Florida Senate - 2014 COMMITTEE AMENDMENT
Bill No. SB 542
Senate . House
Comm: RCS .
1 Senate Amendment (with title amendment)
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
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 produces
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
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
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.
61 The provisions of this subsection do not apply to workers’
62 compensation, employer’s liability insurance, and motor vehicle
64 Section 2. Paragraph (b) of subsection (2) and subsection
65 (3) of section 627.0628, Florida Statutes, are amended to read:
66 627.0628 Florida Commission on Hurricane Loss Projection
67 Methodology; public records exemption; public meetings
69 (2) COMMISSION CREATED.—
70 (b) The commission shall consist of the following 14 12
72 1. The insurance consumer advocate.
73 2. The senior employee of the State Board of Administration
74 responsible for the operations of the Florida Hurricane
75 Catastrophe Fund.
76 3. The Executive Director of the Citizens Property
77 Insurance Corporation.
78 4. The Director of the Division of Emergency Management.
79 5. The actuary member of the Florida Hurricane Catastrophe
80 Fund Advisory Council.
81 6. An employee of the office who is an actuary responsible
82 for property insurance rate filings and who is appointed by the
83 director of the office.
84 7. Seven Five members appointed by the Chief Financial
85 Officer, as follows:
86 a. An actuary who is employed full time by a property and
87 casualty insurer that was responsible for at least 1 percent of
88 the aggregate statewide direct written premium for homeowner’s
89 insurance in the calendar year preceding the member’s
90 appointment to the commission.
91 b. An expert in insurance finance who is a full-time member
92 of the faculty of the State University System and who has a
93 background in actuarial science.
94 c. An expert in statistics who is a full-time member of the
95 faculty of the State University System and who has a background
96 in insurance.
97 d. An expert in computer system design who is a full-time
98 member of the faculty of the State University System.
99 e. An expert in meteorology who is a full-time member of
100 the faculty of the State University System and who specializes
101 in hurricanes.
102 f. A licensed professional engineer who is an expert in
103 floodplain management and who is not regularly retained by or on
104 behalf of a property and casualty insurer.
105 g. A meteorologist who specializes in floods.
106 8. A licensed professional structural engineer who is a
107 full-time faculty member in the State University System and who
108 has expertise in wind mitigation techniques. This appointment
109 shall be made by the Governor.
110 (3) ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.—
111 (a) The commission shall consider any actuarial methods,
112 principles, standards, models, or output ranges that have the
113 potential for improving the accuracy of or reliability of the
114 hurricane loss projections and flood loss projections used in
115 residential property insurance rate filings. The commission
116 shall , from time to time, adopt and update findings as to the
117 accuracy or reliability of particular methods, principles,
118 standards, models, or output ranges.
119 (b) The commission shall consider any actuarial methods,
120 principles, standards, or models that have the potential for
121 improving the accuracy of or reliability of projecting probable
122 maximum loss levels. The commission shall adopt and update
123 findings as to the accuracy or reliability of particular
124 methods, principles, standards, or models related to probable
125 maximum loss calculations.
126 (c) In establishing reimbursement premiums for the Florida
127 Hurricane Catastrophe Fund, the State Board of Administration
128 must, to the extent feasible, employ actuarial methods,
129 principles, standards, models, or output ranges found by the
130 commission to be accurate or reliable.
131 (d) With respect to a rate filing under s. 627.062, an
132 insurer shall employ and may not modify or adjust actuarial
133 methods, principles, standards, models, or output ranges found
134 by the commission to be accurate or reliable in determining
135 hurricane loss factors for use in a rate filing under s.
136 627.062. An insurer shall employ and may not modify or adjust
137 models found by the commission to be accurate or reliable in
138 determining probable maximum loss levels pursuant to paragraph
139 (b) with respect to a rate filing under s. 627.062 made more
140 than 60 days after the commission has made such findings. This
141 paragraph does not prohibit an insurer from averaging model
142 results or output ranges or using an average for the purpose of
143 a flood insurance rate filing under s. 627.062.
144 (e) The commission shall adopt actuarial methods,
145 principles, standards, models, or output ranges for flood loss
146 by July 1, 2015.
147 (f) (e) The commission shall revise adopt revisions to
148 previously adopted actuarial methods, principles, standards,
149 models, or output ranges every odd-numbered odd year.
150 (g) (f)1. A trade secret, as defined in s. 688.002, which
151 that is used in designing and constructing a hurricane loss
152 model and which that is provided pursuant to this section , by a
153 private company , to the commission, office, or consumer advocate
154 appointed pursuant to s. 627.0613 , is confidential and exempt
155 from s. 119.07(1) and s. 24(a), Art. I of the State
157 2.a. That portion of a meeting of the commission or of a
158 rate proceeding on an insurer’s rate filing at which a trade
159 secret made confidential and exempt by this paragraph is
160 discussed is exempt from s. 286.011 and s. 24(b), Art. I of the
161 State Constitution. The closed meeting must be recorded, and no
162 portion of the closed meeting may be off the record.
163 b. The recording of a closed portion of a meeting is exempt
164 from s. 119.07(1) and s. 24(a), Art. I of the State
166 c. This subparagraph is subject to the Open Government
167 Sunset Review Act in accordance with s. 119.15 and shall stand
168 repealed on October 2, 2015, unless reviewed and saved from
169 repeal through reenactment by the Legislature.
170 Section 3. Section 627.715, Florida Statutes, is created to
172 627.715 Flood insurance.—Subject to the requirements of
173 this section, an insurer may issue an insurance policy,
174 contract, or endorsement providing coverage for the peril of
175 flood on any structure or on the contents of personal property
176 on a form that has been filed with and approved by the office
177 pursuant to s. 627.410(2) and that may be substantially similar
178 to the form used by the National Flood Insurance Program (NFIP).
179 (1) The Legislature finds that:
180 (a) The National Flood Insurance Program is a federal
181 program that enables property owners in participating
182 communities to purchase flood insurance. A community
183 participates in the federal program by adopting and enforcing
184 floodplain management regulations that meet or exceed federal
185 floodplain management criteria designed to reduce future flood
186 risk to new construction in floodplains. The program was created
187 by Congress in 1968 because insurance covering the peril of
188 flood was often unavailable in the private insurance market and
189 was intended to reduce the amount of financial aid paid by the
190 Federal Government in the aftermath of flood-related disasters.
191 After the creation of the NFIP, flood insurance coverage
192 continued to be generally unavailable for purchase from private
193 market insurance companies.
194 (b) The Biggert-Waters Flood Insurance Reform Act of 2012
195 reauthorized and revised the NFIP. The act increases flood
196 insurance premiums purchased through the program for second
197 homes, business properties, severe repetitive loss properties,
198 and substantially improved damaged properties by requiring
199 premium increases of 25 percent per year until premiums meet the
200 full actuarial cost. Most residences lose their subsidized rates
201 if the property is sold, the policy lapses, repeated and severe
202 flood losses occur, or a new policy is purchased. Policyholders
203 whose communities adopt a new, updated Flood Insurance Rate Map
204 (FIRM) that results in higher rates will experience a 5-year
205 phase-in of rate increases to achieve required rate levels.
206 (c) The Biggert-Waters Flood Insurance Reform Act of 2012
207 also encourages the use and acceptance of private market flood
208 insurance. The Legislature finds, however, that there has been a
209 long-term inadequacy of private market flood insurance available
210 in this state. Such inadequacy suggests that the private market
211 in this state is unlikely to expand unless the Legislature
212 provides multiple options for the regulation of flood insurance.
213 The Legislature also finds that the consumers of this state
214 would benefit from the availability of competitively priced
215 private market flood insurance due to the continued availability
216 of NFIP flood insurance, the likely availability of alternative
217 private market flood insurance coverage options, and the
218 oversight of the Office of Insurance Regulation.
219 (d) The NFIP, as amended by the Biggert-Waters Flood
220 Insurance Reform Act of 2012, will prevent many property owners
221 from obtaining affordable flood insurance coverage in this
222 state. The absence of affordable flood insurance threatens the
223 public health, safety, and welfare and the economic health of
224 this state. Therefore, the state has a compelling public purpose
225 and interest in providing alternatives to coverage from NFIP by
226 promoting the availability of flood insurance from private
227 market insurers at potentially lower premium rates so as to
228 facilitate the remediation, reconstruction, and replacement of
229 damaged or destroyed property in order to reduce or avoid harm
230 to the public health, safety, and welfare, to the economy of
231 this state, and to the revenues of state and local governments
232 which are needed to provide for the public welfare.
233 (2) As used in this section, the term “flood” means a
234 general and temporary condition of partial or complete
235 inundation of 2 acres or more of normally dry land area or of
236 two or more properties, at least one of which is the
237 policyholder’s property, from:
238 (a) Overflow of inland or tidal waters;
239 (b) Unusual and rapid accumulation or runoff of surface
240 waters from any source;
241 (c) Mudflow; or
242 (d) Collapse or subsidence of land along the shore of a
243 lake or similar body of water as a result of erosion or
244 undermining caused by waves or currents of water exceeding
245 anticipated cyclical levels which result in a flood.
246 (3) At a minimum, coverage for the peril of flood must
247 cover a flood as defined in subsection (2). Coverage for the
248 peril of flood may also include water intrusion, as defined by
249 the policy, which originates from outside the structure and is
250 not otherwise covered under the definition of flood.
251 (4) An insurer may offer a flood coverage policy, contract,
252 or endorsement:
253 (a) That has a flood deductible based on a stated dollar
254 amount or a percentage of the coverage amount. At a minimum, an
255 insurer must offer deductible amounts applicable to flood losses
256 that equal the standard deductibles offered under the National
257 Flood Insurance Program;
258 (b) That provides that any flood loss will be adjusted on
259 the basis of:
260 1. The actual cash value of the property; or
261 2. Replacement costs up to the policy limits as provided
262 under s. 627.7011(3);
263 (c) That restricts flood coverage to the principal
264 building, as defined in the applicable policy;
265 (d) In an agreed-upon amount, including coverage limited to
266 the amount of all outstanding mortgages applicable to the
267 covered property. However, if a policy, contract, or endorsement
268 does not limit flood coverage to the replacement cost of the
269 covered property, the contract or endorsement may not include a
270 provision penalizing the policyholder for not insuring the
271 covered property up to replacement cost; or
272 (e) That, as to the peril of flood, does not cover:
273 1. Additional living expenses;
274 2. Personal property or contents; or
275 3. Law and ordinance coverage. However, an insurer, must
276 offer law and ordinance coverage that is comparable to the law
277 and ordinance coverage offered in the standard NFIP policy. A
278 policy, endorsement, or contract that includes the law and
279 ordinance coverage that must be offered under this paragraph
280 must include the following disclosure in uppercase bold
281 lettering of at least 12-point type: LAW AND ORDINANCE COVERAGE
282 UNDER THIS POLICY MIGHT HAVE LIMITATIONS ON WHAT IS COVERED IN
283 THE EVENT OF A LOSS. YOU SHOULD CONSULT WITH YOUR AGENT IF YOU
284 HAVE QUESTIONS ABOUT THE COVERAGE OFFERED UNDER THIS POLICY.
285 (5) Any limitations on flood coverage or policy limits as
286 to the peril of flood, including, but not limited to, flood
287 deductibles or flood coverage limited to the amount of all
288 outstanding mortgages, must be prominently disclosed on the
289 declarations page or face page of the policy in uppercase bold
290 lettering of at least 12-point type and be sufficiently clear so
291 as to be readily understandable by both the agent and the
292 property owner.
293 (a) A policy that limits flood coverage to the amount of
294 all outstanding mortgages must include the statement: “THIS
295 POLICY LIMITS FLOOD COVERAGE TO THE AMOUNT OF THE OUTSTANDING
296 MORTGAGES ON THE PROEPRTY, WHICH MAY RESULT IN HIGH OUT-OF
297 POCKET EXPENSES TO YOU AND MAY PUT YOUR EQUITY IN THIS PROPERTY
298 AT RISK.”
299 (b) A policy that insures a dwelling on the basis of actual
300 cash value must in include the statement: “THIS POLICY PAYS YOU
301 THE DEPRECIATED VALUE OF YOUR PROPERTY THAT IS DAMAGED BY FLOOD,
302 WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU IF YOUR
303 PROPERTY NEEDS TO BE REPAIRED OR REPLACED.”
304 (6) An insurer may establish and use flood coverage rates
305 in accordance with the rate standards under s. 627.062. For
306 flood coverage rates filed with the office before July 1, 2017,
307 the insurer may also elect one or more of the following options:
308 (a) In accordance with the rates, rating schedules, or
309 rating manuals filed by the insurer with the office which allow
310 the insurer a reasonable rate of return on flood coverage
311 written in this state. Flood coverage rates established under
312 this paragraph are not subject to s. 627.062(2)(a) and (f). An
313 insurer shall notify the office of any change to rates within 30
314 days after the effective date of the change. The notice must
315 include the name of the insurer and the average statewide
316 percentage change in rates. Actuarial data with regard to rates
317 for flood coverage must be maintained by the insurer for 2 years
318 after the effective date of such rate change and is subject to
319 examination by the office. The office may require the insurer to
320 incur the costs associated with an examination. Upon
321 examination, the office, in accordance with generally accepted
322 and reasonable actuarial techniques, shall consider the rate
323 factors and standards specified in s. 627.062 to determine if
324 the rate is excessive, inadequate, or unfairly discriminatory.
325 (b) Through individual risk rating as provided in s.
326 627.062(3)(a) and (b).
327 (c) With the written consent of the insured signed before
328 the policy inception date and filed with the insurer, using a
329 flood coverage rate that has not been approved by the office.
330 The signed consent form must notify the insured that the rate is
331 not subject to the approval of the office. A copy of the form
332 shall be maintained by the insurer for 3 years and must be
333 available for review by the office. An insurer is not required
334 to obtain subsequent written consents upon renewal, but shall
335 provide notice at each renewal that the rate is not subject to
336 office approval.
337 (7) A policy, endorsement, or contract providing coverage
338 for the peril of flood must provide notice that flood insurance
339 coverage is available from the NFIP.
340 (8) A surplus lines agent may export a contract or
341 endorsement providing flood coverage of $1 million or more to an
342 eligible surplus lines insurer without making a diligent effort
343 to seek such coverage from three or more authorized insurers
344 under s. 626.916(1)(a). This subsection expires July 1, 2017.
345 (9) A policy, endorsement, or contract providing coverage
346 for the peril of flood must require the insurer to give 45 days’
347 prior written notice of cancellation or nonrenewal to the
348 insured and any regulated lending institution or federal agency
349 that is a mortgagee. An insurer or insured may cancel during the
350 term of the policy or upon renewal if the cancellation is for a
351 valid reason under the NFIP.
352 (10) In addition to any other applicable requirements, an
353 insurer providing flood coverage in this state must:
354 (a) Notify the office at least 30 days before writing flood
355 insurance in this state; and
356 (b) File a plan of operation and financial projections or
357 revisions to such plan, as applicable, with the office, unless
358 the insurer maintains at least $35 million in surplus and
359 provides coverage as an endorsement to an existing property
360 insurance form.
361 (11) With respect to the regulation of flood insurance
362 coverage written in this state by private insurers, this section
363 supersedes any other provision in the Florida Insurance Code in
364 the event of a conflict.
365 Section 4. If federal law or rule requires a certification
366 by a state insurance regulatory official as a condition of
367 qualifying for private flood insurance or disaster assistance,
368 the Commissioner of the Office of Insurance Regulation shall
369 provide such certification, and such certification is not
370 subject to review under chapter 120.
371 Section 5. This act shall take effect upon becoming a law.
373 ================= T I T L E A M E N D M E N T ================
374 And the title is amended as follows:
375 Delete everything before the enacting clause
376 and insert:
377 A bill to be entitled
378 An act relating to flood insurance; amending s.
379 627.062, F.S.; adding projected flood losses to the
380 factors that must be considered by the Office of
381 Insurance Regulation in reviewing certain rate
382 filings; amending s. 627.0628, F.S.; increasing the
383 membership of the Florida Commission on Hurricane Loss
384 Projection Methodology to include an engineer who is
385 an expert in floodplain management and a meteorologist
386 who specializes in floods; requiring the commission to
387 adopt standards and guidelines relating to flood loss
388 by a certain date; creating s. 627.715, F.S.;
389 authorizing insurers to offer flood insurance in this
390 state; providing legislative findings; defining the
391 term “flood”; establishing the minimum coverage
392 requirements for such policies; providing coverage
393 limitations that an insurer may include in such
394 policies; requiring that certain limitations be noted
395 on the policy declarations or face page; providing the
396 insurer with rate options; requiring the insurer to
397 provide notice that flood insurance is available from
398 the National Flood Insurance Program; allowing an
399 insurer to export a contract or endorsement of a
400 certain amount to a surplus lines insurer without
401 meeting certain requirements; providing prior notice
402 requirements for cancellation or nonrenewal of a
403 policy; requiring the insurer to notify the office
404 before writing flood insurance and to file a plan of
405 operation with the office; providing that any
406 conflicts with other provisions of the Florida
407 Insurance Code are preempted by this section;
408 requiring the Commissioner of the Office of Insurance
409 Regulation to provide certification that a condition
410 qualifies for flood insurance or disaster assistance;
411 providing an effective date.