Florida Senate - 2025 SB 282
By Senator Truenow
13-00738-25 2025282__
1 A bill to be entitled
2 An act relating to home and service warranty
3 association financial requirements; amending s.
4 634.3077, F.S.; making technical changes; amending s.
5 634.406, F.S.; revising the circumstances under which
6 certain service warranty associations are not required
7 to establish unearned premium reserves or to maintain
8 contractual liability insurance and are authorized to
9 allow their premiums to exceed specified ratios;
10 providing an effective date.
11
12 Be It Enacted by the Legislature of the State of Florida:
13
14 Section 1. Subsection (3) of section 634.3077, Florida
15 Statutes, is amended to read:
16 634.3077 Financial requirements.—
17 (3) An association may not be required to set up an
18 unearned premium reserve if it has purchased contractual
19 liability insurance which demonstrates to the satisfaction of
20 the office that 100 percent of its claim exposure is covered by
21 such insurance. Such contractual liability insurance must shall
22 be obtained from an insurer or insurers that hold a certificate
23 of authority to do business within this the state or from an
24 insurer or insurers approved by the office as financially
25 capable of meeting the obligations incurred pursuant to the
26 policy or policies. For purposes of this subsection, the
27 contractual liability policy or policies must shall contain the
28 following provisions:
29 (a) In the event that the home warranty association is
30 unable to fulfill its obligation under its contracts issued in
31 this state for any reason, including insolvency, bankruptcy, or
32 dissolution, the contractual liability insurer or insurers will
33 pay losses and unearned premiums under such plans directly to
34 persons making claims under such contracts.
35 (b) The insurer or insurers issuing the policy or policies
36 shall assume full responsibility for the administration of
37 claims in the event of the inability of the association to do
38 so.
39 (c) The policy or policies may not be canceled or not
40 renewed by the insurer or insurers or the association unless 60
41 days’ written notice thereof has been given to the office by the
42 insurer or insurers before the date of such cancellation or
43 nonrenewal.
44 (d) The contractual liability insurance policy or policies
45 must shall insure all home warranty contracts that were issued
46 while the policy or policies were was in effect regardless of
47 whether or not the premium has been remitted to the insurer or
48 insurers.
49 Section 2. Subsections (3) and (4), paragraphs (b) and (c)
50 of subsection (6), and paragraph (a) of subsection (7) of
51 section 634.406, Florida Statutes, are amended to read:
52 634.406 Financial requirements.—
53 (3) An association will not be required to establish an
54 unearned premium reserve if it has purchased contractual
55 liability insurance which demonstrates to the satisfaction of
56 the office that 100 percent of its claim exposure is covered by
57 such policy or policies. The contractual liability insurance
58 must shall be obtained from an insurer or insurers that hold
59 holds a certificate of authority to do business within the
60 state. For the purposes of this subsection, the contractual
61 liability policy or policies must shall contain the following
62 provisions:
63 (a) In the event that the service warranty association does
64 not fulfill its obligation under contracts issued in this state
65 for any reason, including insolvency, bankruptcy, or
66 dissolution, the contractual liability insurer or insurers will
67 pay losses and unearned premium refunds under such plans
68 directly to the person making a claim under the contract.
69 (b) The insurer or insurers issuing the contractual
70 liability policy or policies shall assume full responsibility
71 for the administration of claims in the event of the inability
72 of the association to do so.
73 (c) The policy or policies may not be canceled or not
74 renewed by either the insurer or insurers or the association
75 unless 60 days’ written notice thereof has been given to the
76 office by the insurer or insurers before the date of such
77 cancellation or nonrenewal.
78 (d) The contractual liability insurance policy or policies
79 must shall insure all service warranty contracts which were
80 issued while the policy or policies were was in effect
81 regardless of whether or not the premium has been remitted to
82 the insurer or insurers.
83 (e) In the event the issuer or issuers of the contractual
84 liability policy or policies are is fulfilling the service
85 warranty covered by policy or policies and in the event the
86 service warranty holder cancels the service warranty, it is the
87 responsibility of the contractual liability policy issuer or
88 issuers to effectuate a full refund of unearned premium to the
89 consumer. This refund is shall be subject to the cancellation
90 fee provisions of s. 634.414. The salesperson or agent shall
91 refund to the contractual liability policy issuer or issuers the
92 unearned pro rata commission.
93 (f) An association may not use utilize both the unearned
94 premium reserve and contractual liability insurance
95 simultaneously. However, an association is shall be allowed to
96 have contractual liability coverage on service warranties
97 previously sold and sell new service warranties covered by the
98 unearned premium reserve, and the converse of this is shall also
99 be allowed. An association must be able to distinguish how each
100 individual service warranty is covered.
101 (4) No warrantor may allow its gross written premiums in
102 force to exceed a 7-to-1 ratio to net assets; however, a company
103 may exceed this requirement if:
104 (a) The company:
105 1.(a) Holds licenses issued pursuant to the provisions of
106 part I and this part;, and
107 2.(b) Maintains net assets of at least $2.5 million;, and
108 3.(c) Uses Utilizes contractual liability insurance which
109 reimburses the service warranty association for 100 percent of
110 its paid claims;, and
111 (b)(d) The insurer or insurers issuing the contractual
112 liability insurance policy or policies maintain maintains a
113 policyholder surplus of at least $100 million and are is rated
114 “A” or higher by A.M. Best Company.
115 (6) An association that holds a license under this part may
116 allow its premiums for service warranties written under this
117 part to exceed the ratio to net assets limitations of this
118 section if the association meets all of the following:
119 (b) Uses a contractual liability insurance policy or
120 policies approved by the office that:
121 1. Reimburse Reimburses the service warranty association
122 for 100 percent of their its claims liability and are is issued
123 by an insurer or insurers that maintain maintains a policyholder
124 surplus of at least $100 million; or
125 2. Comply Complies with subsection (3) and are is issued by
126 an insurer or insurers that maintain maintains a policyholder
127 surplus of at least $200 million.
128 (c) The insurer or insurers issuing the contractual
129 liability insurance policy or policies:
130 1. Are Is rated “A” or higher by A.M. Best Company or an
131 equivalent rating by another national rating service acceptable
132 to the office.
133 2. In conjunction with the warranty association’s filing of
134 the quarterly and annual reports, provide provides, on a form
135 prescribed by the commission, a statement certifying the gross
136 written premiums in force reported by the warranty association
137 and a statement that all of the warranty association’s gross
138 written premium in force is covered under the contractual
139 liability policy or policies, regardless of whether it has been
140 reported.
141 (7) An association licensed under this part and holding no
142 other license under part I or part II of this chapter is not
143 required to establish an unearned premium reserve or maintain
144 contractual liability insurance and may allow its premiums to
145 exceed the ratio to net assets limitation of this section if the
146 association complies with one of the following:
147 (a) The association or, if the association is a direct or
148 indirect wholly owned subsidiary of a parent corporation, its
149 parent corporation has, and maintains at all times, a minimum
150 net worth of at least $100 million and provides the office with
151 one of the following:
152 1. A copy of the association’s annual audited financial
153 statements or the audited consolidated financial statements of
154 the association’s parent corporation, prepared by an independent
155 certified public accountant in accordance with generally
156 accepted accounting principles, which clearly demonstrate the
157 net worth of the association or its parent corporation to be
158 $100 million and a quarterly written certification to the office
159 that such entity continues to maintain the net worth required
160 under this paragraph.
161 2. The association’s, or its parent corporation’s, Form 10
162 K, Form 10-Q, or Form 20-F as filed with the United States
163 Securities and Exchange Commission or such other documents
164 required to be filed with a recognized stock exchange, which
165 shall be provided on a quarterly and annual basis within 10 days
166 after the last date each such report must be filed with the
167 Securities and Exchange Commission, the National Association of
168 Security Dealers Automated Quotation system, or other recognized
169 stock exchange.
170
171 Failure to timely file the documents required under this
172 paragraph may, at the discretion of the office, subject the
173 association to suspension or revocation of its license under
174 this part.
175 Section 3. This act shall take effect July 1, 2025.