Florida Senate - 2016 CS for CS for SB 1274 By the Committees on Fiscal Policy; and Banking and Insurance; and Senator Latvala 594-04393-16 20161274c2 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 timeframe to the Office of Insurance 23 Regulation; requiring an insurer to maintain certain 24 actuarial data for a specified timeframe; 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; providing an effective 35 date. 36 37 Be It Enacted by the Legislature of the State of Florida: 38 39 Section 1. Subsection (1) of section 624.407, Florida 40 Statutes, is amended to read: 41 624.407 Surplus required; new insurers.— 42 (1) To receive authority to transact any one kind or 43 combinations of kinds of insurance, as defined in part V of this 44 chapter, an insurer applying for its original certificate of 45 authority in this state shall possess surplus as to 46 policyholders at least the greater of: 47 (a) For a property and casualty insurer, $5 million, or 48 $2.5 million for any other insurer; 49 (b) For life insurers, 4 percent of the insurer’s total 50 liabilities; 51 (c) For life and health insurers, 4 percent of the 52 insurer’s total liabilities, plus 6 percent of the insurer’s 53 liabilities relative to health insurance; 54 (d) For all insurers other than life insurers and life and 55 health insurers, 10 percent of the insurer’s total liabilities; 56
or57 (e) Notwithstanding paragraph (a) or paragraph (d), for a 58 domestic insurer that transacts residential property insurance 59 and is: 60 1. Not a wholly owned subsidiary of an insurer domiciled in 61 any other state, $15 million. 62 2. A wholly owned subsidiary of an insurer domiciled in any 63 other state, $50 million; or 64 (f) Notwithstanding paragraphs (a), (d), and (e), for a 65 domestic insurer that only transacts limited sinkhole coverage 66 insurance for personal lines residential property pursuant to s. 67 627.7151, $7.5 million. 68 Section 2. Paragraph (h) is added to subsection (1) of 69 section 624.408, Florida Statutes, to read: 70 624.408 Surplus required; current insurers.— 71 (1) To maintain a certificate of authority to transact any 72 one kind or combinations of kinds of insurance, as defined in 73 part V of this chapter, an insurer in this state must at all 74 times maintain surplus as to policyholders at least the greater 75 of: 76 (h) Notwithstanding paragraphs (e), (f), and (g), for a 77 domestic insurer that only transacts limited sinkhole coverage 78 insurance for personal lines residential property pursuant to s. 79 627.7151, $7.5 million. 80 81 The office may reduce the surplus requirement in paragraphs (f) 82 and (g) if the insurer is not writing new business, has premiums 83 in force of less than $1 million per year in residential 84 property insurance, or is a mutual insurance company. 85 Section 3. Section 627.7151, Florida Statutes, is created 86 to read: 87 627.7151 Limited sinkhole coverage insurance.— 88 (1) An authorized insurer may issue, but is not required to 89 make available, a limited sinkhole coverage insurance policy 90 providing personal lines residential coverage, subject to 91 underwriting, for the peril of sinkhole loss on any structure or 92 the contents of personal property contained therein, subject to 93 this section and ss. 627.706–627.7074. This section does not 94 apply to commercial lines residential or commercial lines 95 nonresidential coverage for the peril of sinkhole loss. This 96 section also does not apply to coverage for the peril of 97 sinkhole loss that is excess coverage over any other insurance 98 covering the peril of sinkhole loss. 99 (2) Limited sinkhole coverage insurance must cover only 100 losses from the peril of sinkhole loss, as defined in s. 101 627.706(2)(j); however, such coverage shall not be required to 102 provide for contents and additional living expenses. 103 (3) Limited sinkhole coverage insurance may: 104 (a) Notwithstanding s. 627.707(5), limit coverage to 105 repairs to stabilize the building and repair the foundation in 106 accordance with the recommendations of the professional engineer 107 retained pursuant to s. 627.707(2). However, if the insurer’s 108 professional engineer determines that the repair cannot be 109 completed within policy limits, the insurer must pay to complete 110 the repairs recommended by the insurer’s professional engineer 111 or tender the policy limits to the policyholder. 112 (b) In addition to the deductibles authorized under s. 113 627.706(1)(b), offer deductibles agreed to by the insured and 114 the insurer. 115 (c) Offer policy limits agreed to by the insured and the 116 insurer, provided policy limits below $50,000 are not allowed 117 unless that amount exceeds full replacement costs of the 118 property. 119 (4) Before issuing a limited sinkhole coverage insurance 120 policy under this section, the insurance agent must obtain from 121 an applicant an acknowledgement signed by the applicant that 122 includes the following statement in at least 12-point bold, 123 uppercase type: “BY ACCEPTING THIS LIMITED SINKHOLE COVERAGE 124 INSURANCE POLICY I HAVE READ AND UNDERSTAND THE LIMITATIONS THAT 125 MAY APPLY TO MY POLICY.” The signed acknowledgment must also 126 include, in at least 12-point bold, uppercase type, for a 127 policy: 128 (a) That limits limited sinkhole coverage to an amount less 129 than the full replacement cost of the property, the following 130 statement: “THIS POLICY LIMITS SINKHOLE COVERAGE TO LESS THAN 131 THE FULL COST OF REPLACEMENT FOR THE PROPERTY, WHICH MAY RESULT 132 IN HIGH OUT-OF-POCKET EXPENSES TO YOU AND MAY PUT YOUR EQUITY IN 133 THIS PROPERTY AT RISK.” 134 (b) That provides for a deductible which exceeds the 135 deductibles authorized under s. 627.706(1)(b), the following 136 statement: “THIS POLICY EXCEEDS THE DEDUCTIBLE AMOUNT PERMITTED 137 FOR OTHER AUTHORIZED SINKHOLE LOSS INSURANCE POLICIES WHICH MAY 138 RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.” 139 (5) An insurer may establish and use limited sinkhole 140 coverage forms. Limited sinkhole coverage forms are not subject 141 to filing and approval pursuant to s. 627.410. 142 (6)(a) An insurer may establish and use limited sinkhole 143 coverage rates in accordance with the rate standards provided in 144 s. 627.062. 145 (b) For limited sinkhole coverage rates filed with the 146 office before October 1, 2019, the insurer may also establish 147 and use such rates in accordance with the rates, rating 148 schedules, or rating manuals filed by the insurer with the 149 office which allow the insurer a reasonable rate of return on 150 limited sinkhole coverage written in this state. Limited 151 sinkhole coverage rates established pursuant to this paragraph 152 are not subject to s. 627.062(2)(a) or (f). An insurer shall 153 notify the office of any change to such rates within 30 days 154 after the effective date of the change. The notice must include 155 the name of the insurer and the average statewide percentage 156 change in rates. Actuarial data with regard to such rates for 157 limited sinkhole coverage must be maintained by the insurer for 158 2 years after the effective date of such rate change and is 159 subject to examination by the office. The office may require the 160 insurer to incur the costs associated with an examination. Upon 161 examination, the office, in accordance with generally accepted 162 and reasonable actuarial techniques, shall consider the rate 163 factors in s. 627.062(2)(b) and (d), and the standards in s. 164 627.062(2)(e), to determine whether the rate is excessive, 165 inadequate, or unfairly discriminatory. 166 (7) A surplus lines agent may export limited sinkhole 167 coverage insurance to an eligible surplus lines insurer without 168 satisfying the conditions set forth in s. 626.916(1). This 169 subsection expires July 1, 2020. 170 (8) In addition to any other applicable requirements, an 171 insurer providing limited sinkhole coverage in this state must: 172 (a) Notify the office at least 30 days before writing 173 limited sinkhole coverage insurance in this state. 174 (b) File a plan of operation and financial projections or 175 revisions to such plan, as applicable, with the office. 176 Section 4. This act shall take effect July 1, 2016.