Florida Senate - 2020                        COMMITTEE AMENDMENT
       Bill No. SB 1334
                              LEGISLATIVE ACTION                        
                    Senate             .             House              
                   Comm: WD            .                                
                  02/12/2020           .                                

       The Committee on Banking and Insurance (Rouson) recommended the
    1         Senate Amendment to Amendment (632742) (with directory and
    2  title amendments)
    4         Between lines 53 and 54
    5  insert:
    7         (a)Findings and intent.
    8         1.The Legislature finds that:
    9         a.Because of temporary disruptions in the market for
   10  catastrophic reinsurance, many property insurers were unable to
   11  procure affordable reinsurance for the 2019 hurricane season
   12  with an attachment point below the insurers’ respective Florida
   13  Hurricane Catastrophe Fund attachment points, were unable to
   14  procure sufficient amounts of such reinsurance, or were able to
   15  procure such reinsurance only by incurring substantially higher
   16  costs than in prior years.
   17         b.The reinsurance market problems were responsible, at
   18  least in part, for substantial premium increases to many
   19  consumers and potential increases in the number of policies
   20  issued by the Citizens Property Insurance Corporation.
   21         c.It is likely that the reinsurance market disruptions
   22  will not significantly abate before the 2020 hurricane season.
   23         2.It is the intent of the Legislature to create a
   24  temporary emergency program, applicable to the 2020, 2021, and
   25  2022 hurricane seasons, to address these market disruptions and
   26  enable insurers, at their option, to procure additional coverage
   27  from the Florida Hurricane Catastrophe Fund.
   28         (b)Applicability of other provisions of this section.All
   29  other provisions of this section and the rules adopted under
   30  this section apply to the program created by this subsection
   31  unless specifically superseded by this subsection.
   32         (c)Optional coverage.For the contract year commencing
   33  June 1, 2020, and ending May 31, 2021, the contract year
   34  commencing June 1, 2021, and ending May 31, 2022, and the
   35  contract year commencing June 1, 2022, and ending May 31, 2023,
   36  the board shall offer for each of such years the optional
   37  coverage as provided in this subsection.
   38         (d)Additional definitions.—As used in this subsection, the
   39  term:
   40         1.“TEACO addendum” means an addendum to the reimbursement
   41  contract reflecting the obligations of the fund and TEACO
   42  insurers under the program created by this subsection.
   43         2.“TEACO insurer” means an insurer that has opted to
   44  obtain coverage under the TEACO options in addition to the
   45  coverage provided to the insurer under its reimbursement
   46  contract.
   47         3.“TEACO options” means the temporary emergency additional
   48  coverage options created under this subsection.
   49         4.“TEACO reimbursement premium” means the premium charged
   50  by the fund for coverage provided under the TEACO options.
   51         5.“TEACO retention” means the amount of losses below which
   52  a TEACO insurer is not entitled to reimbursement from the fund
   53  under the TEACO option selected. A TEACO insurer’s retention
   54  options shall be calculated as follows:
   55         a.The board shall calculate and report to each TEACO
   56  insurer the TEACO retention multiples. There shall be three
   57  TEACO retention multiples for defining coverage. Each multiple
   58  shall be calculated by dividing $3 billion, $4 billion, or $5
   59  billion by the total estimated TEACO reimbursement premium,
   60  assuming all insurers selected that option. The total estimated
   61  TEACO reimbursement premium, for purposes of the calculation
   62  under this sub-subparagraph, shall be calculated using the
   63  assumption that all insurers have selected a specific TEACO
   64  retention multiple option and have selected the 90-percent
   65  coverage level.
   66         b.The TEACO retention multiples as determined under sub
   67  subparagraph a. shall be adjusted to reflect the coverage level
   68  elected by the insurer. For insurers electing the 90-percent
   69  coverage level, the adjusted retention multiple is 100 percent
   70  of the amount determined under sub-subparagraph a. For insurers
   71  electing the 75-percent coverage level, the retention multiple
   72  is 120 percent of the amount determined under sub-subparagraph
   73  a. For insurers electing the 45-percent coverage level, the
   74  adjusted retention multiple is 200 percent of the amount
   75  determined under sub-subparagraph a.
   76         c.An insurer shall determine its provisional TEACO
   77  retention by multiplying its provisional TEACO reimbursement
   78  premium by the applicable adjusted TEACO retention multiple and
   79  shall determine its actual TEACO retention by multiplying its
   80  actual TEACO reimbursement premium by the applicable adjusted
   81  TEACO retention multiple.
   82         d.For a TEACO insurer that experiences multiple covered
   83  events causing loss during the contract year, the insurer’s full
   84  TEACO retention shall be applied to each of the covered events
   85  causing the two largest losses for that insurer. For other
   86  covered events resulting in losses, the TEACO option does not
   87  apply and the insurer’s retention shall be one-third of the full
   88  retention as calculated under paragraph (2)(e).
   89         (e)TEACO addendum.
   90         1.The TEACO addendum shall provide for reimbursement of
   91  TEACO insurers for covered events occurring during the contract
   92  year in exchange for the TEACO reimbursement premium paid into
   93  the fund under paragraph (f). Any insurer writing covered
   94  policies has the option of choosing to accept the TEACO addendum
   95  for any of the three contract years that the coverage is
   96  offered.
   97         2.The TEACO addendum shall contain a promise by the board
   98  to reimburse the TEACO insurer for 45 percent, 75 percent, or 90
   99  percent of its losses from each covered event in excess of the
  100  insurer’s TEACO retention, plus 10 percent of the reimbursed
  101  losses to cover loss adjustment expenses. The percentage shall
  102  be the same as the coverage level selected by the insurer under
  103  paragraph (4)(b).
  104         3.The TEACO addendum shall provide that reimbursement
  105  amounts shall not be reduced by reinsurance paid or payable to
  106  the insurer from other sources.
  107         4.The TEACO addendum shall also provide that the
  108  obligation of the board with respect to all TEACO addenda shall
  109  not exceed an amount equal to two times the difference between
  110  the industry retention level calculated under paragraph (2)(e)
  111  and the $3 billion, $4 billion, or $5 billion industry TEACO
  112  retention level options actually selected, but in no event may
  113  the board’s obligation exceed the actual claims-paying capacity
  114  of the fund plus the additional capacity created in paragraph
  115  (g). If the actual claims-paying capacity and the additional
  116  capacity created under paragraph (g) fall short of the board’s
  117  obligations under the reimbursement contract, each insurer’s
  118  share of the fund’s capacity shall be prorated based on the
  119  premium an insurer pays for its normal reimbursement coverage
  120  and the premium paid for its optional TEACO coverage as each
  121  such premium bears to the total premiums paid to the fund times
  122  the available capacity.
  123         5.The priorities, schedule, and method of reimbursements
  124  under the TEACO addendum shall be the same as provided under
  125  subsection (4).
  126         6.A TEACO insurer’s maximum reimbursement under the TEACO
  127  addendum shall be calculated by multiplying the insurer’s share
  128  of the estimated total TEACO reimbursement premium as calculated
  129  under sub-subparagraph (d)5.a. by an amount equal to two times
  130  the difference between the industry retention level calculated
  131  under paragraph (2)(e) and the $3 billion, $4 billion, or $5
  132  billion industry TEACO retention level specified in sub
  133  subparagraph (d)5.a. as selected by the TEACO insurer.
  134         (f)TEACO reimbursement premiums.
  135         1.Each TEACO insurer shall pay to the fund, in the manner
  136  and at the time provided in the reimbursement contract for
  137  payment of reimbursement premiums, a TEACO reimbursement premium
  138  calculated as specified in this paragraph.
  139         2.The TEACO reimbursement premiums shall be calculated
  140  based on the assumption that if all insurers entering into
  141  reimbursement contracts under subsection (4) also accepted the
  142  TEACO option:
  143         a.The industry TEACO reimbursement premium associated with
  144  the $3 billion retention option would be equal to 85 percent of
  145  the difference between the industry retention level calculated
  146  under paragraph (2)(e) and the $3 billion industry TEACO
  147  retention level.
  148         b.The TEACO reimbursement premium associated with the $4
  149  billion retention option would be equal to 80 percent of the
  150  difference between the industry retention level calculated under
  151  paragraph (2)(e) and the $4 billion industry TEACO retention
  152  level.
  153         c.The TEACO reimbursement premium associated with the $5
  154  billion retention option would be equal to 75 percent of the
  155  difference between the industry retention level calculated under
  156  paragraph (2)(e) and the $5 billion industry TEACO retention
  157  level.
  158         3.Each insurer’s TEACO reimbursement premium shall be
  159  calculated based on its share of the total TEACO reimbursement
  160  premiums based on its coverage selection under the TEACO
  161  addendum.
  162         (g)Effect on claims-paying capacity of the fund.—For the
  163  contract term commencing June 1, 2020, the contract year
  164  commencing June 1, 2021, and the contract term beginning June 1,
  165  2022, the program created by this subsection shall increase the
  166  claims-paying capacity of the fund as provided in subparagraph
  167  (4)(c)1. by an amount equal to two times the difference between
  168  the industry retention level calculated under paragraph (2)(e)
  169  and the $3 billion industry TEACO retention level specified in
  170  sub-subparagraph (d)5.a. The additional capacity shall apply
  171  only to the additional coverage provided by the TEACO option and
  172  shall not otherwise affect any insurer’s reimbursement from the
  173  fund.
  175  ====== D I R E C T O R Y  C L A U S E  A M E N D M E N T ======
  176  And the directory clause is amended as follows:
  177         Delete line 6
  178  and insert:
  179  215.555, Florida Statutes, is amended, and subsection (17) is
  180  added to that section, to read:
  182  ================= T I T L E  A M E N D M E N T ================
  183  And the title is amended as follows:
  184         Delete line 1268
  185  and insert:
  186         policies; requiring the State Board of Administration
  187         to offer temporary emergency additional coverage
  188         options (TEACO) to insurers during specified contract
  189         years; defining terms; specifying requirements for the
  190         TEACO addendum to the reimbursement contract;
  191         specifying requirements for, and calculations of,
  192         TEACO reimbursement premiums; specifying the effect of
  193         the TEACO program on the fund’s claims-paying
  194         capacity; amending s. 319.30, F.S.; revising a certain