Senate Bill sb1418e2

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    CS for SB 1418                          Second Engrossed (ntc)



  1                      A bill to be entitled

  2         An act relating to insurance; amending s.

  3         215.555, F.S.; revising a definition; providing

  4         for certain additional coverages under the

  5         Florida Hurricane Catastrophe Fund; increasing

  6         the cap on fund liability; imposing an

  7         additional liquidity enhancement factor to

  8         reimbursement premiums; amending s. 627.351,

  9         F.S.; providing for waiver of required flood

10         insurance under certain circumstances;

11         specifying policyholder burden of proof under

12         certain circumstances; authorizing an

13         association to deny certain coverage under

14         certain circumstances; renaming the Residential

15         Property and Casualty Joint Underwriting

16         Association as the Citizens Property Insurance

17         Corporation to provide residential and

18         commercial property insurance; requiring

19         insurers writing property insurance to

20         participate in the corporation; providing for

21         dividing the revenues, assets, liabilities,

22         losses, and expenses of the corporation into

23         three accounts; authorizing the Department of

24         Insurance to remove certain territories from

25         certain eligible areas under certain

26         circumstances; providing for emergency

27         assessments for policyholders of participating

28         insurers; providing a plan of operation;

29         defining the terms "quota share primary

30         insurance" and "eligible risks"; authorizing

31         the corporation to enter into quota share


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    CS for SB 1418                          Second Engrossed (ntc)



  1         primary insurance agreements; providing for a

  2         board of governors appointed by the Treasurer,

  3         subject to confirmation by the Cabinet;

  4         providing rate limitations and requirements;

  5         requiring the Department of Insurance to

  6         provide the corporation with certain rate

  7         information for certain purposes; requiring the

  8         corporation to certify certain rates to the

  9         department; authorizing the department to adopt

10         rules; requiring the corporation to impose and

11         collect an additional amount to augment the

12         corporation's financial resources; requiring

13         the corporation to file quarterly statements of

14         financial condition and submit other reports to

15         the Department of Insurance; providing that the

16         corporation is not required to obtain a

17         certificate of authority from the Department of

18         Insurance; providing that the corporation is

19         not required to be a member of the Florida

20         Insurance Guaranty Association; requiring the

21         corporation to pay assessments pledged by the

22         association to secure bonds to pay covered

23         claims arising from insurer insolvencies caused

24         by hurricane losses; providing for transfer of

25         policies of the association and the Florida

26         Windstorm Underwriting Association to the

27         corporation; providing for a transfer of assets

28         and liabilities; requiring the associations to

29         take actions necessary to further the

30         transfers; providing for the redesignation of

31         certain coverage as the high-risk account of


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    CS for SB 1418                          Second Engrossed (ntc)



  1         the corporation; providing that such account be

  2         treated as if it were a separate participating

  3         insurer for certain purposes; providing that

  4         the personal lines and commercial lines

  5         accounts be treated as a single participating

  6         insurer for certain purposes; providing that

  7         the department may postpone the July 1, 2002,

  8         effective date of transfer under the act;

  9         providing legislative intent; requiring the

10         board to report to the Legislature on certain

11         loss activities; requiring the board to reduce

12         certain eligibility boundaries under certain

13         circumstances; providing legislative intent not

14         to interfere with the rights of creditors, to

15         preserve the obligation of the association, and

16         to assure that outstanding financing agreements

17         pass unchanged to the corporation; amending s.

18         627.3511, F.S.; revising certain agent

19         commission payment policy servicing procedures

20         and requirements; creating s. 627.3517, F.S.;

21         preserving the right of a residual-market

22         policyholder to select and maintain an agent of

23         his or her own choice; providing an effective

24         date.

25

26  Be It Enacted by the Legislature of the State of Florida:

27

28         Section 1.  Paragraph (d) of subsection (2) and

29  paragraph (b) of subsection (5) of section 215.555, Florida

30  Statutes, are amended to read:

31         215.555  Florida Hurricane Catastrophe Fund.--


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    CS for SB 1418                          Second Engrossed (ntc)



  1         (2)  DEFINITIONS.--As used in this section:

  2         (d)  "Losses" means direct incurred losses under

  3  covered policies, which shall include losses for additional

  4  living expenses not to exceed 20 percent of the insured value

  5  of mobile homes or personal residential structures and 40

  6  percent of the insured value of contents covered under a

  7  tenant's policy or a condominium unit owners policy and shall

  8  exclude excluding losses attributable to additional living

  9  expense coverages and excluding loss adjustment expenses.

10  "Losses" does not include losses for fair rental value

11  associated with personal and commercial residential exposures

12  or business interruption losses associated with commercial

13  residential exposures.

14         (5)  REIMBURSEMENT PREMIUMS.--

15         (b)  The State Board of Administration shall select an

16  independent consultant to develop a formula for determining

17  the actuarially indicated premium to be paid to the fund. The

18  formula shall specify, for each zip code or other limited

19  geographical area, the amount of premium to be paid by an

20  insurer for each $1,000 of insured value under covered

21  policies in that zip code or other area. In establishing

22  premiums, the board shall consider the coverage elected under

23  paragraph (4)(b) and any factors that tend to enhance the

24  actuarial sophistication of ratemaking for the fund, including

25  deductibles, type of construction, type of coverage provided,

26  relative concentration of risks, a factor providing for more

27  rapid cash buildup in the fund until the fund capacity for a

28  single hurricane season is fully funded, and other such

29  factors deemed by the board to be appropriate.  The formula

30  may provide for a procedure to determine the premiums to be

31  paid by new insurers that begin writing covered policies after


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    CS for SB 1418                          Second Engrossed (ntc)



  1  the beginning of a contract year, taking into consideration

  2  when the insurer starts writing covered policies, the

  3  potential exposure of the insurer, the potential exposure of

  4  the fund, the administrative costs to the insurer and to the

  5  fund, and any other factors deemed appropriate by the board.

  6  The formula must be approved by unanimous vote of the board.

  7  The board may, at any time, revise the formula pursuant to the

  8  procedure provided in this paragraph.

  9         Section 2.  Paragraph (b) of subsection (2) and

10  subsection (6) of section 627.351, Florida Statutes, are

11  amended to read:

12         627.351  Insurance risk apportionment plans.--

13         (2)  WINDSTORM INSURANCE RISK APPORTIONMENT.--

14         (b)  The department shall require all insurers holding

15  a certificate of authority to transact property insurance on a

16  direct basis in this state, other than joint underwriting

17  associations and other entities formed pursuant to this

18  section, to provide windstorm coverage to applicants from

19  areas determined to be eligible pursuant to paragraph (c) who

20  in good faith are entitled to, but are unable to procure, such

21  coverage through ordinary means; or it shall adopt a

22  reasonable plan or plans for the equitable apportionment or

23  sharing among such insurers of windstorm coverage, which may

24  include formation of an association for this purpose. As used

25  in this subsection, the term "property insurance" means

26  insurance on real or personal property, as defined in s.

27  624.604, including insurance for fire, industrial fire, allied

28  lines, farmowners multiperil, homeowners' multiperil,

29  commercial multiperil, and mobile homes, and including

30  liability coverages on all such insurance, but excluding

31  inland marine as defined in s. 624.607(3) and excluding


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    CS for SB 1418                          Second Engrossed (ntc)



  1  vehicle insurance as defined in s. 624.605(1)(a) other than

  2  insurance on mobile homes used as permanent dwellings. The

  3  department shall adopt rules that provide a formula for the

  4  recovery and repayment of any deferred assessments.

  5         1.  For the purpose of this section, properties

  6  eligible for such windstorm coverage are defined as dwellings,

  7  buildings, and other structures, including mobile homes which

  8  are used as dwellings and which are tied down in compliance

  9  with mobile home tie-down requirements prescribed by the

10  Department of Highway Safety and Motor Vehicles pursuant to s.

11  320.8325, and the contents of all such properties. An

12  applicant or policyholder is eligible for coverage only if an

13  offer of coverage cannot be obtained by or for the applicant

14  or policyholder from an admitted insurer at approved rates.

15         2.a.(I)  All insurers required to be members of such

16  association shall participate in its writings, expenses, and

17  losses. Surplus of the association shall be retained for the

18  payment of claims and shall not be distributed to the member

19  insurers. Such participation by member insurers shall be in

20  the proportion that the net direct premiums of each member

21  insurer written for property insurance in this state during

22  the preceding calendar year bear to the aggregate net direct

23  premiums for property insurance of all member insurers, as

24  reduced by any credits for voluntary writings, in this state

25  during the preceding calendar year. For the purposes of this

26  subsection, the term "net direct premiums" means direct

27  written premiums for property insurance, reduced by premium

28  for liability coverage and for the following if included in

29  allied lines: rain and hail on growing crops; livestock;

30  association direct premiums booked; National Flood Insurance

31  Program direct premiums; and similar deductions specifically


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    CS for SB 1418                          Second Engrossed (ntc)



  1  authorized by the plan of operation and approved by the

  2  department. A member's participation shall begin on the first

  3  day of the calendar year following the year in which it is

  4  issued a certificate of authority to transact property

  5  insurance in the state and shall terminate 1 year after the

  6  end of the calendar year during which it no longer holds a

  7  certificate of authority to transact property insurance in the

  8  state. The commissioner, after review of annual statements,

  9  other reports, and any other statistics that the commissioner

10  deems necessary, shall certify to the association the

11  aggregate direct premiums written for property insurance in

12  this state by all member insurers.

13         (II)  Effective July 1, 2002, the association shall

14  operate subject to the supervision and approval of The plan of

15  operation shall provide for a board of governors who are the

16  same individuals that have been appointed by the Treasurer to

17  serve on the board of governors of the Citizens Property

18  Insurance Corporation directors consisting of the Insurance

19  Consumer Advocate appointed under s. 627.0613, 1 consumer

20  representative appointed by the Insurance Commissioner, 1

21  consumer representative appointed by the Governor, and 12

22  additional members appointed as specified in the plan of

23  operation. One of the 12 additional members shall be elected

24  by the domestic companies of this state on the basis of

25  cumulative weighted voting based on the net direct premiums of

26  domestic companies in this state. Nothing in the 1997

27  amendments to this paragraph terminates the existing board or

28  the terms of any members of the board.

29         (III)  The plan of operation shall provide a formula

30  whereby a company voluntarily providing windstorm coverage in

31  affected areas will be relieved wholly or partially from


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    CS for SB 1418                          Second Engrossed (ntc)



  1  apportionment of a regular assessment pursuant to

  2  sub-sub-subparagraph d.(I) or sub-sub-subparagraph d.(II).

  3         (IV)  A company which is a member of a group of

  4  companies under common management may elect to have its

  5  credits applied on a group basis, and any company or group may

  6  elect to have its credits applied to any other company or

  7  group.

  8         (V)  There shall be no credits or relief from

  9  apportionment to a company for emergency assessments collected

10  from its policyholders under sub-sub-subparagraph d.(III).

11         (VI)  The plan of operation may also provide for the

12  award of credits, for a period not to exceed 3 years, from a

13  regular assessment pursuant to sub-sub-subparagraph d.(I) or

14  sub-sub-subparagraph d.(II) as an incentive for taking

15  policies out of the Residential Property and Casualty Joint

16  Underwriting Association.  In order to qualify for the

17  exemption under this sub-sub-subparagraph, the take-out plan

18  must provide that at least 40 percent of the policies removed

19  from the Residential Property and Casualty Joint Underwriting

20  Association cover risks located in Dade, Broward, and Palm

21  Beach Counties or at least 30 percent of the policies so

22  removed cover risks located in Dade, Broward, and Palm Beach

23  Counties and an additional 50 percent of the policies so

24  removed cover risks located in other coastal counties, and

25  must also provide that no more than 15 percent of the policies

26  so removed may exclude windstorm coverage.  With the approval

27  of the department, the association may waive these geographic

28  criteria for a take-out plan that removes at least the lesser

29  of 100,000 Residential Property and Casualty Joint

30  Underwriting Association policies or 15 percent of the total

31  number of Residential Property and Casualty Joint Underwriting


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    CS for SB 1418                          Second Engrossed (ntc)



  1  Association policies, provided the governing board of the

  2  Residential Property and Casualty Joint Underwriting

  3  Association certifies that the take-out plan will materially

  4  reduce the Residential Property and Casualty Joint

  5  Underwriting Association's 100-year probable maximum loss from

  6  hurricanes.  With the approval of the department, the board

  7  may extend such credits for an additional year if the insurer

  8  guarantees an additional year of renewability for all policies

  9  removed from the Residential Property and Casualty Joint

10  Underwriting Association, or for 2 additional years if the

11  insurer guarantees 2 additional years of renewability for all

12  policies removed from the Residential Property and Casualty

13  Joint Underwriting Association.

14         b.  Assessments to pay deficits in the association

15  under this subparagraph shall be included as an appropriate

16  factor in the making of rates as provided in s. 627.3512.

17         c.  The Legislature finds that the potential for

18  unlimited deficit assessments under this subparagraph may

19  induce insurers to attempt to reduce their writings in the

20  voluntary market, and that such actions would worsen the

21  availability problems that the association was created to

22  remedy. It is the intent of the Legislature that insurers

23  remain fully responsible for paying regular assessments and

24  collecting emergency assessments for any deficits of the

25  association; however, it is also the intent of the Legislature

26  to provide a means by which assessment liabilities may be

27  amortized over a period of years.

28         d.(I)  When the deficit incurred in a particular

29  calendar year is 10 percent or less of the aggregate statewide

30  direct written premium for property insurance for the prior

31  calendar year for all member insurers, the association shall


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    CS for SB 1418                          Second Engrossed (ntc)



  1  levy an assessment on member insurers in an amount equal to

  2  the deficit.

  3         (II)  When the deficit incurred in a particular

  4  calendar year exceeds 10 percent of the aggregate statewide

  5  direct written premium for property insurance for the prior

  6  calendar year for all member insurers, the association shall

  7  levy an assessment on member insurers in an amount equal to

  8  the greater of 10 percent of the deficit or 10 percent of the

  9  aggregate statewide direct written premium for property

10  insurance for the prior calendar year for member insurers. Any

11  remaining deficit shall be recovered through emergency

12  assessments under sub-sub-subparagraph (III).

13         (III)  Upon a determination by the board of directors

14  that a deficit exceeds the amount that will be recovered

15  through regular assessments on member insurers, pursuant to

16  sub-sub-subparagraph (I) or sub-sub-subparagraph (II), the

17  board shall levy, after verification by the department,

18  emergency assessments to be collected by member insurers and

19  by underwriting associations created pursuant to this section

20  which write property insurance, upon issuance or renewal of

21  property insurance policies other than National Flood

22  Insurance policies in the year or years following levy of the

23  regular assessments. The amount of the emergency assessment

24  collected in a particular year shall be a uniform percentage

25  of that year's direct written premium for property insurance

26  for all member insurers and underwriting associations,

27  excluding National Flood Insurance policy premiums, as

28  annually determined by the board and verified by the

29  department. The department shall verify the arithmetic

30  calculations involved in the board's determination within 30

31  days after receipt of the information on which the


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    CS for SB 1418                          Second Engrossed (ntc)



  1  determination was based. Notwithstanding any other provision

  2  of law, each member insurer and each underwriting association

  3  created pursuant to this section shall collect emergency

  4  assessments from its policyholders without such obligation

  5  being affected by any credit, limitation, exemption, or

  6  deferment.  The emergency assessments so collected shall be

  7  transferred directly to the association on a periodic basis as

  8  determined by the association. The aggregate amount of

  9  emergency assessments levied under this sub-sub-subparagraph

10  in any calendar year may not exceed the greater of 10 percent

11  of the amount needed to cover the original deficit, plus

12  interest, fees, commissions, required reserves, and other

13  costs associated with financing of the original deficit, or 10

14  percent of the aggregate statewide direct written premium for

15  property insurance written by member insurers and underwriting

16  associations for the prior year, plus interest, fees,

17  commissions, required reserves, and other costs associated

18  with financing the original deficit. The board may pledge the

19  proceeds of the emergency assessments under this

20  sub-sub-subparagraph as the source of revenue for bonds, to

21  retire any other debt incurred as a result of the deficit or

22  events giving rise to the deficit, or in any other way that

23  the board determines will efficiently recover the deficit. The

24  emergency assessments under this sub-sub-subparagraph shall

25  continue as long as any bonds issued or other indebtedness

26  incurred with respect to a deficit for which the assessment

27  was imposed remain outstanding, unless adequate provision has

28  been made for the payment of such bonds or other indebtedness

29  pursuant to the document governing such bonds or other

30  indebtedness. Emergency assessments collected under this

31  sub-sub-subparagraph are not part of an insurer's rates, are


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    CS for SB 1418                          Second Engrossed (ntc)



  1  not premium, and are not subject to premium tax, fees, or

  2  commissions; however, failure to pay the emergency assessment

  3  shall be treated as failure to pay premium.

  4         (IV)  Each member insurer's share of the total regular

  5  assessments under sub-sub-subparagraph (I) or

  6  sub-sub-subparagraph (II) shall be in the proportion that the

  7  insurer's net direct premium for property insurance in this

  8  state, for the year preceding the assessment bears to the

  9  aggregate statewide net direct premium for property insurance

10  of all member insurers, as reduced by any credits for

11  voluntary writings for that year.

12         (V)  If regular deficit assessments are made under

13  sub-sub-subparagraph (I) or sub-sub-subparagraph (II), or by

14  the Residential Property and Casualty Joint Underwriting

15  Association under sub-subparagraph (6)(b)3.a. or

16  sub-subparagraph (6)(b)3.b., the association shall levy upon

17  the association's policyholders, as part of its next rate

18  filing, or by a separate rate filing solely for this purpose,

19  a market equalization surcharge in a percentage equal to the

20  total amount of such regular assessments divided by the

21  aggregate statewide direct written premium for property

22  insurance for member insurers for the prior calendar year.

23  Market equalization surcharges under this sub-sub-subparagraph

24  are not considered premium and are not subject to commissions,

25  fees, or premium taxes; however, failure to pay a market

26  equalization surcharge shall be treated as failure to pay

27  premium.

28         e.  The governing body of any unit of local government,

29  any residents of which are insured under the plan, may issue

30  bonds as defined in s. 125.013 or s. 166.101 to fund an

31  assistance program, in conjunction with the association, for


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    CS for SB 1418                          Second Engrossed (ntc)



  1  the purpose of defraying deficits of the association. In order

  2  to avoid needless and indiscriminate proliferation,

  3  duplication, and fragmentation of such assistance programs,

  4  any unit of local government, any residents of which are

  5  insured by the association, may provide for the payment of

  6  losses, regardless of whether or not the losses occurred

  7  within or outside of the territorial jurisdiction of the local

  8  government. Revenue bonds may not be issued until validated

  9  pursuant to chapter 75, unless a state of emergency is

10  declared by executive order or proclamation of the Governor

11  pursuant to s. 252.36 making such findings as are necessary to

12  determine that it is in the best interests of, and necessary

13  for, the protection of the public health, safety, and general

14  welfare of residents of this state and the protection and

15  preservation of the economic stability of insurers operating

16  in this state, and declaring it an essential public purpose to

17  permit certain municipalities or counties to issue bonds as

18  will provide relief to claimants and policyholders of the

19  association and insurers responsible for apportionment of plan

20  losses. Any such unit of local government may enter into such

21  contracts with the association and with any other entity

22  created pursuant to this subsection as are necessary to carry

23  out this paragraph. Any bonds issued under this

24  sub-subparagraph shall be payable from and secured by moneys

25  received by the association from assessments under this

26  subparagraph, and assigned and pledged to or on behalf of the

27  unit of local government for the benefit of the holders of

28  such bonds. The funds, credit, property, and taxing power of

29  the state or of the unit of local government shall not be

30  pledged for the payment of such bonds. If any of the bonds

31  remain unsold 60 days after issuance, the department shall


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    CS for SB 1418                          Second Engrossed (ntc)



  1  require all insurers subject to assessment to purchase the

  2  bonds, which shall be treated as admitted assets; each insurer

  3  shall be required to purchase that percentage of the unsold

  4  portion of the bond issue that equals the insurer's relative

  5  share of assessment liability under this subsection. An

  6  insurer shall not be required to purchase the bonds to the

  7  extent that the department determines that the purchase would

  8  endanger or impair the solvency of the insurer. The authority

  9  granted by this sub-subparagraph is additional to any bonding

10  authority granted by subparagraph 6.

11         3.  The plan shall also provide that any member with a

12  surplus as to policyholders of $20 million or less writing 25

13  percent or more of its total countrywide property insurance

14  premiums in this state may petition the department, within the

15  first 90 days of each calendar year, to qualify as a limited

16  apportionment company. The apportionment of such a member

17  company in any calendar year for which it is qualified shall

18  not exceed its gross participation, which shall not be

19  affected by the formula for voluntary writings. In no event

20  shall a limited apportionment company be required to

21  participate in any apportionment of losses pursuant to

22  sub-sub-subparagraph 2.d.(I) or sub-sub-subparagraph 2.d.(II)

23  in the aggregate which exceeds $50 million after payment of

24  available plan funds in any calendar year. However, a limited

25  apportionment company shall collect from its policyholders any

26  emergency assessment imposed under sub-sub-subparagraph

27  2.d.(III). The plan shall provide that, if the department

28  determines that any regular assessment will result in an

29  impairment of the surplus of a limited apportionment company,

30  the department may direct that all or part of such assessment

31  be deferred. However, there shall be no limitation or


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    CS for SB 1418                          Second Engrossed (ntc)



  1  deferment of an emergency assessment to be collected from

  2  policyholders under sub-sub-subparagraph 2.d.(III).

  3         4.  The plan shall provide for the deferment, in whole

  4  or in part, of a regular assessment of a member insurer under

  5  sub-sub-subparagraph 2.d.(I) or sub-sub-subparagraph 2.d.(II),

  6  but not for an emergency assessment collected from

  7  policyholders under sub-sub-subparagraph 2.d.(III), if, in the

  8  opinion of the commissioner, payment of such regular

  9  assessment would endanger or impair the solvency of the member

10  insurer. In the event a regular assessment against a member

11  insurer is deferred in whole or in part, the amount by which

12  such assessment is deferred may be assessed against the other

13  member insurers in a manner consistent with the basis for

14  assessments set forth in sub-sub-subparagraph 2.d.(I) or

15  sub-sub-subparagraph 2.d.(II).

16         5.a.  The plan of operation may include deductibles and

17  rules for classification of risks and rate modifications

18  consistent with the objective of providing and maintaining

19  funds sufficient to pay catastrophe losses.

20         b.  The association may require arbitration of a rate

21  filing under s. 627.062(6). It is the intent of the

22  Legislature that the rates for coverage provided by the

23  association be actuarially sound and not competitive with

24  approved rates charged in the admitted voluntary market such

25  that the association functions as a residual market mechanism

26  to provide insurance only when the insurance cannot be

27  procured in the voluntary market.  The plan of operation shall

28  provide a mechanism to assure that, beginning no later than

29  January 1, 1999, the rates charged by the association for each

30  line of business are reflective of approved rates in the

31  voluntary market for hurricane coverage for each line of


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    CS for SB 1418                          Second Engrossed (ntc)



  1  business in the various areas eligible for association

  2  coverage.

  3         c.  The association shall provide for windstorm

  4  coverage on residential properties in limits up to $10 million

  5  for commercial lines residential risks and up to $1 million

  6  for personal lines residential risks. If coverage with the

  7  association is sought for a residential risk valued in excess

  8  of these limits, coverage shall be available to the risk up to

  9  the replacement cost or actual cash value of the property, at

10  the option of the insured, if coverage for the risk cannot be

11  located in the authorized market. The association must accept

12  a commercial lines residential risk with limits above $10

13  million or a personal lines residential risk with limits above

14  $1 million if coverage is not available in the authorized

15  market.  The association may write coverage above the limits

16  specified in this subparagraph with or without facultative or

17  other reinsurance coverage, as the association determines

18  appropriate.

19         d.  The plan of operation must provide objective

20  criteria and procedures, approved by the department, to be

21  uniformly applied for all applicants in determining whether an

22  individual risk is so hazardous as to be uninsurable. In

23  making this determination and in establishing the criteria and

24  procedures, the following shall be considered:

25         (I)  Whether the likelihood of a loss for the

26  individual risk is substantially higher than for other risks

27  of the same class; and

28         (II)  Whether the uncertainty associated with the

29  individual risk is such that an appropriate premium cannot be

30  determined.

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1  The acceptance or rejection of a risk by the association

  2  pursuant to such criteria and procedures must be construed as

  3  the private placement of insurance, and the provisions of

  4  chapter 120 do not apply.

  5         e.  The policies issued by the association must provide

  6  that if the association obtains an offer from an authorized

  7  insurer to cover the risk at its approved rates under either a

  8  standard policy including wind coverage or, if consistent with

  9  the insurer's underwriting rules as filed with the department,

10  a basic policy including wind coverage, the risk is no longer

11  eligible for coverage through the association. Upon

12  termination of eligibility, the association shall provide

13  written notice to the policyholder and agent of record stating

14  that the association policy must be canceled as of 60 days

15  after the date of the notice because of the offer of coverage

16  from an authorized insurer. Other provisions of the insurance

17  code relating to cancellation and notice of cancellation do

18  not apply to actions under this sub-subparagraph.

19         f.  Association policies and applications must include

20  a notice that the association policy could, under this

21  section, be replaced with a policy issued by an authorized

22  insurer that does not provide coverage identical to the

23  coverage provided by the association. The notice shall also

24  specify that acceptance of association coverage creates a

25  conclusive presumption that the applicant or policyholder is

26  aware of this potential.

27         6.a.  The plan of operation may authorize the formation

28  of a private nonprofit corporation, a private nonprofit

29  unincorporated association, a partnership, a trust, a limited

30  liability company, or a nonprofit mutual company which may be

31  empowered, among other things, to borrow money by issuing


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    CS for SB 1418                          Second Engrossed (ntc)



  1  bonds or by incurring other indebtedness and to accumulate

  2  reserves or funds to be used for the payment of insured

  3  catastrophe losses. The plan may authorize all actions

  4  necessary to facilitate the issuance of bonds, including the

  5  pledging of assessments or other revenues.

  6         b.  Any entity created under this subsection, or any

  7  entity formed for the purposes of this subsection, may sue and

  8  be sued, may borrow money; issue bonds, notes, or debt

  9  instruments; pledge or sell assessments, market equalization

10  surcharges and other surcharges, rights, premiums, contractual

11  rights, projected recoveries from the Florida Hurricane

12  Catastrophe Fund, other reinsurance recoverables, and other

13  assets as security for such bonds, notes, or debt instruments;

14  enter into any contracts or agreements necessary or proper to

15  accomplish such borrowings; and take other actions necessary

16  to carry out the purposes of this subsection. The association

17  may issue bonds or incur other indebtedness, or have bonds

18  issued on its behalf by a unit of local government pursuant to

19  subparagraph (g)2., in the absence of a hurricane or other

20  weather-related event, upon a determination by the association

21  subject to approval by the department that such action would

22  enable it to efficiently meet the financial obligations of the

23  association and that such financings are reasonably necessary

24  to effectuate the requirements of this subsection. Any such

25  entity may accumulate reserves and retain surpluses as of the

26  end of any association year to provide for the payment of

27  losses incurred by the association during that year or any

28  future year. The association shall incorporate and continue

29  the plan of operation and articles of agreement in effect on

30  the effective date of chapter 76-96, Laws of Florida, to the

31  extent that it is not inconsistent with chapter 76-96, and as


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    CS for SB 1418                          Second Engrossed (ntc)



  1  subsequently modified consistent with chapter 76-96. The board

  2  of directors and officers currently serving shall continue to

  3  serve until their successors are duly qualified as provided

  4  under the plan. The assets and obligations of the plan in

  5  effect immediately prior to the effective date of chapter

  6  76-96 shall be construed to be the assets and obligations of

  7  the successor plan created herein.

  8         c.  In recognition of s. 10, Art. I of the State

  9  Constitution, prohibiting the impairment of obligations of

10  contracts, it is the intent of the Legislature that no action

11  be taken whose purpose is to impair any bond indenture or

12  financing agreement or any revenue source committed by

13  contract to such bond or other indebtedness issued or incurred

14  by the association or any other entity created under this

15  subsection.

16         7.  On such coverage, an agent's remuneration shall be

17  that amount of money payable to the agent by the terms of his

18  or her contract with the company with which the business is

19  placed. However, no commission will be paid on that portion of

20  the premium which is in excess of the standard premium of that

21  company.

22         8.  Subject to approval by the department, the

23  association may establish different eligibility requirements

24  and operational procedures for any line or type of coverage

25  for any specified eligible area or portion of an eligible area

26  if the board determines that such changes to the eligibility

27  requirements and operational procedures are justified due to

28  the voluntary market being sufficiently stable and competitive

29  in such area or for such line or type of coverage and that

30  consumers who, in good faith, are unable to obtain insurance

31  through the voluntary market through ordinary methods would


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    CS for SB 1418                          Second Engrossed (ntc)



  1  continue to have access to coverage from the association. When

  2  coverage is sought in connection with a real property

  3  transfer, such requirements and procedures shall not provide

  4  for an effective date of coverage later than the date of the

  5  closing of the transfer as established by the transferor, the

  6  transferee, and, if applicable, the lender.

  7         9.  Notwithstanding any other provision of law:

  8         a.  The pledge or sale of, the lien upon, and the

  9  security interest in any rights, revenues, or other assets of

10  the association created or purported to be created pursuant to

11  any financing documents to secure any bonds or other

12  indebtedness of the association shall be and remain valid and

13  enforceable, notwithstanding the commencement of and during

14  the continuation of, and after, any rehabilitation,

15  insolvency, liquidation, bankruptcy, receivership,

16  conservatorship, reorganization, or similar proceeding against

17  the association under the laws of this state or any other

18  applicable laws.

19         b.  No such proceeding shall relieve the association of

20  its obligation, or otherwise affect its ability to perform its

21  obligation, to continue to collect, or levy and collect,

22  assessments, market equalization or other surcharges,

23  projected recoveries from the Florida Hurricane Catastrophe

24  Fund, reinsurance recoverables, or any other rights, revenues,

25  or other assets of the association pledged.

26         c.  Each such pledge or sale of, lien upon, and

27  security interest in, including the priority of such pledge,

28  lien, or security interest, any such assessments, emergency

29  assessments, market equalization or renewal surcharges,

30  projected recoveries from the Florida Hurricane Catastrophe

31  Fund, reinsurance recoverables, or other rights, revenues, or


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    CS for SB 1418                          Second Engrossed (ntc)



  1  other assets which are collected, or levied and collected,

  2  after the commencement of and during the pendency of or after

  3  any such proceeding shall continue unaffected by such

  4  proceeding.

  5         d.  As used in this subsection, the term "financing

  6  documents" means any agreement, instrument, or other document

  7  now existing or hereafter created evidencing any bonds or

  8  other indebtedness of the association or pursuant to which any

  9  such bonds or other indebtedness has been or may be issued and

10  pursuant to which any rights, revenues, or other assets of the

11  association are pledged or sold to secure the repayment of

12  such bonds or indebtedness, together with the payment of

13  interest on such bonds or such indebtedness, or the payment of

14  any other obligation of the association related to such bonds

15  or indebtedness.

16         e.  Any such pledge or sale of assessments, revenues,

17  contract rights or other rights or assets of the association

18  shall constitute a lien and security interest, or sale, as the

19  case may be, that is immediately effective and attaches to

20  such assessments, revenues, contract, or other rights or

21  assets, whether or not imposed or collected at the time the

22  pledge or sale is made. Any such pledge or sale is effective,

23  valid, binding, and enforceable against the association or

24  other entity making such pledge or sale, and valid and binding

25  against and superior to any competing claims or obligations

26  owed to any other person or entity, including policyholders in

27  this state, asserting rights in any such assessments,

28  revenues, contract, or other rights or assets to the extent

29  set forth in and in accordance with the terms of the pledge or

30  sale contained in the applicable financing documents, whether

31  or not any such person or entity has notice of such pledge or


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    CS for SB 1418                          Second Engrossed (ntc)



  1  sale and without the need for any physical delivery,

  2  recordation, filing, or other action.

  3         f.  There shall be no liability on the part of, and no

  4  cause of action of any nature shall arise against, any member

  5  insurer or its agents or employees, agents or employees of the

  6  association, members of the board of directors of the

  7  association, or the department or its representatives, for any

  8  action taken by them in the performance of their duties or

  9  responsibilities under this subsection. Such immunity does not

10  apply to actions for breach of any contract or agreement

11  pertaining to insurance, or any willful tort.

12         (6)  CITIZENS RESIDENTIAL PROPERTY INSURANCE

13  CORPORATION AND CASUALTY JOINT UNDERWRITING ASSOCIATION.--

14         (a)1.  The Legislature finds that actual and threatened

15  catastrophic losses to property in this state from hurricanes

16  have caused insurers to be unwilling or unable to provide

17  property insurance coverage to the extent sought and needed.

18  It is in the public interest and a public purpose to assist in

19  assuring that property in the state is insured so as to

20  facilitate the remediation, reconstruction, and replacement of

21  damaged or destroyed property in order to reduce or avoid the

22  negative effects otherwise resulting to the public health,

23  safety, and welfare; to the economy of the state; and to the

24  revenues of the state and local governments needed to provide

25  for the public welfare. It is necessary, therefore, to provide

26  property insurance to applicants who are in good faith

27  entitled to procure insurance through the voluntary market but

28  are unable to do so. The Legislature intends by this

29  subsection that property insurance be provided and that it

30  continues, as long as necessary, through an entity organized

31  to achieve efficiencies and economies, all toward the


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    CS for SB 1418                          Second Engrossed (ntc)



  1  achievement of the foregoing public purposes. Because it is

  2  essential for the corporation to have the maximum financial

  3  resources to pay claims following a catastrophic hurricane, it

  4  is the intent of the Legislature that the income of the

  5  corporation be exempt from federal income taxation and that

  6  interest on the debt obligations issued by the corporation be

  7  exempt from federal income taxation.

  8         2.  The Residential Property and Casualty Joint

  9  Underwriting Association originally created by this statute

10  shall be known, as of July 1, 2002, as the Citizens Property

11  Insurance Corporation. The corporation shall provide insurance

12  for residential and commercial

13         (a)  There is created a joint underwriting association

14  for equitable apportionment or sharing among insurers of

15  property and casualty insurance covering residential property,

16  for applicants who are in good faith entitled, but are unable,

17  to procure insurance through the voluntary market. The

18  corporation association shall operate pursuant to a plan of

19  operation approved by order of the department. The plan is

20  subject to continuous review by the department. The department

21  may, by order, withdraw approval of all or part of a plan if

22  the department determines that conditions have changed since

23  approval was granted and that the purposes of the plan require

24  changes in the plan.  For the purposes of this subsection,

25  residential coverage includes both personal lines residential

26  coverage, which consists of the type of coverage provided by

27  homeowner's, mobile home owner's, dwelling, tenant's,

28  condominium unit owner's, and similar policies, and commercial

29  lines residential coverage, which consists of the type of

30  coverage provided by condominium association, apartment

31  building, and similar policies.


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    CS for SB 1418                          Second Engrossed (ntc)



  1         (b)1.  All insurers authorized to write one or more

  2  subject lines of business in this state are subject to

  3  assessment by the corporation and, for the purposes of this

  4  subsection, are referred to collectively as "assessable

  5  insurers." Insurers writing one or more subject lines of

  6  business in this state pursuant to part VIII of chapter 626

  7  are not assessable insurers, but insureds who procure one or

  8  more subject lines of business in this state pursuant to part

  9  VIII of chapter 626 are subject to assessment by the

10  corporation and are referred to collectively as "assessable

11  insureds." An authorized insurer's assessment liability, other

12  than underwriting associations or other entities created under

13  this section, must participate in and be members of the

14  Residential Property and Casualty Joint Underwriting

15  Association. A member's participation shall begin on the first

16  day of the calendar year following the year in which the

17  insurer member was issued a certificate of authority to

18  transact insurance for subject lines of business in this state

19  and shall terminate 1 year after the end of the first calendar

20  year during which the insurer member no longer holds a

21  certificate of authority to transact insurance for subject

22  lines of business in this state.

23         2.a.  All revenues, assets, liabilities, losses, and

24  expenses of the corporation association shall be divided into

25  three two separate accounts as follows:

26         (I)  A personal lines account for personal residential

27  policies issued by the corporation or issued by the

28  Residential Property and Casualty Joint Underwriting

29  Association and renewed by the corporation that provide

30  comprehensive, multi-peril coverage on risks that are not

31  located in areas eligible for coverage in the Florida


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    CS for SB 1418                          Second Engrossed (ntc)



  1  Windstorm Underwriting Association as those areas were defined

  2  on January 1, 2002 and for such policies that do not provide

  3  coverage for the peril of wind on risks that are located in

  4  such areas;

  5         (II)  A commercial lines account for commercial

  6  residential policies issued by the corporation or issued by

  7  the Residential Property and Casualty Joint Underwriting

  8  Association and renewed by the corporation that provide

  9  coverage for basic property perils on risks that are not

10  located in areas eligible for coverage in the Florida

11  Windstorm Underwriting Association as those areas were defined

12  on January 1, 2002 and for such policies that do not provide

13  coverage for the peril of wind on risks that are located in

14  such areas; and

15         (III)  A high-risk account for personal residential

16  policies and commercial residential and commercial

17  non-residential property policies issued by the corporation or

18  transferred to the corporation that provide coverage for the

19  peril of wind on risks that are located in areas eligible for

20  coverage in the Florida Windstorm Underwriting Association as

21  those areas were defined on January 1, 2002. The high-risk

22  account must also include quota share primary insurance under

23  subparagraph (c)2. The area eligible for coverage under the

24  high-risk account also includes the area within Port

25  Canaveral, which is bordered on the south by the City of Cape

26  Canaveral, bordered on the west by the Banana River, and

27  bordered on the north by Federal Government property.  The

28  department may remove territory from the area eligible for

29  wind-only and quota share coverage if, after a public hearing,

30  the department finds that authorized insurers in the voluntary

31  market are willing and able to write sufficient amounts of


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    CS for SB 1418                          Second Engrossed (ntc)



  1  personal and commercial residential coverage for all perils in

  2  the territory, including coverage for the peril of wind, such

  3  that risks covered by wind-only policies in the removed

  4  territory could be issued a policy by the corporation in

  5  either the personal lines or commercial lines account without

  6  a significant increase in the corporation's probable maximum

  7  loss in such account. Removal of territory from the area

  8  eligible for wind-only or quota share coverage does not alter

  9  the assignment of wind coverage written in such areas to the

10  high-risk account.

11         b.  The three separate accounts must be maintained as

12  long as financing obligations entered into by the Florida

13  Windstorm Underwriting Association or Residential Property and

14  Casualty Joint Underwriting Association are outstanding, in

15  accordance with the terms of the corresponding financing

16  documents. When the financing obligations are no longer

17  outstanding, in accordance with the terms of the corresponding

18  financing documents, the corporation may use a single account

19  for all revenues, assets, liabilities, losses, and expenses of

20  the corporation., one of which is for personal lines

21  residential coverages and the other of which is for commercial

22  lines residential coverages.

23         c.  Creditors of the Residential Property and Casualty

24  Joint Underwriting Association shall have a claim against, and

25  recourse to, the accounts referred to in sub-sub-subparagraphs

26  a.(I) and (II) and shall have no claim against, or recourse

27  to, the account referred to in sub-sub-subparagraph a.(III).

28  Creditors of the Florida Windstorm Underwriting Association

29  shall have a claim against, and recourse to, the account

30  referred to in sub-sub-subparagraph a.(III) and shall have no

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1  claim against, or recourse to, the accounts referred to in

  2  sub-sub-subparagraphs a.(I) and (II).

  3         d.  Revenues, assets, liabilities, losses, and expenses

  4  not attributable to particular accounts coverages shall be

  5  prorated among between the accounts.

  6         e.  The Legislature finds that the revenues of the

  7  corporation are revenues that are necessary to meet the

  8  requirements set forth in documents authorizing the issuance

  9  of bonds under this subsection.

10         f.  No part of the income of the corporation may inure

11  to the benefit of any private person.

12         3.  With respect to a deficit in an account:

13         a.  When the deficit incurred in a particular calendar

14  year is not greater than 10 percent of the aggregate statewide

15  direct written premium for the subject lines of business for

16  the prior calendar year for all member insurers, the entire

17  deficit shall be recovered through regular assessments of

18  assessable member insurers under paragraph (g) and assessable

19  insureds.

20         b.  When the deficit incurred in a particular calendar

21  year exceeds 10 percent of the aggregate statewide direct

22  written premium for the subject lines of business for the

23  prior calendar year for all member insurers, the corporation

24  association shall levy regular assessments an assessment on

25  assessable member insurers under paragraph (g) and on

26  assessable insureds in an amount equal to the greater of 10

27  percent of the deficit or 10 percent of the aggregate

28  statewide direct written premium for the subject lines of

29  business for the prior calendar year for all member insurers.

30  Any remaining deficit shall be recovered through emergency

31  assessments under sub-subparagraph d.


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    CS for SB 1418                          Second Engrossed (ntc)



  1         c.  Each assessable member insurer's share of the

  2  amount being assessed total assessment under sub-subparagraph

  3  a. or sub-subparagraph b. shall be in the proportion that the

  4  assessable member insurer's direct written premium for the

  5  subject lines of business for the year preceding the

  6  assessment bears to the aggregate statewide direct written

  7  premium for the subject lines of business for that year for

  8  all member insurers. The assessment percentage applicable to

  9  each assessable insured is the ratio of the amount being

10  assessed under sub-subparagraph a. or sub-subparagraph b. to

11  the aggregate statewide direct written premium for the subject

12  lines of business for the prior year. Assessments levied by

13  the corporation on assessable insurers under sub-subparagraphs

14  a. and b. shall be paid as required by the corporation's plan

15  of operation and paragraph (g). Assessments levied by the

16  corporation on assessable insureds under sub-subparagraphs a.

17  and b. shall be collected by the surplus lines agent at the

18  time the surplus lines agent collects the surplus lines tax

19  required by s. 626.932 and shall be paid to the Florida

20  Surplus Lines Service Office at the time the surplus lines

21  agent pays the surplus lines tax to the Florida Surplus Lines

22  Service Office. Upon receipt of regular assessments from

23  surplus lines agents, the Florida Surplus Lines Service Office

24  shall transfer the assessments directly to the corporation as

25  determined by the corporation.

26         d.  Upon a determination by the board of governors that

27  a deficit in an account exceeds the amount that will be

28  recovered through regular assessments on member insurers under

29  sub-subparagraph a. or sub-subparagraph b., the board shall

30  levy, after verification by the department, emergency

31  assessments, for as many years as necessary to cover the


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    CS for SB 1418                          Second Engrossed (ntc)



  1  deficits, to be collected by assessable member insurers and

  2  the corporation and collected from assessable insureds by

  3  underwriting associations created under this section which

  4  write subject lines of business upon issuance or renewal of

  5  policies for subject lines of business, excluding National

  6  Flood Insurance policies, in the year or years following levy

  7  of the regular assessments.  The amount of the emergency

  8  assessment collected in a particular year shall be a uniform

  9  percentage of that year's direct written premium for subject

10  lines of business and all accounts of the corporation for all

11  member insurers and underwriting associations, excluding

12  National Flood Insurance Program policy premiums, as annually

13  determined by the board and verified by the department. The

14  department shall verify the arithmetic calculations involved

15  in the board's determination within 30 days after receipt of

16  the information on which the determination was based.

17  Notwithstanding any other provision of law, the corporation

18  and each assessable member insurer that and each underwriting

19  association created under this section which writes subject

20  lines of business shall collect emergency assessments from its

21  policyholders without such obligation being affected by any

22  credit, limitation, exemption, or deferment. Emergency

23  assessments levied by the corporation on assessable insureds

24  shall be collected by the surplus lines agent at the time the

25  surplus lines agent collects the surplus lines tax required by

26  s. 626.932 and shall be paid to the Florida Surplus Lines

27  Service Office at the time the surplus lines agent pays the

28  surplus lines tax to the Florida Surplus Lines Service Office.

29  The emergency assessments so collected shall be transferred

30  directly to the corporation association on a periodic basis as

31  determined by the corporation and shall be held by the


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    CS for SB 1418                          Second Engrossed (ntc)



  1  corporation solely in the applicable account  association.

  2  The aggregate amount of emergency assessments levied for an

  3  account under this sub-subparagraph in any calendar year may

  4  not exceed the greater of 10 percent of the amount needed to

  5  cover the original deficit, plus interest, fees, commissions,

  6  required reserves, and other costs associated with financing

  7  of the original deficit, or 10 percent of the aggregate

  8  statewide direct written premium for subject lines of business

  9  and for all accounts of the corporation written by member

10  insurers and underwriting associations for the prior year,

11  plus interest, fees, commissions, required reserves, and other

12  costs associated with financing the original deficit.

13         e.  The corporation board may pledge the proceeds of

14  assessments, projected recoveries from the Florida Hurricane

15  Catastrophe Fund, other insurance and reinsurance

16  recoverables, market equalization surcharges and other

17  surcharges, and other funds available to the corporation

18  association as the source of revenue for and to secure bonds

19  issued under paragraph (g), bonds or other indebtedness issued

20  under subparagraph (c)3., or lines of credit or other

21  financing mechanisms issued or created under this subsection,

22  or to retire any other debt incurred as a result of deficits

23  or events giving rise to deficits, or in any other way that

24  the board determines will efficiently recover such deficits.

25  The purpose of the lines of credit or other financing

26  mechanisms is to provide additional resources to assist the

27  corporation association in covering claims and expenses

28  attributable to a catastrophe. As used in this subsection, the

29  term "assessments" includes regular assessments under

30  sub-subparagraph a., sub-subparagraph b., or subparagraph

31  (g)1. and emergency assessments under sub-subparagraph d.


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    CS for SB 1418                          Second Engrossed (ntc)



  1  Emergency assessments collected under sub-subparagraph d. are

  2  not part of an insurer's rates, are not premium, and are not

  3  subject to premium tax, fees, or commissions; however, failure

  4  to pay the emergency assessment shall be treated as failure to

  5  pay premium. The emergency assessments under sub-subparagraph

  6  d. shall continue as long as any bonds issued or other

  7  indebtedness incurred with respect to a deficit for which the

  8  assessment was imposed remain outstanding, unless adequate

  9  provision has been made for the payment of such bonds or other

10  indebtedness pursuant to the documents governing such bonds or

11  other indebtedness.

12         f.  As used in this subsection, the term "subject lines

13  of business" means insurance written by assessable insurers or

14  procured by assessable insureds on real or personal property,

15  as defined in s. 624.604, including insurance for fire,

16  industrial fire, allied lines, farmowners multiperil,

17  homeowners multiperil, commercial multiperil, and mobile

18  homes, and including liability coverage on all such insurance,

19  but excluding inland marine as defined in s. 624.607(3) and

20  excluding vehicle insurance as defined in s. 624.605(1) other

21  than insurance on mobile homes used as permanent dwellings.

22         g.  The Florida Surplus Lines Service Office shall

23  determine annually the aggregate statewide written premium in

24  subject lines of business procured by assessable insureds and

25  shall report that information to the corporation in a form and

26  at a time the corporation specifies to ensure that the

27  corporation can meet the requirements of this subsection and

28  the corporation's financing obligations.

29         h.  The Florida Surplus Lines Service Office shall

30  verify the proper application by surplus lines agents of

31  assessment percentages for regular assessments and emergency


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    CS for SB 1418                          Second Engrossed (ntc)



  1  assessments levied under this subparagraph on assessable

  2  insureds and shall assist the corporation in ensuring the

  3  accurate, timely collection and payment of assessments by

  4  surplus lines agents as required by the corporation., with

  5  respect to the personal lines account, any personal lines

  6  policy defined in s. 627.4025, and means, with respect to the

  7  commercial lines account, all commercial property and

  8  commercial fire insurance.

  9         (c)  The plan of operation of the corporation

10  association:

11         1.  May provide for one or more designated insurers,

12  able and willing to provide policy and claims service, to act

13  on behalf of the association to provide such service.  Each

14  licensed agent shall be entitled to indicate the order of

15  preference regarding who will service the business placed by

16  the agent.  The association shall adhere to each agent's

17  preferences unless after consideration of other factors in

18  assigning agents, including, but not limited to, servicing

19  capacity and fee arrangements, the association has reason to

20  believe it is in the best interest of the association to make

21  a different assignment.

22         1.2.  Must provide for adoption of residential property

23  and casualty insurance policy forms and commercial residential

24  and nonresidential property insurance forms, which forms must

25  be approved by the department prior to use.  The corporation

26  association shall adopt the following policy forms:

27         a.  Standard personal lines policy forms that including

28  wind coverage, which are comprehensive multiperil policies

29  providing what is generally considered to be full coverage of

30  a residential property equivalent similar to the coverage

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1  provided in the private insurance market under an HO-2, HO-3,

  2  HO-4, or HO-6 policy.

  3         b.  Standard personal lines policy forms without wind

  4  coverage, which are the same as the policies described in

  5  sub-subparagraph a. except that they do not include wind

  6  coverage.

  7         b.c.  Basic personal lines policy forms that including

  8  wind coverage, which are policies similar to an HO-8 policy or

  9  a dwelling fire policy that provide coverage meeting the

10  requirements of the secondary mortgage market, but which

11  coverage is more limited than the coverage under a standard

12  policy.

13         d.  Basic personal lines policy forms without wind

14  coverage, which are the same as the policies described in

15  sub-subparagraph c. except that they do not include wind

16  coverage.

17         c.e.  Commercial lines residential policy forms

18  including wind coverage that are generally similar to the

19  basic perils of full coverage obtainable for commercial

20  residential structures in the admitted voluntary market.

21         d.  Personal lines and commercial lines residential

22  property insurance forms that cover the peril of wind only.

23  The forms are applicable only to residential properties

24  located in areas eligible for coverage under the high-risk

25  account referred to in sub-subparagraph (b)2.a.

26         e.  Commercial lines nonresidential property insurance

27  forms that cover the peril of wind only.  The forms are

28  applicable only to nonresidential properties located in areas

29  eligible for coverage under the high-risk account referred to

30  in sub-subparagraph (b)2.a.

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1         2.a.  Must provide that the corporation adopt a program

  2  in which the corporation and authorized insurers enter into

  3  quota share primary insurance agreements for hurricane

  4  coverage, as defined in s. 627.4025(2)(a), for eligible risks,

  5  and adopt property insurance forms for eligible risks which

  6  cover the peril of wind only. As used in this subsection, the

  7  term:

  8         (I)  "Quota share primary insurance" means an

  9  arrangement in which the primary hurricane coverage of an

10  eligible risk is provided in specified percentages by the

11  corporation and an authorized insurer. The corporation and

12  authorized insurer are each solely responsible for a specified

13  percentage of hurricane coverage of an eligible risk as set

14  forth in a quota share primary insurance agreement between the

15  corporation and an authorized insurer and the insurance

16  contract. The responsibility of the corporation or authorized

17  insurer to pay its specified percentage of hurricane losses of

18  an eligible risk, as set forth in the quota share primary

19  insurance agreement, may not be altered by the inability of

20  the other party to the agreement to pay its specified

21  percentage of hurricane losses. Eligible risks that are

22  provided hurricane coverage through a quota share primary

23  insurance arrangement must be provided policy forms that set

24  forth the obligations of the corporation and authorized

25  insurer under the arrangement, clearly specify the percentages

26  of quota share primary insurance provided by the corporation

27  and authorized insurer, and conspicuously and clearly state

28  that neither the authorized insurer nor the corporation may be

29  held responsible beyond its specified percentage of coverage

30  of hurricane losses.

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1         (II)  "Eligible risks" means personal lines residential

  2  and commercial lines residential risks that meet the

  3  underwriting criteria of the corporation and are located in

  4  areas that were eligible for coverage by the Florida Windstorm

  5  Underwriting Association on January 1, 2002.

  6         b.  The corporation may enter into quota share primary

  7  insurance agreements with authorized insurers at corporation

  8  coverage levels of 90 percent and 50 percent.

  9         c.  If the corporation determines that additional

10  coverage levels are necessary to maximize participation in

11  quota share primary insurance agreements by authorized

12  insurers, the corporation may establish additional coverage

13  levels. However, the corporation's quota share primary

14  insurance coverage level may not exceed 90 percent.

15         d.  Any quota share primary insurance agreement entered

16  into between an authorized insurer and the corporation must

17  provide for a uniform, specified percentage of coverage of

18  hurricane losses, by county or territory as set forth by the

19  corporation board, for all eligible risks of the authorized

20  insurer covered under the quota share primary insurance

21  agreement.

22         e.  Any quota share primary insurance agreement entered

23  into between an authorized insurer and the corporation is

24  subject to review and approval by the department. However,

25  such agreement shall be authorized only as to insurance

26  contracts entered into between an authorized insurer and an

27  insured who is already insured by the corporation for wind

28  coverage.

29         f.  For all eligible risks covered under quota share

30  primary insurance agreements, the exposure and coverage levels

31  for both the corporation and authorized insurers shall be


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    CS for SB 1418                          Second Engrossed (ntc)



  1  reported by the corporation to the Florida Hurricane

  2  Catastrophe Fund. For all policies of eligible risks covered

  3  under quota share primary insurance agreements, the

  4  corporation and the authorized insurer shall maintain complete

  5  and accurate records for the purpose of exposure and loss

  6  reimbursement audits as required by Florida Hurricane

  7  Catastrophe Fund rules. The corporation and the authorized

  8  insurer shall each maintain duplicate copies of policy

  9  declaration pages and supporting claims documents.

10         g.  The corporation board shall establish in its plan

11  of operation standards for quota share agreements which ensure

12  that there is no discriminatory application among insurers as

13  to the terms of quota share agreements, pricing of quota share

14  agreements, incentive provisions if any, and consideration

15  paid for servicing policies or adjusting claims.

16         h.  The quota share primary insurance agreement between

17  the corporation and an authorized insurer must set forth the

18  specific terms under which coverage is provided, including,

19  but not limited to, the sale and servicing of policies issued

20  under the agreement by the insurance agent of the authorized

21  insurer producing the business, the reporting of information

22  concerning eligible risks, the payment of premium to the

23  corporation, and arrangements for the adjustment and payment

24  of hurricane claims incurred on eligible risks by the claims

25  adjuster and personnel of the authorized insurer. Entering

26  into a quota sharing insurance agreement between the

27  corporation and an authorized insurer shall be voluntary and

28  at the discretion of the authorized insurer.

29         f.  Commercial lines residential policy forms without

30  wind coverage, which are the same as the policies described in

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1  sub-subparagraph e. except that they do not include wind

  2  coverage.

  3         3.  May provide that the corporation association may

  4  employ or otherwise contract with individuals or other

  5  entities to provide administrative or professional services

  6  that may be appropriate to effectuate the plan. The

  7  corporation association shall have the power to borrow funds,

  8  by issuing bonds or by incurring other indebtedness, and shall

  9  have other powers reasonably necessary to effectuate the

10  requirements of this subsection. The corporation may, but is

11  not required to, seek judicial validation of its bonds or

12  other indebtedness under chapter 75. The corporation

13  association may issue bonds or incur other indebtedness, or

14  have bonds issued on its behalf by a unit of local government

15  pursuant to subparagraph (g)2., in the absence of a hurricane

16  or other weather-related event, upon a determination by the

17  corporation association, subject to approval by the

18  department, that such action would enable it to efficiently

19  meet the financial obligations of the corporation association

20  and that such financings are reasonably necessary to

21  effectuate the requirements of this subsection. The

22  corporation association is authorized to take all actions

23  needed to facilitate tax-free status for any such bonds or

24  indebtedness, including formation of trusts or other

25  affiliated entities. The corporation association shall have

26  the authority to pledge assessments, projected recoveries from

27  the Florida Hurricane Catastrophe Fund, other reinsurance

28  recoverables, market equalization and other surcharges, and

29  other funds available to the corporation association as

30  security for bonds or other indebtedness. In recognition of s.

31  10, Art. I of the State Constitution, prohibiting the


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    CS for SB 1418                          Second Engrossed (ntc)



  1  impairment of obligations of contracts, it is the intent of

  2  the Legislature that no action be taken whose purpose is to

  3  impair any bond indenture or financing agreement or any

  4  revenue source committed by contract to such bond or other

  5  indebtedness.

  6         4.a.  Must require that the corporation association

  7  operate subject to the supervision and approval of a board of

  8  governors consisting of 7 13 individuals who are residents of

  9  this state, from different geographical areas of this state,

10  appointed by the Treasurer. The Treasurer shall designate one

11  of the appointees as chair. All board members serve at the

12  pleasure of the Treasurer., including 1 who is elected as

13  chair. The board shall consist of:

14         a.  The insurance consumer advocate appointed under s.

15  627.0613.

16         b.  Five members designated by the insurance industry.

17         c.  Five consumer representatives appointed by the

18  Insurance Commissioner. Two of the consumer representatives

19  must, at the time of appointment, be holders of policies

20  issued by the association, who are selected with consideration

21  given to reflecting the geographic balance of association

22  policyholders. Two of the consumer members must be individuals

23  who are minority persons as defined in s. 288.703(3). One of

24  the consumer members shall have expertise in the field of

25  mortgage lending.

26         d.  Two representatives of the insurance industry

27  appointed by the Insurance Commissioner. Of the two insurance

28  industry representatives appointed by the Insurance

29  Commissioner, at least one must be an individual who is a

30  minority person as defined in s. 288.703(3).

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1  Any board member may be disapproved or removed and replaced by

  2  the commissioner at any time for cause. All board members,

  3  including the chair, must be appointed to serve for 3-year

  4  terms beginning annually on a date designated by the plan. Any

  5  board vacancy shall be filled for the unexpired term by the

  6  Treasurer. The Treasurer shall appoint a technical advisory

  7  group to provide information and advice to the board of

  8  governors in connection with the board's duties under this

  9  subsection. The executive director and senior managers of the

10  corporation shall be engaged by the Treasurer and serve at the

11  pleasure of the Treasurer. The executive director is

12  responsible for employing other staff as the corporation may

13  require, subject to review and concurrence by the Office of

14  the Treasurer.

15         b.  To ensure the effective and efficient

16  implementation of this subsection, the Treasurer shall appoint

17  the board of governors by July 1, 2002. The board of governors

18  shall work in conjunction with the Residential Property

19  Insurance Market Coordinating Council to address appropriate

20  organizational, operational, and financial matters relating to

21  the corporation. In addition, after consultation with the

22  Residential Property Insurance Market Coordinating Council,

23  the bond trustees and rating agencies, the Treasurer may

24  postpone for a period not to exceed 180 days after the

25  effective date, the implementation of the corporation or the

26  implementation of one or more of the provisions relating to

27  transfer of Florida Windstorm Underwriting Association

28  policies, obligations, rights, assets, and liabilities into

29  the high-risk accounts and such other provisions that may be

30  affected thereby if the Treasurer determines that postponement

31  is necessary:


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    CS for SB 1418                          Second Engrossed (ntc)



  1         (i)  Due to emergency conditions;

  2         (ii)  To ensure the effective and efficient

  3  implementation of the corporation's operations; or

  4         (iii)  To maintain existing financing arrangements

  5  without a material adverse effect on the creditors of the

  6  Residential Property and Casualty Joint Underwriting

  7  Association or the Florida Windstorm Underwriting Association.

  8         5.  Must provide a procedure for determining the

  9  eligibility of a risk for coverage, as follows:

10         a.  With respect to personal lines residential risks,

11  if the risk is offered full coverage from an authorized

12  insurer at the insurer's approved rate under either a standard

13  policy including wind coverage or, if consistent with the

14  insurer's underwriting rules as filed with the department, a

15  basic policy including wind coverage, the risk is not eligible

16  for any policy issued by the corporation association. If the

17  risk accepts an offer of coverage through the market

18  assistance plan or an offer of coverage through a mechanism

19  established by the corporation association before a policy is

20  issued to the risk by the corporation association or during

21  the first 30 days of coverage by the corporation association,

22  and the producing agent who submitted the application to the

23  plan or to the corporation association is not currently

24  appointed by the insurer, the insurer shall either:

25         (I)  Pay to the producing agent of record of the

26  policy, for the first year, an amount which is the greater of

27  the insurer's usual and customary commission for the type of

28  policy written or a policy fee equal to the usual and

29  customary commission of the corporation; or

30         (II)  Offer to allow the producing agent of record of

31  the policy to continue servicing the policy for a period of


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    CS for SB 1418                          Second Engrossed (ntc)



  1  not less than 1 year and offer to pay the agent the insurer's

  2  usual and customary commission for the type of policy written.

  3  If the producing agent is unwilling or unable to accept

  4  appointment by the new insurer, the new insurer shall pay the

  5  agent in accordance with sub-sub-subparagraph (I). appoint the

  6  agent to service the risk or, if the insurer places the

  7  coverage through a new agent, require the new agent who then

  8  writes the policy to pay not less than 50 percent of the first

  9  year's commission to the producing agent who submitted the

10  application to the plan or the association, except that if the

11  new agent is an employee or exclusive agent of the insurer,

12  the new agent shall pay a policy fee of $50 to the producing

13  agent in lieu of splitting the commission.

14

15  If the risk is not able to obtain any such offer, the risk is

16  eligible for either a standard policy including wind coverage

17  or a basic policy including wind coverage issued by the

18  corporation association; however, if the risk could not be

19  insured under a standard policy including wind coverage

20  regardless of market conditions, the risk shall be eligible

21  for a basic policy including wind coverage unless rejected

22  under subparagraph 8. The corporation association shall

23  determine the type of policy to be provided on the basis of

24  objective standards specified in the underwriting manual and

25  based on generally accepted underwriting practices.

26         b.  With respect to commercial lines residential risks,

27  if the risk is offered coverage under a policy including wind

28  coverage from an authorized insurer at its approved rate, the

29  risk is not eligible for any policy issued by the corporation

30  association. If the risk accepts an offer of coverage through

31  the market assistance plan or an offer of coverage through a


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    CS for SB 1418                          Second Engrossed (ntc)



  1  mechanism established by the corporation association before a

  2  policy is issued to the risk by the corporation association,

  3  and the producing agent who submitted the application to the

  4  plan or the corporation association is not currently appointed

  5  by the insurer, the insurer shall either:

  6         (I)  Pay to the producing agent of record of the

  7  policy, for the first year, an amount which is the greater of

  8  the insurer's usual and customary commission for the type of

  9  policy written or a policy fee equal to the usual and

10  customary commission of the corporation; or

11         (II)  Offer to allow the producing agent of record of

12  the policy to continue servicing the policy for a period of

13  not less than 1 year and offer to pay the agent the insurer's

14  usual and customary commission for the type of policy written.

15  If the producing agent is unwilling or unable to accept

16  appointment by the new insurer, the new insurer shall pay the

17  agent in accordance with sub-sub-subparagraph (I). appoint the

18  agent to service the risk or, if the insurer places the

19  coverage through a new agent, require the new agent who then

20  writes the policy to pay not less than 50 percent of the first

21  year's commission to the producing agent who submitted the

22  application to the plan, except that if the new agent is an

23  employee or exclusive agent of the insurer, the new agent

24  shall pay a policy fee of $50 to the producing agent in lieu

25  of splitting the commission.

26

27  If the risk is not able to obtain any such offer, the risk is

28  eligible for a policy including wind coverage issued by the

29  corporation association.

30         c.  This subparagraph does not require the association

31  to provide wind coverage or hurricane coverage in any area in


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    CS for SB 1418                          Second Engrossed (ntc)



  1  which such coverage is available through the Florida Windstorm

  2  Underwriting Association.

  3         6.  Must include rules for classifications of risks and

  4  rates therefor.

  5         7.  Must provide that if premium and investment income

  6  for an account attributable to a particular calendar plan year

  7  are in excess of projected losses and expenses for the account

  8  of the plan attributable to that year, such excess shall be

  9  held in surplus in the account. Such surplus shall be

10  available to defray deficits in that account as to future

11  years and shall be used for that purpose prior to assessing

12  assessable member insurers and assessable insureds as to any

13  calendar plan year.

14         8.  Must provide objective criteria and procedures to

15  be uniformly applied for all applicants in determining whether

16  an individual risk is so hazardous as to be uninsurable. In

17  making this determination and in establishing the criteria and

18  procedures, the following shall be considered:

19         a.  Whether the likelihood of a loss for the individual

20  risk is substantially higher than for other risks of the same

21  class; and

22         b.  Whether the uncertainty associated with the

23  individual risk is such that an appropriate premium cannot be

24  determined.

25

26  The acceptance or rejection of a risk by the corporation

27  association shall be construed as the private placement of

28  insurance, and the provisions of chapter 120 shall not apply.

29         9.  Must provide that the corporation association shall

30  make its best efforts to procure catastrophe reinsurance at

31  reasonable rates, as determined by the board of governors.


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    CS for SB 1418                          Second Engrossed (ntc)



  1         10.  Must provide that in the event of regular deficit

  2  assessments under sub-subparagraph (b)3.a. or sub-subparagraph

  3  (b)3.b., in the personal lines account, the commercial lines

  4  residential account, or the high-risk account or by the

  5  Florida Windstorm Underwriting Association under

  6  sub-sub-subparagraph (2)(b)2.d.(I) or sub-sub-subparagraph

  7  (2)(b)2.d.(II), the corporation association shall levy upon

  8  corporation association policyholders in its next rate filing,

  9  or by a separate rate filing solely for this purpose, a market

10  equalization surcharge arising from a regular assessment in

11  such account in a percentage equal to the total amount of such

12  regular assessments divided by the aggregate statewide direct

13  written premium for subject lines of business for member

14  insurers for the prior calendar year. Market equalization

15  surcharges under this subparagraph are not considered premium

16  and are not subject to commissions, fees, or premium taxes;

17  however, failure to pay a market equalization surcharge shall

18  be treated as failure to pay premium.

19         11.  The policies issued by the corporation association

20  must provide that, if the corporation association or the

21  market assistance plan obtains an offer from an authorized

22  insurer to cover the risk at its approved rates under either a

23  standard policy including wind coverage or a basic policy

24  including wind coverage, the risk is no longer eligible for

25  renewal coverage through the corporation association. However,

26  if the risk is located in an area in which Florida Windstorm

27  Underwriting Association coverage is available, such an offer

28  of a standard or basic policy terminates eligibility

29  regardless of whether or not the offer includes wind coverage.

30  Upon termination of eligibility, the association shall provide

31  written notice to the policyholder and agent of record stating


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    CS for SB 1418                          Second Engrossed (ntc)



  1  that the association policy shall be canceled as of 60 days

  2  after the date of the notice because of the offer of coverage

  3  from an authorized insurer. Other provisions of the insurance

  4  code relating to cancellation and notice of cancellation do

  5  not apply to actions under this subparagraph.

  6         12.  Corporation Association policies and applications

  7  must include a notice that the corporation association policy

  8  could, under this section or s. 627.3511, be replaced with a

  9  policy issued by an authorized admitted insurer that does not

10  provide coverage identical to the coverage provided by the

11  corporation association. The notice shall also specify that

12  acceptance of corporation association coverage creates a

13  conclusive presumption that the applicant or policyholder is

14  aware of this potential.

15         13.  May establish, subject to approval by the

16  department, different eligibility requirements and operational

17  procedures for any line or type of coverage for any specified

18  county or area if the board determines that such changes to

19  the eligibility requirements and operational procedures are

20  justified due to the voluntary market being sufficiently

21  stable and competitive in such area or for such line or type

22  of coverage and that consumers who, in good faith, are unable

23  to obtain insurance through the voluntary market through

24  ordinary methods would continue to have access to coverage

25  from the corporation association. When coverage is sought in

26  connection with a real property transfer, such requirements

27  and procedures shall not provide for an effective date of

28  coverage later than the date of the closing of the transfer as

29  established by the transferor, the transferee, and, if

30  applicable, the lender.

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1         14.  Must provide that, with respect to the high-risk

  2  account, any assessable insurer with a surplus as to

  3  policyholders of $25 million or less writing 25 percent or

  4  more of its total countrywide property insurance premiums in

  5  this state may petition the department, within the first 90

  6  days of each calendar year, to qualify as a limited

  7  apportionment company. In no event shall a limited

  8  apportionment company be required to participate in the

  9  portion of any assessment, within the high-risk account,

10  pursuant to sub-subparagraph (b)3.a. or sub-subparagraph

11  (b)3.b. in the aggregate which exceeds $50 million after

12  payment of available high-risk account funds in any calendar

13  year. However, a limited apportionment company shall collect

14  from its policyholders any emergency assessment imposed under

15  sub-subparagraph (b)3.d. The plan shall provide that, if the

16  department determines that any regular assessment will result

17  in an impairment of the surplus of a limited apportionment

18  company, the department may direct that all or part of such

19  assessment be deferred as provided in subparagraph (g)4.

20  However, there shall be no limitation or deferment of an

21  emergency assessment to be collected from policyholders under

22  sub-subparagraph (b)3.d.

23         15.  Must provide that the corporation appoint as its

24  licensed agents only those agents who also hold an appointment

25  as defined in s. 626.104 with an insurer who at the time of

26  the agent's initial appointment by the corporation is

27  authorized to write and is actually writing personal lines

28  residential property coverage, commercial residential property

29  coverage, or commercial nonresidential property coverage

30  within the state.

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1         (d)1.  It is the intent of the Legislature that the

  2  rates for coverage provided by the corporation association be

  3  actuarially sound and not competitive with approved rates

  4  charged in the admitted voluntary market, so that the

  5  corporation association functions as a residual market

  6  mechanism to provide insurance only when the insurance cannot

  7  be procured in the voluntary market. Rates shall include an

  8  appropriate catastrophe loading factor that reflects the

  9  actual catastrophic exposure of the corporation association

10  and recognizes that the association has little or no capital

11  or surplus; and the association shall carefully review each

12  rate filing to assure that provider compensation is not

13  excessive.

14         2.  For each county, the average rates of the

15  corporation association for each line of business for personal

16  lines residential policies excluding rates for wind-only

17  policies shall be no lower than the average rates charged by

18  the insurer that had the highest average rate in that county

19  among the 20 insurers with the greatest total direct written

20  premium in the state for that line of business in the

21  preceding year, except that with respect to mobile home

22  coverages, the average rates of the corporation association

23  shall be no lower than the average rates charged by the

24  insurer that had the highest average rate in that county among

25  the 5 insurers with the greatest total written premium for

26  mobile home owner's policies in the state in the preceding

27  year.

28         3.  Rates for personal lines residential wind-only

29  policies must be actuarially sound and not competitive with

30  approved rates charged by authorized insurers. However, for

31  personal lines residential wind-only policies issued or


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    CS for SB 1418                          Second Engrossed (ntc)



  1  renewed between July 1, 2002, and June 30, 2003, the maximum

  2  premium increase must be no greater than 10 percent of the

  3  Florida Windstorm Underwriting Association premium for that

  4  policy in effect on June 30, 2002, as adjusted for coverage

  5  changes and seasonal occupancy surcharges.  The personal lines

  6  residential wind-only rates for the corporation effective July

  7  1, 2003, must be based on a rate filing by the corporation

  8  which establishes rates which are actuarially sound and not

  9  competitive with approved rates charged by authorized

10  insurers.  Corporation rate manuals shall include a rate

11  surcharge for seasonal occupancy.  To ensure that personal

12  lines residential wind-only rates effective on or after July

13  1, 2003, are not competitive with approved rates charged by

14  authorized insurers, the department, by March 1 of each year,

15  shall provide the corporation, for each county in which there

16  are geographical areas in which personal lines residential

17  wind-only policies may be issued, the average rates charged by

18  the insurer that had the highest average rate in that county

19  for wind coverage in that insurer's rating territories which

20  most closely approximate the geographical area in that county

21  in which personal lines residential wind-only policies may be

22  written by the corporation.  The average rates provided must

23  be from an insurer among the 20 insurers with the greatest

24  total direct written premium in the state for personal lines

25  residential property insurance for the preceding year.  With

26  respect to mobile homes, the five insurers with the greatest

27  total written premium for that line of business in the

28  preceding year shall be used.  The corporation shall certify

29  to the department that its average personal lines residential

30  wind-only rates are no lower in each county than the average

31  rates provided by the department.  The department is


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    CS for SB 1418                          Second Engrossed (ntc)



  1  authorized to adopt rules to establish reporting requirements

  2  to obtain the necessary wind-only rate information from

  3  insurers to implement this provision.

  4         4.3.  Rates for commercial lines residential coverage

  5  shall not be subject to the requirements of subparagraph 2.,

  6  but shall be subject to all other requirements of this

  7  paragraph and s. 627.062.

  8         5.4.  Nothing in this paragraph shall require or allow

  9  the corporation association to adopt a rate that is inadequate

10  under s. 627.062 or to reduce rates approved under s. 627.062.

11         6.5.  The association may require arbitration of a

12  filing pursuant to s. 627.062(6). Rate filings of the

13  association under this paragraph shall be made on a use and

14  file basis under s. 627.062(2)(a)2. The corporation

15  association shall make a rate filing at least once a year, but

16  no more often than quarterly.

17         7.  In addition to the rates otherwise determined

18  pursuant to this paragraph, the corporation shall impose and

19  collect an amount equal to the premium tax provided for in s.

20  624.509 to augment the financial resources of the corporation.

21         (e)  If coverage in an account through the association

22  is hereby activated effective upon approval of the plan, and

23  shall remain activated until coverage is deactivated pursuant

24  to paragraph (f). Thereafter, coverage through the corporation

25  association shall be reactivated by order of the department

26  only under one of the following circumstances:

27         1.  If the market assistance plan receives a minimum of

28  100 applications for coverage within a 3-month period, or 200

29  applications for coverage within a 1-year period or less for

30  residential coverage, unless the market assistance plan

31  provides a quotation from admitted carriers at their filed


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    CS for SB 1418                          Second Engrossed (ntc)



  1  rates for at least 90 percent of such applicants. Any market

  2  assistance plan application that is rejected because an

  3  individual risk is so hazardous as to be uninsurable using the

  4  criteria specified in subparagraph (c)8. shall not be included

  5  in the minimum percentage calculation provided herein. In the

  6  event that there is a legal or administrative challenge to a

  7  determination by the department that the conditions of this

  8  subparagraph have been met for eligibility for coverage in the

  9  corporation association, any eligible risk may obtain coverage

10  during the pendency of such challenge.

11         2.  In response to a state of emergency declared by the

12  Governor under s. 252.36, the department may activate coverage

13  by order for the period of the emergency upon a finding by the

14  department that the emergency significantly affects the

15  availability of residential property insurance.

16         (f)1.  The corporation shall file with the department

17  quarterly statements of financial condition, an annual

18  statement of financial condition, and audited financial

19  statements in the manner prescribed by law. In addition, the

20  corporation shall report to the department monthly on the

21  types, premium, exposure, and distribution by county of its

22  policies in force, and shall submit other reports as the

23  department requires to carry out its oversight of the

24  corporation.

25         2.  The activities of the corporation association shall

26  be reviewed at least annually by the department to determine

27  whether board and, upon recommendation by the board or

28  petition of any interested party, coverage shall be

29  deactivated in an account on the basis if the department finds

30  that the conditions giving rise to its activation no longer

31  exist.


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    CS for SB 1418                          Second Engrossed (ntc)



  1         (g)1.  The corporation board shall certify to the

  2  department its needs for annual assessments as to a particular

  3  calendar year, and for any startup or interim assessments that

  4  it deems to be necessary to sustain operations as to a

  5  particular year pending the receipt of annual assessments.

  6  Upon verification, the department shall approve such

  7  certification, and the corporation board shall levy such

  8  annual, startup, or interim assessments. Such assessments

  9  shall be prorated as provided in paragraph (b). The

10  corporation board shall take all reasonable and prudent steps

11  necessary to collect the amount of assessment due from each

12  assessable participating member insurer, including, if

13  prudent, filing suit to collect such assessment. If the

14  corporation board is unable to collect an assessment from any

15  assessable member insurer, the uncollected assessments shall

16  be levied as an additional assessment against the assessable

17  participating member insurers and any assessable participating

18  member insurer required to pay an additional assessment as a

19  result of such failure to pay shall have a cause of action

20  against such nonpaying assessable member insurer. Assessments

21  shall be included as an appropriate factor in the making of

22  rates. The failure of a surplus lines agent to collect and

23  remit any regular or emergency assessment levied by the

24  corporation is considered to be a violation of s. 626.936 and

25  subjects the surplus lines agent to the penalties provided in

26  that section.

27         2.  The governing body of any unit of local government,

28  any residents of which are insured by the corporation

29  association, may issue bonds as defined in s. 125.013 or s.

30  166.101 from time to time to fund an assistance program, in

31  conjunction with the corporation association, for the purpose


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    CS for SB 1418                          Second Engrossed (ntc)



  1  of defraying deficits of the corporation association. In order

  2  to avoid needless and indiscriminate proliferation,

  3  duplication, and fragmentation of such assistance programs,

  4  any unit of local government, any residents of which are

  5  insured by the corporation association, may provide for the

  6  payment of losses, regardless of whether or not the losses

  7  occurred within or outside of the territorial jurisdiction of

  8  the local government. Revenue bonds under this subparagraph

  9  may not be issued until validated pursuant to chapter 75,

10  unless a state of emergency is declared by executive order or

11  proclamation of the Governor pursuant to s. 252.36 making such

12  findings as are necessary to determine that it is in the best

13  interests of, and necessary for, the protection of the public

14  health, safety, and general welfare of residents of this state

15  and the protection and preservation of the economic stability

16  of insurers operating in this state, and declaring it an

17  essential public purpose to permit certain municipalities or

18  counties to issue such bonds as will permit relief to

19  claimants and policyholders of the corporation joint

20  underwriting association and insurers responsible for

21  apportionment of association losses. Any such unit of local

22  government may enter into such contracts with the corporation

23  association and with any other entity created pursuant to this

24  subsection as are necessary to carry out this paragraph. Any

25  bonds issued under this subparagraph shall be payable from and

26  secured by moneys received by the corporation association from

27  emergency assessments under sub-subparagraph (b)3.d., and

28  assigned and pledged to or on behalf of the unit of local

29  government for the benefit of the holders of such bonds.  The

30  funds, credit, property, and taxing power of the state or of

31  the unit of local government shall not be pledged for the


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    CS for SB 1418                          Second Engrossed (ntc)



  1  payment of such bonds. If any of the bonds remain unsold 60

  2  days after issuance, the department shall require all insurers

  3  subject to assessment to purchase the bonds, which shall be

  4  treated as admitted assets; each insurer shall be required to

  5  purchase that percentage of the unsold portion of the bond

  6  issue that equals the insurer's relative share of assessment

  7  liability under this subsection. An insurer shall not be

  8  required to purchase the bonds to the extent that the

  9  department determines that the purchase would endanger or

10  impair the solvency of the insurer.

11         3.a.  In addition to any credits, bonuses, or

12  exemptions provided under s. 627.3511, The corporation board

13  shall adopt one or more programs a program subject to approval

14  by the department for the reduction of both new and renewal

15  writings in the corporation association. The corporation board

16  may consider any prudent and not unfairly discriminatory

17  approach to reducing corporation association writings, and may

18  but must adopt at least a credit against assessment liability

19  or other liability that provides an incentive for insurers to

20  take risks out of the corporation association and to keep

21  risks out of the corporation association by maintaining or

22  increasing voluntary writings in counties or areas in which

23  corporation association risks are highly concentrated and a

24  program to provide a formula under which an insurer

25  voluntarily taking risks out of the corporation association by

26  maintaining or increasing voluntary writings will be relieved

27  wholly or partially from assessments under sub-subparagraphs

28  (b)3.a. and b. When the corporation enters into a contractual

29  agreement for a take-out plan, the producing agent of record

30  of the corporation policy is entitled to retain any unearned

31  commission on such policy, and the insurer shall either:


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    CS for SB 1418                          Second Engrossed (ntc)



  1         (I)  Pay to the producing agent of record of the

  2  policy, for the first year, an amount which is the greater of

  3  the insurer's usual and customary commission for the type of

  4  policy written or a policy fee equal to the usual and

  5  customary commission of the corporation; or

  6         (II)  Offer to allow the producing agent of record of

  7  the policy to continue servicing the policy for a period of

  8  not less than 1 year and offer to pay the agent the insurer's

  9  usual and customary commission for the type of policy written.

10  If the producing agent is unwilling or unable to accept

11  appointment by the new insurer, the new insurer shall pay the

12  agent in accordance with sub-sub-subparagraph (I).

13         b.  Any credit or exemption from regular assessments

14  adopted under this subparagraph shall last no longer than the

15  3 years following the cancellation or expiration of the policy

16  by the corporation association. With the approval of the

17  department, the board may extend such credits for an

18  additional year if the insurer guarantees an additional year

19  of renewability for all policies removed from the corporation

20  association, or for 2 additional years if the insurer

21  guarantees 2 additional years of renewability for all policies

22  so removed.

23         c.  There shall be no credit, limitation, exemption, or

24  deferment from emergency assessments to be collected from

25  policyholders pursuant to sub-subparagraph (b)3.d.

26         4.  The plan shall provide for the deferment, in whole

27  or in part, of the assessment of an assessable a member

28  insurer, other than an emergency assessment collected from

29  policyholders pursuant to sub-subparagraph (b)3.d., if the

30  department finds that payment of the assessment would endanger

31  or impair the solvency of the insurer. In the event an


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    CS for SB 1418                          Second Engrossed (ntc)



  1  assessment against an assessable a member insurer is deferred

  2  in whole or in part, the amount by which such assessment is

  3  deferred may be assessed against the other assessable member

  4  insurers in a manner consistent with the basis for assessments

  5  set forth in paragraph (b).

  6         (h)  Nothing in this subsection shall be construed to

  7  preclude the issuance of residential property insurance

  8  coverage pursuant to part VIII of chapter 626.

  9         (i)  There shall be no liability on the part of, and no

10  cause of action of any nature shall arise against, any

11  assessable member insurer or its agents or employees, the

12  corporation association or its agents or employees, members of

13  the board of governors or their respective designees at a

14  board meeting, corporation association committee members, or

15  the department or its representatives, for any action taken by

16  them in the performance of their duties or responsibilities

17  under this subsection. Such immunity does not apply to:

18         1.  Any of the foregoing persons or entities for any

19  willful tort;

20         2.  The corporation association or its servicing or

21  producing agents for breach of any contract or agreement

22  pertaining to insurance coverage;

23         3.  The corporation association with respect to

24  issuance or payment of debt; or

25         4.  Any assessable member insurer with respect to any

26  action to enforce an assessable a member insurer's obligations

27  to the corporation association under this subsection.

28         (j)  The Residential Property and Casualty Joint

29  Underwriting Association is not a state agency, board, or

30  commission. However, For the purposes of s. 199.183(1), the

31  corporation Residential Property and Casualty Joint


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    CS for SB 1418                          Second Engrossed (ntc)



  1  Underwriting Association shall be considered a political

  2  subdivision of the state and shall be exempt from the

  3  corporate income tax. The premiums, assessments, investment

  4  income, and other revenue of the corporation are funds

  5  received for providing property insurance coverage as required

  6  by this subsection, paying claims for Florida citizens insured

  7  by the corporation, securing and repaying debt obligations

  8  issued by the corporation, and conducting all other activities

  9  of the corporation, and shall not be considered taxes, fees,

10  licenses, or charges for services imposed by the Legislature

11  on individuals, businesses, or agencies outside state

12  government. Bonds and other debt obligations issued by or on

13  behalf of the corporation are not to be considered "State

14  bonds" within the meaning of s. 215.58(10). The corporation is

15  not subject to the procurement provisions of chapter 287, and

16  policies and decisions of the corporation relating to

17  incurring debt, levying of assessments and the sale, issuance,

18  continuation, terms and claims under corporation policies, and

19  all services relating thereto, are not subject to the

20  provisions of chapter 120. The corporation is not required to

21  obtain or to hold a certificate of authority issued by the

22  department, nor is it required to participate as a member

23  insurer of the Florida Insurance Guaranty Association.

24  However, the corporation is required to pay, in the same

25  manner as an authorized insurer, assessments pledged by the

26  Florida Insurance Guaranty Association to secure bonds issued

27  or other indebtedness incurred to pay covered claims arising

28  from insurer insolvencies caused by, or proximately related

29  to, hurricane losses. It is the intent of the Legislature that

30  the tax exemptions provided in this paragraph will augment the

31  financial resources of the corporation to better enable the


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    CS for SB 1418                          Second Engrossed (ntc)



  1  corporation to fulfill its public purposes. Any bonds issued

  2  by the corporation, their transfer, and the income therefrom,

  3  including any profit made on the sale thereof, shall at all

  4  times be free from taxation of every kind by the state and any

  5  political subdivision or local unit or other instrumentality

  6  thereof; however, this exemption does not apply to any tax

  7  imposed by chapter 200 on interest, income, or profits on debt

  8  obligations owned by corporations other than the corporation.

  9         (k)  Upon a determination by the department board of

10  governors that the conditions giving rise to the establishment

11  and activation of the corporation association no longer exist,

12  and upon the consent thereto by order of the department, the

13  corporation association is dissolved. Upon dissolution, the

14  assets of the association shall be applied first to pay all

15  debts, liabilities, and obligations of the corporation

16  association, including the establishment of reasonable

17  reserves for any contingent liabilities or obligations, and

18  all remaining assets of the corporation association shall

19  become property of the state and deposited in the Florida

20  Hurricane Catastrophe Fund.

21         (l)1.  Effective July 1, 2002, policies of the

22  Residential Property and Casualty Joint Underwriting

23  Association shall become policies of the corporation. All

24  obligations, rights, assets and liabilities of the Residential

25  Property and Casualty Joint Underwriting Association,

26  including bonds, note and debt obligations, and the financing

27  documents pertaining to them become those of the corporation

28  as of July 1, 2002. The corporation is not required to issue

29  endorsements or certificates of assumption to insureds during

30  the remaining term of in-force transferred policies.

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1         2.  Effective July 1, 2002, policies of the Florida

  2  Windstorm Underwriting Association are transferred to the

  3  corporation and shall become policies of the corporation. All

  4  obligations, rights, assets, and liabilities of the Florida

  5  Windstorm Underwriting Association, including bonds, note, and

  6  debt obligations, and the financing documents pertaining to

  7  them are transferred to and assumed by the corporation on July

  8  1, 2002. The corporation is not required to issue endorsement

  9  or certificates of assumption to insureds during the remaining

10  term of in-force transferred policies.

11         3.  The Florida Windstorm Underwriting Association and

12  the Residential Property and Casualty Joint Underwriting

13  Association shall take all actions as may be proper to further

14  evidence the transfers and shall provide the documents and

15  instruments of further assurance as may reasonably be

16  requested by the corporation for that purpose. The corporation

17  shall execute assumptions and instruments as the trustees or

18  other parties to the financing documents of the Florida

19  Windstorm Underwriting Association or the Residential Property

20  and Casualty Joint Underwriting Association may reasonably

21  request to further evidence the transfers and assumptions,

22  which transfers and assumptions, however, are effective on the

23  date provided under this paragraph whether or not, and

24  regardless of the date on which, the assumptions or

25  instruments are executed by the corporation. Subject to the

26  relevant financing documents pertaining to their outstanding

27  bonds, notes, indebtedness, or other financing obligations,

28  the moneys, investments, receivables, choses in action, and

29  other intangibles of the Florida Windstorm Underwriting

30  Association shall be credited to the high-risk account of the

31  corporation, and those of the personal lines residential


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    CS for SB 1418                          Second Engrossed (ntc)



  1  coverage account and the commercial lines residential coverage

  2  account of the Residential Property and Casualty Joint

  3  Underwriting Association shall be credited to the personal

  4  lines account and the commercial lines account, respectively,

  5  of the corporation.

  6         4.  Effective July 1, 2002, a new applicant for

  7  property insurance coverage who would otherwise have been

  8  eligible for coverage in the Florida Windstorm Underwriting

  9  Association is eligible for coverage from the corporation as

10  provided in this subsection.

11         5.  The transfer of all policies, obligations, rights,

12  assets, and liabilities from the Florida Windstorm

13  Underwriting Association to the corporation and the renaming

14  of the Residential Property and Casualty Joint Underwriting

15  Association as the corporation shall in no way affect the

16  coverage with respect to covered policies as defined in s.

17  215.555(2)(c) provided to these entities by the Florida

18  Hurricane Catastrophe Fund. The coverage provided by the

19  Florida Hurricane Catastrophe Fund to the Florida Windstorm

20  Underwriting Association based on its exposures as of June 30,

21  2002, and each June 30 thereafter shall be redesignated as

22  coverage for the high-risk account of the corporation.

23  Notwithstanding any other provision of law, the coverage

24  provided by the Florida Hurricane Catastrophe Fund to the

25  Residential Property and Casualty Joint Underwriting

26  Association based on its exposures as of June 30, 2002, and

27  each June 30 thereafter shall be transferred to the personal

28  lines account and the commercial lines account of the

29  corporation. Notwithstanding any other provision of law, the

30  high-risk account shall be treated, for all Florida Hurricane

31  Catastrophe Fund purposes, as if it were a separate


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    CS for SB 1418                          Second Engrossed (ntc)



  1  participating insurer with its own exposures, reimbursement

  2  premium, and loss reimbursement. Likewise, the personal lines

  3  and commercial lines accounts shall be viewed together, for

  4  all Florida Hurricane Catastrophe Fund purposes, as if the two

  5  accounts were one and represent a single, separate

  6  participating insurer with its own exposures, reimbursement

  7  premium, and loss reimbursement. The coverage provided by the

  8  Florida Hurricane Catastrophe Fund to the corporation shall

  9  constitute and operate as a full transfer of coverage from the

10  Florida Windstorm Underwriting Association and Residential

11  Property and Casualty Joint Underwriting to the corporation.

12  All obligations, rights, assets, and liabilities of the

13  Florida Property and Casualty Joint Underwriting Association

14  created by subsection (5), which obligations, rights, assets,

15  or liabilities relate to the provision of commercial lines

16  residential property insurance coverage as described in this

17  section are hereby transferred to the Residential Property and

18  Casualty Joint Underwriting Association. The Residential

19  Property and Casualty Joint Underwriting Association is not

20  required to issue endorsements or certificates of assumption

21  to insureds during the remaining term of in-force transferred

22  policies.

23         (m)  Notwithstanding any other provision of law:

24         1.  The pledge or sale of, the lien upon, and the

25  security interest in any rights, revenues, or other assets of

26  the corporation association created or purported to be created

27  pursuant to any financing documents to secure any bonds or

28  other indebtedness of the corporation association shall be and

29  remain valid and enforceable, notwithstanding the commencement

30  of and during the continuation of, and after, any

31  rehabilitation, insolvency, liquidation, bankruptcy,


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    CS for SB 1418                          Second Engrossed (ntc)



  1  receivership, conservatorship, reorganization, or similar

  2  proceeding against the corporation association under the laws

  3  of this state.

  4         2.  No such proceeding shall relieve the corporation

  5  association of its obligation, or otherwise affect its ability

  6  to perform its obligation, to continue to collect, or levy and

  7  collect, assessments, market equalization or other surcharges

  8  under subparagraph (c)10., or any other rights, revenues, or

  9  other assets of the corporation association pledged pursuant

10  to any financing documents.

11         3.  Each such pledge or sale of, lien upon, and

12  security interest in, including the priority of such pledge,

13  lien, or security interest, any such assessments, market

14  equalization or other surcharges, or other rights, revenues,

15  or other assets which are collected, or levied and collected,

16  after the commencement of and during the pendency of, or

17  after, any such proceeding shall continue unaffected by such

18  proceeding.  As used in this subsection, the term "financing

19  documents" means any agreement or agreements, instrument or

20  instruments, or other document or documents now existing or

21  hereafter created evidencing any bonds or other indebtedness

22  of the corporation association or pursuant to which any such

23  bonds or other indebtedness has been or may be issued and

24  pursuant to which any rights, revenues, or other assets of the

25  corporation association are pledged or sold to secure the

26  repayment of such bonds or indebtedness, together with the

27  payment of interest on such bonds or such indebtedness, or the

28  payment of any other obligation or financial product, as

29  defined in the plan of operation of the corporation

30  association related to such bonds or indebtedness.

31


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    CS for SB 1418                          Second Engrossed (ntc)



  1         4.  Any such pledge or sale of assessments, revenues,

  2  contract rights, or other rights or assets of the corporation

  3  association shall constitute a lien and security interest, or

  4  sale, as the case may be, that is immediately effective and

  5  attaches to such assessments, revenues, or contract rights or

  6  other rights or assets, whether or not imposed or collected at

  7  the time the pledge or sale is made.  Any such pledge or sale

  8  is effective, valid, binding, and enforceable against the

  9  corporation association or other entity making such pledge or

10  sale, and valid and binding against and superior to any

11  competing claims or obligations owed to any other person or

12  entity, including policyholders in this state, asserting

13  rights in any such assessments, revenues, or contract rights

14  or other rights or assets to the extent set forth in and in

15  accordance with the terms of the pledge or sale contained in

16  the applicable financing documents, whether or not any such

17  person or entity has notice of such pledge or sale and without

18  the need for any physical delivery, recordation, filing, or

19  other action.

20         (n)1.  The following records of the corporation

21  Residential Property and Casualty Joint Underwriting

22  Association are confidential and exempt from the provisions of

23  s. 119.07(1) and s. 24(a), Art. I of the State Constitution:

24         a.  Underwriting files, except that a policyholder or

25  an applicant shall have access to his or her own underwriting

26  files.

27         b.  Claims files, until termination of all litigation

28  and settlement of all claims arising out of the same incident,

29  although portions of the claims files may remain exempt, as

30  otherwise provided by law. Confidential and exempt claims file

31  records may be released to other governmental agencies upon


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    CS for SB 1418                          Second Engrossed (ntc)



  1  written request and demonstration of need; such records held

  2  by the receiving agency remain confidential and exempt as

  3  provided for herein.

  4         c.  Records obtained or generated by an internal

  5  auditor pursuant to a routine audit, until the audit is

  6  completed, or if the audit is conducted as part of an

  7  investigation, until the investigation is closed or ceases to

  8  be active.  An investigation is considered "active" while the

  9  investigation is being conducted with a reasonable, good faith

10  belief that it could lead to the filing of administrative,

11  civil, or criminal proceedings.

12         d.  Matters reasonably encompassed in privileged

13  attorney-client communications.

14         e.  Proprietary information licensed to the corporation

15  association under contract and the contract provides for the

16  confidentiality of such proprietary information.

17         f.  All information relating to the medical condition

18  or medical status of a corporation an association employee

19  which is not relevant to the employee's capacity to perform

20  his or her duties, except as otherwise provided in this

21  paragraph. Information which is exempt shall include, but is

22  not limited to, information relating to workers' compensation,

23  insurance benefits, and retirement or disability benefits.

24         g.  Upon an employee's entrance into the employee

25  assistance program, a program to assist any employee who has a

26  behavioral or medical disorder, substance abuse problem, or

27  emotional difficulty which affects the employee's job

28  performance, all records relative to that participation shall

29  be confidential and exempt from the provisions of s. 119.07(1)

30  and s. 24(a), Art. I of the State Constitution, except as

31  otherwise provided in s. 112.0455(11).


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    CS for SB 1418                          Second Engrossed (ntc)



  1         h.  Information relating to negotiations for financing,

  2  reinsurance, depopulation, or contractual services, until the

  3  conclusion of the negotiations.

  4         i.  Minutes of closed meetings regarding underwriting

  5  files, and minutes of closed meetings regarding an open claims

  6  file until termination of all litigation and settlement of all

  7  claims with regard to that claim, except that information

  8  otherwise confidential or exempt by law will be redacted.

  9

10  When an authorized insurer is considering underwriting a risk

11  insured by the corporation association, relevant underwriting

12  files and confidential claims files may be released to the

13  insurer provided the insurer agrees in writing, notarized and

14  under oath, to maintain the confidentiality of such files.

15  When a file is transferred to an insurer that file is no

16  longer a public record because it is not held by an agency

17  subject to the provisions of the public records law.

18  Underwriting files and confidential claims files may also be

19  released to staff of and the board of governors of the market

20  assistance plan established pursuant to s. 627.3515, who must

21  retain the confidentiality of such files, except such files

22  may be released to authorized insurers that are considering

23  assuming the risks to which the files apply, provided the

24  insurer agrees in writing, notarized and under oath, to

25  maintain the confidentiality of such files.  Finally, the

26  corporation association or the board or staff of the market

27  assistance plan may make the following information obtained

28  from underwriting files and confidential claims files

29  available to licensed general lines insurance agents: name,

30  address, and telephone number of the residential property

31  owner or insured; location of the risk; rating information;


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    CS for SB 1418                          Second Engrossed (ntc)



  1  loss history; and policy type.  The receiving licensed general

  2  lines insurance agent must retain the confidentiality of the

  3  information received.

  4         2.  Portions of meetings of the corporation Residential

  5  Property and Casualty Joint Underwriting Association are

  6  exempt from the provisions of s. 286.011 and s. 24(b), Art. I

  7  of the State Constitution wherein confidential underwriting

  8  files or confidential open claims files are discussed.  All

  9  portions of corporation association meetings which are closed

10  to the public shall be recorded by a court reporter.  The

11  court reporter shall record the times of commencement and

12  termination of the meeting, all discussion and proceedings,

13  the names of all persons present at any time, and the names of

14  all persons speaking.  No portion of any closed meeting shall

15  be off the record.  Subject to the provisions hereof and s.

16  119.07(2)(a), the court reporter's notes of any closed meeting

17  shall be retained by the corporation association for a minimum

18  of 5 years. A copy of the transcript, less any exempt matters,

19  of any closed meeting wherein claims are discussed shall

20  become public as to individual claims after settlement of the

21  claim.

22         (o)  It is the intent of the Legislature that the

23  amendments to this subsection enacted in 2002 should, over

24  time, reduce the probable maximum windstorm losses in the

25  residual markets and should reduce the potential assessments

26  to be levied on property insurers and policyholders statewide.

27  In furtherance of this intent:

28         1.  The board shall, on or before February 1 of each

29  year, provide a report to the President of the Senate and the

30  Speaker of the House of Representatives showing the reduction

31  or increase in the 100-year probable maximum loss attributable


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    CS for SB 1418                          Second Engrossed (ntc)



  1  to wind-only coverages and the quota share program under this

  2  subsection combined, as compared to the benchmark 100-year

  3  probable maximum loss of the Florida Windstorm Underwriting

  4  Association.  For purposes of this paragraph, the benchmark

  5  100-year probable maximum loss of the Florida Windstorm

  6  Underwriting Association shall be the calculation dated

  7  February 2001 and based on November 30, 2000, exposures.  In

  8  order to ensure comparability of data, the board shall use the

  9  same methods for calculating its probable maximum loss as were

10  used to calculate the benchmark probable maximum loss.

11         2.  Beginning February 1, 2007, if the report under

12  subparagraph 1. for any year indicates that the 100-year

13  probable maximum loss attributable to wind-only coverages and

14  the quota share program combined does not reflect a reduction

15  of at least 25 percent from the benchmark, the board shall

16  reduce the boundaries of the high-risk area eligible for

17  wind-only coverages under this subsection in a manner

18  calculated to reduce such probable maximum loss to an amount

19  at least 25 percent below the benchmark.

20         3.  Beginning February 1, 2012, if the report under

21  subparagraph 1. for any year indicates that the 100-year

22  probable maximum loss attributable to wind-only coverages and

23  the quota share program combined does not reflect a reduction

24  of at least 50 percent from the benchmark, the boundaries of

25  the high-risk area eligible for wind-only coverages under this

26  subsection shall be reduced by the elimination of any area

27  that is not seaward of a line 1,000 feet inland from the

28  Intracoastal Waterway.

29         (p)  In enacting the provisions of this section, the

30  Legislature recognizes that both the Florida Windstorm

31  Underwriting Association and the Residential Property and


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    CS for SB 1418                          Second Engrossed (ntc)



  1  Casualty Joint Underwriting Association have entered into

  2  financing arrangements that obligate each entity to service

  3  its debts and maintain the capacity to repay funds secured

  4  under these financing arrangements. It is the intent of the

  5  Legislature that nothing in this section be construed to

  6  compromise, diminish, or interfere with the rights of

  7  creditors under such financing arrangements. It is further the

  8  intent of the Legislature to preserve the obligations of the

  9  Florida Windstorm Underwriting Association and Residential

10  Property and Casualty Joint Underwriting Association with

11  regard to outstanding financing arrangements, with such

12  obligations passing entirely and unchanged to the corporation

13  and, specifically, to the applicable account of the

14  corporation. So long as any bonds, notes, indebtedness, or

15  other financing obligations of the Florida Windstorm

16  Underwriting Association or the Residential Property and

17  Casualty Joint Underwriting Association are outstanding, under

18  the terms of the financing documents pertaining to them, the

19  governing board of the corporation shall have and shall

20  exercise the authority to levy, charge, collect, and receive

21  all premiums, assessments, surcharges, charges, revenues and

22  receipts that the associations had authority to levy, charge,

23  collect, or receive under the provisions of subsection (2) and

24  subsection (6), respectively, as they existed on January 1,

25  2002, to the extent necessary to provide moneys, together with

26  other available moneys of the corporation in the applicable

27  account without exercise of the authority provided by this

28  paragraph, in at least the amounts, and by the times, as would

29  be provided under those former provisions of subsection (2) or

30  subsection (6), respectively, so that the value, amount, and

31  collectability of any assets, revenues, or revenue source


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    CS for SB 1418                          Second Engrossed (ntc)



  1  pledged or committed to, or any lien thereon securing such

  2  outstanding bonds, notes, indebtedness, or other financing

  3  obligations will not be diminished, impaired, or adversely

  4  affected by the amendments made by this act and to permit

  5  compliance with all provisions of financing documents

  6  pertaining to such bonds, notes, indebtedness, or other

  7  financing obligations, or the security or credit enhancement

  8  for them, and any reference in this subsection to bonds,

  9  notes, indebtedness, financing obligations, or similar

10  obligations, of the corporation shall include like instruments

11  or contracts of the Florida Windstorm Underwriting Association

12  and the Residential Property and Casualty Joint Underwriting

13  Association to the extent not inconsistent with the provisions

14  of the financing documents pertaining to them.

15         (q)  Effective January 7, 2003, any reference in this

16  subsection to the Treasurer shall be deemed to be a reference

17  to the Chief Financial Officer and any reference to the

18  Department of Insurance shall be deemed to be a reference to

19  the Department of Insurance and Financial Services or other

20  successor to the Department of Insurance specified by law.

21         (r)  The corporation shall not require the securing of

22  flood insurance as a condition of coverage if the insured or

23  applicant executes a form approved by the department affirming

24  that flood insurance is not provided by the corporation and

25  that if flood insurance is not secured by the applicant or

26  insured in addition to coverage by the corporation, the risk

27  will not be covered for flood damage. A corporation

28  policyholder electing not to secure flood insurance and

29  executing a form as provided herein making a clam for water

30  damage against the corporation shall have the burden of

31  proving the damage was not caused by flooding. Notwithstanding


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    CS for SB 1418                          Second Engrossed (ntc)



  1  other provisions of this subsection, the corporation may deny

  2  coverage to an applicant or insured who refuses to execute the

  3  form described herein.

  4         Section 3.  Subsection (4) of section 627.3511, Florida

  5  Statutes, is amended to read:

  6         627.3511  Depopulation of Residential Property and

  7  Casualty Joint Underwriting Association.--

  8         (4)  AGENT BONUS.--When the Residential Property and

  9  Casualty Joint Underwriting Association enters into a

10  contractual agreement for a take-out plan that provides a

11  bonus to the insurer, the producing agent of record of the

12  association policy is entitled to retain any unearned

13  commission on such policy, and the insurer shall either:

14         (a)  Pay to the producing agent of record of the

15  association policy, for the first year, an amount that is the

16  greater of equal to the insurer's usual and customary

17  commission for the type of policy written of a fee equal to

18  the if the term of the association policy was in excess of 6

19  months, or one-half of such usual and customary commission if

20  the term of the association policy was 6 months or less; or

21         (b)  Offer to allow the producing agent of record of

22  the association policy to continue servicing the policy for a

23  period of not less than 1 year and offer to pay the agent the

24  greater of the insurer's or the association's usual and

25  customary commission for the type of policy written.

26

27  If the producing agent is unwilling or unable to accept

28  appointment, the new insurer shall pay the agent in accordance

29  with paragraph (a). The insurer need not take any further

30  action if the offer is rejected. This subsection does not

31  apply to any reciprocal interinsurance exchange, nonprofit


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    CS for SB 1418                          Second Engrossed (ntc)



  1  federation, or any subsidiary or affiliate of such

  2  organization. This subsection does not apply if the agent is

  3  also the agent of record on the new coverage. The requirement

  4  of this subsection that the producing agent of record is

  5  entitled to retain the unearned commission on an association

  6  policy does not apply to a policy for which coverage has been

  7  provided in the association for 30 days or less or for which a

  8  cancellation notice has been issued pursuant to s.

  9  627.351(6)(c)11. during the first 30 days of coverage.

10         Section 4.  Section 627.3517, Florida Statutes, is

11  created to read:

12         627.3517  Consumer choice.--No provision of s. 627.351,

13  s. 627.3511, or s. 627.3515 shall be construed to impair the

14  right of any insurance risk apportionment plan policyholder,

15  upon receipt of any keepout or takeout offer, to retain his or

16  her current agent so long as that agent is duly licensed and

17  appointed by the insurance risk apportionment plan or

18  otherwise authorized to place business with the insurance risk

19  apportionment plan. This right shall not be cancelled,

20  suspended, impeded, abridged, or otherwise compromised by any

21  rule, plan of operation, or depopulation plan, whether through

22  keepout, takeout, midterm assumption, or any other means, or

23  any insurance risk apportionment plan or depopulation plan,

24  including, but not limited to, those described in s. 627.351,

25  s. 627.3511, or s. 627.3515. The department shall adopt any

26  rules necessary to cause any insurance risk apportionment plan

27  or market assistance plan under such sections to demonstrate

28  that the operations of the plan do not interfere with,

29  promote, or allow interference with the rights created under

30  this section. If the policyholder's current agent is unable or

31  unwilling to be appointed with the insurer making the takeout


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    CS for SB 1418                          Second Engrossed (ntc)



  1  or keepout offer, the policyholder shall not be disqualified

  2  from participation in the appropriate insurance risk

  3  apportionment plan because of an offer of coverage in the

  4  voluntary market. An offer of full property insurance coverage

  5  by the insurer currently insuring either the ex-wind or

  6  wind-only coverage on the policy to which the offer applies

  7  shall not be considered a takeout or keepout offer. Any rule,

  8  plan of operation, or plan of depopulation, through keepout,

  9  takeout, midterm assumption, or any other means, of any

10  property insurance risk apportionment plan under s. 627.351(2)

11  or s. 627.351(6) is subject to ss. 627.351(2)(b) and (6)(c)

12  and 627.3511(4).

13         Section 5.  This act shall take effect upon becoming a

14  law.

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