Florida Senate - 2005                      COMMITTEE AMENDMENT
    Bill No. SB 2184
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                            CHAMBER ACTION
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11  The Committee on Banking and Insurance (Baker) recommended the
12  following amendment:
13  
14         Senate Amendment (with title amendment) 
15         On page 2, line 28, through
16            page 13, line 1, delete those lines
17  
18  and insert:  
19         Section 1.  Paragraph (f) is added to subsection (2) of
20  section 631.181, Florida Statutes, to read:
21         631.181  Filing and proof of claim.--
22         (2)
23         (f)  The signed statement required by this section
24  shall not be required, at the option of a guaranty fund, on
25  claims for which adequate claims file documentation exists
26  within the records of the insolvent insurer. Claims for
27  payment of unearned premium shall not be required to use the
28  signed statement required by this section if the receiver
29  certifies to the guaranty fund that the records of the
30  insolvent insurer are sufficient to determine the amount of
31  unearned premium owed to each policyholder of the insured and
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 1  such information is remitted to the guaranty fund by the
 2  receiver in electronic or other mutually agreed upon format.
 3         Section 2.  Section 631.1915, Florida Statutes, is
 4  created to read:
 5         631.1915  Policyholder collateral; deductible
 6  reimbursements; other policyholder obligations.--
 7         (1)  Any collateral held by or for the benefit of, or
 8  assigned to, the insurer or subsequently the receiver in order
 9  to secure the obligations of a policyholder under a deductible
10  agreement shall not be considered an asset of the estate and
11  shall be maintained and administered by the receiver as
12  provided in this section, notwithstanding any other provision
13  of law or contract to the contrary.
14         (2)  If the collateral is being held by or for the
15  benefit of, or assigned to, the insurer or subsequently the
16  receiver to secure obligations under a deductible agreement
17  with a policyholder subject to the provisions of this section,
18  the collateral shall be used to secure the policyholder's
19  obligation to fund or reimburse claims payments within the
20  agreed deductible amount.
21         (3)  If a claim is subject to a deductible agreement
22  and secured by collateral and is not covered by any guaranty
23  association, the receiver shall adjust and pay the noncovered
24  claim using the collateral, but only to the extent of the
25  available collateral. A claim against the collateral by a
26  third-party claimant is not a claim against the insolvent
27  insurer's estate for purposes of s. 631.193. If the collateral
28  is exhausted and the insured is not able to provide funds to
29  pay the remaining claims within the deductible, the remaining
30  claims shall be claims against the insurer's estate subject to
31  complying with other provisions in this part for the filing
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 1  and allowance of such claims.
 2         (4)  To the extent the receiver is holding collateral
 3  provided by a policyholder that was obtained to secure a
 4  deductible agreement and to secure other obligations of the
 5  policyholder, the receiver shall equitably allocate the
 6  collateral among such obligations and administer the
 7  collateral allocated to the deductible agreement pursuant to
 8  this section. The receiver shall inform the guaranty
 9  associations of the method and details of all the foregoing
10  allocations.
11         (5)  Regardless of whether there is collateral, if the
12  insurer has contractually agreed to allow the policyholder to
13  fund its own claims within the deductible amount pursuant to a
14  deductible agreement, through the policyholder's own
15  administration of its claims or through the policyholder
16  providing funds directly to a third-party administrator who
17  administers the claims, the receiver may allow such funding
18  arrangement to continue and, where applicable, shall enforce
19  such arrangements. The funding of such claims by the
20  policyholder within the deductible amount acts as a bar to any
21  claim for such amount in the liquidation proceeding,
22  including, but not limited to, any such claim by the
23  policyholder or the third-party claimant. The funding
24  extinguishes both the obligation, if any, of any guaranty
25  association to pay such claims within the deductible amount
26  and the obligations, if any, of the policyholder or
27  third-party administrator to reimburse the guaranty
28  association. No charge of any kind shall be made against any
29  guaranty association on the basis of the policyholder's
30  funding of claims payment made pursuant to the mechanism set
31  forth in this subsection.
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 1         (6)  If the insurer has not contractually agreed to
 2  allow the policyholder to fund the policyholder's own claims
 3  within the deductible amount, to the extent a guaranty
 4  association is required by applicable state law to pay any
 5  claims for which the insurer would have been entitled to
 6  reimbursement from the policyholder under the terms of the
 7  deductible agreement and to the extent the claims have not
 8  been paid by a policyholder or third party, the guaranty
 9  association shall bill the policyholder for such reimbursement
10  and the policyholder is obligated to pay such amount to the
11  guaranty association for the benefit of the guaranty
12  associations who paid such claims. Neither the insolvency of
13  the insurer nor its inability to perform any of its
14  obligations under the deductible agreement shall be a defense
15  to the policyholder's reimbursement obligation under the
16  deductible agreement. If the policyholder fails to pay the
17  amounts due within 60 days after the bill for such
18  reimbursements is due, the receiver shall use the collateral
19  to the extent necessary to reimburse the guaranty association
20  and, at the same time, the guaranty association may pursue
21  other collection efforts against the policyholder. If more
22  than one guaranty association has a claim against the same
23  collateral and the available collateral, after allocation
24  under subsection (4), together with billing and collection
25  efforts, are together insufficient to pay each guaranty
26  association in full, the receiver shall prorate payments to
27  each guaranty association based upon the relationship the
28  amount of claims each guaranty association has paid bears to
29  the total of all claims paid by such guaranty associations.
30         (7)(a)  The guaranty association is entitled to deduct
31  from collateral to be returned to a policyholder reasonable
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 1  actual expenses incurred in fulfilling the responsibilities
 2  under this provision, not to exceed 3 percent of the
 3  collateral or the total deductible reimbursements actually
 4  collected by any other guaranty association.
 5         (b)  With respect to claims payments made by any
 6  guaranty association, the guaranty association shall provide
 7  any other guaranty associations and the receiver with a
 8  complete accounting of the guaranty association's deductible
 9  billing and collection activities, including copies of the
10  policyholder billings when rendered and the reimbursements
11  collected. The cost of reports required pursuant to this
12  subsection shall be considered part of the expenses of the
13  guaranty association.
14         (c)  The guaranty association may contract with the
15  receiver for the direct collection from the policyholders on
16  the same basis as the guaranty association and with the same
17  rights and remedies. If so assigned, the receiver shall report
18  any amounts so collected from each policyholder to the
19  guaranty association.
20         (d)  To the extent that guaranty associations pay
21  claims within the deductible amount but are not reimbursed by
22  the receiver under this section or by policyholder payments
23  from the guaranty associations' own collection efforts, the
24  guaranty association shall have a claim on the insolvent
25  insurer's estate for such unreimbursed claims payments. The
26  priority of such claim shall depend upon the nature of the
27  payment that should have been reimbursed.
28         (e)  Periodically, but not more than annually, the
29  receiver shall adjust the collateral being held pursuant to
30  the deductible agreement. The receiver shall maintain adequate
31  collateral to secure 110 percent of the entire estimated
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 1  obligation of the policyholder. The receiver shall provide a
 2  copy of its collateral review to any obligated guaranty
 3  association. Once all claims covered by the collateral have
 4  been paid and the receiver is satisfied that no new claims can
 5  be presented, the receiver may release any remaining
 6  collateral.
 7         (8)  The state court that has jurisdiction over the
 8  liquidation proceedings shall have jurisdiction to resolve
 9  disputes arising under this section.
10         (9)  Nothing in this section limits or adversely
11  affects any right the guaranty associations may have under
12  applicable state law to obtain reimbursement from certain
13  classes of policyholders for claims payments made by such
14  guaranty associations under policies of the insolvent insurer
15  or for related expenses the guaranty associations incur.
16         (10)  This section applies to all liquidations for
17  which an order is entered after July 1, 2005.
18         (11)  For purposes of this section, the term:
19         (a)  "Deductible agreement" means any combination of
20  one or more policies, endorsements, contracts, or security
21  agreements that provide for the policyholder to bear the risk
22  of loss within a specified amount per claim or occurrence
23  covered under a policy of insurance, and that may be subject
24  to aggregate limit of policyholder reimbursement obligations.
25         (b)  "Noncovered claim" means a claim that is subject
26  to a deductible agreement, may be secured by collateral, and
27  is not covered by a guaranty association.
28         (12)  This section does not apply to first-party
29  claims.
30         Section 3.  Subsection (3) of section 631.54, Florida
31  Statutes, is amended to read:
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 1         631.54  Definitions.--As used in this part:
 2         (3)  "Covered claim" means an unpaid claim, including
 3  one of unearned premiums, which arises out of, and is within
 4  the coverage, and not in excess of, the applicable limits of
 5  an insurance policy to which this part applies, issued by an
 6  insurer, if such insurer becomes an insolvent insurer and the
 7  claimant or insured is a resident of this state at the time of
 8  the insured event or the property from which the claim arises
 9  is permanently located in this state. For entities other than
10  an individual, the residence of a claimant, insured, or
11  policyholder is the state in which the entity's principal
12  place of business is located at the time of the insured event.
13  "Covered claim" shall not include:
14         (a)  Any amount due any reinsurer, insurer, insurance
15  pool, or underwriting association, sought directly or
16  indirectly through a third party, as subrogation,
17  contribution, indemnification, or otherwise; or
18         (b)  Any claim that would otherwise be a covered claim
19  under this part that has been rejected by any other state
20  guaranty fund on the grounds that an insured's net worth is
21  greater than that allowed under that state's guaranty law.
22  Member insurers shall have no right of subrogation,
23  contribution, indemnification, or otherwise, sought directly
24  or indirectly through a third party, against the insured of
25  any insolvent member.
26         Section 4.  Paragraph (a) of subsection (1), paragraph
27  (d) of subsection (2), and paragraph (a) of subsection (3) of
28  section 631.57, Florida Statutes, are amended to read:
29         631.57  Powers and duties of the association.--
30         (1)  The association shall:
31         (a)1.  Be obligated to the extent of the covered claims
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 1  existing:
 2         a.  Prior to adjudication of insolvency and arising
 3  within 30 days after the determination of insolvency;
 4         b.  Before the policy expiration date if less than 30
 5  days after the determination; or
 6         c.  Before the insured replaces the policy or causes
 7  its cancellation, if she or he does so within 30 days of the
 8  determination.
 9         2.a.  The obligation under subparagraph 1. shall
10  include only that amount of each covered claim which is in
11  excess of $100 and is less than $300,000, except with respect
12  to policies covering condominium associations or homeowners'
13  associations, which associations have a responsibility to
14  provide insurance coverage on residential units within the
15  association, the obligation shall include that amount of each
16  covered property insurance claim which is less than $100,000
17  multiplied by the number of condominium units or other
18  residential units; however, as to homeowners' associations,
19  this sub-subparagraph subparagraph applies only to claims for
20  damage or loss to residential units and structures attached to
21  residential units.
22         b.  Notwithstanding sub-subparagraph a., the
23  association has no obligation to pay covered claims that are
24  to be paid from the proceeds of bonds issued under s. 631.695.
25  However, the association shall assign and pledge the first
26  available moneys from all or part of the assessments
27  authorized in paragraph (3)(a) to or on behalf of the issuer
28  of such bonds for the benefit of the holders of such bonds.
29  The association shall administer any such covered claims and
30  present valid covered claims for payment in accordance with
31  the provisions of the assistance program in connection with
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 1  which such bonds have been issued.
 2         3.  In no event shall the association be obligated to a
 3  policyholder or claimant in an amount in excess of the
 4  obligation of the insolvent insurer under the policy from
 5  which the claim arises.
 6         (2)  The association may:
 7         (d)  Negotiate and become a party to such contracts as
 8  are necessary to carry out the purpose of this part.
 9  Additionally, the association may enter into such contracts
10  with a municipality or county or such legal entity created
11  pursuant to s. 163.01(7)(g) as are necessary in order for the
12  municipality or county or such legal entity to issue bonds
13  under s. 631.695. In connection with the issuance of any such
14  bonds and the entering into of any such necessary contracts,
15  the association may agree to such terms and conditions as the
16  association deems necessary and proper.
17         (3)(a)  To the extent necessary to secure the funds for
18  the respective accounts for the payment of covered claims, and
19  also to pay the reasonable costs to administer the same, and
20  to the extent necessary to retire indebtedness, including,
21  without limitation, the principal, redemption premium, if any,
22  and interest on, and related costs of issuance of, bonds
23  issued under s. 631.695 and the funding of any reserves and
24  other payments required under the bond resolution or trust
25  indenture pursuant to which such bonds have been issued, the
26  office, upon certification of the board of directors, shall
27  levy assessments in the proportion that each insurer's net
28  direct written premiums in this state in the classes protected
29  by the account bears to the total of said net direct written
30  premiums received in this state by all such insurers for the
31  preceding calendar year for the kinds of insurance included
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 1  within such account. Assessments shall be remitted to and
 2  administered by the board of directors in the manner specified
 3  by the approved plan. Each insurer so assessed shall have at
 4  least 30 days' written notice as to the date the assessment is
 5  due and payable.  Every assessment shall be made as a uniform
 6  percentage applicable to the net direct written premiums of
 7  each insurer in the kinds of insurance included within the
 8  account in which the assessment is made.  The assessments
 9  levied against any insurer shall not exceed in any one year
10  more than 2 percent of that insurer's net direct written
11  premiums in this state for the kinds of insurance included
12  within such account during the calendar year next preceding
13  the date of such assessments.
14         Section 5.  Section 631.695, Florida Statutes, is
15  created to read:
16         631.695  Revenue bond issuance through counties or
17  municipalities.--
18         (1)  The Legislature finds:
19         (a)  The potential for widespread and massive damage to
20  persons and property caused by hurricanes making landfall in
21  this state can generate insurance claims of such a number as
22  to render numerous insurers operating within this state
23  insolvent and therefore unable to satisfy covered claims.
24         (b)  The inability of insureds within this state to
25  receive payment of covered claims or to receive such payment
26  timely creates financial and other hardships for such insureds
27  and places undue burdens on the state, the affected units of
28  local government, and the community at large.
29         (c)  In addition, the failure of insurers to pay
30  covered claims or to pay such claims timely due to the
31  insolvency of such insurers can undermine the public's
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 1  confidence in insurers operating within this state, thereby
 2  adversely affecting the stability of the insurance industry in
 3  this state.
 4         (d)  The state has previously taken action to address
 5  these problems by adopting the Florida Insurance Guaranty
 6  Association Act, which, among other things, provides a
 7  mechanism for the payment of covered claims under certain
 8  insurance policies to avoid excessive delay in payment and to
 9  avoid financial loss to claimants or policyholders because of
10  the insolvency of an insurer.
11         (e)  In the wake of the unprecedented destruction
12  caused by various hurricanes that have made landfall in this
13  state, the resultant covered claims, and the number of
14  insurers rendered insolvent thereby, it is evident that
15  alternative programs must be developed to allow the Florida
16  Insurance Guaranty Association, Inc., to more expeditiously
17  and effectively provide for the payment of covered claims.
18         (f)  It is therefore determined to be in the best
19  interests of, and necessary for, the protection of the public
20  health, safety, and general welfare of the residents of this
21  state, and for the protection and preservation of the economic
22  stability of insurers operating in this state, and it is
23  declared to be an essential public purpose, to permit certain
24  municipalities and counties to take such actions as will
25  provide relief to claimants and policyholders having covered
26  claims against insolvent insurers operating in this state by
27  expediting the handling and payment of covered claims.
28         (g)  To achieve the foregoing purposes, it is proper to
29  authorize municipalities and counties of this state
30  substantially affected by the landfall of a category 1 or
31  greater hurricane to issue bonds to assist the Florida
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 1  Insurance Guaranty Association, Inc., in expediting the
 2  handling and payment of covered claims of insolvent insurers.
 3         (h)  In order to avoid the needless and indiscriminate
 4  proliferation, duplication, and fragmentation of such
 5  assistance programs, it is in the best interests of the
 6  residents of this state to authorize municipalities and
 7  counties severely affected by a category 1 or greater
 8  hurricane to provide for the payment of covered claims beyond
 9  their territorial limits in the implementation of such
10  programs.
11         (i)  It is a paramount public purpose for
12  municipalities and counties substantially affected by the
13  landfall of a category 1 or greater hurricane to be able to
14  issue bonds for the purposes described in this section. Such
15  issuance shall provide assistance to residents of those
16  municipalities and counties, as well as to other residents of
17  this state.
18         (2)  The governing body of any municipality or county
19  the residents of which have been substantially affected by a
20  category 1 or greater hurricane may issue bonds to fund an
21  assistance program in conjunction with, and with the consent
22  of, the Florida Insurance Guaranty Association, Inc., for the
23  purpose of paying claimants' or policyholders' covered claims
24  as defined in s. 631.54 arising through the insolvency of an
25  insurer, which insolvency is determined by the Florida
26  Insurance Guaranty Association, Inc., to have been a result of
27  a category 1 or greater hurricane, regardless of whether such
28  claimants or policyholders are residents of such municipality
29  or county or the property to which such claim relates is
30  located within or outside the territorial jurisdiction of such
31  municipality or county. The power of a municipality or county
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 1  to issue bonds as described in this section is in addition to
 2  any powers granted by law and may not be abrogated or
 3  restricted by any provisions in such municipality's or
 4  county's charter. A municipality or county issuing bonds for
 5  this purpose shall enter into such contracts with the Florida
 6  Insurance Guaranty Association, Inc., or any entity acting on
 7  behalf of the Florida Insurance Guaranty Association, Inc., as
 8  are necessary to implement the assistance program. Any bonds
 9  issued by a municipality or county or combination thereof
10  under this subsection shall be payable from and secured by
11  moneys received by or on behalf of the municipality or county
12  from assessments levied under s. 631.57(3)(a) and assigned and
13  pledged to or on behalf of the municipality or county for the
14  benefit of the holders of such bonds in connection with such
15  assistance program. The funds, credit, property, and taxing
16  power of the state or any municipality or county shall not be
17  pledged for the payment of such bonds.
18         (3)  The association shall issue an annual report on
19  the status of the use of bond proceeds as related to
20  insolvencies caused by hurricanes. The report must contain the
21  number and amount of claims paid. The association shall also
22  include an analysis of the revenue generated from the
23  assessment levied under s. 631.57(3)(a) to pay such bonds. The
24  association shall submit a copy of the report to the President
25  of the Senate, the Speaker of the House of Representatives,
26  and the Chief Financial Officer within 90 days after the end
27  of each calendar year in which bonds were outstanding.
28         (4)  Bonds may be validated by such municipality or
29  county pursuant to chapter 75. The proceeds of such bonds may
30  be used to pay covered claims of insolvent insurers; to
31  refinance or replace previously existing borrowings or
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 1  financial arrangements; to pay interest on bonds; to fund
 2  reserves for the bonds; to pay expenses incident to the
 3  issuance or sale of any bond issued under this section,
 4  including costs of validating, printing, and delivering the
 5  bonds, costs of printing the official statement, costs of
 6  publishing notices of sale of the bonds, costs of obtaining
 7  credit enhancement or liquidity support, and related
 8  administrative expenses; or for such other purposes related to
 9  the financial obligations of the fund as the association may
10  determine. The term of the bonds may not exceed 30 years.
11         (5)  The state covenants with holders of bonds of the
12  assistance program that the state will not take any action
13  which will have a material adverse affect on such holders and
14  will not repeal or abrogate the power of the board of
15  directors of the association to direct the Office of Insurance
16  Regulation to levy the assessments and to collect the proceeds
17  of the revenues pledged to the payment of such bonds as long
18  as any such bonds remain outstanding unless adequate provision
19  has been made for the payment of such bonds pursuant to the
20  documents authorizing the issuance of such bonds.
21         (6)  The accomplishment of the authorized purposes of
22  such municipality or county under this section is in all
23  respects for the benefit of the people of the state, for the
24  increase of their commerce and prosperity, and for the
25  improvement of their health and living conditions. Such
26  municipality or county, in performing essential governmental
27  functions in accomplishing its purposes, is not required to
28  pay any taxes or assessments of any kind whatsoever upon any
29  property acquired or used by the county or municipality for
30  such purposes or upon any revenues at any time received by the
31  county or municipality. The bonds, notes, and other
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 1  obligations of such municipality or county, and the transfer
 2  of and income from such bonds, notes, and other obligations,
 3  including any profits made on the sale of such bonds, notes,
 4  and other obligations, are exempt from taxation of any kind by
 5  the state or by any political subdivision or other agency or
 6  instrumentality of the state. The exemption granted in this
 7  subsection is not applicable to any tax imposed by chapter 220
 8  on interest, income, or profits on debt obligations owned by
 9  corporations.
10         (7)  Two or more municipalities or counties the
11  
12  
13  ================ T I T L E   A M E N D M E N T ===============
14  And the title is amended as follows:
15         On page 1, line 2, through
16            page 2, line 23, delete those lines
17  
18  and insert:
19         An act relating to insurer insolvency; amending
20         s. 631.181, F.S.; providing an exception to
21         certain requirements for a signed statement for
22         certain claims against an insolvent insurer;
23         providing requirements; creating s. 631.1915,
24         F.S.; providing requirements for policyholder
25         collateral, deductible reimbursements, and
26         other policyholder obligations; specifying that
27         certain collateral held by an insurer or a
28         receiver to secure policyholder obligations
29         under a deductible agreement are not an estate
30         asset; requiring use of such collateral to
31         secure policyholder obligations under such
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 1         agreement; requiring a receiver to use such
 2         collateral to pay noncovered claims under
 3         certain circumstances; providing for certain
 4         claims to be claims against an insurer's estate
 5         under certain circumstances; requiring a
 6         receiver to allocate collateral among certain
 7         obligations and administer such collateral;
 8         authorizing a receiver to continue and enforce
 9         certain alternative policyholder claim funding
10         contractual agreements; specifying certain
11         actions as a bar to certain claims and an
12         extinguishment of certain obligations;
13         requiring a guaranty association to bill a
14         policyholder for certain reimbursement amounts
15         for certain claims; specifying policyholder
16         obligation for certain amounts; prohibiting
17         certain defenses; requiring a receiver to use
18         certain collateral for certain purposes;
19         requiring a receiver to prorate certain funds
20         of an estate under certain circumstances;
21         authorizing a guaranty association to deduct
22         certain expenses; requiring a guaranty
23         association to provide a complete accounting of
24         certain billing and collection activities;
25         authorizing a guaranty association to contract
26         for certain collections; providing for claims
27         against an insolvent insurer's estate for
28         certain unreimbursed claims payments; requiring
29         a receiver to annually adjust collateral held
30         pursuant to a deductible agreement; specifying
31         jurisdiction of a state court to resolve
                                  16
    8:59 AM   04/04/05                             s2184c-bi20-ta1
    Florida Senate - 2005                      COMMITTEE AMENDMENT
    Bill No. SB 2184
                        Barcode 591680
 1         disputes; preserving rights of a guaranty
 2         association to reimbursement for certain
 3         claims; providing application to certain orders
 4         of liquidation; providing definitions;
 5         providing for nonapplication to certain claims;
 6         amending s. 631.54, F.S.; redefining the term
 7         "covered claim"; amending s. 631.57, F.S.;
 8         providing requirements and limitations for the
 9         Florida Insurance Guaranty Association, Inc.,
10         relating to assessments for covered claims
11         payable from revenue bonds issued by counties
12         or municipalities; authorizing the association
13         to contract with counties and municipalities to
14         issue revenue bonds for certain purposes;
15         providing requirements for use of bond
16         proceeds; creating s. 631.695, F.S.; providing
17         legislative findings and purposes; providing
18         for issuance of revenue bonds through counties
19         and municipalities to fund assistance programs
20         for paying covered claims for hurricane damage;
21         providing procedures, requirements, and
22         limitations for counties, municipalities, and
23         the Florida Insurance Guaranty Association,
24         Inc., relating to issuance and validation of
25         such bonds; providing for payments on and
26         retirement of such bonds from certain
27         assessments; prohibiting pledging the funds,
28         credit, property, and taxing power of the
29         state, counties, and municipalities for payment
30         of bonds; specifying authorized uses of bond
31         proceeds; limiting the term of bonds;
                                  17
    8:59 AM   04/04/05                             s2184c-bi20-ta1
    Florida Senate - 2005                      COMMITTEE AMENDMENT
    Bill No. SB 2184
                        Barcode 591680
 1         specifying a state covenant to protect
 2         bondholders from adverse actions relating to
 3         such bonds; specifying exemptions for bonds,
 4         notes, and other obligations of counties and
 5         municipalities from certain taxes or
 6         assessments on property and revenues;
 7         authorizing counties and municipalities to
 8         create a legal entity to exercise certain
 9         powers; prohibiting repeal of certain
10         provisions relating to certain bonds under
11         certain circumstances; providing severability;
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    8:59 AM   04/04/05                             s2184c-bi20-ta1