CS for CS for CS for SB 542                First Engrossed (ntc)
       
       
       
       
       
       
       
       
       2014542e1
       
    1                        A bill to be entitled                      
    2         An act relating to flood insurance; amending s.
    3         627.062, F.S.; adding projected flood losses to the
    4         factors that must be considered by the Office of
    5         Insurance Regulation in reviewing certain rate
    6         filings; amending s. 627.0628, F.S.; requiring the
    7         commission to adopt standards and guidelines relating
    8         to flood loss by a certain date; creating s. 627.715,
    9         F.S.; authorizing insurers to offer flood insurance on
   10         residential property in this state; requiring the
   11         insurer to also offer coverage equivalent to that
   12         provided by the National Flood Insurance Program
   13         (NFIP); defining the term “flood”; establishing the
   14         minimum coverage requirements for a flood insurance
   15         policy; providing coverage limitations that an insurer
   16         may include in such policies; requiring that certain
   17         limitations and notices be noted on the policy
   18         declarations or face page; requiring the insurer to
   19         obtain a signed acknowledgement from the applicant
   20         which provides certain specified information;
   21         providing the insurer with rate options; authorizing
   22         the office to conduct an examination with respect to
   23         any rate change; authorizing an insurer to export a
   24         contract or endorsement to a surplus lines insurer
   25         without meeting certain requirements; requiring prior
   26         notice for cancellation or nonrenewal of a policy;
   27         providing additional requirements with respect to
   28         notifying the Office of Insurance Regulation before
   29         writing flood insurance, filing a plan of operation
   30         with the office, using forms that have been approved
   31         by the office, and filing reinsurance contracts before
   32         a certain date; prohibiting Citizens Property
   33         Insurance Corporation from writing flood insurance;
   34         prohibiting the Florida Hurricane Catastrophe Fund
   35         from reimbursing losses caused by flooding; providing
   36         certain exemptions; preempting any conflicts with
   37         other provisions of the Florida Insurance Code;
   38         providing that the Commissioner of the Office of
   39         Insurance Regulation may provide certification that a
   40         condition qualifies for flood insurance or disaster
   41         assistance; providing that such certification is not
   42         subject to ch. 120, F.S.; providing an effective date.
   43          
   44  Be It Enacted by the Legislature of the State of Florida:
   45  
   46         Section 1. Paragraph (b) of subsection (2) of section
   47  627.062, Florida Statutes, is amended to read:
   48         627.062 Rate standards.—
   49         (2) As to all such classes of insurance:
   50         (b) Upon receiving a rate filing, the office shall review
   51  the filing to determine if a rate is excessive, inadequate, or
   52  unfairly discriminatory. In making that determination, the
   53  office shall, in accordance with generally accepted and
   54  reasonable actuarial techniques, consider the following factors:
   55         1. Past and prospective loss experience within and without
   56  this state.
   57         2. Past and prospective expenses.
   58         3. The degree of competition among insurers for the risk
   59  insured.
   60         4. Investment income reasonably expected by the insurer,
   61  consistent with the insurer’s investment practices, from
   62  investable premiums anticipated in the filing, plus any other
   63  expected income from currently invested assets representing the
   64  amount expected on unearned premium reserves and loss reserves.
   65  The commission may adopt rules using reasonable techniques of
   66  actuarial science and economics to specify the manner in which
   67  insurers calculate investment income attributable to classes of
   68  insurance written in this state and the manner in which
   69  investment income is used to calculate insurance rates. Such
   70  manner must contemplate allowances for an underwriting profit
   71  factor and full consideration of investment income that produce
   72  which produce a reasonable rate of return; however, investment
   73  income from invested surplus may not be considered.
   74         5. The reasonableness of the judgment reflected in the
   75  filing.
   76         6. Dividends, savings, or unabsorbed premium deposits
   77  allowed or returned to Florida policyholders, members, or
   78  subscribers in this state.
   79         7. The adequacy of loss reserves.
   80         8. The cost of reinsurance. The office may not disapprove a
   81  rate as excessive solely due to the insurer having obtained
   82  catastrophic reinsurance to cover the insurer’s estimated 250
   83  year probable maximum loss or any lower level of loss.
   84         9. Trend factors, including trends in actual losses per
   85  insured unit for the insurer making the filing.
   86         10. Conflagration and catastrophe hazards, if applicable.
   87         11. Projected hurricane losses, if applicable, which must
   88  be estimated using a model or method found to be acceptable or
   89  reliable by the Florida Commission on Hurricane Loss Projection
   90  Methodology, and as further provided in s. 627.0628.
   91         12. Projected flood losses, if applicable, which may be
   92  estimated using a model, a method, or an average of models or
   93  methods determined to be acceptable or reliable by the Florida
   94  Commission on Hurricane Loss Projection Methodology, and as
   95  further provided in s. 627.0628.
   96         13.12. A reasonable margin for underwriting profit and
   97  contingencies.
   98         14.13. The cost of medical services, if applicable.
   99         15.14. Other relevant factors that affect the frequency or
  100  severity of claims or expenses.
  101  
  102  The provisions of this subsection do not apply to workers’
  103  compensation, employer’s liability insurance, and motor vehicle
  104  insurance.
  105         Section 2. Subsection (3) of section 627.0628, Florida
  106  Statutes, is amended to read:
  107         627.0628 Florida Commission on Hurricane Loss Projection
  108  Methodology; public records exemption; public meetings
  109  exemption.—
  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 needed,
  117  as to the accuracy or reliability of particular methods,
  118  principles, 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 needed, as to the accuracy or reliability of
  124  particular methods, principles, standards, or models related to
  125  probable 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 from using an average for the
  143  purpose of 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, 2016.
  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
  156  Constitution.
  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
  165  Constitution.
  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
  171  read:
  172         627.715Flood 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 residential structure or its contents in this
  176  state. Such insurer must also offer coverage equivalent to that
  177  provided under a standard flood insurance policy issued under
  178  the National Flood Insurance Program (NFIP)
  179         (1) As used in this section, the term “flood” means a
  180  general and temporary condition of partial or complete
  181  inundation of 2 acres or more of normally dry land area or of
  182  two or more properties, at least one of which is the
  183  policyholder’s property, from:
  184         (a) Overflow of inland or tidal waters;
  185         (b) Unusual and rapid accumulation or runoff of surface
  186  waters from any source;
  187         (c) Mudflow; or
  188         (d) Collapse or subsidence of land along the shore of a
  189  lake or similar body of water as a result of erosion or
  190  undermining caused by waves or currents of water exceeding
  191  anticipated cyclical levels.
  192         (2)At a minimum, coverage for the peril of flood must
  193  cover a flood as defined in subsection (1). Coverage for the
  194  peril of flood may also include water intrusion, as defined by
  195  the policy, which originates from outside the structure and is
  196  not otherwise covered under the definition of flood.
  197         (3) An insurer may offer a flood coverage policy, contract,
  198  or endorsement that:
  199         (a) Has a flood deductible based on a stated dollar amount
  200  or a percentage of the coverage amount. The deductible amount
  201  must be acceptable to federal mortgage and banking regulators if
  202  such policy, contract, or endorsement is intended to satisfy a
  203  mortgage requirement;
  204         (b) Provides that any flood loss will be adjusted on the
  205  basis of:
  206         1. The actual cash value of the property; or
  207         2. Replacement costs up to the policy limits as provided
  208  under s. 627.7011(3);
  209         (c) Restricts flood coverage to the principal building, as
  210  defined in the applicable policy;
  211         (d) Is in an agreed-upon amount, including coverage limited
  212  to the amount of all outstanding mortgages applicable to the
  213  covered property. However, if a policy, contract, or endorsement
  214  does not limit flood coverage to the replacement cost of the
  215  covered property, the policy, contract, or endorsement may not
  216  include a provision penalizing the policyholder for not insuring
  217  the covered property up to replacement cost;
  218         (e) As to the peril of flood, does not cover:
  219         1. Additional living expenses;
  220         2. Personal property or contents; or
  221         3. Law and ordinance coverage. However, an insurer must
  222  offer law and ordinance coverage that is comparable to the law
  223  and ordinance coverage offered in the standard NFIP policy;
  224         (f) Provides coverage to an insured that is in addition to
  225  the minimum coverage required by this section; or
  226         (g) Provides coverage designed to supplement an insured’s
  227  coverage with the NFIP or coverage under a policy from an
  228  insurer that meets the requirements of this part.
  229         (4) The deductibles and policy limits as to the peril of
  230  flood, and any other limitations on coverage required to be
  231  included by the office, must be prominently disclosed on the
  232  declarations page or face page of the policy in at least 12
  233  point uppercase and boldfaced type and be accompanied by a
  234  statement encouraging the policyholder to review the entire
  235  policy carefully because it contains coverage limitations.
  236         (5) Before issuing a flood insurance policy, contract, or
  237  endorsement under this section, the insurance agent must obtain
  238  from an applicant an acknowledgement signed by the applicant
  239  that includes the following statement in at least 12-point bold,
  240  uppercase type: “BY ACCEPTING THIS FLOOD INSURANCE POLICY I HAVE
  241  READ AND UNDERSTAND THE LIMITATIONS THAT MAY APPLY TO MY
  242  POLICY.” The signed acknowledgment must also include, in at
  243  least 12-point bold, uppercase type, for a policy, contract, or
  244  endorsement:
  245         (a) That limits flood coverage to an amount less than the
  246  full replacement cost of the property, the following statement:
  247  “THIS POLICY LIMITS FLOOD COVERAGE TO LESS THAN THE FULL COST OF
  248  REPLACEMENT FOR THE PROPERTY, WHICH MAY RESULT IN HIGH OUT-OF
  249  POCKET EXPENSES TO YOU AND MAY PUT YOUR EQUITY IN THIS PROPERTY
  250  AT RISK.”
  251         (b) That insures a dwelling on the basis of actual cash
  252  value, the following statement: “THIS POLICY PAYS YOU THE
  253  DEPRECIATED VALUE OF YOUR PROPERTY THAT IS DAMAGED BY FLOOD,
  254  WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU IF YOUR
  255  PROPERTY NEEDS TO BE REPAIRED OR REPLACED.”
  256         (c) The following disclosure: “FLOOD INSURANCE COVERAGE IS
  257  AVAILABLE FROM THE NATIONAL FLOOD INSURANCE PROGRAM. YOU SHOULD
  258  CONSULT YOUR AGENT IF YOU HAVE QUESTIONS ABOUT NATIONAL FLOOD
  259  INSURANCE PROGRAM COVERAGE.”
  260         (d) On a structure that was previously insured through the
  261  NFIP at a subsidized rate, the following statement: “BY
  262  ACCEPTING A PRIVATE FLOOD INSURANCE POLICY, YOU MAY LOSE YOUR
  263  SUBSIDIZED RATE IN THE NATIONAL FLOOD INSURANCE PROGRAM IF YOU
  264  RETURN TO THE NATIONAL FLOOD INSURANCE PROGRAM AT A LATER TIME.”
  265         (e) That includes the law and ordinance coverage that must
  266  be offered under subparagraph (3)(e)3., the following
  267  disclosure: “LAW AND ORDINANCE COVERAGE UNDER THIS POLICY MIGHT
  268  HAVE LIMITATIONS ON WHAT IS COVERED IN THE EVENT OF A LOSS. YOU
  269  SHOULD CONSULT YOUR AGENT IF YOU HAVE QUESTIONS ABOUT THE
  270  COVERAGE OFFERED UNDER THIS POLICY.”
  271  
  272  If this form is signed, it is conclusively presumed that the
  273  applicant understood and selected on behalf of all insureds the
  274  limitations of coverage in the policy as compared to a flood
  275  insurance policy offered by the NFIP.
  276         (6) In addition to any other method authorized under the
  277  Florida Insurance Code, an insurer or rating organization may
  278  establish and use flood coverage rates, rating schedules, or
  279  rating manuals, filed by the insurer with the office, which
  280  allow the insurer a reasonable rate of return on flood coverage
  281  written in this state. Flood coverage rates established under
  282  this subsection are not subject to s. 627.062(2)(a) and (f).
  283         (a) An insurer shall notify the office of any change to
  284  rates within 30 days after the effective date of the change. The
  285  notice must include the name of the insurer and the average
  286  statewide percentage change in rates.
  287         (b) Actuarial data with regard to rates for flood coverage
  288  shall be maintained by the insurer for 2 years after the
  289  effective date of such rate change and may be examined by the
  290  office pursuant to s. 624.319. The office may require the
  291  insurer to incur the costs associated with an examination. Upon
  292  examination, the office, in accordance with generally accepted
  293  and reasonable actuarial techniques, shall consider the rate
  294  factors specified in s. 627.062(2)(b), (c), and (d), and
  295  standards specified in s. 627.062(2)(e) to determine if the rate
  296  is excessive, inadequate, or unfairly discriminatory. If the
  297  office finds that the rate is excessive, inadequate, or unfairly
  298  discriminatory, the office shall order the insurer to make a
  299  full and complete rate filing under s. 627.062. Upon issuance of
  300  the order, the insurer may not write additional flood insurance
  301  coverage until the office has approved the rate.
  302         (c) This subsection applies to the establishment and use of
  303  flood coverage rates filed with the office before July 1, 2024.
  304         (7) A surplus lines agent may export a contract or
  305  endorsement to an eligible surplus lines insurer without making
  306  a diligent effort to seek such coverage from three or more
  307  authorized insurers under s. 626.916(1)(a). This subsection
  308  expires July 1, 2017.
  309         (8)The insurer shall notify the insured and any regulated
  310  lending institution or federal agency mortgagee, in writing, at
  311  least 60 days before the cancellation or nonrenewal of the
  312  policy, contract, or endorsement providing flood coverage. An
  313  insurer or insured may cancel the policy, contract, or
  314  endorsement while in force or upon renewal if the cancellation
  315  would be permitted under the NFIP.
  316         (9) In addition to any other applicable requirements, an
  317  insurer providing flood coverage under this section shall:
  318         (a) Notify the office at least 30 days before writing flood
  319  insurance in this state;
  320         (b) File a plan of operation and financial projections or
  321  revisions to such plan, as applicable, with the office;
  322         (c) Offer flood insurance on a form that has been filed
  323  with and approved by the office pursuant to s. 627.410. The
  324  filed form may be substantially similar to the form used by the
  325  NFIP; and
  326         (d) File all reinsurance contracts with the office on or
  327  before June 30 of each year.
  328         (10) Citizens Property Insurance Corporation may not
  329  provide insurance for the peril of flood.
  330         (11) The Florida Hurricane Catastrophe Fund may not
  331  reimburse losses proximately caused by the peril of flood,
  332  including losses that occur during a covered event as defined
  333  under s. 215.555(2).
  334         (12) This section does not apply to:
  335         (a) Policies, contracts, and endorsements that provide
  336  flood coverage for commercial nonresidential properties or
  337  policies that provide excess flood coverage over the amount
  338  recoverable under any other policy covering the same property.
  339         (b) A flood insurance policy issued by or on behalf of the
  340  NFIP.
  341         (13) With respect to the regulation of flood insurance
  342  coverage written in this state by admitted insurers, this
  343  section supersedes any other provision in the Florida Insurance
  344  Code in the event of a conflict.
  345         Section 4. If federal law or rule requires a certification
  346  by a state insurance regulatory official as a condition of
  347  qualifying for private flood insurance or disaster assistance,
  348  the Commissioner of the Office of Insurance Regulation may
  349  provide the certification. The certification is not subject to
  350  review under chapter 120.
  351         Section 5. This act shall take effect upon becoming a law.