   59  severity of claims or expenses.
   60  
   61  The provisions of this subsection do not apply to workers’
   62  compensation, employer’s liability insurance, and motor vehicle
   63  insurance.
   64         Section 2. Subsection (3) of section 627.0628, Florida
   65  Statutes, is amended to read:
   66         627.0628 Florida Commission on Hurricane Loss Projection
   67  Methodology; public records exemption; public meetings
   68  exemption.—
   69         (3) ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.—
   70         (a) The commission shall consider any actuarial methods,
   71  principles, standards, models, or output ranges that have the
   72  potential for improving the accuracy of or reliability of the
   73  hurricane loss projections and flood loss projections used in
   74  residential property insurance rate filings. The commission
   75  shall, from time to time, adopt and update findings, as needed,
   76  as to the accuracy or reliability of particular methods,
   77  principles, standards, models, or output ranges.
   78         (b) The commission shall consider any actuarial methods,
   79  principles, standards, or models that have the potential for
   80  improving the accuracy of or reliability of projecting probable
   81  maximum loss levels. The commission shall adopt and update
   82  findings, as needed, as to the accuracy or reliability of
   83  particular methods, principles, standards, or models related to
   84  probable maximum loss calculations.
   85         (c) In establishing reimbursement premiums for the Florida
   86  Hurricane Catastrophe Fund, the State Board of Administration
   87  must, to the extent feasible, employ actuarial methods,
   88  principles, standards, models, or output ranges found by the
   89  commission to be accurate or reliable.
   90         (d) With respect to a rate filing under s. 627.062, an
   91  insurer shall employ and may not modify or adjust actuarial
   92  methods, principles, standards, models, or output ranges found
   93  by the commission to be accurate or reliable in determining
   94  hurricane loss factors for use in a rate filing under s.
   95  627.062. An insurer shall employ and may not modify or adjust
   96  models found by the commission to be accurate or reliable in
   97  determining probable maximum loss levels pursuant to paragraph
   98  (b) with respect to a rate filing under s. 627.062 made more
   99  than 60 days after the commission has made such findings. This
  100  paragraph does not prohibit an insurer from averaging model
  101  results or output ranges or from using an average for the
  102  purpose of a flood insurance rate filing under s. 627.062.
  103         (e) The commission shall adopt actuarial methods,
  104  principles, standards, models, or output ranges for flood loss
  105  by July 1, 2016.
  106         (f)(e) The commission shall revise adopt revisions to
  107  previously adopted actuarial methods, principles, standards,
  108  models, or output ranges every odd-numbered odd year.
  109         (g)(f)1. A trade secret, as defined in s. 688.002, which
  110  that is used in designing and constructing a hurricane loss
  111  model and which that is provided pursuant to this section, by a
  112  private company, to the commission, office, or consumer advocate
  113  appointed pursuant to s. 627.0613, is confidential and exempt
  114  from s. 119.07(1) and s. 24(a), Art. I of the State
  115  Constitution.
  116         2.a. That portion of a meeting of the commission or of a
  117  rate proceeding on an insurer’s rate filing at which a trade
  118  secret made confidential and exempt by this paragraph is
  119  discussed is exempt from s. 286.011 and s. 24(b), Art. I of the
  120  State Constitution. The closed meeting must be recorded, and no
  121  portion of the closed meeting may be off the record.
  122         b. The recording of a closed portion of a meeting is exempt
  123  from s. 119.07(1) and s. 24(a), Art. I of the State
  124  Constitution.
  125         c. This subparagraph is subject to the Open Government
  126  Sunset Review Act in accordance with s. 119.15 and shall stand
  127  repealed on October 2, 2015, unless reviewed and saved from
  128  repeal through reenactment by the Legislature.
  129         Section 3. Section 627.715, Florida Statutes, is created to
  130  read:
  131         627.715Flood insurance.—Subject to the requirements of
  132  this section, an insurer may issue an insurance policy,
  133  contract, or endorsement providing coverage for the peril of
  134  flood on any residential structure or its contents in this
  135  state. Such insurer must also offer coverage equivalent to that
  136  provided under a standard flood insurance policy issued under
  137  the National Flood Insurance Program (NFIP)
  138         (1) As used in this section, the term “flood” means a
  139  general and temporary condition of partial or complete
  140  inundation of 2 acres or more of normally dry land area or of
  141  two or more properties, at least one of which is the
  142  policyholder’s property, from:
  143         (a) Overflow of inland or tidal waters;
  144         (b) Unusual and rapid accumulation or runoff of surface
  145  waters from any source;
  146         (c) Mudflow; or
  147         (d) Collapse or subsidence of land along the shore of a
  148  lake or similar body of water as a result of erosion or
  149  undermining caused by waves or currents of water exceeding
  150  anticipated cyclical levels.
  151         (2)At a minimum, coverage for the peril of flood must
  152  cover a flood as defined in subsection (1). Coverage for the
  153  peril of flood may also include water intrusion, as defined by
  154  the policy, which originates from outside the structure and is
  155  not otherwise covered under the definition of flood.
  156         (3) An insurer may offer a flood coverage policy, contract,
  157  or endorsement that:
  158         (a) Has a flood deductible based on a stated dollar amount
  159  or a percentage of the coverage amount. The deductible amount
  160  must be acceptable to federal mortgage and banking regulators if
  161  such policy, contract, or endorsement is intended to satisfy a
  162  mortgage requirement;
  163         (b) Provides that any flood loss will be adjusted on the
  164  basis of:
  165         1. The actual cash value of the property; or
  166         2. Replacement costs up to the policy limits as provided
  167  under s. 627.7011(3);
  168         (c) Restricts flood coverage to the principal building, as
  169  defined in the applicable policy;
  170         (d) Is in an agreed-upon amount, including coverage limited
  171  to the amount of all outstanding mortgages applicable to the
  172  covered property. However, if a policy, contract, or endorsement
  173  does not limit flood coverage to the replacement cost of the
  174  covered property, the policy, contract, or endorsement may not
  175  include a provision penalizing the policyholder for not insuring
  176  the covered property up to replacement cost; or
  177         (e) As to the peril of flood, does not cover:
  178         1.Additional living expenses;
  179         2.Personal property or contents; or
  180         3. Law and ordinance coverage. However, an insurer must
  181  offer law and ordinance coverage that is comparable to the law
  182  and ordinance coverage offered in the standard NFIP policy.
  183         (4) The deductibles and policy limits as to the peril of
  184  flood, and any other limitations on coverage required to be
  185  included by the office, must be prominently disclosed on the
  186  declarations page or face page of the policy in at least 12
  187  point uppercase and boldfaced type and be accompanied by a
  188  statement encouraging the policyholder to review the entire
  189  policy carefully because it contains coverage limitations.
  190         (5) Before issuing a flood insurance policy, contract, or
  191  endorsement under this section, the insurance agent must obtain
  192  from an applicant an acknowledgement signed by the applicant
  193  that includes the following statement in at least 12-point bold,
  194  uppercase type: “BY ACCEPTING THIS FLOOD INSURANCE POLICY I HAVE
  195  READ AND UNDERSTAND THE LIMITATIONS THAT MAY APPLY TO MY
  196  POLICY.” The signed acknowledgment must also include, in at
  197  least 12-point bold, uppercase type, for a policy, contract, or
  198  endorsement:
  199         (a) That limits flood coverage to an amount less than the
  200  full replacement cost of the property, the following statement:
  201  “THIS POLICY LIMITS FLOOD COVERAGE TO LESS THAN THE FULL COST OF
  202  REPLACEMENT FOR THE PROPERTY, WHICH MAY RESULT IN HIGH OUT-OF
  203  POCKET EXPENSES TO YOU AND MAY PUT YOUR EQUITY IN THIS PROPERTY
  204  AT RISK.”
  205         (b) That insures a dwelling on the basis of actual cash
  206  value, the following statement: “THIS POLICY PAYS YOU THE
  207  DEPRECIATED VALUE OF YOUR PROPERTY THAT IS DAMAGED BY FLOOD,
  208  WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU IF YOUR
  209  PROPERTY NEEDS TO BE REPAIRED OR REPLACED.”
  210         (c) The following disclosure: “FLOOD INSURANCE COVERAGE IS
  211  AVAILABLE FROM THE NATIONAL FLOOD INSURANCE PROGRAM. YOU SHOULD
  212  CONSULT YOUR AGENT IF YOU HAVE QUESTIONS ABOUT NATIONAL FLOOD
  213  INSURANCE PROGRAM COVERAGE.”
  214         (d) On a structure that was previously insured through the
  215  NFIP at a subsidized rate, the following statement: “BY
  216  ACCEPTING A PRIVATE FLOOD INSURANCE POLICY, YOU MAY LOSE YOUR
  217  SUBSIDIZED RATE IN THE NATIONAL FLOOD INSURANCE PROGRAM IF YOU
  218  RETURN TO THE NATIONAL FLOOD INSURANCE PROGRAM AT A LATER TIME.”
  219         (e) That includes the law and ordinance coverage that must
  220  be offered under subparagraph (3)(e)3., the following
  221  disclosure: “LAW AND ORDINANCE COVERAGE UNDER THIS POLICY MIGHT
  222  HAVE LIMITATIONS ON WHAT IS COVERED IN THE EVENT OF A LOSS. YOU
  223  SHOULD CONSULT YOUR AGENT IF YOU HAVE QUESTIONS ABOUT THE
  224  COVERAGE OFFERED UNDER THIS POLICY.”
  225  
  226  If this form is signed, it is conclusively presumed that the
  227  applicant understood and selected on behalf of all insureds the
  228  limitations of coverage in the policy as compared to a flood
  229  insurance policy offered by the NFIP.
  230         (6) In addition to any other method authorized under the
  231  Florida Insurance Code, an insurer or rating organization may
  232  establish and use flood coverage rates, rating schedules, or
  233  rating manuals, filed by the insurer with the office, which
  234  allow the insurer a reasonable rate of return on flood coverage
  235  written in this state. Flood coverage rates established under
  236  this subsection are not subject to s. 627.062(2)(a) and (f).
  237         (a) An insurer shall notify the office of any change to
  238  rates within 30 days after the effective date of the change. The
  239  notice must include the name of the insurer and the average
  240  statewide percentage change in rates.
  241         (b) Actuarial data with regard to rates for flood coverage
  242  shall be maintained by the insurer for 2 years after the
  243  effective date of such rate change and may be examined by the
  244  office pursuant to s. 624.319. The office may require the
  245  insurer to incur the costs associated with an examination. Upon
  246  examination, the office, in accordance with generally accepted
  247  and reasonable actuarial techniques, shall consider the rate
  248  factors specified in s. 627.062(2)(b), (c), and (d), and
  249  standards specified in s. 627.062(2)(e) to determine if the rate
  250  is excessive, inadequate, or unfairly discriminatory. If the
  251  office finds that the rate is excessive, inadequate, or unfairly
  252  discriminatory, the office shall order the insurer to make a
  253  full and complete rate filing under s. 627.062. Upon issuance of
  254  the order, the insurer may not write additional flood insurance
  255  coverage until the office has approved the rate.
  256         (c) This subsection applies to the establishment and use of
  257  flood coverage rates filed with the office before July 1, 2024.
  258         (7) A surplus lines agent may export a contract or
  259  endorsement to an eligible surplus lines insurer without making
  260  a diligent effort to seek such coverage from three or more
  261  authorized insurers under s. 626.916(1)(a). This subsection
  262  expires July 1, 2017.
  263         (8)The insurer shall notify the insured and any regulated
  264  lending institution or federal agency mortgagee, in writing, at
  265  least 60 days before the cancellation or nonrenewal of the
  266  policy, contract, or endorsement providing flood coverage. An
  267  insurer or insured may cancel the policy, contract, or
  268  endorsement while in force or upon renewal if the cancellation
  269  would be permitted under the NFIP.
  270         (9) In addition to any other applicable requirements, an
  271  insurer providing flood coverage under this section shall:
  272         (a) Notify the office at least 30 days before writing flood
  273  insurance in this state;
  274         (b) File a plan of operation and financial projections or
  275  revisions to such plan, as applicable, with the office;
  276         (c) Offer flood insurance on a form that has been filed
  277  with and approved by the office pursuant to s. 627.410. The
  278  filed form may be substantially similar to the form used by the
  279  NFIP; and
  280         (d) File all reinsurance contracts with the office on or
  281  before June 30 of each year.
  282         (10) Citizens Property Insurance Corporation may not
  283  provide insurance for the peril of flood.
  284         (11) The Florida Hurricane Catastrophe Fund may not
  285  reimburse losses proximately caused by the peril of flood,
  286  including losses that occur during a covered event as defined
  287  under s. 215.555(2).
  288         (12) This section does not apply to:
  289         (a) Policies, contracts, and endorsements that provide
  290  flood coverage for commercial nonresidential properties or
  291  policies that provide excess flood coverage over the amount
  292  recoverable under any other policy covering the same property.
  293         (b) A flood insurance policy issued by or on behalf of the
  294  NFIP.
  295         (13) With respect to the regulation of flood insurance
  296  coverage written in this state by admitted insurers, this
  297  section supersedes any other provision in the Florida Insurance
  298  Code in the event of a conflict.
  299         Section 4. If federal law or rule requires a certification
  300  by a state insurance regulatory official as a condition of
  301  qualifying for private flood insurance or disaster assistance,
  302  the Commissioner of the Office of Insurance Regulation may
  303  provide the certification. The certification is not subject to
  304  review under chapter 120.
  305         Section 5. This act shall take effect upon becoming a law.
  306  
  307  ================= T I T L E  A M E N D M E N T ================
  308  And the title is amended as follows:
  309         Delete everything before the enacting clause
  310  and insert:
  311                        A bill to be entitled                      
  312         An act relating to flood insurance; amending s.
  313         627.062, F.S.; adding projected flood losses to the
  314         factors that must be considered by the Office of
  315         Insurance Regulation in reviewing certain rate
  316         filings; amending s. 627.0628, F.S.; requiring the
  317         commission to adopt standards and guidelines relating
  318         to flood loss by a certain date; creating s. 627.715,
  319         F.S.; authorizing insurers to offer flood insurance on
  320         residential property in this state; requiring the
  321         insurer to also offer coverage equivalent to that
  322         provided by the National Flood Insurance Program
  323         (NFIP); defining the term “flood”; establishing the
  324         minimum coverage requirements for a flood insurance
  325         policy; providing coverage limitations that an insurer
  326         may include in such policies; requiring that certain
  327         limitations and notices be noted on the policy
  328         declarations or face page; requiring the insurer to
  329         obtain a signed acknowledgement from the applicant
  330         which provides certain specified information;
  331         providing the insurer with rate options; authorizing
  332         the office to conduct an examination with respect to
  333         any rate change; authorizing an insurer to export a
  334         contract or endorsement to a surplus lines insurer
  335         without meeting certain requirements; requiring prior
  336         notice for cancellation or nonrenewal of a policy;
  337         providing additional requirements with respect to
  338         notifying the Office of Insurance Regulation before
  339         writing flood insurance, filing a plan of operation
  340         with the office, using forms that have been approved
  341         by the office, and filing reinsurance contracts before
  342         a certain date; prohibiting Citizens Property
  343         Insurance Corporation from writing flood insurance;
  344         prohibiting the Florida Hurricane Catastrophe Fund
  345         from reimbursing losses caused by flooding; providing
  346         certain exemptions; preempting any conflicts with
  347         other provisions of the Florida Insurance Code;
  348         providing that the Commissioner of the Office of
  349         Insurance Regulation may provide certification that a
  350         condition qualifies for flood insurance or disaster
  351         assistance; providing that such certification is not
  352         subject to ch. 120, F.S.; providing an effective date.