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015-2001 LTC . CITY OF MIAMI BEACH CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139 .. tTttp:\\cLmiami-beach. fl. us L.T.C. No.IS-ZDI)I LETTER TO COMMISSION January 18,2001 TO: Mayor Neisen O. Kasdin and Members of the City Commission Jorge M. Gonzalez \ ~ City Manager 0' . U FROM: SUBJECT: WINDSTORM INSURANCE LEGISLATION Attached, please find Senate Bill 182, which has been proposed by Senator Ron Silver. This bill, if enacted, will address one of the City of Miami Beach's highest legislative priorities for the 2001 Legislative Session. Included in the Bill is a provision that insurers may not use a model to determine hurricane-loss factors for use in a rate filing until the Florida Commission on Hurricane Loss Projection Methodology fmds that a publicly owned model developed by the State University System is reliable to determine such factors. Additionally, the Bill will modify the membership of the board of directors of the Florida Windstorm Underwriting Association. The City's lobbyists will continuously track the progress of this Bill and provide an update on its status in their weekly report during the Legislative Session. Please contact me if you need additional information on this priority. JMG:cffltkr "". c: Christina M. Cuervo, Assistant City Manager Mayra Diaz-Buttacavoli, Assistant City Manager Matthew Schwartz, Assistant City Manager Ronnie Singer, Executive Assistant to the City Manager Patricia Walker, Finance Director Attachment Florida Senate - 2001 By Senator Silver SB 182 38-88-01 1 A bill to be entitled 2 An act relating to insurance; amending s. 3 627.0628, F.S.; providing that insurers may not 4 use a model to determine hurricane-loss factors 5 for use in a rate filing until the Florida 6 Commission on Hurricane Loss Projection 7 Methodology finds that a publicly owned model 8 developed by the State University System is 9 reliable to determine such factors; amending s. 10 627.351, F.S.; modifying membership of the 11 board of directors of the Florida Windstorm 12 Underwriting Association; providing for 13 assignment by the association of personal lines 14 residential policies located in a deauthorized 15 area to authorized insurers; providing criteria 16 for distributing assigned policies; providing 17 procedures; providing that assignment of a 18 policy does not affect the producing agent's 19 entitlement to unearned commission; providing 20 for appeals of assignment of policies to the 21 Department of Insurance; providing that a 22 failure to accept residential policies assigned 23 by the association is a willful violation of 24 the Florida Insurance Code; authorizing the 25 department to adopt rules; repealing s. 26 627.062(6), F.S., relating to rate standards; 27 providing an effective date. 28 29 Be It Enacted by the Legislature of the State of Florida: 30 31 1 CODING:Words ~L"~~~cu are deletions; words underlined are additions, Florida Senate - 2001 38-88-01 SB 182 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Section 1. Section 627.0628, Florida Statutes, is amended to read: 627.0628 Florida Commission on Hurricane Loss Projection Methodology.-- (1) LEGISLATIVE FINDINGS AND INTENT.-- (a) Reliable projections of hurricane losses are necessary in order to assure that rates for residential property insurance meet the statutory requirement that rates be neither excessive nor inadequate. The ability to accurately project hurricane losses has been enhanced greatly in recent years through the use of computer modeling. It is the public policy of this state to encourage the use of the most sophisticated actuarial methods to assure that consumers are charged lawful rates for residential property insurance coverage. (bl The Legislature recognizes the need for expert evaluation of computer models and other recently developed or improved actuarial methodologies for projecting hurricane losses, in order to resolve conflicts among actuarial professionals, and in order to provide both immediate and continuing improvement in the sophistication of actuarial methods used to set rates charged to consumers. Ic) It is the intent of the Legislature to create the Florida Commission on Hurricane Loss Projection Methodology as a panel of experts to provide the most actuarially sophisticated guidelines and standards for projection of hurricane losses possible, given the current state of actuarial science. It is the further intent of the Legislature that such standards and guidelines must be used by the State Board of Administration in developing reimbursement premium rates for the Florida Hurricane Catastrophe Fund, and 2 20 21 22 23 24 25 26 27 28 29 30 31 CODING:Words ~L.~~l~H are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 may be used by insurers in rate filings under s. 627.062 2 unless the way in which such standards and guidelines were 3 applied by the insurer was erroneous, as shown by a 4 preponderance of the evidence. 5 (d) It is the intent of the Legislature that such 6 standards and guidelines be employed as soon as possible, and 7 that they be subject to continuing review thereafter. 8 (2) COMMISSION CREATED.-- 9 (a) There is created. the Florida Commission on 10 Hurricane Loss Projection Methodology, which is assigned to 11 the State Board of Administration. The commission shall be 12 administratively housed within the State Board of 13 Administration, but it shall independently exercise the powers 14 and duties specified in this section. 15 (b) The commission shall consist of the following 11 16 members: 17 1. The insurance consumer advocate. 18 2. The Chief Operating Officer of the Florida 19 Hurricane Catastrophe Fund. 20 3. The Executive Director of the Residential Property 21 and Casualty Joint Underwriting Association. 22 4. The Director of the Division of Emergency 23 Management of the Department of Community Affairs. 24 5. The actuary member of the Florida Hurricane 25 Catastrophe Fund Advisory Council. 26 6. Six members appointed by the Insurance 27 Commissioner, as follows: 28 a. An employee of the Department of Insurance who is 29 an actuary responsible for property insurance rate filings. 30 b. An actuary who is employed full time by a property 31 and casualty insurer which was responsible for at least 1 3 CODING:Words ~L~~~~~u are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 percent of the aggregate statewide direct written premium for 2 homeowner's insurance in the calendar year preceding the 3 member's appointment to the commission. 4 c. An expert in insurance finance who is a full time 5 member of the faculty of the State University System and who 6 has a background in actuarial science. 7 d. An expert in statistics who is a full time member 8 of the faculty of the State University System and who has a 9 background in insurance. 10 e. An expert in computer system design who is a full 11 time member of the faculty of the State University System. 12 f. An expert in meteorology who is a full time member 13 of the faculty of the State University System and who 14 specializes in hurricanes. 15 (c) Members designated under subparagraphs (bl1.-5. 16 shall serve on the commission as long as they maintain the 17 respective offices designated in subparagraphs (b)1.-5. 18 Members appointed by the Insurance Commissioner under 19 subparagraph (bI6. shall serve on the commission until the end 20 of the term of office of the Insurance Commissioner who 21 appointed them, unless earlier removed by the Insurance 22 Commissioner for cause. Vacancies on the commission shall be 23 filled in the same manner as the original appointment. 24 (d) The State Board of Administration shall annually 25 appoint one of the members of the commission to serve as 26 chair. 27 (e) Members of the commission shall serve without 28 compensation, but shall be reimbursed for per diem and travel 29 expenses pursuant to s. 112.061. 30 (fl The State Board of Administration shall, as a cost 31 of administration of the Florida Hurricane Catastrophe Fund, 4 CODING :Words ~ '._;'~],d, are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 provide for travel, expenses, and staff support for the 2 commission. 3 (g) There shall be no liability on the part of, and no 4 cause of action of any nature shall arise against, any member 5 of the commission, any member of the State Board of 6 Administration, or any employee of the State Board of 7 Administration for any action taken in the performance of 8 their duties under this section. In addition, the commission 9 may, in writing, waive any potential cause of action for 10 negligence of a consultant, contractor, or contract employee 11 engaged to assist the commission. 12 (3) ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.-- 13 (a) The commission shall consider any actuarial 14 methods, principles, standards, models, or output ranges that 15 have the potential for improving the accuracy of or 16 reliability of the hurricane loss projections used in 17 residential property insurance rate filings. The commission 18 shall, from time to time, adopt findings as to the accuracy or 19 reliability of particular methods, principles, standards, 20 models, or output ranges. 21 (b) In establishing reimbursement premiums for the 22 Florida Hurricane Catastrophe Fund, the State Board of 23 Administration must, to the extent feasible, employ actuarial 24 methods, principles, standards, models, or output ranges found 25 by the commission to be accurate or reliable. 26 (c) With respect to a rate filing under s. 627.062, an 27 insurer may employ actuarial methods, principles, standards, 28 models, or output ranges found by the commission to be 29 accurate or reliable to determine hurricane loss factors for 30 use in a rate filing under s. 627.062, which findings and 31 factors are admissible and relevant in consideration of a rate 5 CODING:Words "L"~~~~H are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 51 182 1 filing by the department or in any arbitration or 2 administrative or judicial review. Notwithstandinq the 3 provisions of subsection (1), an insurer may not avail itself 4 of the provisions of this paragraph until the commission finds 5 that a publicly owned model developed by the State University 6 System is accurate and reliable for determininq hurricane-loss 7 factors for use in a rate filinq under s. 627.062. 8 (d) The commission shall adopt initial actuarial 9 methods, principles, standards, models, or output ranges no 10 later than December 31, 1995. The commission shall adopt 11 revisions to such actuarial methods, principles, standards, 12 models, or output ranges at least annually thereafter. As 13 soon as possible, but no later than July 1, 1996, the 14 commission shall adopt revised actuarial methods, principles, 15 standards, models, or output ranges which include 16 specification of acceptable computer models or output ranges 17 derived from computer models. 18 Section 2. Paragraph (b) of subsection (2) and 19 paragraph (dl of subsection (61 of section 627.351, Florida 20 Statutes, are amended, and paragraph (f) is added to 21 subsection (2), to read: 22 627.351 Insurance risk apportionment p1ans.-- 23 (21 WINDSTORM INSURANCE RISK APPORTIONMENT.-- 24 (b) The department shall require all insurers holding 25 a certificate of authority to transact property insurance on a 26 direct basis in this state, other than joint underwriting 27 associations and other entities formed pursuant to this 28 section, to provide windstorm coverage to applicants from 29 areas determined to be eligible pursuant to paragraph (c) who 30 in good faith are entitled to, but are unable to procure, such 31 coverage through ordinary means; or it shall adopt a 6 CODING:Words ~L~~G~cu are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 reasonable plan or plans for the equitable apportionment or 2 sharing among such insurers of windstorm coverage, which may 3 include formation of an association for this purpose. As used 4 in this subsection, the term "property insurance" means 5 insurance on real or personal property, as defined in s. 6 624.604, including insurance for fire, industrial fire, allied 7 lines, farmowners multiperil, homeowners' multiperil, 8 commercial multiperil, and mobile homes, and including 9 liability coverages on all such insurance, but excluding 10 inland marine as defined in s. 624.607(3) and excluding 11 vehicle insurance as defined in s. 624.605 (1) (a) other than 12 insurance on mobile homes used as permanent dwellings. The 13 department shall adopt rules that provide a formula for the 14 recovery and repayment of any deferred assessments. 15 1. For the purpose of this section, properties 16 eligible for such windstorm coverage are defined as dwellings, 17 buildings, and other structures, including mobile homes which 18 are used as dwellings and which are tied down in compliance 19 with mobile home tie-down requirements prescribed by the 20 Department of Highway Safety and Motor Vehicles pursuant to s. 21 320.8325, and the contents of all such properties. An 22 applicant or policyholder is eligible for coverage only if an 23 offer of coverage cannot be obtained by or for the applicant 24 Qr policyholder from an admitted insurer at approved rates. 25 2. a. (I) All insurers required to be members of such 26 association shall participate in its writings, expenses, and 27 losses. Surplus of the association shall be retained for the 28 payment of claims and shall not be distributed to the member 29 insurers. Such participation by member insurers shall be in 30 the proportion that the net direct premiums of each member 31 insurer written for property insurance in this state during 7 CODING:Words ~L~~~l~" are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 the preceding calendar year bear to the aggregate net direct 2 premiums for property insurance of all member insurers, as 3 reduced by any credits for voluntary writings, in this state 4 during the preceding calendar year. For the purposes of this 5 subsection, the term "net direct premiums" means direct 6 written premiums for property insurance, reduced by premium 7 for liability coverage and for the following if included in 8 allied lines: rain and hail on growing crops; livestock; 9 association direct premiums booked; National Flood Insurance 10 Program direct premiums; and similar deductions specifically 11 authorized by the plan of operation and approved by the 12 department. A member's participation shall begin on the first 13 day of the calendar year following the year in which it is 14 issued a certificate of authority to transact property 15 insurance in the state and shall terminate 1 year after the 16 end of the calendar year during which it no longer holds a 17 certificate of authority to transact property insurance in the 18 state. The commissioner, after review of annual statements, 19 other reports, and any other statistics that the commissioner 20 deems necessary, shall certify to the association the 21 aggregate direct premiums written for property insurance in 22 this state by all member insurers. 23 (II) The plan of operation shall provide for a board 24 of directors consisting of the Insurance Consumer Advocate 25 appointed under s. 627.0613, 1 representative of a financial 26 institution engaging in residential mortgage lending within 27 the association's eliqible areas, 1 representative of realtors 28 engaged in the sale of residential property within the 29 association's eliqible areas, 1 representative who has 30 expertise in State Minimum Building Codes and coastal 31 construction, 1 association policyholder, 1 representative who 8 CODING:Words ~L~~~l~u are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 is a licensed property and casualty insurance agent,l 2 consumer representative appointed by the Insurance 3 Commissioner, 1 consumer representative appointed by the 4 Governor, and 7 ~ additional members appointed as specified 5 in the plan of operation. One of the 7 +r additional members 6 shall be elected by the domestic companies of this state on 7 the basis of cumulative weighted voting based on the net 8 direct premiums of domestic companies in this state. Nothing 9 in the 1997 amendments to this paragraph terminates the 10 existing board or the terms of any members of the board. 11 (III) The plan of operation shall provide a formula 12 whereby a company voluntarily providing windstorm coverage in 13 affected areas will be relieved wholly or partially from 14 apportionment of a regular assessment pursuant to 15 sub-sub-subparagraph d. (I) or sub-sub-subparagraph d. (II) 16 (IV) A company which is a member of a group of 17 companies under common management may elect to have its 18 credits applied on a group basis, and any company or group may 19 elect to have its credits applied to any other company or 20 group. 21 (V) There shall be no credits or relief from 22 apportionment to a company for emergency assessments collected 23 from its policyholders under sub-sub-subparagraph d. (III) . 24 (VI) The plan of operation may also provide for the 25 award of credits, for a period not to exceed 3 years, from a 26 regular assessment pursuant to sub-sub-subparagraph d. (I) or 27 sub-sub-subparagraph d. (II) as an incentive for taking 28 policies out of the Residential Property and Casualty Joint 29 Underwriting Association. In order to qualify for the 30 exemption under this sub-sub-subparagraph, the take-out plan 31 must provide that at least 40 percent of the policies removed 9 CODING:Words ~L"~vl~H are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 from the Residential Property and Casualty Joint Underwriting 2 Association cover risks located in Dade, Broward, and Palm 3 Beach Counties or at least 30 percent of the policies so 4 removed cover risks located in Dade, Broward, and Palm Beach 5 Counties and an additional 50 percent of the policies so 6 removed cover risks located in other coastal counties, and 7 must also provide that no more than 15 percent of the policies 8 so removed may exclude windstorm coverage. With the approval 9 of the department, the association may waive these geographic 10 criteria for a take-out plan that removes at least the lesser 11 of 100,000 Residential Property and Casualty Joint 12 Underwriting Association policies or 15 percent of the total 13 number of Residential Property and Casualty Joint Underwriting 14 Association policies, provided the governing board of the 15 Residential Property and Casualty Joint Underwriting 16 Association certifies that the take-out plan will materially 17 reduce the Residential Property and Casualty Joint 18 Underwriting Association's lOa-year probable maximum loss from 19 hurricanes. With the approval of the department, the board 20 may extend such credits for an additional year if the insurer 21 guarantees an additional year of renewability for all policies 22 removed from the Residential Property and Casualty Joint 23 Underwriti~g Association, or for 2 additional years if the 24 insurer guarantees 2 additional years of renewability for all 25 policies removed from the Residential Property and Casualty 26 Joint Underwriting Association. 27 b. Assessments to pay deficits in the association 28 under this subparagraph shall be included as an appropriate 29 factor in the making of rates as provided in s. 627.3512. 30 c. The Legislature finds that the potential for 31 unlimited deficit assessments under this subparagraph may 10 CODING:Words ~LL~Glcu are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 induce insurers to attempt to reduce their writings in the 2 voluntary market, and that such actions would worsen the 3 availability problems that the association was created to 4 remedy. It is the intent of the Legislature that insurers 5 remain fully responsible for paying regular assessments and 6 collecting emergency assessments for any deficits of the 7 association; however, it is also the intent of the Legislature 8 to provide a means by which assessment liabilities may be 9 amortized over a period of years. 10 d. (I) When the deficit incurred in a particular 11 calendar year is 10 percent or less of the aggregate statewide 12 direct written premium for property insurance for the prior 13 calendar year for all member insurers, the association shall 14 levy an assessment on member insurers in an amount equal to 15 the deficit. 16 (II) When the deficit incurred in a particular 17 calendar year exceeds 10 percent of the aggregate statewide 18 direct written premium for property insurance for the prior 19 calendar year for all member insurers, the association shall 20 levy an assessment on member insurers in an amount equal to 21 the greater of 10 percent of the deficit or 10 percent of the 22 aggregate statewide direct written premium for property 23 insurance for the prior calendar year for member insurers. Any 24 remaining deficit shall be recovered through emergency 25 assessments under sub-sub-subparagraph (III). 26 (III) Upon a determination by the board of directors 27 that a deficit exceeds the amount that will be recovered 28 through regular assessments on member insurers, pursuant to 29 sub-sub-subparagraph (I) or sub-sub-subparagraph (II), the 30 board shall levy, after verification by the department, 31 emergency assessments to be collected by member insurers and 11 CODING:Words "L.~Gl~u are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 by underwriting associations created pursuant to this section 2 which write property insurance, upon issuance or renewal of 3 property insurance policies other than National Flood 4 Insurance policies in the year or years following levy of the 5 regular assessments. The amount of the emergency assessment 6 collected in a particular year shall be a uniform percentage 7 of that year's direct written premium for property insurance 8 for all member insurers and underwriting associations, 9 excluding National Flood Insurance policy premiums, as 10 annually determined by the board and verified by the 11 department. The department shall verify the arithmetic 12 calculations involved in the board's determination within 30 13 days after receipt of the information on which the 14 determination was based. Notwithstanding any other provision 15 of law, each member insurer and each underwriting association 16 created pursuant to this section shall collect emergency 17 assessments from its policyholders without such obligation 18 being affected by any credit, limitation, exemption, or 19 deferment. The emergency assessments so collected shall be 20 transferred directly to the association on a periodic basis as 21 determined by the association. The aggregate amount of 22 emergency assessments levied under this sub-sub-subparagraph 23 in any calendar year may not exceed the greater of 10 percent 24 of the amount needed to cover the original deficit, plus 25 interest, fees, commissions, required reserves, and other 26 costs associated with financing of the original deficit, or 10 27 percent of the aggregate statewide direct written premium for 28 property insurance written by member insurers and underwriting 29 associations for the prior year, plus interest, fees, 30 commissions, required reserves, and other costs associated 31 with financing the original deficit. The board may pledge the 12 CODING:Words ~ L.~~),cu are deletions; words underlined are additions. ~ . Florida Senate - 2001 38-88-01 SB 182 1 proceeds of the emergency assessments under this 2 sub-sub-subparagraph as the source of revenue for bonds, to 3 retire any other debt incurred as a result of the deficit or 4 events giving rise to the deficit, or in any other way that 5 the board determines will efficiently recover the deficit. The 6 emergency assessments under this sub-sub-subparagraph shall 7 continue as long as any bonds issued or other indebtedness 8 incurred with respect to a deficit for which the assessment 9 was imposed remain outstanding, unless adequate provision has 10 been made for the payment of such bonds or other indebtedness 11 pursuant to the document governing such bonds or other 12 indebtedness. Emergency assessments collected under this 13 sub-sub-subparagraph are not part of an insurer's rates, are 14 not premium, and are not subject to premium tax, fees, or 15 commissions; however, failure to pay the emergency assessment 16 shall be treated as failure to pay premium. 17 (IV) Each member insurer's share of the total regular 18 assessments under sub-sub-subparagraph (I) or 19 sub-sub-subparagraph (II) shall be in the proportion that the 20 insurer's net direct premium for property insurance in this 21 state, for the year preceding the assessment bears to the 22 aggregate statewide net direct premium for property insurance 23 of all member insurers, as reduced by any credits for 24 voluntary writings for that year. 25 (V) If regular deficit assessments are made under 26 sub-sub-subparagraph (I) or sub-sub-subparagraph (II), or by 27 the Residential Property and Casualty Joint Underwriting 28 Association under sub-subparagraph (6) (b)3.a. or 29 sub-subparagraph (6) (b) 3.b., the association shall levy upon 30 the association's policyholders, as part of its next rate 31 filing, or by a separate rate filing solely for this purpose, 13 CODING:Words ~Lc':'~k~H are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 a market equalization surcharge in a percentage equal to the 2 total amount of such regular assessments divided by the 3 aggregate statewide direct written premium for property 4 insurance for member insurers for the prior calendar year. 5 Market equalization surcharges under this sub-sub-subparagraph 6 are not considered premium and are not subject to commissions, 7 fees, or premium taxes; however, failure to pay a market 8 equalization surcharge shall be treated as failure to pay 9 premium. 10 e. The governing body of any unit of local government, 11 any residents of which are insured under the plan, may issue 12 bonds as defined in s. 125.013 or s. 166.101 to fund an 13 assistance program, in conjunction with the association, for 14 the purpose of defraying deficits of the association. In order 15 to avoid needless and indiscriminate proliferation, 16 duplication, and fragmentation of such assistance programs, 17 any unit of local government, any residents of which are 18 insured by the association, may provide for the payment of 19 losses, regardless of whether or not the losses occurred 20 within or outside of the territorial jurisdiction of the local 21 government. Revenue bonds may not be issued until validated 22 pursuant to chapter 75, unless a state of emergency is 23 declared by executive orde~ or proclamation of the Governo= 24 pursuant to s. 252.36 making such findings as are necessary to 25 determine that it is in the best interests of, and necessary 26 for, the protection of the public health, safety, and general 27 welfare of residents of this state and the protection and 28 preservation of the economic stability of insurers operating 29 in this state, and declaring it an essential public purpose to 30 permit certain municipalities or counties to issue bonds as 31 will provide relief to claimants and policyholders of the 14 CODING:Words ~c.~cl~u are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 association and insu=ers responsible for apportionment of plan 2 losses. Any such unit of local government may enter into such 3 contracts with the association and with any other entity 4 created pursuant to this subsection as are necessary to carry 5 out this paragraph. Any bonds issued under this 6 sub-subparagraph shall be payable from and secured by moneys 7 received by the association from assessments under this 8 subparagraph, and assigned and pledged to or on behalf of the 9 unit of local government for the benefit of the holders of 10 such bonds. The funds, credit, property, and taxing power of 11 the state or of the unit of local government shall not be 12 pledged for the payment of such bonds. If any of the bonds 13 remain unsold 60 days after issuance, the department shall 14 require all insurers subject to assessment to purchase the 15 bonds, which shall be treated as admitted assets; each insurer 16 shall be required to purchase that percentage of the unsold 17 portion of the bond issue that equals the insurer's relative 18 share of assessment liability under this subsection. An 19 insurer shall not be required to purchase the bonds to the 20 extent that the department determines that the purchase would 21 endanger or impair the solvency of the insurer. The authority 22 granted by this sub-subparagraph is additional to any bonding 23 authority granted by subparagraph 6. 24 3. The plan shall also provide that any member with a 25 surplus as to policyholders of $20 million or less writing 25 26 percent or more of its total countrywide property insurance 27 premiums in this state may petition the department, within the 28 first 90 days of each calendar year, to qualify as a limited 29 apportionment company. The apportionment of such a member 30 company in any calendar year for which it is qualified shall 31 not exceed its gross participation, which shall not be 15 CODING:Words ~Lc~GhcH are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SI 182 1 affected by the formula for voluntary writings. In no event 2 shall a limited apportionment company be required to 3 participate in any apportionment of losses pursuant to 4 sub-sub-subparagraph 2. d. (I) or sub-sub-subparagraph 2. d. (II) 5 in the aggregate which exceeds $50 million after payment of 6 available plan funds in any calendar year. However, a limited 7 apportionment company shall collect from its policyholders any 8 emergency assessment imposed under sub-sub-subparagraph 9 2. d. (I I I). The plan shall provide that, if the department 10 determines that any regular assessment will result in an 11 impairment of the surplus of a limited apportionment company, 12 the department may direct that all or part of such assessment 13 be deferred. However, there shall be no limitation or 14 deferment of an emergency assessment to be collected from 15 policyholders under sUb-sub-subparagraph 2.d. (III) . 16 4. The plan shall provide for the deferment, in whole 17 or in part, of a regular assessment of a member insurer under 18 sub-sub-subparagraph 2.d. (I) or sUb-sub-subparagraph 2.d. (II), 19 but not for an emergency assessment collected from 20 policyholders under sub-sub-subparagraph 2.d. (III), if, in the 21 opinion of the commissioner, payment of such regular 22 assessment would endanger or impair the solvency of the member 23 insurer. In the event a regular assessment against a member 24 insurer is deferred in whole or in part, the amount by which 25 such assessment is deferred may be assessed against the other 26 member insurers in a manner consistent with the basis for 27 assessments set forth in sub-sub-subparagraph 2.d. (I) or 28 sub-sub-subparagraph 2. d. (II) . 29 5.a. The plan of operation may include deductibles and 30 rules for classification of risks and rate modifications 31 16 CODING:Words oLti~h~" are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 consistent with the objective of providing and maintaining 2 funds sufficient to pay catastrophe losses. 3 b. TL-= 6.~..;>,-,,-';'......L':'uu H~"""'y J.._'-iu.":"J..<:; o.J...L":"tJ..o.L":"uu v[ Cl ..........L<; 4 Zi:';'u~ tlL.J.~.L. .;). C27. OG2 (C) . It is the intent of the 5 Legislature that the rates for coverage provided by the 6 association be actuarially sound and not competitive with 7 approved rates charged in the admitted voluntary market such 8 that the association functions as a residual market mechanism 9 to provide insurance only when the insurance cannot be 10 procured in the voluntary market. The plan of operation shall 11 provide a mechanism to assure that, beginning no later than 12 January 1, 1999, the rates charged by the association for each 13 line of business are reflective of approved rates in the 14 voluntary market for hurricane coverage for each line of 15 business in the various areas eligible for association 16 coverage. 17 c. The association shall provide for windstorm 18 coverage on residential properties in limits up to $10 million 19 for commercial lines residential risks and up to $1 million 20 for personal lines residential risks. If coverage with the 21 association is sought for a residential risk valued in excess 22 of these limits, coverage shall be available to the risk up to 23 the replacement cost or actual cash value of the property, at 24 the option of the insured, if coverage for the risk cannot be 25 located in the authorized market. The association must accept 26 a commercial lines residential risk with limits above $10 27 million or a personal lines residential risk with limits above 28 $1 million if coverage is not available in the authorized 29 market. The association may write coverage above the limits 30 specified in this subparagraph with or without facultative or 31 17 CODING:Words oC.';'~k~H are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 other reinsurance coverage, as the association determines 2 appropriate. 3 d. The plan of operation must provide objective 4 criteria and procedures, approved by the department, to be 5 uniformly applied for all applicants in determining whether an 6 individual risk is so hazardous as to be uninsurable. In 7 making this determination and in estab~ishing the criteria and 8 procedures, the following shall be considered: 9 (I) Whether the likelihood of a loss for the 10 individual risk is substantially higher than for other risks 11 of the same class; and 12 (II) Whether the uncertainty associated with the 13 individual risk is such that an appropriate premium cannot be 14 determined. 15 16 The acceptance or rejection of a risk by the association 17 pursuant to such criteria and procedures must be construed as 18 the private placement of insurance, and the provisions of 19 chapter 120 do not apply. 20 e. The.po1icies issued by the association must provide 21 that if the association obtains an offer from an authorized 22 insurer to Cover the risk at its approved rates under either a 23 standard policy including wind coverage or, if consistent with 24 the insurer's underwriting rules as filed with the department, 25 a basic policy including wind coverage, the risk is no longer 26 eligible for coverage through the association. Upon 27 termination of eligibility, the association shall provide 28 written notice to the policyholder and agent of record stating 29 that the association policy must be canceled as of 60 days 30 after the date of the notice because of the offer of coverage 31 from an authorized insurer. Other provisions of the insurance 18 CODING:Words oc.~~~_u are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 51 182 1 code relating to cancellation and notice of cancellation do 2 not apply to actions under this sub-subparagraph. 3 f. Association policies and applications must include 4 a notice that the association policy could, under this 5 section, be replaced with a policy issued by an authorized 6 insurer that does not provide coverage identical to the 7 coverage provided by the association. The notice shall also 8 specify that acceptance of association coverage creates a 9 conclusive presumption that the applicant or policyholder is 10 aware of this potential. 11 6.a. The plan of operation may authorize the formation 12 of a private nonprofit corporation, a private nonprofit 13 unincorporated association, a partnership, a trust, a limited 14 liability company, or a nonprofit mutual company which may be 15 empowered, among other things, to borrow money by issuing 16 bonds or by incurring other indebtedness and to accumulate 17 reserves or funds to be used for the payment of insured 18 catastrophe losses. The plan may authorize all actions 19 necessary to facilitate the issuance of bonds, including the 20 pledging of assessments or other revenues. 21 b. Any entity created under this subsection, or any 22 entity formed for the purposes of this subsection, may sue and 23 be sued, may borrow money; issue bonds, notes, or debt 24 instruments; pledge or sell assessments! market equalization 25 surcharges and other surcharges, rights, premiums, contractual 26 rights, projected recoveries from the Florida Hurricane 27 Catastrophe Fund, other reinsurance recoverables, and other 28 assets as security for such bonds, notes, or debt instruments; 29 enter into any contracts or agreements necessary or proper to 30 accomplish such borrowings; and take other actions necessary 31 to carry out the purposes of this subsection. The association 19 CODING:Words o.~~~l~u are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 may issue bonds or incur other indebtedness, or have bonds 2 issued on its behalf by a unit of local government pursuant to 3 subparagraph (g)2., in the absence of a hurricane or other 4 weather-related event, upon a determination by the association 5 subJect to approval by the department that such action would 6 enable it to efficiently meet the financial obligations of the 7 association and that such financings are reasonably necessary 8 to effectuate the requirements of this subsection. Any such 9 entity may accumulate reserves and retain surpluses as of the 10 end of any association year to provide for the payment of 11 losses incurred by the association during that year or any 12 future year. The association shall incorporate and continue 13 the plan of operation and articles of agreement in effect on 14 the effective date of chapter 76-96, Laws of Florida, to the 15 extent that it is not inconsistent with chapter 76-96, and as 16 subsequently modified consistent with chapter 76-96. The board 17 of directors and officers currently serving shall continue to 18 serve until their successors are duly qualified as provided 19 under the plan. The assets and obligations of the plan in 20 effect immediately prior to the effective date of chapter 21 76-96 shall be construed to be the assets and obligations of 22 the successor plan created herein. 23 c. In recognition of s. 10, Art. I of the State 24 Constitution, prohibiting the impairment of obligations of 25 contracts, it is the intent of the Legislature that no action 26 be taken whose purpose is to impair any bond indenture or 27 financing agreement or any revenue source committed by 28 contract to such bond or other indebtedness issued or incurred 29 by the association or any other entity created under this 30 subsection. 31 20 CODING:Words ~c~~~Lc" are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SI 182 1 7. On such coverage, an agent's remuneration shall be 2 that amount of money payable to the agent by the terms of his 3 or her contract with the company with which the business is 4 placed. However, no commission will be paid on that portion of 5 the premium which is in excess of the standard premium of that 6 company. 7 8. Subject to approval by the department, the 8 association may establish different eligibility requirements 9 and operational procedures for any line or type of coverage 10 for any specified eligible area or portion of an eligible area 11 if the board determines that such changes to the eligibility 12 requirements and operational procedures are justified due to 13 the voluntary market being sufficiently stable and competitive 14 in such area or for such line or type of coverage and that 15 consumers who, in good faith, are unable to obtain insurance 16 through the voluntary market through ordinary methods would 17 continue to have access to coverage from the association. When 18 coverage is sought in connection with a real property 19 transfer, such requirements and procedures shall not provide 20 for an effective date of coverage later than the date of the 21 closing of the transfer as established by the transferor, the 22 transferee, and, if applicable, the lender. 23 9. Notwithstanding any other provision of law: 24 a. The pledge or sale of, the lien upon, and the 25 security interest in any rights, revenues, or other assets of 26 the association created or purported to be created pursuant to 27 any financing documents to secure any bonds or other 28 indebtedness of the association shall be and remain valid and 29 enforceable, notwithstanding the commencement of and during 30 the continuation of, and after, any rehabilitation, 31 insolvency, liquidation, bankruptcy, receivership, 21 CODING:Words ~."~~leH are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 conservatorship, reorganization, or similar proceeding against 2 the association under the laws of this state or any other 3 applicable laws. 4 b. No such proceeding shall relieve the association of 5 its obligation, or otherwise affect its ability to perform its 6 obligation, to continue to collect, or levy and collect, 7 assessments, market equalization or other surcharges, 8 projected recoveries from the Florida Hurricane Catastrophe 9 Fund, reinsurance recoverables, or any other rights, revenues, 10 or other assets of the association pledged. 11 c. Each such pledge or sale of, lien upon, and 12 security interest in, including the priority of such pledge, 13 lien, or security interest, any such assessments, emergency 14 assessments, market equalization or renewal surcharges, 15 projected recoveries from the Florida Hurricane Catastrophe 16 Fund, reinsurance recoverables, or other rights, revenues, or 17 other assets which are collected, or levied and collected, 18 after the commencement of and during the pendency of or after 19 any such proceeding shall continue unaffected by such 20 proceeding. 21 d. As used in this subsection, the term "financing 22 documents" means any agreement, instrument, or other document 23 now existing or hereafter created evidencing any bonds or 24 other indebtedness of the association or pursuant to which any 25 such bonds or other indebtedness has been or may be issued and 26 pursuant to which any rights, revenues, or other assets of the 27 association are pledged or sold to secure the repayment of 28 such bonds or indebtedness, together with the payment of 29 interest on such bonds or such indebtedness, or the payment of 30 any other obligation of the association related to such bonds 31 or indebtedness. 22 CODING:Words ~L_';'~k~u are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 e. Any such pledge or sale of assessments, revenues, 2 contract rights or other rights or assets of the association 3 shall constitute a lien and security interest, or sale, as the 4 case may be, that is immediately effective and attaches to 5 such assessments, revenues, contract, or other rights or 6 assets, whether or not imposed or collected at the time the 7 pledge or sale is made. Any such pledge or sale is effective, 8 valid, binding, and enforceable against the association or 9 other entity making such pledge or sale, and valid and binding 10 11 12 13 14 set forth in and in accordance with the terms of the pledge or 15 sale contained in the applicable financing documents, whether 16 or not any such person or entity has notice of such pledge or 17 sale and without the need for any physical delivery, 18 recordation, filing, or other action. 19 f. There shall be no liability on the part of, and no 20 cause of action of any nature shall arise against, any member 21 insurer or its agents or employees, agents or employees of the 22 association, members of the board of directors of the 23 association, or the department or its representatives, for any 24 action taken by them in the performance of their duties or 25 responsibilities under this subsection. Such immunity does not 26 apply to actions for breach of any contract or agreement 27 pertaining to insurance, or any willful tort. 28 (fl1. After December 31, 2001, the association may not 29 accept an apPlication for coverage for a risk located in the 30 deauthorized area. As used in this paragraph, the term 31 against and superior to any competing claims or obligations owed to any other person or entity, including policyholders in this state, asserting rights in any such assessments, revenues, contract, or other rights or assets to the extent 23 CODING:Words ~c_~~~~" are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 "deauthorized area" means the area between 1-95 and U.S. 1 in 2 Miami-Dade, Broward, and Palm Beach Counties. 3 2. Until January 1, 2002, the association shall afford 4 to all authorized insurers an opportunity to voluntarily 5 remove policies located in the deauthorized area from the 6 association. Each policy must be w~itten for at least three 7 full annual policy terms, using rates and forms approved by 8 the department. 9 3.a. Beginning January 1, 2002, every authorized 10 insurer writing personal lines residential coverage in this 11 state must accept assignments of personal lines residential 12 policies located in the deauthorized area from the 13 association, as provided in this paragraph. 14 b. By January 1, 2002, the association shall identify 15 the personal lines residential policies in the deauthorized 16 area that will be assigned to each insurer. The association 17 shall provide each insurer access to information concerning 18 each policy assigned to the insurer. The selection and 19 subsequent assignment must be coordinated by the association 20 among the various insurers by allocating the distribution of 21 the assigned policies among such insurers in such a manner as 22 to limit adverse solvency consequences; to avoid excess 23 concentration of policies in anyone area with respect to the 24 insurer's personal lines residential coveraqe book of 25 business; to take into account the characteristics of risks 26 underwritten in the vOluntary market by the assigned insurer 27 and attempt to match assigned risks as closely as possible to 28 the insurer's expertise; and to take into account variations 29 in the market value of the assigned risks. 30 c. The assiqnments must be made to each insurer such 31 that each insurer's share of the policies assigned is 24 CODING:Words ~tC~~~~H are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 approximately equal to that insurer's proportional share of 2 personal lines residential insurance policies written in this 3 state. Insurers that voluntarily remove policies from the 4 deauthorized area may receive a reduction in the number of 5 asslgnments such insurers would otherwise receive from the 6 association. 7 d. If more than one insurer within an insurer group is 8 authorized to write personal lines resiaen~lal coverage in 9 this state, insurers in the group receivinq the assignments 10 may cede the assignments among authorized members of the group 11 as approved by the department. 12 e. Each insurer to which policies are assigned must 13 renew each policy for at least 3 years, unless canceled by the 14 insurer for a lawful reason other than reduction of hurricane 15 exposure or unless nonrenewed by the policyholder. Nothing in 16 this paragraph precludes an insurer from offering an assiqned 17 policyholder coveraqe for nonwind perils. If such an offer is 18 accepted, the insurer may satisfy its assignment ob1iqations 19 with regard to that risk by writing all perils coverage at 20 such insurer's approved rates and on its approved forms. For 21 each assigned policy canceled or nonrenewed bv the insurer for 22 any reason during the coveraqe period required by this 23 paragraph, the insurer shall accept from the association, if 24 available, one additional policy covering a risk similar to 25 the rlsk covered by the canceled or nonrenewed policy. 26 f. Assignment of a policy does not affect the 27 producing agent's entitlement to unearned commission, If the 28 policy lS assiqned to an insurer with which the producing 29 agent has a contract, the producing aqent shall retain the 30 business. If the policy is assiqned to an insurer that is 31 using the services of a manaqinq general agent, the producing 25 CODING:Words ~~~~~l~H are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 agent is entitled to act as the brokering agent. If the agent 2 is not appointed or offered an appointment with the assuming 3 insurer or not broke ring the business with a managing general 4 agent being used by the assuming insurer, the agent shall 5 receive an assignment fee of $50, payable by the association. 6 g. If an insurer believes that the assignment of risks 7 would result in the insurer's insolvency or impair the 8 insurer's capital and surplus, as those terms are defined in 9 s. 631.011(91, (101, and (111, and reasonable means to avoid 10 the insolvency or impairment are unavailable, the insurer may 11 petition the deoartment fo~ revision, in whole or in part, of 12 the selection and assignment of such risks. The insurers shall 13 bear the burden of proving such resulting insolvency or 14 impairment of capital or surplus. 15 4. The failure of an insurer to accept the residential 16 policies selected bv the association, constitutes a willful 17 violation of the Florida Insurance Code. Each policy refused 18 or relected by an insu~er cons~itutes a separate violation. 19 5. The department may adopt rules to administer this 20 paragraph. 21 6. The department may require the revision or 22 amendment of the association's plan of operation or bvlaws as 23 necessary for the purposes of this paragraph. 24 7. The department may require the revision or 25 amendment of any plan of operation or bylaws of the market 26 assistance plan established under s. 627.3515 as necessary for 27 the purposes of this paragraph. 28 (6) RESIDENTIAL PROPERTY AND CASUALTY JOINT 29 UNDERWRITING ASSOCIATION.-- 30 (d)l. It is the intent of the Legislature that the 31 rates for coverage provided by the association be actuarially 26 CODING:Words o'L~~l~I, are deletions; words underlined are additions. Florida Senate - 2001 38-88-01 SB 182 1 sound and not competitive with approved rates charged in the 2 admitted voluntary market, so that the association functions 3 as a residual market mechanism to provide insurance only when 4 the insurance cannot be procured in the voluntary market. 5 Rates shall include an appropriate catastrophe loading factor 6 that reflects the actual catastrophic exposure of the 7 association and recognizes that the association has little or o no capltal or surplus; and the association shall carefully 9 review each rate filing to assure that provider compensation 10 is not excessive. 11 2. For each county, the average rates of the 12 association for each line of business for personal lines 13 residential policies shall be no lower than the average rates 14 charged by the insurer that had the highest average rate in 15 that county among the 20 insurers with the greatest total 16 direct written premium in the state for that line of business 17 in the preceding year, except that with respect to mobile home 18 coverages, the average rates of the association shall be no 19 lower than the average rates charged by the insurer that had 20 the highest average rate in that county among the 5 insurers 21 with the greatest total written premium for mobile home 22 owner's policies in the state in the preceding year. 23 3. Rates for commercial residential coverage shall not 24 be subject to the requirements of subparagraph 2., but shall 25 be subject to all other requirements of this paragraph and s. 26 627.062. 27 4. Nothing in this paragraph shall require or allow 28 the association to adopt a rate that is inadequate under s. 29 627.062 or to reduce rates approved under s. 627.062. 30 5. T~~~ ~",,'!:'v\.-~o.L':'Vh Wc.l..Y .J...!.y.I,..l.';'.J...__ o..LL";'~ra.~';'ou vi 6. r.;'l":'u':j 31 !-,u~~u",,~ Lu o. "27. OG2 (G, .Rate filings of the association 27 CODING:Words ~t,~~k~" are deletions; words underlined are additions. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Florida Senate - 2001 38-88-01 SB 182 1 under this paragraph shall be made on a use and file basis 2 under s. 627.062(2) (a)2. The association shall make a rate 3 filing at least once a year, but no more often than quarterly. 4 Section 3. Subsection (61 of section 627.062, Florida 5 Statutes, is repealed. 6 Section 4. This act shall take effect upon becoming a 7 law. ***************************************** SENATE SUMMARY Provides that insurers may not use a model to determine hurricane-loss factors for use in a rate filing until the Florida Commission on Hurricane Loss Projection Methodology finds that a publicly owned model developed by the State University System is reliable to determlne such factors. Modifies the membership of the board of directors of the Florida Windstorm Underwriting Association. Provides for the assignment by the association of personal lines residential policies located in a deauthorized area as defined to authorized insurers. Provides for the distribution of assigned policies. Provides procedures. Provides that assignment of a policy does not affect the producing agent's entitlement to unearned cornmisslons. Provides for an appeal of the association's assignment of policies to the Department of Insurance. Provides that a failure to accept residential policies assigned by the association is a willful violatlon of the Florida Insurance Code. Authorizes the department to adopt rules. Repeals s. 627.062(6), F.S., relating to rate standards. 28 CODING:Words ~tLi~h~u are deletions; words underlined are additions.