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A bill to be entitled

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An act relating to windstorm insurance coverage; amending

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s. 215.555, F.S.; providing additional legislative

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findings; revising certain definitions; providing for

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application of the Florida Hurricane Catastrophe Fund to

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costs of the Florida Windstorm Insurance Program; revising

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certain reimbursement contract board obligation

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limitations; providing for future expiration of certain

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limitations; revising legislative findings and

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declarations relating to revenue bonds; providing for

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application to coverage of costs of property damage under

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policies issued under the Florida Windstorm Insurance

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Program; revising emergency assessment requirement

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provisions to include application to policies issued under

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the Florida Windstorm Insurance Program; providing for

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future expiration of certain provisions; creating the

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Florida Windstorm Insurance Program within the Florida

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Hurricane Catastrophe Fund; providing a purpose; providing

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definitions; providing requirements for coverage,

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standards, and policy forms under the program; providing

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limitations; providing for administration of the program

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by the State Board of Administration; requiring the board

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to adopt rules; providing an eligibility limitation on

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certain properties' participation in the program;

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providing requirements for insurers participating in the

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program; providing contract requirements; providing for

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participating insurer compliance audits; specifying powers

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and duties of the program; providing claims payment

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requirements; providing for payment of certain insurer's

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costs and expenses; providing for penalties for insurers

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for certain actions; specifying absence of liability for

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certain actions; providing for effect of termination of an

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insurer's participation; specifying ratemaking

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requirements; authorizing the board to add a rapid cash

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buildup premium surcharge to rates under certain

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circumstances; requiring the board to adopt a rate plan;

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providing requirements for procuring reinsurance;

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authorizing the board to waive or modify certain

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reinsurance requirements; requiring an annual report to

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the Legislature; requiring windstorm coverage under

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certain insurance policies issued by certain insurers to

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be subject to certain rate standards requirements;

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providing transitional requirements; specifying

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requirements for the board in implementing the program;

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amending s. 627.351, F.S.; prohibiting the Citizens

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Property Insurance Corporation from issuing or renewing

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certain windstorm-only insurance policies after a certain

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date; providing requirements for transfer of policies of

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the corporation to the program; providing for transfer of

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certain proceeds and funds to the Florida Hurricane

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Catastrophe Fund for certain purposes; amending s.

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627.712, F.S.; revising windstorm coverage requirements

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for insurers; providing an effective dates.

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

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     Section 1.  Effective June 1, 2009, paragraph (h) is added

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to subsection (1) of section 215.555, Florida Statutes,

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paragraphs (a), (c), and (e) of subsection (2), subsection (3),

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paragraph (c) of subsection (4), and paragraphs (a) and (b) of

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subsection (6) of that section are amended, and subsection (18)

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is added to that section, to read:

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     215.555  Florida Hurricane Catastrophe Fund.--

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     (1)  FINDINGS AND PURPOSE.--The Legislature finds and

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declares as follows:

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     (h)1. The Legislature further finds that, as of January

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2008, more than 15 years of efforts to use state regulatory,

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financial, and insurance mechanisms to ensure availability and

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affordability of residential property insurance coverage have

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failed to satisfactorily achieve these goals.

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     2. The continuing lack of available, affordable coverage

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creates a substantial burden on the state's economy.

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     3. The unsatisfactory performance of a system intended to

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provide available, affordable coverage for windstorm losses in

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this state indicates that, in light of this state's unique

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exposure to windstorm losses, windstorm may be an uninsurable

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peril in all or parts of this state as the concept of

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insurability is commonly understood. Therefore, a restructured

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system of protecting homeowners from windstorm losses is

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necessary to maintain the viability of the economy of this state.

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

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     (a)  "Actuarially indicated" means, with respect to premiums

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paid by insurers for reimbursement provided by the fund under

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subsection (4) and premiums paid by insureds for windstorm

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coverage provided under subsection (18), an amount determined

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according to principles of actuarial science to be adequate, but

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not excessive, in the aggregate, to pay current and future

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obligations and expenses of the fund, including additional

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amounts if needed to pay debt service on revenue bonds issued

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under this section and to provide required debt service coverage

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in excess of the amounts required to pay actual debt service on

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revenue bonds issued under subsection (6), and:

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     1. With respect to premiums paid by insurers for

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reimbursement under subsection (4), determined according to

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principles of actuarial science to reflect each insurer's

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relative exposure to hurricane losses; or

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     2. With respect to premiums paid by insureds for windstorm

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coverage under subsection (18), determined according to

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principles of actuarial science to reflect each insured's

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relative exposure to windstorm losses.

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     (c)  "Covered policy" means any insurance policy covering

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residential property in this state, including, but not limited

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to, any homeowner's, mobile home owner's, farm owner's,

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condominium association, condominium unit owner's, tenant's, or

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apartment building policy, or any other policy covering a

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residential structure or its contents issued by any authorized

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insurer, including a commercial self-insurance fund holding a

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certificate of authority issued by the Office of Insurance

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Regulation under s. 624.462, the Citizens Property Insurance

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Corporation, and any joint underwriting association or similar

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entity created under law. The term "covered policy" includes any

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collateral protection insurance policy covering personal

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residences which protects both the borrower's and the lender's

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financial interests, in an amount at least equal to the coverage

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for the dwelling in place under the lapsed homeowner's policy, if

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such policy can be accurately reported as required in subsection

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(5). Additionally, covered policies include policies covering the

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peril of wind removed from the Florida Residential Property and

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Casualty Joint Underwriting Association or from the Citizens

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Property Insurance Corporation, created under s. 627.351(6), or

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from the Florida Windstorm Underwriting Association, created

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under s. 627.351(2), by an authorized insurer under the terms and

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conditions of an executed assumption agreement between the

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authorized insurer and such association or Citizens Property

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Insurance Corporation. Each assumption agreement between the

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association and such authorized insurer or Citizens Property

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Insurance Corporation must be approved by the Office of Insurance

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Regulation before the effective date of the assumption, and the

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Office of Insurance Regulation must provide written notification

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to the board within 15 working days after such approval. "Covered

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policy" does not include any policy that excludes wind coverage

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or hurricane coverage or any reinsurance agreement and does not

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include any policy otherwise meeting this definition which is

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issued by a surplus lines insurer or a reinsurer. All commercial

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residential excess policies and all deductible buy-back policies

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that, based on sound actuarial principles, require individual

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ratemaking shall be excluded by rule if the actuarial soundness

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of the fund is not jeopardized. For this purpose, the term

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"excess policy" means a policy that provides insurance protection

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for large commercial property risks and that provides a layer of

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coverage above a primary layer insured by another insurer.

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Effective June 1, 2010, the term "covered policy" does not

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include any policy providing personal lines residential property

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insurance coverage as defined in subsection (18).

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     (e)  "Retention" means the amount of losses below which an

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insurer is not entitled to reimbursement from the fund. An

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insurer's retention shall be calculated as follows:

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     1.  The board shall calculate and report to each insurer the

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retention multiples for that year. For the contract year

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beginning June 1, 2005, the retention multiple shall be equal to

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$4.5 billion divided by the total estimated reimbursement premium

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for the contract year; for the contract year beginning June 1,

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2006, through the contract year beginning June 1, 2009 subsequent

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years, the retention multiple shall be equal to $4.5 billion,

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adjusted based upon the reported exposure from the prior contract

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year to reflect the percentage growth in exposure to the fund for

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covered policies since 2004, divided by the total estimated

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reimbursement premium for the contract year. For the contract

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year beginning June 1, 2010, the retention multiple shall be

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equal to $1 billion divided by the total estimated reimbursement

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premium for the contract year; for subsequent years, the

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retention multiple shall be equal to $1 billion, adjusted based

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upon the reported exposure from the prior contract year to

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reflect the percentage growth in exposure to the fund for covered

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policies since 2009, divided by the total estimated reimbursement

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premium for the contract year. Total reimbursement premium for

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purposes of the calculation under this subparagraph shall be

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estimated using the assumption that all insurers have selected

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the 90-percent coverage level.

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     2.  The retention multiple as determined under subparagraph

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1. shall be adjusted to reflect the coverage level elected by the

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insurer. For insurers electing the 90-percent coverage level, the

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adjusted retention multiple is 100 percent of the amount

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determined under subparagraph 1. For insurers electing the 75-

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percent coverage level, the retention multiple is 120 percent of

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the amount determined under subparagraph 1. For insurers electing

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the 45-percent coverage level, the adjusted retention multiple is

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200 percent of the amount determined under subparagraph 1.

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     3.  An insurer shall determine its provisional retention by

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multiplying its provisional reimbursement premium by the

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applicable adjusted retention multiple and shall determine its

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actual retention by multiplying its actual reimbursement premium

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by the applicable adjusted retention multiple.

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     4.  For insurers who experience multiple covered events

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causing loss during the contract year, beginning June 1, 2005,

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each insurer's full retention shall be applied to each of the

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covered events causing the two largest losses for that insurer.

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For each other covered event resulting in losses, the insurer's

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retention shall be reduced to one-third of the full retention.

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The reimbursement contract shall provide for the reimbursement of

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losses for each covered event based on the full retention with

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adjustments made to reflect the reduced retentions after January

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1 of the contract year provided the insurer reports its losses as

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specified in the reimbursement contract.

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     (3)  FLORIDA HURRICANE CATASTROPHE FUND CREATED.--There is

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created the Florida Hurricane Catastrophe Fund to be administered

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by the State Board of Administration. Moneys in the fund may not

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be expended, loaned, or appropriated except to pay obligations of

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the fund arising out of reimbursement contracts entered into

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under subsection (4), payment of debt service on revenue bonds

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issued under subsection (6), costs of the mitigation program

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under subsection (7), costs of procuring reinsurance, costs of

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the Florida Windstorm Insurance Program under subsection (18),

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and costs of administration of the fund. The board shall invest

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the moneys in the fund pursuant to ss. 215.44-215.52. Except as

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otherwise provided in this section, earnings from all investments

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shall be retained in the fund. The board may employ or contract

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with such staff and professionals as the board deems necessary

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for the administration of the fund. The board may adopt such

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rules as are reasonable and necessary to implement this section

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and shall specify interest due on any delinquent remittances,

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which interest may not exceed the fund's rate of return plus 5

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percent. Such rules must conform to the Legislature's specific

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intent in establishing the fund as expressed in subsection (1),

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must enhance the fund's potential ability to respond to claims

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for covered events, must contain general provisions so that the

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rules can be applied with reasonable flexibility so as to

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accommodate insurers in situations of an unusual nature or where

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undue hardship may result, except that such flexibility may not

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in any way impair, override, supersede, or constrain the public

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purpose of the fund, and must be consistent with sound insurance

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practices. The board may, by rule, provide for the exemption from

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subsections (4) and (5) of insurers writing covered policies with

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less than $10 million in aggregate exposure for covered policies

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if the exemption does not affect the actuarial soundness of the

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fund.

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     (4)  REIMBURSEMENT CONTRACTS.--

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     (c)1.a. The contract shall also provide that the obligation

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of the board with respect to all contracts covering a particular

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contract year shall not exceed the actual claims-paying capacity

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of the fund up to a limit of $15 billion for that contract year

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adjusted based upon the reported exposure from the prior contract

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year to reflect the percentage growth in exposure to the fund for

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covered policies since 2003, provided the dollar growth in the

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limit may not increase in any year by an amount greater than the

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dollar growth of the balance of the fund as of December 31, less

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any premiums or interest attributable to optional coverage, as

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defined by rule which occurred over the prior calendar year. This

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sub-subparagraph expires June 1, 2010.

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     b. For the contract year beginning June 1, 2010, and

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subsequent contract years, the contract shall provide that the

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obligation of the board with respect to all reimbursement

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contracts covering a particular contract year shall not exceed $3

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billion for that contract year plus an adjustment based upon the

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reported exposure from the prior contract year to reflect the

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percentage growth in exposure of the fund for commercial lines

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residential policies since 2009.

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     2.  In May before the start of the upcoming contract year

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and in October during the contract year, the board shall publish

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in the Florida Administrative Weekly a statement of the fund's

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estimated borrowing capacity and the projected balance of the

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fund as of December 31. After the end of each calendar year, the

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board shall notify insurers of the estimated borrowing capacity

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and the balance of the fund as of December 31 to provide insurers

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with data necessary to assist them in determining their retention

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and projected payout from the fund for loss reimbursement

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purposes. In conjunction with the development of the premium

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formula, as provided for in subsection (5), the board shall

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publish factors or multiples that assist insurers in determining

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their retention and projected payout for the next contract year.

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For all regulatory and reinsurance purposes, an insurer may

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calculate its projected payout from the fund as its share of the

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total fund premium for the current contract year multiplied by

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the sum of the projected balance of the fund as of December 31

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and the estimated borrowing capacity for that contract year as

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reported under this subparagraph.

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     (6)  REVENUE BONDS.--

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     (a)  General provisions.--

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     1.  Upon the occurrence of a hurricane and a determination

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that the moneys in the fund are or will be insufficient to pay

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reimbursement at the levels promised in the reimbursement

272

contracts, the board may take the necessary steps under paragraph

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(c) or paragraph (d) for the issuance of revenue bonds for the

274

benefit of the fund. The proceeds of such revenue bonds may be

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used to make reimbursement payments under reimbursement

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contracts; to refinance or replace previously existing borrowings

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or financial arrangements; to pay interest on bonds; to fund

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reserves for the bonds; to pay expenses incident to the issuance

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or sale of any bond issued under this section, including costs of

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validating, printing, and delivering the bonds, costs of printing

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the official statement, costs of publishing notices of sale of

282

the bonds, and related administrative expenses; or for such other

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purposes related to the financial obligations of the fund as the

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board may determine. The term of the bonds may not exceed 30

285

years. The board may pledge or authorize the corporation to

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pledge all or a portion of all revenues under subsection (5) and

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under paragraph (b) to secure such revenue bonds and the board

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may execute such agreements between the board and the issuer of

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any revenue bonds and providers of other financing arrangements

290

under paragraph (7)(b) as the board deems necessary to evidence,

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secure, preserve, and protect such pledge. If reimbursement

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premiums received under subsection (5) or earnings on such

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premiums are used to pay debt service on revenue bonds, such

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premiums and earnings shall be used only after the use of the

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moneys derived from assessments under paragraph (b). The funds,

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credit, property, or taxing power of the state or political

297

subdivisions of the state shall not be pledged for the payment of

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such bonds. The board may also enter into agreements under

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paragraph (c) or paragraph (d) for the purpose of issuing revenue

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bonds in the absence of a hurricane upon a determination that

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such action would maximize the ability of the fund to meet future

302

obligations.

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     2.  The Legislature finds and declares that the issuance of

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bonds under this subsection is for the public purpose of paying

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the proceeds of the bonds to insurers as required by the

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contracts entered into under subsection (4), thereby enabling

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insurers to pay the claims of policyholders to assure that

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policyholders are able to pay the cost of construction,

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reconstruction, repair, and restoration, and other costs

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associated with damage to property of policyholders of covered

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policies after the occurrence of a hurricane, and for the public

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purpose of paying claims of policyholders under subsection (18)

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to ensure that policyholders are able to pay the costs of

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construction, reconstruction, repair, and restoration and other

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costs associated with damage to their property after a hurricane

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or other windstorm.

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     (b)  Emergency assessments.--

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     1.a. If the board determines that the amount of revenue

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produced under subsections subsection (5) and (18) is

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insufficient to fund the obligations, costs, and expenses of the

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fund and the corporation, including repayment of revenue bonds

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and that portion of the debt service coverage not met by

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reimbursement premiums, the board shall direct the Office of

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Insurance Regulation to levy, by order, an emergency assessment

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on direct premiums for all property and casualty lines of

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business in this state, including property and casualty business

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of surplus lines insurers regulated under part VIII of chapter

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626, but not including any workers' compensation premiums or

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medical malpractice premiums. As used in this subsection, the

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term "property and casualty business" includes all lines of

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business identified on Form 2, Exhibit of Premiums and Losses, in

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the annual statement required of authorized insurers by s.

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624.424 and any rule adopted under this section, except for those

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lines identified as accident and health insurance and except for

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policies written under the National Flood Insurance Program. The

336

assessment shall be specified as a percentage of direct written

337

premium and is subject to annual adjustments by the board in

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order to meet debt obligations. The same percentage shall apply

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to all policies in lines of business subject to the assessment

340

issued or renewed during the 12-month period beginning on the

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effective date of the assessment. This sub-subparagraph expires

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June 1, 2010; however, the expiration of this sub-subparagraph

343

does not affect any assessments levied under this sub-

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subparagraph prior to that date.

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     b. Effective June 1, 2010, if the board determines that the

346

amount of revenue produced under subsections (5) and (18) is

347

insufficient to fund the obligations, costs, and expenses of the

348

fund and the corporation, including repayment of revenue bonds

349

and that portion of the debt service coverage not met by

350

reimbursement premiums, the board shall direct the Office of

351

Insurance Regulation to levy, by order, an emergency assessment

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on direct premiums for all personal lines and commercial lines

353

policies providing property insurance coverage, including

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policies issued by the Florida Windstorm Insurance Program under

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subsection (18). The assessment shall be specified as a

356

percentage of direct written premium and is subject to annual

357

adjustments by the board in order to meet debt obligations. The

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same percentage shall apply to all policies in lines of business

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subject to the assessment issued or renewed during the 12-month

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period beginning on the effective date of the assessment.

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Assessments under this sub-subparagraph do not apply to policies

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providing personal lines residential property insurance coverage

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issued by an insurer that is not a participating insurer within

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the meaning provided in subsection (18).

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     2.a. A premium is not subject to an annual assessment under

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this paragraph in excess of 6 percent of premium with respect to

367

obligations arising out of losses attributable to any one

368

contract year, and a premium is not subject to an aggregate

369

annual assessment under this paragraph in excess of 10 percent of

370

premium. This sub-subparagraph expires June 1, 2010; however, the

371

expiration of this sub-subparagraph does not affect any

372

assessments levied under this sub-subparagraph prior to that

373

date.

374

     b. Effective June 1, 2010, the total amount of emergency

375

assessments under this paragraph with respect to any year may not

376

exceed 10 percent of the statewide total gross written premium

377

for all insurers for personal lines and commercial lines policies

378

providing property insurance coverage, including policies issued

379

by the Florida Windstorm Insurance Program under subsection (18),

380

for the prior year. However, if the fund deficit with respect to

381

any year exceeds such amount and bonds are issued to defray the

382

deficit, the total amount of emergency assessments with respect

383

to such deficit may not in any year exceed 10 percent of the

384

deficit or such lesser percentage as is sufficient to retire the

385

bonds as determined by the board.

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     c. An annual assessment under this paragraph shall continue

387

as long as the revenue bonds issued with respect to which the

388

assessment was imposed are outstanding, including any bonds the

389

proceeds of which were used to refund the revenue bonds, unless

390

adequate provision has been made for the payment of the bonds

391

under the documents authorizing issuance of the bonds.

392

     3.  Emergency assessments shall be collected from

393

policyholders. Emergency assessments shall be remitted by

394

insurers as a percentage of direct written premium for the

395

preceding calendar quarter as specified in the order from the

396

Office of Insurance Regulation. The office shall verify the

397

accurate and timely collection and remittance of emergency

398

assessments and shall report the information to the board in a

399

form and at a time specified by the board. Each insurer

400

collecting assessments shall provide the information with respect

401

to premiums and collections as may be required by the office to

402

enable the office to monitor and verify compliance with this

403

paragraph.

404

     4.  With respect to assessments of surplus lines premiums,

405

each surplus lines agent shall collect the assessment at the same

406

time as the agent collects the surplus lines tax required by s.

407

626.932, and the surplus lines agent shall remit the assessment

408

to the Florida Surplus Lines Service Office created by s. 626.921

409

at the same time as the agent remits the surplus lines tax to the

410

Florida Surplus Lines Service Office. The emergency assessment on

411

each insured procuring coverage and filing under s. 626.938 shall

412

be remitted by the insured to the Florida Surplus Lines Service

413

Office at the time the insured pays the surplus lines tax to the

414

Florida Surplus Lines Service Office. The Florida Surplus Lines

415

Service Office shall remit the collected assessments to the fund

416

or corporation as provided in the order levied by the Office of

417

Insurance Regulation. The Florida Surplus Lines Service Office

418

shall verify the proper application of such emergency assessments

419

and shall assist the board in ensuring the accurate and timely

420

collection and remittance of assessments as required by the

421

board. The Florida Surplus Lines Service Office shall annually

422

calculate the aggregate written premium on property and casualty

423

business, other than workers' compensation and medical

424

malpractice, procured through surplus lines agents and insureds

425

procuring coverage and filing under s. 626.938 and shall report

426

the information to the board in a form and at a time specified by

427

the board.

428

     5.  Any assessment authority not used for a particular

429

contract year may be used for a subsequent contract year. If, for

430

a subsequent contract year, the board determines that the amount

431

of revenue produced under subsection (5) is insufficient to fund

432

the obligations, costs, and expenses of the fund and the

433

corporation, including repayment of revenue bonds and that

434

portion of the debt service coverage not met by reimbursement

435

premiums, the board shall direct the Office of Insurance

436

Regulation to levy an emergency assessment up to an amount not

437

exceeding the amount of unused assessment authority from a

438

previous contract year or years, plus an additional 4 percent

439

provided that the assessments in the aggregate do not exceed the

440

limits specified in subparagraph 2. This subparagraph expires

441

June 1, 2010; however, the expiration of this subparagraph does

442

not affect any assessments levied under this subparagraph prior

443

to that date.

444

     6.  The assessments otherwise payable to the corporation

445

under this paragraph shall be paid to the fund unless and until

446

the Office of Insurance Regulation and the Florida Surplus Lines

447

Service Office have received from the corporation and the fund a

448

notice, which shall be conclusive and upon which they may rely

449

without further inquiry, that the corporation has issued bonds

450

and the fund has no agreements in effect with local governments

451

under paragraph (c). On or after the date of the notice and until

452

the date the corporation has no bonds outstanding, the fund shall

453

have no right, title, or interest in or to the assessments,

454

except as provided in the fund's agreement with the corporation.

455

     7.  Emergency assessments are not premium and are not

456

subject to the premium tax, to the surplus lines tax, to any

457

fees, or to any commissions. An insurer is liable for all

458

assessments that it collects and must treat the failure of an

459

insured to pay an assessment as a failure to pay the premium. An

460

insurer is not liable for uncollectible assessments.

461

     8.  When an insurer is required to return an unearned

462

premium, it shall also return any collected assessment

463

attributable to the unearned premium. A credit adjustment to the

464

collected assessment may be made by the insurer with regard to

465

future remittances that are payable to the fund or corporation,

466

but the insurer is not entitled to a refund.

467

     9.  When a surplus lines insured or an insured who has

468

procured coverage and filed under s. 626.938 is entitled to the

469

return of an unearned premium, the Florida Surplus Lines Service

470

Office shall provide a credit or refund to the agent or such

471

insured for the collected assessment attributable to the unearned

472

premium prior to remitting the emergency assessment collected to

473

the fund or corporation.

474

     10.  The exemption of medical malpractice insurance premiums

475

from emergency assessments under this paragraph is repealed May

476

31, 2010, and medical malpractice insurance premiums shall be

477

subject to emergency assessments attributable to loss events

478

occurring in the contract years commencing on June 1, 2010.

479

     (18) FLORIDA WINDSTORM INSURANCE PROGRAM.--

480

     (a) Creation; purpose.--The Florida Windstorm Insurance

481

Program is created within the Florida Hurricane Catastrophe Fund.

482

The purpose of the program is to provide personal lines

483

residential windstorm insurance coverage for properties

484

throughout the state.

485

     (b) Definitions.--The definitions in subsection (2) apply

486

to the program, except as modified by this paragraph. As used in

487

this subsection:

488

     1. "Board" means the State Board of Administration.

489

     2. "Participating insurer" means an insurer providing

490

personal lines residential property insurance coverage for

491

nonwindstorm perils that administers windstorm coverage on behalf

492

of the program.

493

     3. "Personal lines residential property insurance coverage"

494

consists of the type of coverage provided by homeowner's, mobile

495

home owner's, dwelling, tenant's, condominium unit owner's,

496

cooperative unit owner's, and similar policies. The term

497

"personal lines residential property insurance coverage" does not

498

include the type of coverage provided by condominium association,

499

cooperative association, apartment building, and similar

500

policies, including policies covering the common elements of a

501

homeowners' association.

502

     4. "Program" means the Florida Windstorm Insurance Program

503

created under this subsection.

504

     5. "Windstorm coverage" means coverage for loss or damage

505

to personal lines residential property caused by wind, wind

506

gusts, hail, rain, tornadoes, cyclones, tropical storms, or

507

hurricanes. The term "windstorm coverage" does not include

508

coverage for loss or damage to residential property caused by

509

flood, storm surge, or rising water.

510

     (c) Coverage provided; standards; policy forms.--

511

     1. The program shall issue a policy providing windstorm

512

coverage to each personal lines residential risk covered by a

513

participating insurer, except if inconsistent with the

514

underwriting standards adopted under the program. Coverage shall

515

include structure, contents, additional living expenses,

516

emergency debris removal, and temporary repairs after loss.

517

     2. The board shall adopt by rule standards for the program,

518

including, but not limited to, standards relating to

519

underwriting, mitigation discounts, deductibles, cancellation and

520

nonrenewal, agent compensation, and recordkeeping.

521

     3. The board shall adopt by rule policy forms to be used

522

for program policies. Program policies must comply with part X of

523

chapter 627. The board shall also adopt by rule such notices,

524

coverage summaries, and outlines of coverage as are required by

525

law or as the board deems appropriate, including a notice

526

informing an insured of the duties of the program and the duties

527

of the participating insurer.

528

     4. The policy for coverage of a structure may not exceed $2

529

million. The board shall establish by rule policy limits for

530

coverage of contents, additional living expenses, emergency

531

debris removal, and temporary repairs after loss.

532

     5. This subsection does not restrict an insured's ability

533

to exclude windstorm coverage, hurricane coverage, or contents

534

coverage under s. 627.712.

535

     6. Any residential property covered by the program that

536

sustains a total loss for windstorm coverage more than three

537

times in any given 10-year period shall no longer be eligible for

538

coverage under the program.

539

     (d) Participating insurers.--

540

     1. The board shall adopt by rule a form for the contract

541

between the program and a participating insurer specifying the

542

respective rights and duties of the program and the participating

543

insurer. The contract shall be effective for a term of 5 years.

544

     2. Any insurer writing personal lines residential property

545

insurance coverage may elect to, and Citizens Property Insurance

546

Corporation shall, enter into a contract with the program under

547

which the program agrees to issue a policy providing windstorm

548

coverage to each insured for which the participating insurer

549

provides a policy providing personal lines residential property

550

insurance coverage for other perils, except as provided in sub-

551

subparagraph 3.b., and under which the participating insurer

552

agrees to administer the program policy. In the case of a group

553

of two or more insurers under common ownership, all members of

554

the group writing personal lines residential property insurance

555

coverage must make the same election as to participation or

556

nonparticipation in the program.

557

     3. The contract shall require the participating insurer to:

558

     a. Collect premiums for program coverage as established by

559

the program and apply deductibles, discounts, surcharges,

560

credits, and limits as established by the program.

561

     b. Administer the windstorm coverage under the program

562

policy and provide the program policy to each of its personal

563

lines residential property insureds, except to the extent

564

inconsistent with program underwriting standards or the property

565

owner's option to exclude coverage under s. 627.712(2) or (3).

566

     c. Comply with program rules and standards relating to

567

program policies, including underwriting, cancellation and

568

nonrenewal, and agent compensation.

569

     d. Provide application processing, premium processing,

570

claims processing, and adjusting services in accordance with

571

program rules and standards.

572

     4. An insurer has a fiduciary duty to the program to fairly

573

adjust claims and allocate losses between windstorm and

574

nonwindstorm perils.

575

     5. The program shall establish an annual audit process to

576

determine each participating insurer's compliance with the

577

requirements of the contract.

578

     (e) Program powers and duties.--

579

     1. The program shall make claims payments directly to

580

insureds based on the information provided to the program by the

581

participating insurer. The contract between the program and the

582

participating insurer may provide that the participating insurer

583

shall make claims payments to the insured on behalf of the

584

program, but only to the extent the program has advanced funds to

585

the participating insurer for the purpose of paying claims.

586

     2. The contract between the program and the participating

587

insurer shall require the program to pay the participating

588

insurer's loss adjustment expense, acquisition cost, litigation

589

costs, and judgments attributable to program policies, except to

590

the extent that the costs or expenses are the result of the

591

participating insurer's breach of the contract or breach of its

592

fiduciary duty.

593

     3. If a participating insurer fails to substantially comply

594

with its obligations under the program contract or breaches its

595

fiduciary duty to the program, the program may impose any

596

combination of the following sanctions: suspension of the

597

participating insurer's ability to participate in the program for

598

a period not to exceed 5 years, actual damages plus a penalty of

599

up to 50 percent, or liquidated damages as specified in the

600

program contract.

601

     4. There shall be no liability on the part of, and no cause

602

of action of any nature shall arise against, any participating

603

insurer or its agents or employees, the program or its employees,

604

or members of the board for any action taken by such persons or

605

entities in the performance of their respective duties or

606

responsibilities under this subsection. Such immunity does not

607

apply to:

608

     a. Any of the foregoing persons or entities for any willful

609

tort.

610

     b. The program, a participating insurer, or a participating

611

insurer's producing agents for breach of any written contract or

612

written agreement pertaining to insurance coverage.

613

     c. The program or the fund with respect to issuance or

614

payment of debt.

615

     d. Any participating insurer with respect to any action by

616

the program to enforce a participating insurer's obligations to

617

the program under this subsection.

618

     e. The program in any action for breach of contract or for

619

benefits under a policy issued by the program. In any such

620

action, the program shall be liable to the policyholders and

621

beneficiaries for attorney's fees as provided in s. 627.428.

622

     5. The termination of an insurer's participation in the

623

program terminates the program policies the insurer had been

624

administering, and such policies remain in effect until their

625

expiration date unless terminated for some other cause. The

626

insurer shall continue to have a duty to administer such policies

627

unless the program makes other arrangements for the

628

administration of such policies.

629

     (f) Ratemaking.--

630

     1. The board shall select an independent consultant to

631

recommend to the board a rate plan for program coverage.

632

     2.a. Program rates must be as close as possible to

633

actuarially indicated rates, taking into account the state's need

634

to restore or maintain affordability of property insurance

635

coverage for property owners and the cost of reinsurance and

636

other risk-transfer mechanisms.

637

     b. Except as otherwise provided in this paragraph, rates

638

may not be excessive, inadequate, or unfairly discriminatory

639

within the meaning provided in s. 627.062 and must provide the

640

mitigation discounts and other loss-prevention incentives

641

specified in s. 627.0629.

642

     c. In the aggregate, the rates must generate premium

643

revenue equal to or greater than the statewide average annual

644

insured windstorm loss, based on an average of all models

645

currently determined to meet the standards and guidelines of the

646

Florida Commission on Hurricane Loss Projection Methodology plus

647

expenses.

648

     d. If the board determines that the cash balance of the

649

fund, net of the proceeds of any pre-event debt instruments, is

650

less than $1 billion, the board may add to the rates determined

651

under this subparagraph a rapid cash buildup premium surcharge of

652

not more than 25 percent.

653

     3. Annually, after a public hearing, the board shall adopt

654

a rate plan pursuant to this paragraph. A rate plan takes effect

655

upon its approval by the unanimous vote of all members of the

656

board or at a later date specified in the rate plan and remains

657

in effect until the effective date of a subsequently adopted rate

658

plan.

659

     4. The rate plan recommended to or adopted by the board is

660

not subject to any other regulatory review or approval. The rate

661

plan as adopted is final agency action for purposes of chapter

662

120 and is subject to judicial review in the manner provided in

663

s. 120.68, except judicial review must be sought in the District

664

Court of Appeal, First District, regardless of where any party

665

resides.

666

     (g) Reinsurance; annual report.--

667

     1. The program may procure reinsurance or other financial

668

alternatives at any loss level.

669

     2. The program shall annually engage in negotiations to

670

procure reinsurance or other financial alternatives to transfer

671

some or all of the risk of loss in excess of the program's 100-

672

year probable maximum loss.

673

     3.a. The program shall annually procure reinsurance or

674

other financial alternatives to transfer at least 50 percent of

675

the risk of loss between the program's 50-year probable maximum

676

loss and the program's 100-year probable maximum loss. The board

677

may structure such reinsurance and other financial alternatives

678

in such layer or layers, and with such percentages of retained

679

liability in a particular layer, as the board deems appropriate.

680

     b. The program shall annually procure reinsurance or other

681

financial alternatives to transfer at least the first 50 percent

682

of the risk of loss between the program's 100-year probable

683

maximum loss and the program's 250-year probable maximum loss.

684

     c. The board may, with respect to any year, waive or modify

685

the requirements of this subparagraph only if the board finds,

686

after a public hearing and by a unanimous vote of all members of

687

the board, that transferring risk as required by this

688

subparagraph would not be a cost-effective means of reducing the

689

potential assessment liability of property owners.

690

     4. The board shall provide an annual report to the

691

President of the Senate and the Speaker of the House of

692

Representatives describing the state of the market for

693

reinsurance and other risk-transfer mechanisms, summarizing

694

negotiations for reinsurance and other financial alternatives to

695

transfer program risk, and explaining the program's actions with

696

regard to reinsurance and other financial alternatives.

697

     (h) Personal lines residential windstorm coverage issued by

698

nonparticipating insurers.--Windstorm coverage under a personal

699

lines residential property insurance policy issued by an insurer

700

that is not a participating insurer is subject to s. 627.062,

701

except that the rates for such coverage may be disapproved only

702

if they are inadequate or unfairly discriminatory.

703

     (i) Transition.--It is the intent of the Legislature that

704

participating insurers continue to provide windstorm coverage to

705

their existing policyholders under policies providing personal

706

lines residential property insurance coverage until the first

707

renewal date on or after June 1, 2009, at which time the

708

windstorm coverage shall be provided under a program policy. For

709

that purpose, a participating insurer remains eligible for

710

coverage under subsection (4) during the contract year beginning

711

June 1, 2009, to the extent the participating insurer has in

712

force policies defined as covered policies under subsection (2).

713

The replacement of windstorm coverage under a participating

714

insurer's policy providing personal lines residential property

715

insurance coverage with windstorm coverage under a program policy

716

does not constitute a cancellation or nonrenewal for purposes of

717

s. 627.4133 or any other purposes under the Insurance Code. With

718

respect to noncommercial residential property insurance policy

719

renewals taking effect on or after June 1, 2009, and before June

720

1, 2010, the notice of renewal premium shall include a notice, in

721

a form specified by the board, that, as of the policy renewal

722

date, windstorm coverage will be provided under a program policy

723

administered by the insurer and coverage for other perils will be

724

provided under a residential property insurance policy issued by

725

the insurer.

726

     Section 2. State Board of Administration; implementation of

727

the Florida Windstorm Insurance Program.--No later than January

728

1, 2009, the State Board of Administration shall adopt all

729

contract forms, rules, standards, policy forms, mitigation

730

discounts, and rates required to implement the Florida Windstorm

731

Insurance Program created by s. 215.555, Florida Statutes, as

732

amended by this act.

733

     Section 3.  Paragraph (gg) is added to subsection (6) of

734

section 627.351, Florida Statutes, to read:

735

     627.351  Insurance risk apportionment plans.--

736

     (6)  CITIZENS PROPERTY INSURANCE CORPORATION.--

737

     (gg) Notwithstanding any provision of this subsection or s.

738

627.3517:

739

     1. On or after June 1, 2009, the corporation may not issue

740

or renew any personal lines residential property insurance policy

741

providing windstorm-only coverage.

742

     2.a. In order to facilitate the transfer of policies of the

743

corporation from the corporation to the competitive market and in

744

order to provide a capital contribution to the Florida Windstorm

745

Insurance Program, the corporation shall offer insurers the

746

opportunity to bid on the right to provide nonwindstorm coverage

747

to current policyholders of the corporation, to take effect on

748

the policyholder's first renewal date on or after June 1, 2009,

749

or through an assumption agreement effective on or after June 1,

750

2009.

751

     b. The corporation shall prepare blocks of business that

752

are balanced as to geographic location and insured value and

753

shall offer the blocks of business at auction beginning no later

754

than October 1, 2008. The insurer that prevails in the auction

755

shall have an exclusive right to enter into an assumption

756

agreement with the corporation under which the participating

757

insurer assumes the nonwindstorm coverage for the remainder of

758

the policy term and the Florida Windstorm Insurance Program

759

assumes the windstorm coverage for the remainder of the policy

760

term. If an assumption occurs, any renewal shall be at the

761

participating insurer's rates as to the nonwindstorm coverage and

762

the Florida Windstorm Insurance Program rates as to the windstorm

763

coverage. Any assumptions under this sub-subparagraph must take

764

effect no later than May 31, 2010.

765

     c. The provisions of s. 627.3517 do not apply to any offer

766

to replace coverage by the corporation with personal lines

767

residential property insurance coverage provided by a

768

participating insurer as defined in s. 215.555(18), including any

769

assumption under this subparagraph.

770

     d. The corporation shall transfer all proceeds of the

771

auctions to the Florida Hurricane Catastrophe Fund, which shall

772

treat the proceeds as a capital contribution for the benefit of

773

the Florida Windstorm Insurance Program.

774

     3. Effective June 1, 2009, the corporation may not issue or

775

renew a policy providing personal lines residential property

776

insurance coverage if the owner of the property has received an

777

offer of coverage from a participating insurer as defined in s.

778

215.555(18), provided the participating insurer has provided the

779

corporation with notice of the offer of coverage at least 30 days

780

prior to the renewal date or expected issuance date of the

781

corporation's policy.

782

     4. No later than December 31, 2010, the corporation shall

783

transfer to the Florida Hurricane Catastrophe Fund an additional

784

capital contribution for the benefit of the Florida Windstorm

785

Insurance Program. The contribution shall consist of the

786

corporation's surplus as to policyholders, multiplied by a ratio:

787

     a. The numerator of which is the total structural insured

788

value as of June 1, 2010, for risks covered by all policies

789

issued by the corporation; and

790

     b. The denominator of which is the total structural insured

791

value as of June 1, 2009, for risks covered by all policies

792

issued by the corporation.

793

     Section 4.  Effective June 1, 2009, subsection (1) of

794

section 627.712, Florida Statutes, is amended to read:

795

     627.712  Residential windstorm coverage required;

796

availability of exclusions for windstorm or contents.--

797

     (1) Effective upon the date of issuance of the policy or

798

the date of the first renewal on or after June 1, 2009, an

799

insurer issuing or renewing a residential property insurance

800

policy must provide windstorm coverage as part of the policy

801

issued by the insurer or under a separate policy issued by the

802

Florida Windstorm Insurance Program under s. 215.555 and

803

administered by the insurer. This subsection does not apply with

804

respect to risks that are eligible for wind-only coverage from

805

Citizens Property Insurance Corporation under s. 627.351(6).

806

     Section 5.  Except as otherwise expressly provided in this

807

act, this act shall take effect upon becoming a law.