Florida Senate - 2016 CS for SB 1274 By the Committee on Banking and Insurance; and Senator Latvala 597-03221-16 20161274c1 1 A bill to be entitled 2 An act relating to limited sinkhole coverage 3 insurance; amending s. 624.407, F.S.; specifying the 4 amount of surplus funds required for domestic insurers 5 applying for a certificate of authority to provide 6 limited sinkhole coverage insurance; amending s. 7 624.408, F.S.; specifying the minimum surplus that 8 must be maintained by insurers that provide limited 9 sinkhole coverage insurance; creating s. 627.7151, 10 F.S.; authorizing certain insurers to offer limited 11 sinkhole coverage insurance in this state; providing 12 applicability; providing a limitation of coverage; 13 authorizing a specified limitation of coverage subject 14 to a certain condition; authorizing certain policy 15 terms; requiring an insurance agent to obtain a 16 specified signed acknowledgement from an applicant 17 before issuing a policy; authorizing insurer forms and 18 exempting forms from approval; authorizing an insurer 19 to establish and use rates in accordance with 20 specified rate standards; requiring an insurer to 21 provide a specified notice of changes to rates within 22 a specified time frame to the Office of Insurance 23 Regulation; requiring an insurer to maintain certain 24 actuarial data for a specified time frame; authorizing 25 the office to require an insurer to incur the costs 26 associated with examining such data; providing factors 27 for the office in determining whether a rate is 28 excessive, inadequate, or unfairly discriminatory; 29 authorizing a surplus lines agent to export a contract 30 or endorsement for sinkhole coverage to a surplus 31 lines insurer without meeting certain requirements; 32 requiring the insurer to notify the office before 33 writing sinkhole insurance and to file a plan of 34 operation with the office; prohibiting assignments of 35 post-loss claims; providing an exception; providing an 36 effective date. 37 38 Be It Enacted by the Legislature of the State of Florida: 39 40 Section 1. Subsection (1) of section 624.407, Florida 41 Statutes, is amended to read: 42 624.407 Surplus required; new insurers.— 43 (1) To receive authority to transact any one kind or 44 combinations of kinds of insurance, as defined in part V of this 45 chapter, an insurer applying for its original certificate of 46 authority in this state shall possess surplus as to 47 policyholders at least the greater of: 48 (a) For a property and casualty insurer, $5 million, or 49 $2.5 million for any other insurer; 50 (b) For life insurers, 4 percent of the insurer’s total 51 liabilities; 52 (c) For life and health insurers, 4 percent of the 53 insurer’s total liabilities, plus 6 percent of the insurer’s 54 liabilities relative to health insurance; 55 (d) For all insurers other than life insurers and life and 56 health insurers, 10 percent of the insurer’s total liabilities; 57
or58 (e) Notwithstanding paragraph (a) or paragraph (d), for a 59 domestic insurer that transacts residential property insurance 60 and is: 61 1. Not a wholly owned subsidiary of an insurer domiciled in 62 any other state, $15 million. 63 2. A wholly owned subsidiary of an insurer domiciled in any 64 other state, $50 million; or 65 (f) Notwithstanding paragraphs (a), (d), and (e), for a 66 domestic insurer that only transacts limited sinkhole coverage 67 insurance for personal lines residential property pursuant to s. 68 627.7151, $7.5 million. 69 Section 2. Paragraph (h) is added to subsection (1) of 70 section 624.408, Florida Statutes, to read: 71 624.408 Surplus required; current insurers.— 72 (1) To maintain a certificate of authority to transact any 73 one kind or combinations of kinds of insurance, as defined in 74 part V of this chapter, an insurer in this state must at all 75 times maintain surplus as to policyholders at least the greater 76 of: 77 (h) Notwithstanding paragraphs (e), (f), and (g), for a 78 domestic insurer that only transacts limited sinkhole coverage 79 insurance for personal lines residential property pursuant to s. 80 627.7151, $7.5 million. 81 82 The office may reduce the surplus requirement in paragraphs (f) 83 and (g) if the insurer is not writing new business, has premiums 84 in force of less than $1 million per year in residential 85 property insurance, or is a mutual insurance company. 86 Section 3. Section 627.7151, Florida Statutes, is created 87 to read: 88 627.7151 Limited sinkhole coverage insurance.— 89 (1) An authorized insurer may issue, but is not required to 90 make available, a limited sinkhole coverage insurance policy 91 providing personal lines residential coverage, subject to 92 underwriting, for the peril of sinkhole loss on any structure or 93 the contents of personal property contained therein, subject to 94 this section and ss. 627.706–627.7074. This section does not 95 apply to commercial lines residential or commercial lines 96 nonresidential coverage for the peril of sinkhole loss. This 97 section also does not apply to coverage for the peril of 98 sinkhole loss that is excess coverage over any other insurance 99 covering the peril of sinkhole loss. 100 (2) Limited sinkhole coverage insurance must cover only 101 losses from the peril of sinkhole loss, as defined in s. 102 627.706(2)(j); however, such coverage shall not be required to 103 provide for contents and additional living expenses. 104 (3) Limited sinkhole coverage insurance may: 105 (a) Notwithstanding s. 627.707(5), limit coverage to 106 repairs to stabilize the building and repair the foundation in 107 accordance with the recommendations of the professional engineer 108 retained pursuant to s. 627.707(2). However, if the insurer’s 109 professional engineer determines that the repair cannot be 110 completed within policy limits, the insurer must pay to complete 111 the repairs recommended by the insurer’s professional engineer 112 or tender the policy limits to the policyholder. 113 (b) In addition to the deductibles authorized under s. 114 627.706(1)(b), offer deductibles agreed to by the insured and 115 insurer. 116 (c) Offer policy limits agreed to by the insured and 117 insurer, provided policy limits below $50,000 are not allowed 118 unless that amount exceeds full replacement costs of the 119 property. 120 (4) Before issuing a limited sinkhole coverage insurance 121 policy under this section, the insurance agent must obtain from 122 an applicant an acknowledgement signed by the applicant that 123 includes the following statement in at least 12-point bold, 124 uppercase type: “BY ACCEPTING THIS LIMITED SINKHOLE COVERAGE 125 INSURANCE POLICY I HAVE READ AND UNDERSTAND THE LIMITATIONS THAT 126 MAY APPLY TO MY POLICY.” The signed acknowledgment must also 127 include, in at least 12-point bold, uppercase type, for a 128 policy: 129 (a) That limits limited sinkhole coverage to an amount less 130 than the full replacement cost of the property, the following 131 statement: “THIS POLICY LIMITS SINKHOLE COVERAGE TO LESS THAN 132 THE FULL COST OF REPLACEMENT FOR THE PROPERTY, WHICH MAY RESULT 133 IN HIGH OUT-OF-POCKET EXPENSES TO YOU AND MAY PUT YOUR EQUITY IN 134 THIS PROPERTY AT RISK.” 135 (b) That provides for a deductible which exceeds the 136 deductibles authorized under s. 627.706(1)(b), the following 137 statement: “THIS POLICY EXCEEDS THE DEDUCTIBLE AMOUNT PERMITTED 138 FOR OTHER AUTHORIZED SINKHOLE LOSS INSURANCE POLICIES WHICH MAY 139 RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.” 140 (5) An insurer may establish and use limited sinkhole 141 coverage forms. Limited sinkhole coverage forms are not subject 142 to filing and approval pursuant to s. 627.410. 143 (6)(a) An insurer may establish and use limited sinkhole 144 coverage rates in accordance with the rate standards provided in 145 s. 627.062. 146 (b) For limited sinkhole coverage rates filed with the 147 office before October 1, 2019, the insurer may also establish 148 and use such 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 written in this state. Limited 152 sinkhole coverage rates established pursuant to this paragraph 153 are not subject to s. 627.062(2)(a) or (f). An insurer shall 154 notify the office of any change to such rates within 30 days 155 after the effective date of the change. The notice must include 156 the name of the insurer and the average statewide percentage 157 change in rates. Actuarial data with regard to such rates for 158 limited sinkhole coverage must be maintained by the insurer for 159 2 years after the effective date of such rate change and is 160 subject to examination by the office. The office may require the 161 insurer to incur the costs associated with an examination. Upon 162 examination, the office, in accordance with generally accepted 163 and reasonable actuarial techniques, shall consider the rate 164 factors in s. 627.062(2)(b) and (d), and the standards in s. 165 627.062(2)(e), to determine whether the rate is excessive, 166 inadequate, or unfairly discriminatory. 167 (7) A surplus lines agent may export limited sinkhole 168 coverage insurance to an eligible surplus lines insurer without 169 satisfying the conditions set forth in s. 626.916(1). This 170 subsection expires July 1, 2020. 171 (8) In addition to any other applicable requirements, an 172 insurer providing limited sinkhole coverage in this state must: 173 (a) Notify the office at least 30 days before writing 174 limited sinkhole coverage insurance in this state. 175 (b) File a plan of operation and financial projections or 176 revisions to such plan, as applicable, with the office. 177 (9) A policyholder of a limited sinkhole coverage insurance 178 policy authorized by this section who incurs a covered loss may 179 not assign a post-loss claim except to a subsequent purchaser of 180 the property who acquires insurable interest following a loss. 181 Section 4. This act shall take effect July 1, 2016.