CS/HB 983

1
A bill to be entitled
2An act relating to windstorm insurance coverage; amending
3s. 215.555, F.S.; providing additional legislative
4findings; revising certain definitions; providing for
5application of the Florida Hurricane Catastrophe Fund to
6costs of the Florida Windstorm Insurance Program; revising
7certain reimbursement contract board obligation
8limitations; providing for future expiration of certain
9limitations; revising legislative findings and
10declarations relating to revenue bonds; providing for
11application to coverage of costs of property damage under
12policies issued under the Florida Windstorm Insurance
13Program; revising emergency assessment requirement
14provisions to include application to policies issued under
15the Florida Windstorm Insurance Program; providing for
16future expiration of certain provisions; creating the
17Florida Windstorm Insurance Program within the Florida
18Hurricane Catastrophe Fund; providing a purpose; providing
19definitions; providing requirements for coverage,
20standards, and policy forms under the program; providing
21limitations; providing for administration of the program
22by the State Board of Administration; requiring the board
23to adopt rules; providing an eligibility limitation on
24certain properties' participation in the program;
25providing requirements for insurers participating in the
26program; providing contract requirements; providing for
27participating insurer compliance audits; specifying powers
28and duties of the program; providing claims payment
29requirements; providing for payment of certain insurer's
30costs and expenses; providing for penalties for insurers
31for certain actions; specifying absence of liability for
32certain actions; providing for effect of termination of an
33insurer's participation; specifying ratemaking
34requirements; authorizing the board to add a rapid cash
35buildup premium surcharge to rates under certain
36circumstances; requiring the board to adopt a rate plan;
37providing requirements for procuring reinsurance;
38authorizing the board to waive or modify certain
39reinsurance requirements; requiring an annual report to
40the Legislature; requiring windstorm coverage under
41certain insurance policies issued by certain insurers to
42be subject to certain rate standards requirements;
43providing transitional requirements; specifying
44requirements for the board in implementing the program;
45amending s. 627.351, F.S.; prohibiting the Citizens
46Property Insurance Corporation from issuing or renewing
47certain windstorm-only insurance policies after a certain
48date; providing requirements for transfer of policies of
49the corporation to the program; providing for transfer of
50certain proceeds and funds to the Florida Hurricane
51Catastrophe Fund for certain purposes; amending s.
52627.712, F.S.; revising windstorm coverage requirements
53for insurers; providing effective dates.
54
55Be It Enacted by the Legislature of the State of Florida:
56
57     Section 1.  Effective June 1, 2009, paragraph (h) is added
58to subsection (1) of section 215.555, Florida Statutes,
59paragraphs (a), (c), and (e) of subsection (2), subsection (3),
60paragraph (c) of subsection (4), and paragraphs (a) and (b) of
61subsection (6) of that section are amended, and subsection (18)
62is added to that section, to read:
63     215.555  Florida Hurricane Catastrophe Fund.--
64     (1)  FINDINGS AND PURPOSE.--The Legislature finds and
65declares as follows:
66     (h)1.  The Legislature further finds that, as of January
672008, more than 15 years of efforts to use state regulatory,
68financial, and insurance mechanisms to ensure availability and
69affordability of residential property insurance coverage have
70failed to satisfactorily achieve these goals.
71     2.  The continuing lack of available, affordable coverage
72creates a substantial burden on the state's economy.
73     3.  The unsatisfactory performance of a system intended to
74provide available, affordable coverage for windstorm losses in
75this state indicates that, in light of this state's unique
76exposure to windstorm losses, windstorm may be an uninsurable
77peril in all or parts of this state as the concept of
78insurability is commonly understood. Therefore, a restructured
79system of protecting homeowners from windstorm losses is
80necessary to maintain the viability of the economy of this
81state.
82     (2)  DEFINITIONS.--As used in this section:
83     (a)  "Actuarially indicated" means, with respect to
84premiums paid by insurers for reimbursement provided by the fund
85under subsection (4) and premiums paid by insureds for windstorm
86coverage provided under subsection (18), an amount determined
87according to principles of actuarial science to be adequate, but
88not excessive, in the aggregate, to pay current and future
89obligations and expenses of the fund, including additional
90amounts if needed to pay debt service on revenue bonds issued
91under this section and to provide required debt service coverage
92in excess of the amounts required to pay actual debt service on
93revenue bonds issued under subsection (6), and:
94     1.  With respect to premiums paid by insurers for
95reimbursement under subsection (4), determined according to
96principles of actuarial science to reflect each insurer's
97relative exposure to hurricane losses; or
98     2.  With respect to premiums paid by insureds for windstorm
99coverage under subsection (18), determined according to
100principles of actuarial science to reflect each insured's
101relative exposure to windstorm losses.
102     (c)  "Covered policy" means any insurance policy covering
103residential property in this state, including, but not limited
104to, any homeowner's, mobile home owner's, farm owner's,
105condominium association, condominium unit owner's, tenant's, or
106apartment building policy, or any other policy covering a
107residential structure or its contents issued by any authorized
108insurer, including a commercial self-insurance fund holding a
109certificate of authority issued by the Office of Insurance
110Regulation under s. 624.462, the Citizens Property Insurance
111Corporation, and any joint underwriting association or similar
112entity created under law. The term "covered policy" includes any
113collateral protection insurance policy covering personal
114residences which protects both the borrower's and the lender's
115financial interests, in an amount at least equal to the coverage
116for the dwelling in place under the lapsed homeowner's policy,
117if such policy can be accurately reported as required in
118subsection (5). Additionally, covered policies include policies
119covering the peril of wind removed from the Florida Residential
120Property and Casualty Joint Underwriting Association or from the
121Citizens Property Insurance Corporation, created under s.
122627.351(6), or from the Florida Windstorm Underwriting
123Association, created under s. 627.351(2), by an authorized
124insurer under the terms and conditions of an executed assumption
125agreement between the authorized insurer and such association or
126Citizens Property Insurance Corporation. Each assumption
127agreement between the association and such authorized insurer or
128Citizens Property Insurance Corporation must be approved by the
129Office of Insurance Regulation before the effective date of the
130assumption, and the Office of Insurance Regulation must provide
131written notification to the board within 15 working days after
132such approval. "Covered policy" does not include any policy that
133excludes wind coverage or hurricane coverage or any reinsurance
134agreement and does not include any policy otherwise meeting this
135definition which is issued by a surplus lines insurer or a
136reinsurer. All commercial residential excess policies and all
137deductible buy-back policies that, based on sound actuarial
138principles, require individual ratemaking shall be excluded by
139rule if the actuarial soundness of the fund is not jeopardized.
140For this purpose, the term "excess policy" means a policy that
141provides insurance protection for large commercial property
142risks and that provides a layer of coverage above a primary
143layer insured by another insurer. Effective June 1, 2010, the
144term "covered policy" does not include any policy providing
145personal lines residential property insurance coverage as
146defined in subsection (18).
147     (e)  "Retention" means the amount of losses below which an
148insurer is not entitled to reimbursement from the fund. An
149insurer's retention shall be calculated as follows:
150     1.  The board shall calculate and report to each insurer
151the retention multiples for that year. For the contract year
152beginning June 1, 2005, the retention multiple shall be equal to
153$4.5 billion divided by the total estimated reimbursement
154premium for the contract year; for the contract year beginning
155June 1, 2006, through the contract year beginning June 1, 2009
156subsequent years, the retention multiple shall be equal to $4.5
157billion, adjusted based upon the reported exposure from the
158prior contract year to reflect the percentage growth in exposure
159to the fund for covered policies since 2004, divided by the
160total estimated reimbursement premium for the contract year. For
161the contract year beginning June 1, 2010, the retention multiple
162shall be equal to $1 billion divided by the total estimated
163reimbursement premium for the contract year; for subsequent
164years, the retention multiple shall be equal to $1 billion,
165adjusted based upon the reported exposure from the prior
166contract year to reflect the percentage growth in exposure to
167the fund for covered policies since 2009, divided by the total
168estimated reimbursement premium for the contract year. Total
169reimbursement premium for purposes of the calculation under this
170subparagraph shall be estimated using the assumption that all
171insurers have selected the 90-percent coverage level.
172     2.  The retention multiple as determined under subparagraph
1731. shall be adjusted to reflect the coverage level elected by
174the insurer. For insurers electing the 90-percent coverage
175level, the adjusted retention multiple is 100 percent of the
176amount determined under subparagraph 1. For insurers electing
177the 75-percent coverage level, the retention multiple is 120
178percent of the amount determined under subparagraph 1. For
179insurers electing the 45-percent coverage level, the adjusted
180retention multiple is 200 percent of the amount determined under
181subparagraph 1.
182     3.  An insurer shall determine its provisional retention by
183multiplying its provisional reimbursement premium by the
184applicable adjusted retention multiple and shall determine its
185actual retention by multiplying its actual reimbursement premium
186by the applicable adjusted retention multiple.
187     4.  For insurers who experience multiple covered events
188causing loss during the contract year, beginning June 1, 2005,
189each insurer's full retention shall be applied to each of the
190covered events causing the two largest losses for that insurer.
191For each other covered event resulting in losses, the insurer's
192retention shall be reduced to one-third of the full retention.
193The reimbursement contract shall provide for the reimbursement
194of losses for each covered event based on the full retention
195with adjustments made to reflect the reduced retentions after
196January 1 of the contract year provided the insurer reports its
197losses as specified in the reimbursement contract.
198     (3)  FLORIDA HURRICANE CATASTROPHE FUND CREATED.--There is
199created the Florida Hurricane Catastrophe Fund to be
200administered by the State Board of Administration. Moneys in the
201fund may not be expended, loaned, or appropriated except to pay
202obligations of the fund arising out of reimbursement contracts
203entered into under subsection (4), payment of debt service on
204revenue bonds issued under subsection (6), costs of the
205mitigation program under subsection (7), costs of procuring
206reinsurance, costs of the Florida Windstorm Insurance Program
207under subsection (18), and costs of administration of the fund.
208The board shall invest the moneys in the fund pursuant to ss.
209215.44-215.52. Except as otherwise provided in this section,
210earnings from all investments shall be retained in the fund. The
211board may employ or contract with such staff and professionals
212as the board deems necessary for the administration of the fund.
213The board may adopt such rules as are reasonable and necessary
214to implement this section and shall specify interest due on any
215delinquent remittances, which interest may not exceed the fund's
216rate of return plus 5 percent. Such rules must conform to the
217Legislature's specific intent in establishing the fund as
218expressed in subsection (1), must enhance the fund's potential
219ability to respond to claims for covered events, must contain
220general provisions so that the rules can be applied with
221reasonable flexibility so as to accommodate insurers in
222situations of an unusual nature or where undue hardship may
223result, except that such flexibility may not in any way impair,
224override, supersede, or constrain the public purpose of the
225fund, and must be consistent with sound insurance practices. The
226board may, by rule, provide for the exemption from subsections
227(4) and (5) of insurers writing covered policies with less than
228$10 million in aggregate exposure for covered policies if the
229exemption does not affect the actuarial soundness of the fund.
230     (4)  REIMBURSEMENT CONTRACTS.--
231     (c)1.a.  The contract shall also provide that the
232obligation of the board with respect to all contracts covering a
233particular contract year shall not exceed the actual claims-
234paying capacity of the fund up to a limit of $15 billion for
235that contract year adjusted based upon the reported exposure
236from the prior contract year to reflect the percentage growth in
237exposure to the fund for covered policies since 2003, provided
238the dollar growth in the limit may not increase in any year by
239an amount greater than the dollar growth of the balance of the
240fund as of December 31, less any premiums or interest
241attributable to optional coverage, as defined by rule which
242occurred over the prior calendar year. This sub-subparagraph
243expires June 1, 2010.
244     b.  For the contract year beginning June 1, 2010, and
245subsequent contract years, the contract shall provide that the
246obligation of the board with respect to all reimbursement
247contracts covering a particular contract year shall not exceed
248$3 billion for that contract year plus an adjustment based upon
249the reported exposure from the prior contract year to reflect
250the percentage growth in exposure of the fund for commercial
251lines residential policies since 2009.
252     2.  In May before the start of the upcoming contract year
253and in October during the contract year, the board shall publish
254in the Florida Administrative Weekly a statement of the fund's
255estimated borrowing capacity and the projected balance of the
256fund as of December 31. After the end of each calendar year, the
257board shall notify insurers of the estimated borrowing capacity
258and the balance of the fund as of December 31 to provide
259insurers with data necessary to assist them in determining their
260retention and projected payout from the fund for loss
261reimbursement purposes. In conjunction with the development of
262the premium formula, as provided for in subsection (5), the
263board shall publish factors or multiples that assist insurers in
264determining their retention and projected payout for the next
265contract year. For all regulatory and reinsurance purposes, an
266insurer may calculate its projected payout from the fund as its
267share of the total fund premium for the current contract year
268multiplied by the sum of the projected balance of the fund as of
269December 31 and the estimated borrowing capacity for that
270contract year as reported under this subparagraph.
271     (6)  REVENUE BONDS.--
272     (a)  General provisions.--
273     1.  Upon the occurrence of a hurricane and a determination
274that the moneys in the fund are or will be insufficient to pay
275reimbursement at the levels promised in the reimbursement
276contracts, the board may take the necessary steps under
277paragraph (c) or paragraph (d) for the issuance of revenue bonds
278for the benefit of the fund. The proceeds of such revenue bonds
279may be used to make reimbursement payments under reimbursement
280contracts; to refinance or replace previously existing
281borrowings or financial arrangements; to pay interest on bonds;
282to fund reserves for the bonds; to pay expenses incident to the
283issuance or sale of any bond issued under this section,
284including costs of validating, printing, and delivering the
285bonds, costs of printing the official statement, costs of
286publishing notices of sale of the bonds, and related
287administrative expenses; or for such other purposes related to
288the financial obligations of the fund as the board may
289determine. The term of the bonds may not exceed 30 years. The
290board may pledge or authorize the corporation to pledge all or a
291portion of all revenues under subsection (5) and under paragraph
292(b) to secure such revenue bonds and the board may execute such
293agreements between the board and the issuer of any revenue bonds
294and providers of other financing arrangements under paragraph
295(7)(b) as the board deems necessary to evidence, secure,
296preserve, and protect such pledge. If reimbursement premiums
297received under subsection (5) or earnings on such premiums are
298used to pay debt service on revenue bonds, such premiums and
299earnings shall be used only after the use of the moneys derived
300from assessments under paragraph (b). The funds, credit,
301property, or taxing power of the state or political subdivisions
302of the state shall not be pledged for the payment of such bonds.
303The board may also enter into agreements under paragraph (c) or
304paragraph (d) for the purpose of issuing revenue bonds in the
305absence of a hurricane upon a determination that such action
306would maximize the ability of the fund to meet future
307obligations.
308     2.  The Legislature finds and declares that the issuance of
309bonds under this subsection is for the public purpose of paying
310the proceeds of the bonds to insurers as required by the
311contracts entered into under subsection (4), thereby enabling
312insurers to pay the claims of policyholders to assure that
313policyholders are able to pay the cost of construction,
314reconstruction, repair, and restoration, and other costs
315associated with damage to property of policyholders of covered
316policies after the occurrence of a hurricane, and for the public
317purpose of paying claims of policyholders under subsection (18)
318to ensure that policyholders are able to pay the costs of
319construction, reconstruction, repair, and restoration and other
320costs associated with damage to their property after a hurricane
321or other windstorm.
322     (b)  Emergency assessments.--
323     1.a.  If the board determines that the amount of revenue
324produced under subsections subsection (5) and (18) is
325insufficient to fund the obligations, costs, and expenses of the
326fund and the corporation, including repayment of revenue bonds
327and that portion of the debt service coverage not met by
328reimbursement premiums, the board shall direct the Office of
329Insurance Regulation to levy, by order, an emergency assessment
330on direct premiums for all property and casualty lines of
331business in this state, including property and casualty business
332of surplus lines insurers regulated under part VIII of chapter
333626, but not including any workers' compensation premiums or
334medical malpractice premiums. As used in this subsection, the
335term "property and casualty business" includes all lines of
336business identified on Form 2, Exhibit of Premiums and Losses,
337in the annual statement required of authorized insurers by s.
338624.424 and any rule adopted under this section, except for
339those lines identified as accident and health insurance and
340except for policies written under the National Flood Insurance
341Program. The assessment shall be specified as a percentage of
342direct written premium and is subject to annual adjustments by
343the board in order to meet debt obligations. The same percentage
344shall apply to all policies in lines of business subject to the
345assessment issued or renewed during the 12-month period
346beginning on the effective date of the assessment. This sub-
347subparagraph expires June 1, 2010; however, the expiration of
348this sub-subparagraph does not affect any assessments levied
349under this sub-subparagraph prior to that date.
350     b.  Effective June 1, 2010, if the board determines that
351the amount of revenue produced under subsections (5) and (18) is
352insufficient to fund the obligations, costs, and expenses of the
353fund and the corporation, including repayment of revenue bonds
354and that portion of the debt service coverage not met by
355reimbursement premiums, the board shall direct the Office of
356Insurance Regulation to levy, by order, an emergency assessment
357on direct premiums for all personal lines and commercial lines
358policies providing property insurance coverage, including
359policies issued by the Florida Windstorm Insurance Program under
360subsection (18). The assessment shall be specified as a
361percentage of direct written premium and is subject to annual
362adjustments by the board in order to meet debt obligations. The
363same percentage shall apply to all policies in lines of business
364subject to the assessment issued or renewed during the 12-month
365period beginning on the effective date of the assessment. An
366insurer that is not a participating insurer within the meaning
367provided in subsection (18) may not be assessed under this sub-
368subparagraph to fund the obligations, costs, and expenses of the
369Florida Windstorm Insurance Program.
370     2.a.  A premium is not subject to an annual assessment
371under this paragraph in excess of 6 percent of premium with
372respect to obligations arising out of losses attributable to any
373one contract year, and a premium is not subject to an aggregate
374annual assessment under this paragraph in excess of 10 percent
375of premium. This sub-subparagraph expires June 1, 2010; however,
376the expiration of this sub-subparagraph does not affect any
377assessments levied under this sub-subparagraph prior to that
378date.
379     b.  Effective June 1, 2010, the total amount of emergency
380assessments under this paragraph with respect to any year may
381not exceed 10 percent of the statewide total gross written
382premium for all insurers for personal lines and commercial lines
383policies providing property insurance coverage, including
384policies issued by the Florida Windstorm Insurance Program under
385subsection (18), for the prior year. However, if the fund
386deficit with respect to any year exceeds such amount and bonds
387are issued to defray the deficit, the total amount of emergency
388assessments with respect to such deficit may not in any year
389exceed 10 percent of the deficit or such lesser percentage as is
390sufficient to retire the bonds as determined by the board.
391     c.  An annual assessment under this paragraph shall
392continue as long as the revenue bonds issued with respect to
393which the assessment was imposed are outstanding, including any
394bonds the proceeds of which were used to refund the revenue
395bonds, unless adequate provision has been made for the payment
396of the bonds under the documents authorizing issuance of the
397bonds.
398     3.  Emergency assessments shall be collected from
399policyholders. Emergency assessments shall be remitted by
400insurers as a percentage of direct written premium for the
401preceding calendar quarter as specified in the order from the
402Office of Insurance Regulation. The office shall verify the
403accurate and timely collection and remittance of emergency
404assessments and shall report the information to the board in a
405form and at a time specified by the board. Each insurer
406collecting assessments shall provide the information with
407respect to premiums and collections as may be required by the
408office to enable the office to monitor and verify compliance
409with this paragraph.
410     4.  With respect to assessments of surplus lines premiums,
411each surplus lines agent shall collect the assessment at the
412same time as the agent collects the surplus lines tax required
413by s. 626.932, and the surplus lines agent shall remit the
414assessment to the Florida Surplus Lines Service Office created
415by s. 626.921 at the same time as the agent remits the surplus
416lines tax to the Florida Surplus Lines Service Office. The
417emergency assessment on each insured procuring coverage and
418filing under s. 626.938 shall be remitted by the insured to the
419Florida Surplus Lines Service Office at the time the insured
420pays the surplus lines tax to the Florida Surplus Lines Service
421Office. The Florida Surplus Lines Service Office shall remit the
422collected assessments to the fund or corporation as provided in
423the order levied by the Office of Insurance Regulation. The
424Florida Surplus Lines Service Office shall verify the proper
425application of such emergency assessments and shall assist the
426board in ensuring the accurate and timely collection and
427remittance of assessments as required by the board. The Florida
428Surplus Lines Service Office shall annually calculate the
429aggregate written premium on property and casualty business,
430other than workers' compensation and medical malpractice,
431procured through surplus lines agents and insureds procuring
432coverage and filing under s. 626.938 and shall report the
433information to the board in a form and at a time specified by
434the board.
435     5.  Any assessment authority not used for a particular
436contract year may be used for a subsequent contract year. If,
437for a subsequent contract year, the board determines that the
438amount of revenue produced under subsection (5) is insufficient
439to fund the obligations, costs, and expenses of the fund and the
440corporation, including repayment of revenue bonds and that
441portion of the debt service coverage not met by reimbursement
442premiums, the board shall direct the Office of Insurance
443Regulation to levy an emergency assessment up to an amount not
444exceeding the amount of unused assessment authority from a
445previous contract year or years, plus an additional 4 percent
446provided that the assessments in the aggregate do not exceed the
447limits specified in subparagraph 2. This subparagraph expires
448June 1, 2010; however, the expiration of this subparagraph does
449not affect any assessments levied under this subparagraph prior
450to that date.
451     6.  The assessments otherwise payable to the corporation
452under this paragraph shall be paid to the fund unless and until
453the Office of Insurance Regulation and the Florida Surplus Lines
454Service Office have received from the corporation and the fund a
455notice, which shall be conclusive and upon which they may rely
456without further inquiry, that the corporation has issued bonds
457and the fund has no agreements in effect with local governments
458under paragraph (c). On or after the date of the notice and
459until the date the corporation has no bonds outstanding, the
460fund shall have no right, title, or interest in or to the
461assessments, except as provided in the fund's agreement with the
462corporation.
463     7.  Emergency assessments are not premium and are not
464subject to the premium tax, to the surplus lines tax, to any
465fees, or to any commissions. An insurer is liable for all
466assessments that it collects and must treat the failure of an
467insured to pay an assessment as a failure to pay the premium. An
468insurer is not liable for uncollectible assessments.
469     8.  When an insurer is required to return an unearned
470premium, it shall also return any collected assessment
471attributable to the unearned premium. A credit adjustment to the
472collected assessment may be made by the insurer with regard to
473future remittances that are payable to the fund or corporation,
474but the insurer is not entitled to a refund.
475     9.  When a surplus lines insured or an insured who has
476procured coverage and filed under s. 626.938 is entitled to the
477return of an unearned premium, the Florida Surplus Lines Service
478Office shall provide a credit or refund to the agent or such
479insured for the collected assessment attributable to the
480unearned premium prior to remitting the emergency assessment
481collected to the fund or corporation.
482     10.  The exemption of medical malpractice insurance
483premiums from emergency assessments under this paragraph is
484repealed May 31, 2010, and medical malpractice insurance
485premiums shall be subject to emergency assessments attributable
486to loss events occurring in the contract years commencing on
487June 1, 2010.
488     (18)  FLORIDA WINDSTORM INSURANCE PROGRAM.--
489     (a)  Creation; purpose.--The Florida Windstorm Insurance
490Program is created within the Florida Hurricane Catastrophe
491Fund. The purpose of the program is to provide personal lines
492residential windstorm insurance coverage for properties
493throughout the state.
494     (b)  Definitions.--The definitions in subsection (2) apply
495to the program, except as modified by this paragraph. As used in
496this subsection:
497     1.  "Board" means the State Board of Administration.
498     2.  "Participating insurer" means an insurer providing
499personal lines residential property insurance coverage for
500nonwindstorm perils that administers windstorm coverage on
501behalf of the program.
502     3.  "Personal lines residential property insurance
503coverage" consists of the type of coverage provided by
504homeowner's, mobile home owner's, dwelling, tenant's,
505condominium unit owner's, cooperative unit owner's, and similar
506policies. The term "personal lines residential property
507insurance coverage" does not include the type of coverage
508provided by condominium association, cooperative association,
509apartment building, and similar policies, including policies
510covering the common elements of a homeowners' association.
511     4.  "Program" means the Florida Windstorm Insurance Program
512created under this subsection.
513     5.  "Windstorm coverage" means coverage for loss or damage
514to personal lines residential property caused by wind, wind
515gusts, hail, rain, tornadoes, cyclones, tropical storms, or
516hurricanes. The term "windstorm coverage" does not include
517coverage for loss or damage to residential property caused by
518flood, storm surge, or rising water.
519     (c)  Coverage provided; standards; policy forms.--
520     1.  The program shall issue a policy providing windstorm
521coverage to each personal lines residential risk covered by a
522participating insurer, except if inconsistent with the
523underwriting standards adopted under the program. Coverage shall
524include structure, contents, additional living expenses,
525emergency debris removal, and temporary repairs after loss.
526     2.  The board shall adopt by rule standards for the
527program, including, but not limited to, standards relating to
528underwriting, mitigation discounts, deductibles, cancellation
529and nonrenewal, and recordkeeping.
530     3.  The board shall adopt by rule policy forms to be used
531for program policies. Program policies must comply with part X
532of chapter 627. The board shall also adopt by rule such notices,
533coverage summaries, and outlines of coverage as are required by
534law or as the board deems appropriate, including a notice
535informing an insured of the duties of the program and the duties
536of the participating insurer.
537     4.  The policy for coverage of a structure may not exceed
538$2 million. The board shall establish by rule policy limits for
539coverage of contents, additional living expenses, emergency
540debris removal, and temporary repairs after loss.
541     5.  This subsection does not restrict an insured's ability
542to exclude windstorm coverage, hurricane coverage, or contents
543coverage under s. 627.712.
544     6.  Any residential property covered by the program that
545sustains a total loss for windstorm coverage more than three
546times in any given 10-year period shall no longer be eligible
547for coverage under the program.
548     (d)  Participating insurers.--
549     1.  The board shall adopt by rule a form for the contract
550between the program and a participating insurer specifying the
551respective rights and duties of the program and the
552participating insurer. The contract shall be effective for a
553term of 5 years.
554     2.  Any insurer writing personal lines residential property
555insurance coverage may elect to, and Citizens Property Insurance
556Corporation shall, enter into a contract with the program under
557which the program agrees to issue a policy providing windstorm
558coverage to each insured for which the participating insurer
559provides a policy providing personal lines residential property
560insurance coverage for other perils, except as provided in sub-
561subparagraph 3.b., and under which the participating insurer
562agrees to administer the program policy. In the case of a group
563of two or more insurers under common ownership, all members of
564the group writing personal lines residential property insurance
565coverage must make the same election as to participation or
566nonparticipation in the program.
567     3.  The contract shall require the participating insurer
568to:
569     a.  Collect premiums for program coverage as established by
570the program and apply deductibles, discounts, surcharges,
571credits, and limits as established by the program.
572     b.  Administer the windstorm coverage under the program
573policy and provide the program policy to each of its personal
574lines residential property insureds, except to the extent
575inconsistent with program underwriting standards or the property
576owner's option to exclude coverage under s. 627.712(2) or (3).
577     c.  Comply with program rules and standards relating to
578program policies, including underwriting, and cancellation and
579nonrenewal.
580     d.  Provide application processing, premium processing,
581claims processing, and adjusting services in accordance with
582program rules and standards.
583     4.  An insurer has a fiduciary duty to the program to
584fairly adjust claims and allocate losses between windstorm and
585nonwindstorm perils.
586     5.  The program shall establish an annual audit process to
587determine each participating insurer's compliance with the
588requirements of the contract.
589     (e)  Program powers and duties.--
590     1.  The program shall make claims payments directly to
591insureds based on the information provided to the program by the
592participating insurer. The contract between the program and the
593participating insurer may provide that the participating insurer
594shall make claims payments to the insured on behalf of the
595program, but only to the extent the program has advanced funds
596to the participating insurer for the purpose of paying claims.
597     2.  The contract between the program and the participating
598insurer shall require the program to pay the participating
599insurer's loss adjustment expense, reasonable acquisition costs
600not to exceed the usual and customary amount for each individual
601component of such costs, litigation costs, and judgments
602attributable to program policies, except to the extent that the
603costs or expenses are the result of the participating insurer's
604breach of the contract or breach of its fiduciary duty.
605     3.  If a participating insurer fails to substantially
606comply with its obligations under the program contract or
607breaches its fiduciary duty to the program, the program may
608impose any combination of the following sanctions: suspension of
609the participating insurer's ability to participate in the
610program for a period not to exceed 5 years, actual damages plus
611a penalty of up to 50 percent, or liquidated damages as
612specified in the program contract.
613     4.  There shall be no liability on the part of, and no
614cause of action of any nature shall arise against, any
615participating insurer or its agents or employees, the program or
616its employees, or members of the board for any action taken by
617such persons or entities in the performance of their respective
618duties or responsibilities under this subsection. Such immunity
619does not apply to:
620     a.  Any of the foregoing persons or entities for any
621willful tort.
622     b.  The program, a participating insurer, or a
623participating insurer's producing agents for breach of any
624written contract or written agreement pertaining to insurance
625coverage.
626     c.  The program or the fund with respect to issuance or
627payment of debt.
628     d.  Any participating insurer with respect to any action by
629the program to enforce a participating insurer's obligations to
630the program under this subsection.
631     e.  The program in any action for breach of contract or for
632benefits under a policy issued by the program. In any such
633action, the program shall be liable to the policyholders and
634beneficiaries for attorney's fees as provided in s. 627.428.
635     5.  The termination of an insurer's participation in the
636program terminates the program policies the insurer had been
637administering, and such policies remain in effect until their
638expiration date unless terminated for some other cause. The
639insurer shall continue to have a duty to administer such
640policies unless the program makes other arrangements for the
641administration of such policies.
642     (f)  Ratemaking.--
643     1.  The board shall select an independent consultant to
644recommend to the board a rate plan for program coverage.
645     2.a.  Program rates must be as close as possible to
646actuarially indicated rates, taking into account the state's
647need to restore or maintain affordability of property insurance
648coverage for property owners and the cost of reinsurance and
649other risk-transfer mechanisms.
650     b.  Except as otherwise provided in this paragraph, rates
651may not be excessive, inadequate, or unfairly discriminatory
652within the meaning provided in s. 627.062 and must provide the
653mitigation discounts and other loss-prevention incentives
654specified in s. 627.0629.
655     c.  In the aggregate, the rates must generate premium
656revenue equal to or greater than the statewide average annual
657insured windstorm loss, based on an average of all models
658currently determined to meet the standards and guidelines of the
659Florida Commission on Hurricane Loss Projection Methodology plus
660expenses.
661     d.  If the board determines that the cash balance of the
662fund, net of the proceeds of any pre-event debt instruments, is
663less than $1 billion, the board may add to the rates determined
664under this subparagraph a rapid cash buildup premium surcharge
665of not more than 25 percent.
666     3.  Annually, after a public hearing, the board shall adopt
667a rate plan pursuant to this paragraph. A rate plan takes effect
668upon its approval by the unanimous vote of all members of the
669board or at a later date specified in the rate plan and remains
670in effect until the effective date of a subsequently adopted
671rate plan.
672     4.  The rate plan recommended to or adopted by the board is
673not subject to any other regulatory review or approval. The rate
674plan as adopted is final agency action for purposes of chapter
675120 and is subject to judicial review in the manner provided in
676s. 120.68, except judicial review must be sought in the District
677Court of Appeal, First District, regardless of where any party
678resides.
679     (g)  Reinsurance; annual report.--
680     1.  The program may procure reinsurance or other financial
681alternatives at any loss level.
682     2.  The program shall annually engage in negotiations to
683procure reinsurance or other financial alternatives to transfer
684some or all of the risk of loss in excess of the program's 100-
685year probable maximum loss.
686     3.a.  The program shall annually procure reinsurance or
687other financial alternatives to transfer at least 50 percent of
688the risk of loss between the program's 50-year probable maximum
689loss and the program's 100-year probable maximum loss. The board
690may structure such reinsurance and other financial alternatives
691in such layer or layers, and with such percentages of retained
692liability in a particular layer, as the board deems appropriate.
693     b.  The program shall annually procure reinsurance or other
694financial alternatives to transfer at least the first 50 percent
695of the risk of loss between the program's 100-year probable
696maximum loss and the program's 250-year probable maximum loss.
697     c.  The board may, with respect to any year, waive or
698modify the requirements of this subparagraph only if the board
699finds, after a public hearing and by a unanimous vote of all
700members of the board, that transferring risk as required by this
701subparagraph would not be a cost-effective means of reducing the
702potential assessment liability of property owners.
703     4.  The board shall provide an annual report to the
704President of the Senate and the Speaker of the House of
705Representatives describing the state of the market for
706reinsurance and other risk-transfer mechanisms, summarizing
707negotiations for reinsurance and other financial alternatives to
708transfer program risk, and explaining the program's actions with
709regard to reinsurance and other financial alternatives.
710     (h)  Personal lines residential windstorm coverage issued
711by nonparticipating insurers.--Windstorm coverage under a
712personal lines residential property insurance policy issued by
713an insurer that is not a participating insurer is subject to s.
714627.062, except that the rates for such coverage may be
715disapproved only if they are inadequate or unfairly
716discriminatory.
717     (i)  Transition.--It is the intent of the Legislature that
718participating insurers continue to provide windstorm coverage to
719their existing policyholders under policies providing personal
720lines residential property insurance coverage until the first
721renewal date on or after June 1, 2009, at which time the
722windstorm coverage shall be provided under a program policy. For
723that purpose, a participating insurer remains eligible for
724coverage under subsection (4) during the contract year beginning
725June 1, 2009, to the extent the participating insurer has in
726force policies defined as covered policies under subsection (2).
727The replacement of windstorm coverage under a participating
728insurer's policy providing personal lines residential property
729insurance coverage with windstorm coverage under a program
730policy does not constitute a cancellation or nonrenewal for
731purposes of s. 627.4133 or any other purposes under the
732Insurance Code. With respect to noncommercial residential
733property insurance policy renewals taking effect on or after
734June 1, 2009, and before June 1, 2010, the notice of renewal
735premium shall include a notice, in a form specified by the
736board, that, as of the policy renewal date, windstorm coverage
737will be provided under a program policy administered by the
738insurer and coverage for other perils will be provided under a
739residential property insurance policy issued by the insurer.
740     Section 2.  State Board of Administration; implementation
741of the Florida Windstorm Insurance Program.--No later than
742January 1, 2009, the State Board of Administration shall adopt
743all contract forms, rules, standards, policy forms, mitigation
744discounts, and rates required to implement the Florida Windstorm
745Insurance Program created by s. 215.555, Florida Statutes, as
746amended by this act.
747     Section 3.  Paragraph (gg) is added to subsection (6) of
748section 627.351, Florida Statutes, to read:
749     627.351  Insurance risk apportionment plans.--
750     (6)  CITIZENS PROPERTY INSURANCE CORPORATION.--
751     (gg)  Notwithstanding any provision of this subsection or
752s. 627.3517:
753     1.  On or after June 1, 2009, the corporation may not issue
754or renew any personal lines residential property insurance
755policy providing windstorm-only coverage.
756     2.a.  In order to facilitate the transfer of policies of
757the corporation from the corporation to the competitive market
758and in order to provide a capital contribution to the Florida
759Windstorm Insurance Program, the corporation shall offer
760insurers the opportunity to bid on the right to provide
761nonwindstorm coverage to current personal lines residential
762policyholders of the corporation, to take effect on the
763policyholder's first renewal date on or after June 1, 2009, or
764through an assumption agreement effective on or after June 1,
7652009.
766     b.  The corporation shall prepare blocks of business that
767are balanced as to geographic location and insured value and
768shall offer the blocks of business at auction beginning no later
769than October 1, 2008. The insurer that prevails in the auction
770shall have an exclusive right to enter into an assumption
771agreement with the corporation under which the participating
772insurer assumes the nonwindstorm coverage for the remainder of
773the policy term and the Florida Windstorm Insurance Program
774assumes the windstorm coverage for the remainder of the policy
775term. If an assumption occurs, any renewal shall be at the
776participating insurer's rates as to the nonwindstorm coverage
777and the Florida Windstorm Insurance Program rates as to the
778windstorm coverage. Any assumptions under this sub-subparagraph
779must take effect no later than May 31, 2010.
780     c.  The provisions of s. 627.3517 do not apply to any offer
781to replace coverage by the corporation with personal lines
782residential property insurance coverage provided by a
783participating insurer as defined in s. 215.555(18), including
784any assumption under this subparagraph.
785     d.  The corporation shall transfer all proceeds of the
786auctions to the Florida Hurricane Catastrophe Fund, which shall
787treat the proceeds as a capital contribution for the benefit of
788the Florida Windstorm Insurance Program.
789     3.  Effective June 1, 2009, the corporation may not issue
790or renew a policy providing personal lines residential property
791insurance coverage if the owner of the property has received an
792offer of coverage from a participating insurer as defined in s.
793215.555(18), provided the participating insurer has provided the
794corporation with notice of the offer of coverage at least 30
795days prior to the renewal date or expected issuance date of the
796corporation's policy.
797     4.  No later than December 31, 2010, the corporation shall
798transfer to the Florida Hurricane Catastrophe Fund an additional
799capital contribution for the benefit of the Florida Windstorm
800Insurance Program. The contribution shall consist of the
801corporation's surplus as to policyholders, multiplied by a
802ratio:
803     a.  The numerator of which is the total structural insured
804value as of June 1, 2010, for risks covered by all policies
805issued by the corporation; and
806     b.  The denominator of which is the total structural
807insured value as of June 1, 2009, for risks covered by all
808policies issued by the corporation.
809     Section 4.  Effective June 1, 2009, subsection (1) of
810section 627.712, Florida Statutes, is amended to read:
811     627.712  Residential windstorm coverage required;
812availability of exclusions for windstorm or contents.--
813     (1)  Effective upon the date of issuance of the policy or
814the date of the first renewal on or after June 1, 2009, an
815insurer issuing or renewing a residential property insurance
816policy must provide windstorm coverage as part of the policy
817issued by the insurer or under a separate policy issued by the
818Florida Windstorm Insurance Program under s. 215.555 and
819administered by the insurer. This subsection does not apply with
820respect to risks that are eligible for wind-only coverage from
821Citizens Property Insurance Corporation under s. 627.351(6).
822     Section 5.  Except as otherwise expressly provided in this
823act, this act shall take effect upon becoming a law.


CODING: Words stricken are deletions; words underlined are additions.