Florida Senate - 2016 COMMITTEE AMENDMENT Bill No. SB 1274 Ì657620ÇÎ657620 LEGISLATIVE ACTION Senate . House Comm: RCS . 02/09/2016 . . . . ————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————— The Committee on Banking and Insurance (Margolis) recommended the following: 1 Senate Amendment (with title amendment) 2 3 Delete everything after the enacting clause 4 and insert: 5 Section 1. Subsection (1) of section 624.407, Florida 6 Statutes, is amended to read: 7 624.407 Surplus required; new insurers.— 8 (1) To receive authority to transact any one kind or 9 combinations of kinds of insurance, as defined in part V of this 10 chapter, an insurer applying for its original certificate of 11 authority in this state shall possess surplus as to 12 policyholders at least the greater of: 13 (a) For a property and casualty insurer, $5 million, or 14 $2.5 million for any other insurer; 15 (b) For life insurers, 4 percent of the insurer’s total 16 liabilities; 17 (c) For life and health insurers, 4 percent of the 18 insurer’s total liabilities, plus 6 percent of the insurer’s 19 liabilities relative to health insurance; 20 (d) For all insurers other than life insurers and life and 21 health insurers, 10 percent of the insurer’s total liabilities; 22
or23 (e) Notwithstanding paragraph (a) or paragraph (d), for a 24 domestic insurer that transacts residential property insurance 25 and is: 26 1. Not a wholly owned subsidiary of an insurer domiciled in 27 any other state, $15 million. 28 2. A wholly owned subsidiary of an insurer domiciled in any 29 other state, $50 million; or 30 (f) Notwithstanding paragraphs (a), (d), and (e), for a 31 domestic insurer that only transacts limited sinkhole coverage 32 insurance for personal lines residential property pursuant to s. 33 627.7151, $7.5 million. 34 Section 2. Paragraph (h) is added to subsection (1) of 35 section 624.408, Florida Statutes, to read: 36 624.408 Surplus required; current insurers.— 37 (1) To maintain a certificate of authority to transact any 38 one kind or combinations of kinds of insurance, as defined in 39 part V of this chapter, an insurer in this state must at all 40 times maintain surplus as to policyholders at least the greater 41 of: 42 (h) Notwithstanding paragraphs (e), (f), and (g), for a 43 domestic insurer that only transacts limited sinkhole coverage 44 insurance for personal lines residential property pursuant to s. 45 627.7151, $7.5 million. 46 47 The office may reduce the surplus requirement in paragraphs (f) 48 and (g) if the insurer is not writing new business, has premiums 49 in force of less than $1 million per year in residential 50 property insurance, or is a mutual insurance company. 51 Section 3. Section 627.7151, Florida Statutes, is created 52 to read: 53 627.7151 Limited sinkhole coverage insurance.— 54 (1) An authorized insurer may issue, but is not required to 55 make available, a limited sinkhole coverage insurance policy 56 providing personal lines residential coverage, subject to 57 underwriting, for the peril of sinkhole loss on any structure or 58 the contents of personal property contained therein, subject to 59 this section and ss. 627.706–627.7074. This section does not 60 apply to commercial lines residential or commercial lines 61 nonresidential coverage for the peril of sinkhole loss. This 62 section also does not apply to coverage for the peril of 63 sinkhole loss that is excess coverage over any other insurance 64 covering the peril of sinkhole loss. 65 (2) Limited sinkhole coverage insurance must cover only 66 losses from the peril of sinkhole loss, as defined in s. 67 627.706(2)(j); however, such coverage shall not be required to 68 provide for contents and additional living expenses. 69 (3) Limited sinkhole coverage insurance may: 70 (a) Notwithstanding s. 627.707(5), limit coverage to 71 repairs to stabilize the building and repair the foundation in 72 accordance with the recommendations of the professional engineer 73 retained pursuant to s. 627.707(2). However, if the insurer’s 74 professional engineer determines that the repair cannot be 75 completed within policy limits, the insurer must pay to complete 76 the repairs recommended by the insurer’s professional engineer 77 or tender the policy limits to the policyholder. 78 (b) In addition to the deductibles authorized under s. 79 627.706(1)(b), offer deductibles agreed to by the insured and 80 insurer. 81 (c) Offer policy limits agreed to by the insured and 82 insurer, provided policy limits below $50,000 are not allowed 83 unless that amount exceeds full replacement costs of the 84 property. 85 (4) Before issuing a limited sinkhole coverage insurance 86 policy under this section, the insurance agent must obtain from 87 an applicant an acknowledgement signed by the applicant that 88 includes the following statement in at least 12-point bold, 89 uppercase type: “BY ACCEPTING THIS LIMITED SINKHOLE COVERAGE 90 INSURANCE POLICY I HAVE READ AND UNDERSTAND THE LIMITATIONS THAT 91 MAY APPLY TO MY POLICY.” The signed acknowledgment must also 92 include, in at least 12-point bold, uppercase type, for a 93 policy: 94 (a) That limits limited sinkhole coverage to an amount less 95 than the full replacement cost of the property, the following 96 statement: “THIS POLICY LIMITS SINKHOLE COVERAGE TO LESS THAN 97 THE FULL COST OF REPLACEMENT FOR THE PROPERTY, WHICH MAY RESULT 98 IN HIGH OUT-OF-POCKET EXPENSES TO YOU AND MAY PUT YOUR EQUITY IN 99 THIS PROPERTY AT RISK.” 100 (b) That provides for a deductible which exceeds the 101 deductibles authorized under s. 627.706(1)(b), the following 102 statement: “THIS POLICY EXCEEDS THE DEDUCTIBLE AMOUNT PERMITTED 103 FOR OTHER AUTHORIZED SINKHOLE LOSS INSURANCE POLICIES WHICH MAY 104 RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.” 105 (5) An insurer may establish and use limited sinkhole 106 coverage forms. Limited sinkhole coverage forms are not subject 107 to filing and approval pursuant to s. 627.410. 108 (6)(a) An insurer may establish and use limited sinkhole 109 coverage rates in accordance with the rate standards provided in 110 s. 627.062. 111 (b) For limited sinkhole coverage rates filed with the 112 office before October 1, 2019, the insurer may also establish 113 and use such rates in accordance with the rates, rating 114 schedules, or rating manuals filed by the insurer with the 115 office which allow the insurer a reasonable rate of return on 116 limited sinkhole coverage written in this state. Limited 117 sinkhole coverage rates established pursuant to this paragraph 118 are not subject to s. 627.062(2)(a) or (f). An insurer shall 119 notify the office of any change to such rates within 30 days 120 after the effective date of the change. The notice must include 121 the name of the insurer and the average statewide percentage 122 change in rates. Actuarial data with regard to such rates for 123 limited sinkhole coverage must be maintained by the insurer for 124 2 years after the effective date of such rate change and is 125 subject to examination by the office. The office may require the 126 insurer to incur the costs associated with an examination. Upon 127 examination, the office, in accordance with generally accepted 128 and reasonable actuarial techniques, shall consider the rate 129 factors in s. 627.062(2)(b) and (d), and the standards in s. 130 627.062(2)(e), to determine whether the rate is excessive, 131 inadequate, or unfairly discriminatory. 132 (7) A surplus lines agent may export limited sinkhole 133 coverage insurance to an eligible surplus lines insurer without 134 satisfying the conditions set forth in s. 626.916(1). This 135 subsection expires July 1, 2020. 136 (8) In addition to any other applicable requirements, an 137 insurer providing limited sinkhole coverage in this state must: 138 (a) Notify the office at least 30 days before writing 139 limited sinkhole coverage insurance in this state. 140 (b) File a plan of operation and financial projections or 141 revisions to such plan, as applicable, with the office. 142 (9) A policyholder of a limited sinkhole coverage insurance 143 policy authorized by this section who incurs a covered loss may 144 not assign a post-loss claim except to a subsequent purchaser of 145 the property who acquires insurable interest following a loss. 146 Section 4. This act shall take effect July 1, 2016. 147 148 ================= T I T L E A M E N D M E N T ================ 149 And the title is amended as follows: 150 Delete everything before the enacting clause 151 and insert: 152 A bill to be entitled 153 An act relating to limited sinkhole coverage 154 insurance; amending s. 624.407, F.S.; specifying the 155 amount of surplus funds required for domestic insurers 156 applying for a certificate of authority to provide 157 limited sinkhole coverage insurance; amending s. 158 624.408, F.S.; specifying the minimum surplus that 159 must be maintained by insurers that provide limited 160 sinkhole coverage insurance; creating s. 627.7151, 161 F.S.; authorizing certain insurers to offer limited 162 sinkhole coverage insurance in this state; providing 163 applicability; providing a limitation of coverage; 164 authorizing a specified limitation of coverage subject 165 to a certain condition; authorizing certain policy 166 terms; requiring an insurance agent to obtain a 167 specified signed acknowledgement from an applicant 168 before issuing a policy; authorizing insurer forms and 169 exempting forms from approval; authorizing an insurer 170 to establish and use rates in accordance with 171 specified rate standards; requiring an insurer to 172 provide a specified notice of changes to rates within 173 a specified time frame to the Office of Insurance 174 Regulation; requiring an insurer to maintain certain 175 actuarial data for a specified time frame; authorizing 176 the office to require an insurer to incur the costs 177 associated with examining such data; providing factors 178 for the office in determining whether a rate is 179 excessive, inadequate, or unfairly discriminatory; 180 authorizing a surplus lines agent to export a contract 181 or endorsement for sinkhole coverage to a surplus 182 lines insurer without meeting certain requirements; 183 requiring the insurer to notify the office before 184 writing sinkhole insurance and to file a plan of 185 operation with the office; prohibiting assignments of 186 post-loss claims; providing an exception; providing an 187 effective date.