Florida Senate - 2020 COMMITTEE AMENDMENT
Bill No. SB 1334
Ì647130rÎ647130
LEGISLATIVE ACTION
Senate . House
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The Committee on Banking and Insurance (Rouson) recommended the
following:
1 Senate Amendment (with directory and title amendments)
2
3 Delete lines 149 - 163
4 and insert:
5 (b) The State Board of Administration shall select an
6 independent consultant to develop a formula for determining the
7 actuarially indicated premium to be paid to the fund. The rate
8 formula must shall specify, for each zip code or other limited
9 geographical area, the amount of premium to be paid by an
10 insurer for each $1,000 of insured value under covered policies
11 in that zip code or other area. In establishing premiums, the
12 board shall consider the coverage elected under paragraph (4)(b)
13 and any factors that tend to enhance the actuarial
14 sophistication of ratemaking for the fund, including
15 deductibles, type of construction, type of coverage provided,
16 relative concentration of risks, and other such factors deemed
17 by the board to be appropriate. Beginning in the 2020-2021
18 contract year, the fund’s formula may provide for a rapid cash
19 build-up factor of up to 25 percent only when the available cash
20 balance as of December 31 of the previous year is less than 70
21 percent of the statutory capacity. For the purpose of
22 calculating the rapid cash build-up factor trigger, the
23 available cash balance may not be reduced by reserves for
24 projected participating insurer reimbursements The formula must
25 provide for a cash build-up factor. For the 2009-2010 contract
26 year, the factor is 5 percent. For the 2010-2011 contract year,
27 the factor is 10 percent. For the 2011-2012 contract year, the
28 factor is 15 percent. For the 2012-2013 contract year, the
29 factor is 20 percent. For the 2013-2014 contract year and
30 thereafter, the factor is 25 percent. The rate formula may
31 provide for a procedure to determine the premiums to be paid by
32 new insurers that begin writing covered policies after the
33 beginning of a contract year, taking into consideration when the
34 insurer starts writing covered policies, the potential exposure
35 of the insurer, the potential exposure of the fund, the
36 administrative costs to the insurer and to the fund, and any
37 other factors deemed appropriate by the board. The formula must
38 be approved by unanimous vote of the board. The board may, at
39 any time, revise the formula pursuant to the procedure provided
40 in this paragraph.
41 (f) The Office of Insurance Regulation shall retain an
42 independent consultant to audit the formula developed under this
43 subsection beginning with the 2021 contract year and every 3
44 years thereafter. The audit may not be performed by the
45 independent consultant who developed the formula. The audit must
46 evaluate whether the formula uses actuarially sound principles
47 and whether insurers are paying an actuarially indicated
48 premium. The Office of Insurance Regulation shall also recommend
49 factors, if any, which would enhance the actuarial
50 sophistication of ratemaking for the fund. The Office of
51 Insurance Regulation shall report the findings of the audit and
52 any recommendation to the Financial Services Commission, the
53 President of the Senate, and the Speaker of the House of
54 Representatives on or before March 1 of the year after the
55 contract year audited.
56 (17) TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL COVERAGE.—
57 (a) Findings and intent.—
58 1. The Legislature finds that:
59 a. Because of temporary disruptions in the market for
60 catastrophic reinsurance, many property insurers were unable to
61 procure affordable reinsurance for the 2019 hurricane season
62 with an attachment point below the insurers’ respective Florida
63 Hurricane Catastrophe Fund attachment points, were unable to
64 procure sufficient amounts of such reinsurance, or were able to
65 procure such reinsurance only by incurring substantially higher
66 costs than in prior years.
67 b. The reinsurance market problems were responsible, at
68 least in part, for substantial premium increases to many
69 consumers and potential increases in the number of policies
70 issued by the Citizens Property Insurance Corporation.
71 c. It is likely that the reinsurance market disruptions
72 will not significantly abate before the 2020 hurricane season.
73 2. It is the intent of the Legislature to create a
74 temporary emergency program, applicable to the 2020, 2021, and
75 2022 hurricane seasons, to address these market disruptions and
76 enable insurers, at their option, to procure additional coverage
77 from the Florida Hurricane Catastrophe Fund.
78 (b) Applicability of other provisions of this section.—All
79 other provisions of this section and the rules adopted under
80 this section apply to the program created by this subsection
81 unless specifically superseded by this subsection.
82 (c) Optional coverage.—For the contract year commencing
83 June 1, 2020, and ending May 31, 2021, the contract year
84 commencing June 1, 2021, and ending May 31, 2022, and the
85 contract year commencing June 1, 2022, and ending May 31, 2023,
86 the board shall offer for each of such years the optional
87 coverage as provided in this subsection.
88 (d) Additional definitions.—As used in this subsection, the
89 term:
90 1. “TEACO addendum” means an addendum to the reimbursement
91 contract reflecting the obligations of the fund and TEACO
92 insurers under the program created by this subsection.
93 2. “TEACO insurer” means an insurer that has opted to
94 obtain coverage under the TEACO options in addition to the
95 coverage provided to the insurer under its reimbursement
96 contract.
97 3. “TEACO options” means the temporary emergency additional
98 coverage options created under this subsection.
99 4. “TEACO reimbursement premium” means the premium charged
100 by the fund for coverage provided under the TEACO options.
101 5. “TEACO retention” means the amount of losses below which
102 a TEACO insurer is not entitled to reimbursement from the fund
103 under the TEACO option selected. A TEACO insurer’s retention
104 options shall be calculated as follows:
105 a. The board shall calculate and report to each TEACO
106 insurer the TEACO retention multiples. There shall be three
107 TEACO retention multiples for defining coverage. Each multiple
108 shall be calculated by dividing $3 billion, $4 billion, or $5
109 billion by the total estimated TEACO reimbursement premium,
110 assuming all insurers selected that option. The total estimated
111 TEACO reimbursement premium, for purposes of the calculation
112 under this sub-subparagraph, shall be calculated using the
113 assumption that all insurers have selected a specific TEACO
114 retention multiple option and have selected the 90-percent
115 coverage level.
116 b. The TEACO retention multiples as determined under sub
117 subparagraph a. shall be adjusted to reflect the coverage level
118 elected by the insurer. For insurers electing the 90-percent
119 coverage level, the adjusted retention multiple is 100 percent
120 of the amount determined under sub-subparagraph a. For insurers
121 electing the 75-percent coverage level, the retention multiple
122 is 120 percent of the amount determined under sub-subparagraph
123 a. For insurers electing the 45-percent coverage level, the
124 adjusted retention multiple is 200 percent of the amount
125 determined under sub-subparagraph a.
126 c. An insurer shall determine its provisional TEACO
127 retention by multiplying its provisional TEACO reimbursement
128 premium by the applicable adjusted TEACO retention multiple and
129 shall determine its actual TEACO retention by multiplying its
130 actual TEACO reimbursement premium by the applicable adjusted
131 TEACO retention multiple.
132 d. For a TEACO insurer that experiences multiple covered
133 events causing loss during the contract year, the insurer’s full
134 TEACO retention shall be applied to each of the covered events
135 causing the two largest losses for that insurer. For other
136 covered events resulting in losses, the TEACO option does not
137 apply and the insurer’s retention shall be one-third of the full
138 retention as calculated under paragraph (2)(e).
139 (e) TEACO addendum.—
140 1. The TEACO addendum shall provide for reimbursement of
141 TEACO insurers for covered events occurring during the contract
142 year in exchange for the TEACO reimbursement premium paid into
143 the fund under paragraph (f). Any insurer writing covered
144 policies has the option of choosing to accept the TEACO addendum
145 for any of the three contract years that the coverage is
146 offered.
147 2. The TEACO addendum shall contain a promise by the board
148 to reimburse the TEACO insurer for 45 percent, 75 percent, or 90
149 percent of its losses from each covered event in excess of the
150 insurer’s TEACO retention, plus 10 percent of the reimbursed
151 losses to cover loss adjustment expenses. The percentage shall
152 be the same as the coverage level selected by the insurer under
153 paragraph (4)(b).
154 3. The TEACO addendum shall provide that reimbursement
155 amounts shall not be reduced by reinsurance paid or payable to
156 the insurer from other sources.
157 4. The TEACO addendum shall also provide that the
158 obligation of the board with respect to all TEACO addenda shall
159 not exceed an amount equal to two times the difference between
160 the industry retention level calculated under paragraph (2)(e)
161 and the $3 billion, $4 billion, or $5 billion industry TEACO
162 retention level options actually selected, but in no event may
163 the board’s obligation exceed the actual claims-paying capacity
164 of the fund plus the additional capacity created in paragraph
165 (g). If the actual claims-paying capacity and the additional
166 capacity created under paragraph (g) fall short of the board’s
167 obligations under the reimbursement contract, each insurer’s
168 share of the fund’s capacity shall be prorated based on the
169 premium an insurer pays for its normal reimbursement coverage
170 and the premium paid for its optional TEACO coverage as each
171 such premium bears to the total premiums paid to the fund times
172 the available capacity.
173 5. The priorities, schedule, and method of reimbursements
174 under the TEACO addendum shall be the same as provided under
175 subsection (4).
176 6. A TEACO insurer’s maximum reimbursement under the TEACO
177 addendum shall be calculated by multiplying the insurer’s share
178 of the estimated total TEACO reimbursement premium as calculated
179 under sub-subparagraph (d)5.a. by an amount equal to two times
180 the difference between the industry retention level calculated
181 under paragraph (2)(e) and the $3 billion, $4 billion, or $5
182 billion industry TEACO retention level specified in sub
183 subparagraph (d)5.a. as selected by the TEACO insurer.
184 (f) TEACO reimbursement premiums.—
185 1. Each TEACO insurer shall pay to the fund, in the manner
186 and at the time provided in the reimbursement contract for
187 payment of reimbursement premiums, a TEACO reimbursement premium
188 calculated as specified in this paragraph.
189 2. The TEACO reimbursement premiums shall be calculated
190 based on the assumption that if all insurers entering into
191 reimbursement contracts under subsection (4) also accepted the
192 TEACO option:
193 a. The industry TEACO reimbursement premium associated with
194 the $3 billion retention option would be equal to 85 percent of
195 the difference between the industry retention level calculated
196 under paragraph (2)(e) and the $3 billion industry TEACO
197 retention level.
198 b. The TEACO reimbursement premium associated with the $4
199 billion retention option would be equal to 80 percent of the
200 difference between the industry retention level calculated under
201 paragraph (2)(e) and the $4 billion industry TEACO retention
202 level.
203 c. The TEACO reimbursement premium associated with the $5
204 billion retention option would be equal to 75 percent of the
205 difference between the industry retention level calculated under
206 paragraph (2)(e) and the $5 billion industry TEACO retention
207 level.
208 3. Each insurer’s TEACO reimbursement premium shall be
209 calculated based on its share of the total TEACO reimbursement
210 premiums based on its coverage selection under the TEACO
211 addendum.
212 (g) Effect on claims-paying capacity of the fund.—For the
213 contract term commencing June 1, 2020, the contract year
214 commencing June 1, 2021, and the contract term beginning June 1,
215 2022, the program created by this subsection shall increase the
216 claims-paying capacity of the fund as provided in subparagraph
217 (4)(c)1. by an amount equal to two times the difference between
218 the industry retention level calculated under paragraph (2)(e)
219 and the $3 billion industry TEACO retention level specified in
220 sub-subparagraph (d)5.a. The additional capacity shall apply
221 only to the additional coverage provided by the TEACO option and
222 shall not otherwise affect any insurer’s reimbursement from the
223 fund.
224
225 ====== D I R E C T O R Y C L A U S E A M E N D M E N T ======
226 And the directory clause is amended as follows:
227 Delete lines 97 - 99
228 and insert:
229 Section 1. Paragraph (c) of subsection (2) and paragraph
230 (b) of subsection (5) of section 215.555, Florida Statutes, are
231 amended, and paragraph (f) of subsection (5) and subsection (17)
232 are added to that section, to read:
233
234 ================= T I T L E A M E N D M E N T ================
235 And the title is amended as follows:
236 Delete lines 6 - 12
237 and insert:
238 policies; providing that the fund’s rate formula may
239 provide for a rapid cash build-up factor only if
240 certain conditions are met; specifying a limitation on
241 calculating the trigger for the cash build-up factor;
242 requiring the Office of Insurance Regulation to retain
243 an independent consultant to audit the fund’s
244 reimbursement premium formula at specified intervals;
245 specifying requirements for the audit; requiring the
246 office to report audit findings and certain
247 recommendations to the Financial Services Commission
248 and the Legislature; providing legislative findings
249 and intent; providing applicability; requiring the
250 State Board of Administration to offer temporary
251 emergency additional coverage options (TEACO) to
252 insurers during specified contract years; defining
253 terms; specifying requirements for the TEACO addendum
254 to the reimbursement contract; specifying requirements
255 for, and calculations of, TEACO reimbursement
256 premiums; specifying the effect of the TEACO program
257 on the fund’s claims-paying capacity; amending s.
258 319.30,