| 1 | A bill to be entitled |
| 2 | An act relating to the Florida Hurricane Catastrophe Fund; |
| 3 | amending s. 215.555, F.S.; providing a definition; |
| 4 | specifying the board of directors of the Florida Hurricane |
| 5 | Catastrophe Fund Finance Corporation as the Rate Reduction |
| 6 | Authority for certain purposes; providing for the |
| 7 | authority to extend and expand a temporary emergency |
| 8 | program applicable only to certain hurricane seasons; |
| 9 | authorizing the authority to provide additional contract |
| 10 | years for certain optional coverage; authorizing the Rate |
| 11 | Reduction Authority to sell reinsurance to private |
| 12 | insurance companies at discounted rates under certain |
| 13 | circumstances; providing requirements; extending eligible |
| 14 | contract years for purposes of certain temporary increase |
| 15 | in coverage limit options; increasing the claims-paying |
| 16 | capacity of the fund; increasing the reimbursement premium |
| 17 | amount for certain additional coverage; limiting purchases |
| 18 | of such additional insurance; specifying additional powers |
| 19 | of the Rate Reduction Authority relating to contract |
| 20 | refund requirements, antitrust actions, and selling |
| 21 | reinsurance; providing an effective date. |
| 22 |
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| 23 | Be It Enacted by the Legislature of the State of Florida: |
| 24 |
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| 25 | Section 1. Paragraph (o) is added to subsection (2) of |
| 26 | section 215.555, Florida Statutes, paragraph (d) of subsection |
| 27 | (6), paragraphs (a) and (c) of subsection (16), and paragraphs |
| 28 | (c) and (h) of subsection (17) of that section are amended, and |
| 29 | paragraph (h) is added to subsection (16) of that section, to |
| 30 | read: |
| 31 | 215.555 Florida Hurricane Catastrophe Fund.-- |
| 32 | (2) DEFINITIONS.--As used in this section: |
| 33 | (o) "Board" means the board of directors of the |
| 34 | corporation. |
| 35 | (6) REVENUE BONDS.-- |
| 36 | (d) Florida Hurricane Catastrophe Fund Finance |
| 37 | Corporation.-- |
| 38 | 1. In addition to the findings and declarations in |
| 39 | subsection (1), the Legislature also finds and declares that: |
| 40 | a. The public benefits corporation created under this |
| 41 | paragraph will provide a mechanism necessary for the cost- |
| 42 | effective and efficient issuance of bonds. This mechanism will |
| 43 | eliminate unnecessary costs in the bond issuance process, |
| 44 | thereby increasing the amounts available to pay reimbursement |
| 45 | for losses to property sustained as a result of hurricane |
| 46 | damage. |
| 47 | b. The purpose of such bonds is to fund reimbursements |
| 48 | through the Florida Hurricane Catastrophe Fund to pay for the |
| 49 | costs of construction, reconstruction, repair, restoration, and |
| 50 | other costs associated with damage to properties of |
| 51 | policyholders of covered policies due to the occurrence of a |
| 52 | hurricane. |
| 53 | c. The efficacy of the financing mechanism will be |
| 54 | enhanced by the corporation's ownership of the assessments, by |
| 55 | the insulation of the assessments from possible bankruptcy |
| 56 | proceedings, and by covenants of the state with the |
| 57 | corporation's bondholders. |
| 58 | 2.a. There is created a public benefits corporation, which |
| 59 | is an instrumentality of the state, to be known as the Florida |
| 60 | Hurricane Catastrophe Fund Finance Corporation. |
| 61 | b. The corporation shall operate under a five-member board |
| 62 | of directors consisting of the Governor or a designee, the Chief |
| 63 | Financial Officer or a designee, the Attorney General or a |
| 64 | designee, the director of the Division of Bond Finance of the |
| 65 | State Board of Administration, and the senior employee of the |
| 66 | State Board of Administration responsible for operations of the |
| 67 | Florida Hurricane Catastrophe Fund. The board shall also operate |
| 68 | as the Rate Reduction Authority in its capacity as regulating |
| 69 | and controlling property insurance insurers and the rates of |
| 70 | such insurers. |
| 71 | c. The corporation has all of the powers of corporations |
| 72 | under chapter 607 and under chapter 617, subject only to the |
| 73 | provisions of this subsection. |
| 74 | d. The corporation may issue bonds and engage in such |
| 75 | other financial transactions as are necessary to provide |
| 76 | sufficient funds to achieve the purposes of this section. |
| 77 | e. The corporation may invest in any of the investments |
| 78 | authorized under s. 215.47. |
| 79 | f. There shall be no liability on the part of, and no |
| 80 | cause of action shall arise against, any board members or |
| 81 | employees of the corporation for any actions taken by them in |
| 82 | the performance of their duties under this paragraph. |
| 83 | 3.a. In actions under chapter 75 to validate any bonds |
| 84 | issued by the corporation, the notice required by s. 75.06 shall |
| 85 | be published only in Leon County and in two newspapers of |
| 86 | general circulation in the state, and the complaint and order of |
| 87 | the court shall be served only on the State Attorney of the |
| 88 | Second Judicial Circuit. |
| 89 | b. The state hereby covenants with holders of bonds of the |
| 90 | corporation that the state will not repeal or abrogate the power |
| 91 | of the board to direct the Office of Insurance Regulation to |
| 92 | levy the assessments and to collect the proceeds of the revenues |
| 93 | pledged to the payment of such bonds as long as any such bonds |
| 94 | remain outstanding unless adequate provision has been made for |
| 95 | the payment of such bonds pursuant to the documents authorizing |
| 96 | the issuance of such bonds. |
| 97 | 4. The bonds of the corporation are not a debt of the |
| 98 | state or of any political subdivision, and neither the state nor |
| 99 | any political subdivision is liable on such bonds. The |
| 100 | corporation does not have the power to pledge the credit, the |
| 101 | revenues, or the taxing power of the state or of any political |
| 102 | subdivision. The credit, revenues, or taxing power of the state |
| 103 | or of any political subdivision shall not be deemed to be |
| 104 | pledged to the payment of any bonds of the corporation. |
| 105 | 5.a. The property, revenues, and other assets of the |
| 106 | corporation; the transactions and operations of the corporation |
| 107 | and the income from such transactions and operations; and all |
| 108 | bonds issued under this paragraph and interest on such bonds are |
| 109 | exempt from taxation by the state and any political subdivision, |
| 110 | including the intangibles tax under chapter 199 and the income |
| 111 | tax under chapter 220. This exemption does not apply to any tax |
| 112 | imposed by chapter 220 on interest, income, or profits on debt |
| 113 | obligations owned by corporations other than the Florida |
| 114 | Hurricane Catastrophe Fund Finance Corporation. |
| 115 | b. All bonds of the corporation shall be and constitute |
| 116 | legal investments without limitation for all public bodies of |
| 117 | this state; for all banks, trust companies, savings banks, |
| 118 | savings associations, savings and loan associations, and |
| 119 | investment companies; for all administrators, executors, |
| 120 | trustees, and other fiduciaries; for all insurance companies and |
| 121 | associations and other persons carrying on an insurance |
| 122 | business; and for all other persons who are now or may hereafter |
| 123 | be authorized to invest in bonds or other obligations of the |
| 124 | state and shall be and constitute eligible securities to be |
| 125 | deposited as collateral for the security of any state, county, |
| 126 | municipal, or other public funds. This sub-subparagraph shall be |
| 127 | considered as additional and supplemental authority and shall |
| 128 | not be limited without specific reference to this sub- |
| 129 | subparagraph. |
| 130 | 6. The corporation and its corporate existence shall |
| 131 | continue until terminated by law; however, no such law shall |
| 132 | take effect as long as the corporation has bonds outstanding |
| 133 | unless adequate provision has been made for the payment of such |
| 134 | bonds pursuant to the documents authorizing the issuance of such |
| 135 | bonds. Upon termination of the existence of the corporation, all |
| 136 | of its rights and properties in excess of its obligations shall |
| 137 | pass to and be vested in the state. |
| 138 | (16) TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL |
| 139 | COVERAGE.-- |
| 140 | (a) Findings and intent.-- |
| 141 | 1. The Legislature finds that: |
| 142 | a. Because of temporary disruptions in the market for |
| 143 | catastrophic reinsurance, many property insurers were unable to |
| 144 | procure reinsurance for the 2006 hurricane season with an |
| 145 | attachment point below the insurers' respective Florida |
| 146 | Hurricane Catastrophe Fund attachment points, were unable to |
| 147 | procure sufficient amounts of such reinsurance, or were able to |
| 148 | procure such reinsurance only by incurring substantially higher |
| 149 | costs than in prior years. |
| 150 | b. The reinsurance market problems were responsible, at |
| 151 | least in part, for substantial premium increases to many |
| 152 | consumers and increases in the number of policies issued by the |
| 153 | Citizens Property Insurance Corporation. |
| 154 | c. It is likely that the reinsurance market disruptions |
| 155 | will not significantly abate prior to the 2007 hurricane season. |
| 156 | 2. It is the intent of the Legislature to create a |
| 157 | temporary emergency program, applicable to the 2007, 2008, and |
| 158 | 2009 hurricane seasons, to address these market disruptions and |
| 159 | enable insurers, at their option, to procure additional coverage |
| 160 | from the Florida Hurricane Catastrophe Fund and to allow the |
| 161 | Rate Reduction Authority to extend and expand the program. |
| 162 | (c) Optional coverage.--For the contract year commencing |
| 163 | June 1, 2007, and ending May 31, 2008, the contract year |
| 164 | commencing June 1, 2008, and ending May 31, 2009, and the |
| 165 | contract year commencing June 1, 2009, and ending May 31, 2010, |
| 166 | the board shall offer for each of such years the optional |
| 167 | coverage as provided in this subsection. Additional contract |
| 168 | years may be added by the Rate Reduction Authority. |
| 169 | (h)1. The Rate Reduction Authority may sell reinsurance |
| 170 | below the $6 billion retention level in the Florida Hurricane |
| 171 | Catastrophe Fund within the range of 30 to 60 percent online to |
| 172 | private insurance companies that agree to take out of Citizens |
| 173 | Property Insurance Corporation a specified number of individual |
| 174 | policies held by Citizens Property Insurance Corporation, on a |
| 175 | geographically diverse basis. |
| 176 | 2. Policyholders of Citizens Property Insurance |
| 177 | Corporation that are taken out pursuant to subparagraph 1. must |
| 178 | receive a discount no less than a rate specified by the Rate |
| 179 | Reduction Authority, which must be no less than 10 percent. |
| 180 | 3. The Rate Reduction Authority may offer discounted |
| 181 | reinsurance rates to private insurance companies through offers |
| 182 | to negotiate via auction, individual negotiation, or any method |
| 183 | designed to achieve the best-discounted rate for policyholders |
| 184 | of Citizens Property Insurance Corporation. |
| 185 | 4. The Rate Reduction Authority may determine how many |
| 186 | policies a private company must assume from Citizens Property |
| 187 | Insurance Corporation in order to purchase reinsurance from the |
| 188 | state at the discounted rate. |
| 189 | 5. Private insurance companies shall assume 100 percent of |
| 190 | each policy taken from Citizens Property Insurance Corporation |
| 191 | in exchange for the discounted reinsurance rate. |
| 192 | (17) TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS.-- |
| 193 | (c) Optional coverage.--For the contract year commencing |
| 194 | June 1, 2007, and ending May 31, 2008, the contract year |
| 195 | commencing June 1, 2008, and ending May 31, 2009, and the |
| 196 | contract year commencing June 1, 2009, and ending May 31, 2010, |
| 197 | the board shall offer, for each of such contract years and for |
| 198 | the 10 subsequent contract years, the optional coverage as |
| 199 | provided in this subsection, and may for those years extend the |
| 200 | coverage to cover additional amounts. Additional contract years |
| 201 | may be added by the Rate Reduction Authority. |
| 202 | (h) Increasing the claims-paying capacity of the |
| 203 | fund.--For the contract years commencing June 1, 2007, June 1, |
| 204 | 2008, and years thereafter June 1, 2009, the board may increase |
| 205 | the claims-paying capacity of the fund as provided in paragraph |
| 206 | (g) by an amount not to exceed $15 $4 billion in four $1 billion |
| 207 | options and shall depend on the TICL coverage options selected |
| 208 | and the number of insurers that select the TICL optional |
| 209 | coverage. Each insurer's TICL premium shall be calculated based |
| 210 | upon the additional limit of increased coverage that the insurer |
| 211 | selects. Such limit is determined by multiplying the TICL |
| 212 | multiple associated with one of the four options times the |
| 213 | insurer's FHCF reimbursement premium. The reimbursement premium |
| 214 | associated with the additional coverage provided in this |
| 215 | paragraph shall be determined by the board but shall be no less |
| 216 | than 150 percent of the amount as specified in subsection (5). |
| 217 | This additional insurance may not be purchased from an |
| 218 | affiliated or parent company, as defined by the board. |
| 219 | Section 2. Additional powers of the Rate Reduction |
| 220 | Authority.--In addition to any other power granted to the State |
| 221 | Board of Administration or the Rate Reduction Authority, the |
| 222 | Rate Reduction Authority may also: |
| 223 | (1) Require all property insurance contracts to contain a |
| 224 | provision entitling the insured to a refund if the insured is |
| 225 | canceled without good cause. The refund shall be established by |
| 226 | the authority but shall be no less than 50 percent of an annual |
| 227 | premium and no more than 200 percent of an annual premium. This |
| 228 | provision shall not apply if 2 years' notice of cancellation is |
| 229 | given. |
| 230 | (2) File a collusion or antitrust action against any |
| 231 | insurer or individual, notwithstanding any exemptions in law, |
| 232 | including s. 542.21, Florida Statutes. |
| 233 | (3) Devise a different manner of selling reinsurance to |
| 234 | Citizens Property Insurance Corporation or private insurers in |
| 235 | order to reduce rates. |
| 236 | Section 3. This act shall take effect July 1, 2008. |