| 1 | A bill to be entitled |
| 2 | An act relating to the Citizens Property Insurance |
| 3 | Corporation; amending s. 627.351, F.S.; revising criteria |
| 4 | for rates for coverage provided by the corporation; |
| 5 | providing an effective date. |
| 6 |
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| 7 | Be It Enacted by the Legislature of the State of Florida: |
| 8 |
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| 9 | Section 1. Paragraph (d) of subsection (6) of section |
| 10 | 627.351, Florida Statutes, is amended to read: |
| 11 | 627.351 Insurance risk apportionment plans.-- |
| 12 | (6) CITIZENS PROPERTY INSURANCE CORPORATION.-- |
| 13 | (d)1. It is the intent of the Legislature that the rates |
| 14 | for coverage provided by the corporation be actuarially sound, |
| 15 | as determined by the corporation, but no higher than actuarially |
| 16 | sound, and not competitive with approved rates charged in the |
| 17 | admitted voluntary market, so that the corporation functions as |
| 18 | a residual market mechanism to provide insurance only when the |
| 19 | insurance cannot be procured in the voluntary market. Rates |
| 20 | shall include an appropriate catastrophe loading factor that |
| 21 | reflects the actual catastrophic exposure of the corporation. |
| 22 | 2. For each county, the average rates of the corporation |
| 23 | for each line of business for personal lines residential |
| 24 | policies excluding rates for wind-only policies shall be no |
| 25 | lower than the average rates charged by the insurer that had the |
| 26 | highest average rate in that county among the 20 insurers with |
| 27 | the greatest total direct written premium in the state for that |
| 28 | line of business in the preceding year, except that with respect |
| 29 | to mobile home coverages, the average rates of the corporation |
| 30 | shall be no lower than the average rates charged by the insurer |
| 31 | that had the highest average rate in that county among the 5 |
| 32 | insurers with the greatest total written premium for mobile home |
| 33 | owner's policies in the state in the preceding year. |
| 34 | 3. Rates for personal lines residential wind-only policies |
| 35 | must be actuarially sound and not competitive with approved |
| 36 | rates charged by authorized insurers. However, for personal |
| 37 | lines residential wind-only policies issued or renewed between |
| 38 | July 1, 2002, and June 30, 2003, the maximum premium increase |
| 39 | must be no greater than 10 percent of the Florida Windstorm |
| 40 | Underwriting Association premium for that policy in effect on |
| 41 | June 30, 2002, as adjusted for coverage changes and seasonal |
| 42 | occupancy surcharges. For personal lines residential wind-only |
| 43 | policies issued or renewed between July 1, 2003, and June 30, |
| 44 | 2004, the corporation shall use its existing filed and approved |
| 45 | wind-only rating and classification plans, provided, however, |
| 46 | that the maximum premium increase must be no greater than 20 |
| 47 | percent of the premium for that policy in effect on June 30, |
| 48 | 2003, as adjusted for coverage changes and seasonal occupancy |
| 49 | surcharges. Corporation rate manuals shall include a rate |
| 50 | surcharge for seasonal occupancy. To ensure that personal lines |
| 51 | residential wind-only rates effective on or after July 1, 2004, |
| 52 | are not competitive with approved rates charged by authorized |
| 53 | insurers, the corporation, in conjunction with the office, shall |
| 54 | develop a wind-only ratemaking methodology, which methodology |
| 55 | shall be contained in a rate filing made by the corporation with |
| 56 | the office by January 1, 2004. If the office thereafter |
| 57 | determines that the wind-only rates or rating factors filed by |
| 58 | the corporation fail to comply with the wind-only ratemaking |
| 59 | methodology provided for in this subsection, it shall so notify |
| 60 | the corporation and require the corporation to amend its rates |
| 61 | or rating factors to come into compliance within 90 days of |
| 62 | notice from the office. The office shall report to the Speaker |
| 63 | of the House of Representatives and the President of the Senate |
| 64 | on the provisions of the wind-only ratemaking methodology by |
| 65 | January 31, 2004. |
| 66 | 4. Rates for commercial lines coverage shall not be |
| 67 | subject to the requirements of subparagraph 2., but shall be |
| 68 | subject to all other requirements of this paragraph and s. |
| 69 | 627.062. |
| 70 | 5. Nothing in this paragraph shall require or allow the |
| 71 | corporation to adopt a rate that is inadequate under s. 627.062. |
| 72 | 6. The corporation shall certify to the office at least |
| 73 | twice annually that its personal lines rates comply with the |
| 74 | requirements of subparagraphs 1. and 2. If any adjustment in the |
| 75 | rates or rating factors of the corporation is necessary to |
| 76 | ensure such compliance, the corporation shall make and implement |
| 77 | such adjustments and file its revised rates and rating factors |
| 78 | with the office. If the office thereafter determines that the |
| 79 | revised rates and rating factors fail to comply with the |
| 80 | provisions of subparagraphs 1. and 2., it shall notify the |
| 81 | corporation and require the corporation to amend its rates or |
| 82 | rating factors in conjunction with its next rate filing. The |
| 83 | office must notify the corporation by electronic means of any |
| 84 | rate filing it approves for any insurer among the insurers |
| 85 | referred to in subparagraph 2. |
| 86 | 7. In addition to the rates otherwise determined pursuant |
| 87 | to this paragraph, the corporation shall impose and collect an |
| 88 | amount equal to the premium tax provided for in s. 624.509 to |
| 89 | augment the financial resources of the corporation. |
| 90 | 8.a. To assist the corporation in developing additional |
| 91 | ratemaking methods to assure compliance with subparagraphs 1. |
| 92 | and 4., the corporation shall appoint a rate methodology panel |
| 93 | consisting of one person recommended by the Florida Association |
| 94 | of Insurance Agents, one person recommended by the Professional |
| 95 | Insurance Agents of Florida, one person recommended by the |
| 96 | Florida Association of Insurance and Financial Advisors, one |
| 97 | person recommended by the insurer with the highest voluntary |
| 98 | market share of residential property insurance business in the |
| 99 | state, one person recommended by the insurer with the second- |
| 100 | highest voluntary market share of residential property insurance |
| 101 | business in the state, one person recommended by an insurer |
| 102 | writing commercial residential property insurance in this state, |
| 103 | one person recommended by the Office of Insurance Regulation, |
| 104 | and one board member designated by the board chairman, who shall |
| 105 | serve as chairman of the panel. |
| 106 | b. By January 1, 2004, the rate methodology panel shall |
| 107 | provide a report to the corporation of its findings and |
| 108 | recommendations for the use of additional ratemaking methods and |
| 109 | procedures, including the use of a rate equalization surcharge |
| 110 | in an amount sufficient to assure that the total cost of |
| 111 | coverage for policyholders or applicants to the corporation is |
| 112 | sufficient to comply with subparagraph 1. |
| 113 | c. Within 30 days after such report, the corporation shall |
| 114 | present to the President of the Senate, the Speaker of the House |
| 115 | of Representatives, the minority party leaders of each house of |
| 116 | the Legislature, and the chairs of the standing committees of |
| 117 | each house of the Legislature having jurisdiction of insurance |
| 118 | issues, a plan for implementing the additional ratemaking |
| 119 | methods and an outline of any legislation needed to facilitate |
| 120 | use of the new methods. |
| 121 | d. The plan must include a provision that producer |
| 122 | commissions paid by the corporation shall not be calculated in |
| 123 | such a manner as to include any rate equalization surcharge. |
| 124 | However, without regard to the plan to be developed or its |
| 125 | implementation, producer commissions paid by the corporation for |
| 126 | each account, other than the quota share primary program, shall |
| 127 | remain fixed as to percentage, effective rate, calculation, and |
| 128 | payment method until January 1, 2004. |
| 129 | 9. By January 1, 2004, the corporation shall develop a |
| 130 | notice to policyholders or applicants that the rates of Citizens |
| 131 | Property Insurance Corporation are intended to be higher than |
| 132 | the rates of any admitted carrier and providing other |
| 133 | information the corporation deems necessary to assist consumers |
| 134 | in finding other voluntary admitted insurers willing to insure |
| 135 | their property. |
| 136 | Section 2. This act shall take effect July 1, 2005. |