Florida Senate - 2016 SENATOR AMENDMENT Bill No. CS for CS for SB 1274 Ì734162ÇÎ734162 LEGISLATIVE ACTION Senate . House . . . Floor: 1/AD/2R . 03/02/2016 11:44 AM . ————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————— Senator Latvala moved 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 is not required to provide 68 for contents and additional living expenses. 69 (3) Citizens Property Insurance Corporation may not issue 70 limited sinkhole coverage insurance. 71 (4) Limited sinkhole coverage insurance may: 72 (a) Notwithstanding s. 627.707(5), limit coverage to 73 repairs to stabilize the building and repair the foundation in 74 accordance with the recommendations of the professional engineer 75 retained pursuant to s. 627.707(2). 76 (b) In addition to the deductibles authorized under s. 77 627.706(1)(b), offer deductibles agreed to by the insured and 78 insurer. 79 (c) Offer policy limits agreed to by the insured and 80 insurer. However, policy limits below $50,000 are prohibited 81 unless that amount exceeds full replacement cost of the 82 property. 83 (5) Before issuing a limited sinkhole coverage insurance 84 policy under this section, the insurance agent must obtain a 85 signed acknowledgement from an applicant that includes the 86 following statement in at least 12-point bold, uppercase type: 87 “BY ACCEPTING THIS LIMITED SINKHOLE COVERAGE INSURANCE POLICY, I 88 HAVE READ AND UNDERSTAND THE LIMITATIONS THAT MAY APPLY TO MY 89 POLICY AND I UNDERSTAND THAT MY POLICY IS A “REPAIR-ONLY” POLICY 90 WHICH MEANS ONLY REPAIR AND/OR STABILIZATION OF THE SPECIFIED 91 BUILDING AND ITS FOUNDATION IS COVERED, NOT TO EXCEED THE POLICY 92 LIMITS AFTER APPLICATION OF MY DEDUCTIBLE. I ALSO UNDERSTAND 93 THAT IT IS RECOMMENDED THAT I CONSULT WITH A QUALIFIED 94 PROFESSIONAL TO IDENTIFY THE APPROXIMATE COST OF REPAIRING OR 95 STABILIZING THE SPECIFIED BUILDING AND ITS FOUNDATION SO THAT I 96 CAN MAKE AN INFORMED DECISION WHEN SELECTING MY POLICY LIMITS 97 AND DEDUCTIBLE.” The signed acknowledgment must also include, in 98 at least 12-point bold, uppercase type: 99 (a) For a policy that provides limited sinkhole coverage 100 insurance in an amount less than the full replacement cost of 101 the property, the following statement: “THIS POLICY LIMITS 102 SINKHOLE COVERAGE TO LESS THAN THE FULL COST OF REPLACEMENT FOR 103 THE PROPERTY, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO 104 YOU AND MAY PUT YOUR EQUITY IN THIS PROPERTY AT RISK.” 105 (b) For a policy that provides for a deductible that 106 exceeds the deductibles authorized under s. 627.706(1)(b), the 107 following statement: “THIS POLICY EXCEEDS THE DEDUCTIBLE AMOUNT 108 PERMITTED FOR OTHER AUTHORIZED SINKHOLE LOSS INSURANCE POLICIES, 109 WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.” 110 (6) If the sinkhole loss cannot be repaired within policy 111 limits, the insurer must: 112 (a) Pay the cost, without regard to policy limits, to 113 complete the repairs recommended by the insurer’s professional 114 engineer; or 115 (b) Pay the cost, not to exceed the policy limits, to 116 complete the repairs upon the insured’s entering into a contract 117 to repair the sinkhole loss in accordance with the repairs 118 recommended by the insurer’s professional engineer. 119 120 However, if the insured obtains a lower-cost alternative repair 121 recommendation from a professional engineer for stabilizing the 122 land or the building and repairing the foundation, the insurer 123 must pay the cost, not to exceed the policy limits, to complete 124 the lower-cost alternative repair upon the insured’s entering 125 into a contract to repair the sinkhole loss in accordance with 126 the lower-cost alternative repair recommendation by the 127 insured’s professional engineer. Such lower-cost alternative 128 repair shall be subject to reasonable cost adjustment by the 129 insurer; however, the insurer may not depart from the 130 engineering requirements of the insured’s professional 131 engineer’s lower-cost alternative repair recommendation. Except 132 when payment for sinkhole loss is made under paragraph (a), the 133 insured is responsible for the amount of the repair costs in 134 excess of policy limits, if any. 135 (7) The insurer shall make payment for sinkhole losses to 136 the insured and the contractor performing the repairs jointly. 137 The insurer may make payment for contents and additional living 138 expenses, if covered, directly to the insured. 139 (8) Notwithstanding s. 627.410, an insurer may establish 140 and use a limited sinkhole coverage insurance form without 141 filing the form with the office and requesting approval of the 142 form from the office. 143 (9)(a) An insurer may establish and use limited sinkhole 144 coverage insurance rates in accordance with the rate standards 145 provided in s. 627.062. 146 (b) For limited sinkhole coverage insurance rates filed 147 with the office before October 1, 2019, the insurer may also 148 establish and use rates in accordance with the rates, rating 149 schedules, or rating manuals filed by the insurer with the 150 office which allow the insurer a reasonable rate of return on 151 limited sinkhole coverage insurance written in this state. 152 Limited sinkhole coverage insurance rates established pursuant 153 to this paragraph are not subject to s. 627.062(2)(a) or (f). An 154 insurer shall notify the office of any change to such rates 155 within 30 days after the effective date of the change. The 156 notice must include the name of the insurer and the average 157 statewide percentage change in rates. Actuarial data with regard 158 to such rates for limited sinkhole coverage insurance must be 159 maintained by the insurer for 2 years after the effective date 160 of such rate change and is subject to examination by the office. 161 The office may require the insurer to incur the costs associated 162 with an examination. Upon examination, the office, in accordance 163 with generally accepted and reasonable actuarial techniques, 164 shall consider the rate factors in s. 627.062(2)(b) and (d) and 165 the standards in s. 627.062(2)(e) to determine whether the rate 166 is excessive, inadequate, or unfairly discriminatory. 167 (10) In addition to any other applicable requirements, an 168 insurer providing limited sinkhole coverage insurance in this 169 state must: 170 (a) Notify the office at least 30 days before writing 171 limited sinkhole coverage insurance in this state. 172 (b) File a plan of operation and financial projections or 173 revisions to such plan, as applicable, with the office. 174 Section 4. This act shall take effect July 1, 2016. 175 176 ================= T I T L E A M E N D M E N T ================ 177 And the title is amended as follows: 178 Delete everything before the enacting clause 179 and insert: 180 A bill to be entitled 181 An act relating to limited sinkhole coverage 182 insurance; amending s. 624.407, F.S.; specifying the 183 amount of surplus funds required for domestic insurers 184 applying for a certificate of authority to provide 185 limited sinkhole coverage insurance; amending s. 186 624.408, F.S.; specifying the minimum surplus funds 187 that must be maintained by insurers that provide 188 limited sinkhole coverage insurance; creating s. 189 627.7151, F.S.; authorizing certain insurers to offer 190 limited sinkhole coverage insurance in this state; 191 providing requirements and applicability; prohibiting 192 Citizens Property Insurance Corporation from issuing 193 limited sinkhole coverage insurance; requiring signed 194 acknowledgement of certain statements; specifying loss 195 payment requirements; authorizing use of certain 196 insurance forms; exempting such forms from approval; 197 providing an insurer with rate options; requiring the 198 insurer to notify the Office of Insurance Regulation 199 before writing limited sinkhole coverage insurance and 200 to file a plan of operation with the office; providing 201 an effective date.