Florida Senate - 2012 CS for SB 1372
By the Committee on Banking and Insurance; and Senator Alexander
597-03518-12 20121372c1
1 A bill to be entitled
2 An act relating to the Florida Hurricane Catastrophe
3 Fund; amending s. 215.555, F.S.; revising the
4 definitions of “retention” and “corporation”;
5 providing for calculation of an insurer’s
6 reimbursement premium and retention under the
7 reimbursement contract; revising coverage levels
8 available under the reimbursement contract; revising
9 aggregate coverage limits; providing for the phase-in
10 of changes to coverage levels and limits; revising the
11 cash build-up factor included in reimbursement
12 premiums; providing for phase-in; reducing maximum
13 allowable emergency assessments; changing the name of
14 the Florida Hurricane Catastrophe Fund Finance
15 Corporation; repealing provisions related to temporary
16 emergency options for additional coverage; terminating
17 the temporary increase in coverage limits option at
18 the end of the 2012-2013 contract year; limiting to
19 the 2012-2013 contract year provisions relating to the
20 TICL options addendum, TICL reimbursement premiums,
21 and the claims-paying capacity of the fund, to
22 conform; amending s. 627.0629, F.S.; conforming a
23 cross-reference; providing an effective date.
24
25 Be It Enacted by the Legislature of the State of Florida:
26
27 Section 1. Paragraphs (e) and (n) of subsection (2),
28 paragraphs (b) and (c) of subsection (4), paragraph (b) of
29 subsection (5), paragraphs (b) and (d) of subsection (6), and
30 subsections (16), (17), and (18) of section 215.555, Florida
31 Statutes, are amended to read:
32 215.555 Florida Hurricane Catastrophe Fund.—
33 (2) DEFINITIONS.—As used in this section:
34 (e) “Retention” means the amount of losses below which an
35 insurer is not entitled to reimbursement from the fund. An
36 insurer’s retention shall be calculated as follows:
37 1.a. The board shall calculate and report to each insurer
38 the retention multiples for that year.
39 (I) For the contract year beginning June 1, 2005, the
40 retention multiple shall be equal to $4.5 billion divided by the
41 total estimated reimbursement premium for the contract year; for
42 subsequent years, up to and including the 2012-2013 contract
43 year, the retention multiple shall be equal to $4.5 billion,
44 adjusted based upon the reported exposure for the contract year
45 occurring 2 years before the particular contract year to reflect
46 the percentage growth in exposure to the fund for covered
47 policies since 2004, divided by the total estimated
48 reimbursement premium for the contract year.
49 (II) For the contract year beginning June 1, 2013, the
50 retention multiple shall be equal to $8 billion divided by the
51 total estimated reimbursement premium for the contract year. For
52 subsequent years, the retention multiple shall be equal to $8
53 billion, adjusted based upon the reported exposure for the
54 contract year occurring 2 years before the particular contract
55 year to reflect the percentage growth in exposure to the fund
56 for covered policies since 2011, divided by the total
57 reimbursement premium for the contract year.
58 b. For the 2012-2013 contract year, total reimbursement
59 premium for purposes of the calculation under this subparagraph
60 shall be estimated using the assumption that all insurers have
61 selected the 90-percent coverage level.
62 c. In order to implement the phase-in of reduced coverage
63 levels as provided in paragraph (4)(b), total reimbursement
64 premium for purposes of the calculation under this subparagraph
65 shall be estimated using the following assumptions:
66 (I) For the 2013-2014 contract year, the assumption is that
67 all insurers have selected the 85-percent coverage level.
68 (II) For the 2014-2015 contract year, the assumption is
69 that all insurers have selected the 80-percent coverage level.
70 (III) For the 2015-2016 contract year and subsequent
71 contract years, the assumption is that all insurers have
72 selected the 75-percent coverage level.
73 2. The retention multiple as determined under subparagraph
74 1. shall be adjusted to reflect the coverage level elected by
75 the insurer.
76 a. For an insurer electing the maximum coverage level
77 available under paragraph (4)(b) for a particular contract year
78 For insurers electing the 90-percent coverage level, the
79 adjusted retention multiple is 100 percent of the amount
80 determined under subparagraph 1.
81 b. In order to implement the phase-in of reduced coverage
82 levels as provided in paragraph (4)(b), for an insurer electing
83 a coverage level other than the maximum coverage level, the
84 adjusted retention multiple is as follows:
85 (I) With respect to the 2012-2013 contract year, for an
86 insurer For insurers electing the 75-percent coverage level, the
87 retention multiple is 90/75ths 120 percent of the amount
88 determined under subparagraph 1., and for an insurer For
89 insurers electing the 45-percent coverage level, the adjusted
90 retention multiple is 90/45ths 200 percent of the amount
91 determined under subparagraph 1.
92 (II) With respect to the 2013-2014 contract year, for an
93 insurer electing the 75-percent coverage level, the retention
94 multiple is 85/75ths of the amount determined under subparagraph
95 1., and for an insurer electing the 45-percent coverage level,
96 the retention multiple is 85/45ths of the amount determined
97 under subparagraph 1.
98 (III) With respect to the 2014-2015 contract year, for an
99 insurer electing the 75-percent coverage level, the retention
100 multiple is 80/75ths of the amount determined under subparagraph
101 1., and for an insurer electing the 45-percent coverage level,
102 the retention multiple is 80/45ths of the amount determined
103 under subparagraph 1.
104 (IV) With respect to the 2015-2016 contract year and
105 subsequent contract years, for an insurer electing the 75
106 percent coverage level, the retention multiple is the amount
107 determined under subparagraph 1., and for an insurer electing
108 the 45-percent coverage level, the retention multiple is
109 75/45ths of the amount determined under subparagraph 1.
110 3. An insurer shall determine its provisional retention by
111 multiplying its provisional reimbursement premium by the
112 applicable adjusted retention multiple and shall determine its
113 actual retention by multiplying its actual reimbursement premium
114 by the applicable adjusted retention multiple.
115 4. For insurers who experience multiple covered events
116 causing loss during the contract year, beginning June 1, 2005,
117 each insurer’s full retention shall be applied to each of the
118 covered events causing the two largest losses for that insurer.
119 For each other covered event resulting in losses, the insurer’s
120 retention shall be reduced to one-third of the full retention.
121 The reimbursement contract shall provide for the reimbursement
122 of losses for each covered event based on the full retention
123 with adjustments made to reflect the reduced retentions on or
124 after January 1 of the contract year provided the insurer
125 reports its losses as specified in the reimbursement contract.
126 (n) “Corporation” means the State Board of Administration
127 Florida Hurricane Catastrophe Fund Finance Corporation created
128 in paragraph (6)(d).
129 (4) REIMBURSEMENT CONTRACTS.—
130 (b)1.a. The contract shall contain a promise by the board
131 to reimburse the insurer for a specified percentage 45 percent,
132 75 percent, or 90 percent of its losses from each covered event
133 in excess of the insurer’s retention, plus 5 percent of the
134 reimbursed losses to cover loss adjustment expenses.
135 b. The available coverage levels are as follows:
136 (I) For the 2012-2013 contract year, 90 percent, 75
137 percent, and 45 percent.
138 (II) For the 2013-2014 contract year, 85 percent, 75
139 percent, and 45 percent.
140 (III) For the 2014-2015 contract year, 80 percent, 75
141 percent, and 45 percent.
142 (IV) For the 2015-2016 contract year and subsequent
143 contract years, 75 percent and 45 percent.
144 2.a. The insurer must elect one of the percentage coverage
145 levels specified in this paragraph and may, upon renewal of a
146 reimbursement contract, elect a lower percentage coverage level
147 if no revenue bonds issued under subsection (6) after a covered
148 event are outstanding, or elect a higher percentage coverage
149 level, regardless of whether or not revenue bonds are
150 outstanding. All members of an insurer group must elect the same
151 percentage coverage level. Any joint underwriting association,
152 risk apportionment plan, or other entity created under s.
153 627.351 must elect the maximum 90-percent coverage level
154 available under subparagraph 1.
155 b. In order to implement the phase-in of reduced coverage
156 levels as provided in subparagraph 1., and notwithstanding any
157 provisions of sub-subparagraph a. to the contrary, if revenue
158 bonds issued under subsection (6) after a covered event are
159 outstanding and the insurer has elected the maximum coverage
160 level available under subparagraph 1., the insurer must, upon
161 renewal of the reimbursement contract, elect the maximum
162 coverage level available under subparagraph 1. for the renewal
163 contract year.
164 3. The contract shall provide that reimbursement amounts
165 shall not be reduced by reinsurance paid or payable to the
166 insurer from other sources.
167 4. Notwithstanding any other provision contained in this
168 section, the board shall make available to insurers that
169 purchased coverage provided by this subparagraph in 2008,
170 insurers qualifying as limited apportionment companies under s.
171 627.351(6)(c), and insurers that have been approved to
172 participate in the Insurance Capital Build-Up Incentive Program
173 pursuant to s. 215.5595 a contract or contract addendum that
174 provides an additional amount of reimbursement coverage of up to
175 $10 million. The premium to be charged for this additional
176 reimbursement coverage shall be 50 percent of the additional
177 reimbursement coverage provided, which shall include one prepaid
178 reinstatement. The minimum retention level that an eligible
179 participating insurer must retain associated with this
180 additional coverage layer is 30 percent of the insurer’s surplus
181 as of December 31, 2008, for the 2009-2010 contract year; as of
182 December 31, 2009, for the 2010-2011 contract year; and as of
183 December 31, 2010, for the 2011-2012 contract year. This
184 coverage shall be in addition to all other coverage that may be
185 provided under this section. The coverage provided by the fund
186 under this subparagraph shall be in addition to the claims
187 paying capacity as defined in subparagraph (c)1., but only with
188 respect to those insurers that select the additional coverage
189 option and meet the requirements of this subparagraph. The
190 claims-paying capacity with respect to all other participating
191 insurers and limited apportionment companies that do not select
192 the additional coverage option shall be limited to their
193 reimbursement premium’s proportionate share of the actual
194 claims-paying capacity otherwise defined in subparagraph (c)1.
195 and as provided for under the terms of the reimbursement
196 contract. The optional coverage retention as specified shall be
197 accessed before the mandatory coverage under the reimbursement
198 contract, but once the limit of coverage selected under this
199 option is exhausted, the insurer’s retention under the mandatory
200 coverage will apply. This coverage will apply and be paid
201 concurrently with mandatory coverage. This subparagraph expires
202 on May 31, 2012.
203 (c)1. The contract shall also provide that the obligation
204 of the board with respect to all contracts covering a particular
205 contract year shall not exceed the actual claims-paying capacity
206 of the fund up to the limit specified in this subparagraph.
207 a. For the 2012-2013 contract year, the limit is $17
208 billion.
209 b. For the 2013-2014 contract year, the limit is $15.5
210 billion.
211 c. For the 2014-2015 contract year, the limit is $14
212 billion.
213 d. For the 2015-2016 contract year and subsequent contract
214 years, the limit is $12 billion.
215 e. For contract years after the 2015-2016 contract year, if
216 a limit of $17 billion for that contract year, unless the board
217 determines that there is sufficient estimated claims-paying
218 capacity to provide $12 $17 billion of capacity for the current
219 contract year and an additional $12 $17 billion of capacity for
220 subsequent contract years. If the board makes such a
221 determination, the estimated claims-paying capacity for the
222 particular contract year shall be determined by adding to the
223 $12 $17 billion limit one-half of the fund’s estimated claims
224 paying capacity in excess of $24 $34 billion. However, the
225 dollar growth in the limit may not increase in any year by an
226 amount greater than the dollar growth of the balance of the fund
227 as of December 31, less any premiums or interest attributable to
228 optional coverage, as defined by rule, which occurred over the
229 prior calendar year.
230 2. In May and October of the contract year, the board shall
231 publish in the Florida Administrative Weekly a statement of the
232 fund’s estimated borrowing capacity, the fund’s estimated
233 claims-paying capacity, and the projected balance of the fund as
234 of December 31. After the end of each calendar year, the board
235 shall notify insurers of the estimated borrowing capacity,
236 estimated claims-paying capacity, and the balance of the fund as
237 of December 31 to provide insurers with data necessary to assist
238 them in determining their retention and projected payout from
239 the fund for loss reimbursement purposes. In conjunction with
240 the development of the premium formula, as provided for in
241 subsection (5), the board shall publish factors or multiples
242 that assist insurers in determining their retention and
243 projected payout for the next contract year. For all regulatory
244 and reinsurance purposes, an insurer may calculate its projected
245 payout from the fund as its share of the total fund premium for
246 the current contract year multiplied by the sum of the projected
247 balance of the fund as of December 31 and the estimated
248 borrowing capacity for that contract year as reported under this
249 subparagraph.
250 (5) REIMBURSEMENT PREMIUMS.—
251 (b)1. The State Board of Administration shall select an
252 independent consultant to develop a formula for determining the
253 actuarially indicated premium to be paid to the fund. The
254 formula shall specify, for each zip code or other limited
255 geographical area, the amount of premium to be paid by an
256 insurer for each $1,000 of insured value under covered policies
257 in that zip code or other area. In establishing premiums, the
258 board shall consider the coverage elected under paragraph (4)(b)
259 and any factors that tend to enhance the actuarial
260 sophistication of ratemaking for the fund, including
261 deductibles, type of construction, type of coverage provided,
262 relative concentration of risks, and other such factors deemed
263 by the board to be appropriate.
264 2. The formula must provide for a cash build-up factor as
265 specified in this subparagraph. For the 2009-2010 contract year,
266 the factor is 5 percent. For the 2010-2011 contract year, the
267 factor is 10 percent.
268 a. For the 2011-2012 contract year, the factor is 15
269 percent.
270 b. For the 2012-2013 contract year, the factor is 20
271 percent.
272 c. For the 2013-2014 contract year and thereafter, the
273 factor is 25 percent.
274 d. For the 2014-2015 contract year, the factor is 30
275 percent.
276 e. For the 2015-2016 contract year, the factor is 35
277 percent.
278 f. For the 2016-2017 contract year, the factor is 40
279 percent.
280 g. For the 2017-2018 contract year, the factor is 45
281 percent.
282 h. For the 2018-2019 contract year and subsequent contract
283 years, the factor is 50 percent.
284 3. The formula may provide for a procedure to determine the
285 premiums to be paid by new insurers that begin writing covered
286 policies after the beginning of a contract year, taking into
287 consideration when the insurer starts writing covered policies,
288 the potential exposure of the insurer, the potential exposure of
289 the fund, the administrative costs to the insurer and to the
290 fund, and any other factors deemed appropriate by the board. The
291 formula must be approved by unanimous vote of the board. The
292 board may, at any time, revise the formula pursuant to the
293 procedure provided in this paragraph.
294 (6) REVENUE BONDS.—
295 (b) Emergency assessments—
296 1. If the board determines that the amount of revenue
297 produced under subsection (5) is insufficient to fund the
298 obligations, costs, and expenses of the fund and the
299 corporation, including repayment of revenue bonds and that
300 portion of the debt service coverage not met by reimbursement
301 premiums, the board shall direct the Office of Insurance
302 Regulation to levy, by order, an emergency assessment on direct
303 premiums for all property and casualty lines of business in this
304 state, including property and casualty business of surplus lines
305 insurers regulated under part VIII of chapter 626, but not
306 including any workers’ compensation premiums or medical
307 malpractice premiums. As used in this subsection, the term
308 “property and casualty business” includes all lines of business
309 identified on Form 2, Exhibit of Premiums and Losses, in the
310 annual statement required of authorized insurers by s. 624.424
311 and any rule adopted under this section, except for those lines
312 identified as accident and health insurance and except for
313 policies written under the National Flood Insurance Program. The
314 assessment shall be specified as a percentage of direct written
315 premium and is subject to annual adjustments by the board in
316 order to meet debt obligations. The same percentage shall apply
317 to all policies in lines of business subject to the assessment
318 issued or renewed during the 12-month period beginning on the
319 effective date of the assessment.
320 2.a. A premium is not subject to an annual assessment under
321 this paragraph in excess of 6 percent of premium with respect to
322 obligations arising out of losses attributable to any one
323 contract year prior to the 2015-2016 contract year, and a
324 premium is not subject to an aggregate annual assessment under
325 this paragraph in excess of 10 percent of premium if all of the
326 losses that generated the obligations were attributable to
327 contract years prior to the 2015-2016 contract year. An annual
328 assessment under this paragraph shall continue as long as the
329 revenue bonds issued with respect to which the assessment was
330 imposed are outstanding, including any bonds the proceeds of
331 which were used to refund the revenue bonds, unless adequate
332 provision has been made for the payment of the bonds under the
333 documents authorizing issuance of the bonds.
334 b. Except as provided in sub-subparagraph a., a premium is
335 not subject to an annual assessment under this paragraph in
336 excess of 5 percent of premium with respect to obligations
337 arising out of losses attributable to any one contract year, and
338 a premium is not subject to an aggregate annual assessment under
339 this paragraph in excess of 8 percent of premium. An annual
340 assessment under this paragraph shall continue as long as the
341 revenue bonds issued with respect to which the assessment was
342 imposed are outstanding, including any bonds the proceeds of
343 which were used to refund the revenue bonds, unless adequate
344 provision has been made for the payment of the bonds under the
345 documents authorizing issuance of the bonds.
346 3. Emergency assessments shall be collected from
347 policyholders. Emergency assessments shall be remitted by
348 insurers as a percentage of direct written premium for the
349 preceding calendar quarter as specified in the order from the
350 Office of Insurance Regulation. The office shall verify the
351 accurate and timely collection and remittance of emergency
352 assessments and shall report the information to the board in a
353 form and at a time specified by the board. Each insurer
354 collecting assessments shall provide the information with
355 respect to premiums and collections as may be required by the
356 office to enable the office to monitor and verify compliance
357 with this paragraph.
358 4. With respect to assessments of surplus lines premiums,
359 each surplus lines agent shall collect the assessment at the
360 same time as the agent collects the surplus lines tax required
361 by s. 626.932, and the surplus lines agent shall remit the
362 assessment to the Florida Surplus Lines Service Office created
363 by s. 626.921 at the same time as the agent remits the surplus
364 lines tax to the Florida Surplus Lines Service Office. The
365 emergency assessment on each insured procuring coverage and
366 filing under s. 626.938 shall be remitted by the insured to the
367 Florida Surplus Lines Service Office at the time the insured
368 pays the surplus lines tax to the Florida Surplus Lines Service
369 Office. The Florida Surplus Lines Service Office shall remit the
370 collected assessments to the fund or corporation as provided in
371 the order levied by the Office of Insurance Regulation. The
372 Florida Surplus Lines Service Office shall verify the proper
373 application of such emergency assessments and shall assist the
374 board in ensuring the accurate and timely collection and
375 remittance of assessments as required by the board. The Florida
376 Surplus Lines Service Office shall annually calculate the
377 aggregate written premium on property and casualty business,
378 other than workers’ compensation and medical malpractice,
379 procured through surplus lines agents and insureds procuring
380 coverage and filing under s. 626.938 and shall report the
381 information to the board in a form and at a time specified by
382 the board.
383 5.a. Any assessment authority not used for a particular
384 contract year may be used for a subsequent contract year. If,
385 for a subsequent contract year, the board determines that the
386 amount of revenue produced under subsection (5) is insufficient
387 to fund the obligations, costs, and expenses of the fund and the
388 corporation, including repayment of revenue bonds and that
389 portion of the debt service coverage not met by reimbursement
390 premiums, the board shall direct the Office of Insurance
391 Regulation to levy an emergency assessment up to an amount not
392 exceeding the amount of unused assessment authority from a
393 previous contract year or years, plus an additional 4 percent,
394 if provided that the assessments in the aggregate do not exceed
395 the limits specified in subparagraph 2. and all of the losses
396 that generated the obligations were attributable to contract
397 years prior to the 2015-2016 contract year.
398 b. Except as provided in sub-subparagraph a., any
399 assessment authority not used for a particular contract year may
400 be used for a subsequent contract year. If, for a subsequent
401 contract year, the board determines that the amount of revenue
402 produced under subsection (5) is insufficient to fund the
403 obligations, costs, and expenses of the fund and the
404 corporation, including repayment of revenue bonds and that
405 portion of the debt service coverage not met by reimbursement
406 premiums, the board shall direct the Office of Insurance
407 Regulation to levy an emergency assessment up to an amount not
408 exceeding the amount of unused assessment authority from a
409 previous contract year or years, plus an additional 3 percent,
410 if the assessments in the aggregate do not exceed the limits
411 specified in subparagraph 2.
412 6. The assessments otherwise payable to the corporation
413 under this paragraph shall be paid to the fund unless and until
414 the Office of Insurance Regulation and the Florida Surplus Lines
415 Service Office have received from the corporation and the fund a
416 notice, which shall be conclusive and upon which they may rely
417 without further inquiry, that the corporation has issued bonds
418 and the fund has no agreements in effect with local governments
419 under paragraph (c). On or after the date of the notice and
420 until the date the corporation has no bonds outstanding, the
421 fund shall have no right, title, or interest in or to the
422 assessments, except as provided in the fund’s agreement with the
423 corporation.
424 7. Emergency assessments are not premium and are not
425 subject to the premium tax, to the surplus lines tax, to any
426 fees, or to any commissions. An insurer is liable for all
427 assessments that it collects and must treat the failure of an
428 insured to pay an assessment as a failure to pay the premium. An
429 insurer is not liable for uncollectible assessments.
430 8. When an insurer is required to return an unearned
431 premium, it shall also return any collected assessment
432 attributable to the unearned premium. A credit adjustment to the
433 collected assessment may be made by the insurer with regard to
434 future remittances that are payable to the fund or corporation,
435 but the insurer is not entitled to a refund.
436 9. When a surplus lines insured or an insured who has
437 procured coverage and filed under s. 626.938 is entitled to the
438 return of an unearned premium, the Florida Surplus Lines Service
439 Office shall provide a credit or refund to the agent or such
440 insured for the collected assessment attributable to the
441 unearned premium prior to remitting the emergency assessment
442 collected to the fund or corporation.
443 10. The exemption of medical malpractice insurance premiums
444 from emergency assessments under this paragraph is repealed May
445 31, 2013, and medical malpractice insurance premiums shall be
446 subject to emergency assessments attributable to loss events
447 occurring in the contract years commencing on June 1, 2013.
448 (d) State Board of Administration Florida Hurricane
449 Catastrophe Fund Finance Corporation.—
450 1. In addition to the findings and declarations in
451 subsection (1), the Legislature also finds and declares that:
452 a. The public benefits corporation created under this
453 paragraph will provide a mechanism necessary for the cost
454 effective and efficient issuance of bonds. This mechanism will
455 eliminate unnecessary costs in the bond issuance process,
456 thereby increasing the amounts available to pay reimbursement
457 for losses to property sustained as a result of hurricane
458 damage.
459 b. The purpose of such bonds is to fund reimbursements
460 through the Florida Hurricane Catastrophe Fund to pay for the
461 costs of construction, reconstruction, repair, restoration, and
462 other costs associated with damage to properties of
463 policyholders of covered policies due to the occurrence of a
464 hurricane.
465 c. The efficacy of the financing mechanism will be enhanced
466 by the corporation’s ownership of the assessments, by the
467 insulation of the assessments from possible bankruptcy
468 proceedings, and by covenants of the state with the
469 corporation’s bondholders.
470 2.a. There is created a public benefits corporation, which
471 is an instrumentality of the state, to be known as the State
472 Board of Administration Florida Hurricane Catastrophe Fund
473 Finance Corporation.
474 b. The corporation shall operate under a five-member board
475 of directors consisting of the Governor or a designee, the Chief
476 Financial Officer or a designee, the Attorney General or a
477 designee, the director of the Division of Bond Finance of the
478 State Board of Administration, and the Chief Operating Officer
479 senior employee of the State Board of Administration responsible
480 for operations of the Florida Hurricane Catastrophe Fund.
481 c. The corporation has all of the powers of corporations
482 under chapter 607 and under chapter 617, subject only to the
483 provisions of this subsection.
484 d. The corporation may issue bonds and engage in such other
485 financial transactions as are necessary to provide sufficient
486 funds to achieve the purposes of this section.
487 e. The corporation may invest in any of the investments
488 authorized under s. 215.47.
489 f. There shall be no liability on the part of, and no cause
490 of action shall arise against, any board members or employees of
491 the corporation for any actions taken by them in the performance
492 of their duties under this paragraph.
493 3.a. In actions under chapter 75 to validate any bonds
494 issued by the corporation, the notice required by s. 75.06 shall
495 be published only in Leon County and in two newspapers of
496 general circulation in the state, and the complaint and order of
497 the court shall be served only on the State Attorney of the
498 Second Judicial Circuit.
499 b. The state hereby covenants with holders of bonds of the
500 corporation that the state will not repeal or abrogate the power
501 of the board to direct the Office of Insurance Regulation to
502 levy the assessments and to collect the proceeds of the revenues
503 pledged to the payment of such bonds as long as any such bonds
504 remain outstanding unless adequate provision has been made for
505 the payment of such bonds pursuant to the documents authorizing
506 the issuance of such bonds.
507 4. The bonds of the corporation are not a debt of the state
508 or of any political subdivision, and neither the state nor any
509 political subdivision is liable on such bonds. The corporation
510 does not have the power to pledge the credit, the revenues, or
511 the taxing power of the state or of any political subdivision.
512 The credit, revenues, or taxing power of the state or of any
513 political subdivision shall not be deemed to be pledged to the
514 payment of any bonds of the corporation.
515 5.a. The property, revenues, and other assets of the
516 corporation; the transactions and operations of the corporation
517 and the income from such transactions and operations; and all
518 bonds issued under this paragraph and interest on such bonds are
519 exempt from taxation by the state and any political subdivision,
520 including the intangibles tax under chapter 199 and the income
521 tax under chapter 220. This exemption does not apply to any tax
522 imposed by chapter 220 on interest, income, or profits on debt
523 obligations owned by corporations other than the State Board of
524 Administration Florida Hurricane Catastrophe Fund Finance
525 Corporation.
526 b. All bonds of the corporation shall be and constitute
527 legal investments without limitation for all public bodies of
528 this state; for all banks, trust companies, savings banks,
529 savings associations, savings and loan associations, and
530 investment companies; for all administrators, executors,
531 trustees, and other fiduciaries; for all insurance companies and
532 associations and other persons carrying on an insurance
533 business; and for all other persons who are now or may hereafter
534 be authorized to invest in bonds or other obligations of the
535 state and shall be and constitute eligible securities to be
536 deposited as collateral for the security of any state, county,
537 municipal, or other public funds. This sub-subparagraph shall be
538 considered as additional and supplemental authority and shall
539 not be limited without specific reference to this sub
540 subparagraph.
541 6. The corporation and its corporate existence shall
542 continue until terminated by law; however, no such law shall
543 take effect as long as the corporation has bonds outstanding
544 unless adequate provision has been made for the payment of such
545 bonds pursuant to the documents authorizing the issuance of such
546 bonds. Upon termination of the existence of the corporation, all
547 of its rights and properties in excess of its obligations shall
548 pass to and be vested in the state.
549 7. The State Board of Administration Finance Corporation is
550 for all purposes the successor to the Florida Hurricane
551 Catastrophe Fund Finance Corporation.
552 (16) TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL COVERAGE.—
553 (a) Findings and intent.—
554 1. The Legislature finds that:
555 a. Because of temporary disruptions in the market for
556 catastrophic reinsurance, many property insurers were unable to
557 procure reinsurance for the 2006 hurricane season with an
558 attachment point below the insurers’ respective Florida
559 Hurricane Catastrophe Fund attachment points, were unable to
560 procure sufficient amounts of such reinsurance, or were able to
561 procure such reinsurance only by incurring substantially higher
562 costs than in prior years.
563 b. The reinsurance market problems were responsible, at
564 least in part, for substantial premium increases to many
565 consumers and increases in the number of policies issued by the
566 Citizens Property Insurance Corporation.
567 c. It is likely that the reinsurance market disruptions
568 will not significantly abate prior to the 2007 hurricane season.
569 2. It is the intent of the Legislature to create a
570 temporary emergency program, applicable to the 2007, 2008, and
571 2009 hurricane seasons, to address these market disruptions and
572 enable insurers, at their option, to procure additional coverage
573 from the Florida Hurricane Catastrophe Fund.
574 (b) Applicability of other provisions of this section.—All
575 provisions of this section and the rules adopted under this
576 section apply to the program created by this subsection unless
577 specifically superseded by this subsection.
578 (c) Optional coverage.—For the contract year commencing
579 June 1, 2007, and ending May 31, 2008, the contract year
580 commencing June 1, 2008, and ending May 31, 2009, and the
581 contract year commencing June 1, 2009, and ending May 31, 2010,
582 the board shall offer for each of such years the optional
583 coverage as provided in this subsection.
584 (d) Additional definitions.—As used in this subsection, the
585 term:
586 1. “TEACO options” means the temporary emergency additional
587 coverage options created under this subsection.
588 2. “TEACO insurer” means an insurer that has opted to
589 obtain coverage under the TEACO options in addition to the
590 coverage provided to the insurer under its reimbursement
591 contract.
592 3. “TEACO reimbursement premium” means the premium charged
593 by the fund for coverage provided under the TEACO options.
594 4. “TEACO retention” means the amount of losses below which
595 a TEACO insurer is not entitled to reimbursement from the fund
596 under the TEACO option selected. A TEACO insurer’s retention
597 options shall be calculated as follows:
598 a. The board shall calculate and report to each TEACO
599 insurer the TEACO retention multiples. There shall be three
600 TEACO retention multiples for defining coverage. Each multiple
601 shall be calculated by dividing $3 billion, $4 billion, or $5
602 billion by the total estimated mandatory FHCF reimbursement
603 premium assuming all insurers selected the 90-percent coverage
604 level.
605 b. The TEACO retention multiples as determined under sub
606 subparagraph a. shall be adjusted to reflect the coverage level
607 elected by the insurer. For insurers electing the 90-percent
608 coverage level, the adjusted retention multiple is 100 percent
609 of the amount determined under sub-subparagraph a. For insurers
610 electing the 75-percent coverage level, the retention multiple
611 is 120 percent of the amount determined under sub-subparagraph
612 a. For insurers electing the 45-percent coverage level, the
613 adjusted retention multiple is 200 percent of the amount
614 determined under sub-subparagraph a.
615 c. An insurer shall determine its provisional TEACO
616 retention by multiplying its estimated mandatory FHCF
617 reimbursement premium by the applicable adjusted TEACO retention
618 multiple and shall determine its actual TEACO retention by
619 multiplying its actual mandatory FHCF reimbursement premium by
620 the applicable adjusted TEACO retention multiple.
621 d. For TEACO insurers who experience multiple covered
622 events causing loss during the contract year, the insurer’s full
623 TEACO retention shall be applied to each of the covered events
624 causing the two largest losses for that insurer. For other
625 covered events resulting in losses, the TEACO option does not
626 apply and the insurer’s retention shall be one-third of the full
627 retention as calculated under paragraph (2)(e).
628 5. “TEACO addendum” means an addendum to the reimbursement
629 contract reflecting the obligations of the fund and TEACO
630 insurers under the program created by this subsection.
631 6. “FHCF” means the Florida Hurricane Catastrophe Fund.
632 (e) TEACO addendum.—
633 1. The TEACO addendum shall provide for reimbursement of
634 TEACO insurers for covered events occurring during the contract
635 year, in exchange for the TEACO reimbursement premium paid into
636 the fund under paragraph (f). Any insurer writing covered
637 policies has the option of choosing to accept the TEACO addendum
638 for any of the 3 contract years that the coverage is offered.
639 2. The TEACO addendum shall contain a promise by the board
640 to reimburse the TEACO insurer for 45 percent, 75 percent, or 90
641 percent of its losses from each covered event in excess of the
642 insurer’s TEACO retention, plus 5 percent of the reimbursed
643 losses to cover loss adjustment expenses. The percentage shall
644 be the same as the coverage level selected by the insurer under
645 paragraph (4)(b).
646 3. The TEACO addendum shall provide that reimbursement
647 amounts shall not be reduced by reinsurance paid or payable to
648 the insurer from other sources.
649 4. The TEACO addendum shall also provide that the
650 obligation of the board with respect to all TEACO addenda shall
651 not exceed an amount equal to two times the difference between
652 the industry retention level calculated under paragraph (2)(e)
653 and the $3 billion, $4 billion, or $5 billion industry TEACO
654 retention level options actually selected, but in no event may
655 the board’s obligation exceed the actual claims-paying capacity
656 of the fund plus the additional capacity created in paragraph
657 (g). If the actual claims-paying capacity and the additional
658 capacity created under paragraph (g) fall short of the board’s
659 obligations under the reimbursement contract, each insurer’s
660 share of the fund’s capacity shall be prorated based on the
661 premium an insurer pays for its mandatory reimbursement coverage
662 and the premium paid for its optional TEACO coverage as each
663 such premium bears to the total premiums paid to the fund times
664 the available capacity.
665 5. The priorities, schedule, and method of reimbursements
666 under the TEACO addendum shall be the same as provided under
667 subsection (4).
668 6. A TEACO insurer’s maximum reimbursement for a single
669 event shall be equal to the product of multiplying its mandatory
670 FHCF premium by the difference between its FHCF retention
671 multiple and its TEACO retention multiple under the TEACO option
672 selected and by the coverage selected under paragraph (4)(b),
673 plus an additional 5 percent for loss adjustment expenses. A
674 TEACO insurer’s maximum reimbursement under the TEACO option
675 selected for a TEACO insurer’s two largest events shall be twice
676 its maximum reimbursement for a single event.
677 (f) TEACO reimbursement premiums.—
678 1. Each TEACO insurer shall pay to the fund, in the manner
679 and at the time provided in the reimbursement contract for
680 payment of reimbursement premiums, a TEACO reimbursement premium
681 calculated as specified in this paragraph.
682 2. The insurer’s TEACO reimbursement premium associated
683 with the $3 billion retention option shall be equal to 85
684 percent of a TEACO insurer’s maximum reimbursement for a single
685 event as calculated under subparagraph (e)6. The TEACO
686 reimbursement premium associated with the $4 billion retention
687 option shall be equal to 80 percent of a TEACO insurer’s maximum
688 reimbursement for a single event as calculated under
689 subparagraph (e)6. The TEACO premium associated with the $5
690 billion retention option shall be equal to 75 percent of a TEACO
691 insurer’s maximum reimbursement for a single event as calculated
692 under subparagraph (e)6.
693 (g) Effect on claims-paying capacity of the fund.—For the
694 contract term commencing June 1, 2007, the contract year
695 commencing June 1, 2008, and the contract term beginning June 1,
696 2009, the program created by this subsection shall increase the
697 claims-paying capacity of the fund as provided in subparagraph
698 (4)(c)1. by an amount equal to two times the difference between
699 the industry retention level calculated under paragraph (2)(e)
700 and the $3 billion industry TEACO retention level specified in
701 sub-subparagraph (d)4.a. The additional capacity shall apply
702 only to the additional coverage provided by the TEACO option and
703 shall not otherwise affect any insurer’s reimbursement from the
704 fund.
705 (16)(17) TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS.—
706 (a) Findings and intent.—
707 1. The Legislature finds that:
708 a. Because of temporary disruptions in the market for
709 catastrophic reinsurance, many property insurers were unable to
710 procure sufficient amounts of reinsurance for the 2006 hurricane
711 season or were able to procure such reinsurance only by
712 incurring substantially higher costs than in prior years.
713 b. The reinsurance market problems were responsible, at
714 least in part, for substantial premium increases to many
715 consumers and increases in the number of policies issued by
716 Citizens Property Insurance Corporation.
717 c. It is likely that the reinsurance market disruptions
718 will not significantly abate prior to the 2007 hurricane season.
719 2. It is the intent of the Legislature to create options
720 for insurers to purchase a temporary increased coverage limit
721 above the statutorily determined limit in subparagraph (4)(c)1.,
722 applicable for the 2007, 2008, 2009, 2010, 2011, and 2012, and
723 2013 hurricane seasons, to address market disruptions and enable
724 insurers, at their option, to procure additional coverage from
725 the Florida Hurricane Catastrophe Fund.
726 (b) Applicability of other provisions of this section.—All
727 provisions of this section and the rules adopted under this
728 section apply to the coverage created by this subsection unless
729 specifically superseded by provisions in this subsection.
730 (c) Optional coverage.—For the 2009-2010, 2010-2011, 2011
731 2012, and 2012-2013, and 2013-2014 contract years, the board
732 shall offer, for each of such years, the optional coverage as
733 provided in this subsection.
734 (d) Additional definitions.—As used in this subsection, the
735 term:
736 1. “FHCF” means Florida Hurricane Catastrophe Fund.
737 2. “FHCF reimbursement premium” means the premium paid by
738 an insurer for its coverage as a mandatory participant in the
739 FHCF, but does not include additional premiums for optional
740 coverages.
741 3. “Payout multiple” means the number or multiple created
742 by dividing the statutorily defined claims-paying capacity as
743 determined in subparagraph (4)(c)1. by the aggregate
744 reimbursement premiums paid by all insurers estimated or
745 projected as of calendar year-end.
746 4. “TICL” means the temporary increase in coverage limit.
747 5. “TICL options” means the temporary increase in coverage
748 options created under this subsection.
749 6. “TICL insurer” means an insurer that has opted to obtain
750 coverage under the TICL options addendum in addition to the
751 coverage provided to the insurer under its FHCF reimbursement
752 contract.
753 7. “TICL reimbursement premium” means the premium charged
754 by the fund for coverage provided under the TICL option.
755 8. “TICL coverage multiple” means the coverage multiple
756 when multiplied by an insurer’s reimbursement premium that
757 defines the temporary increase in coverage limit.
758 9. “TICL coverage” means the coverage for an insurer’s
759 losses above the insurer’s statutorily determined claims-paying
760 capacity based on the claims-paying limit in subparagraph
761 (4)(c)1., which an insurer selects as its temporary increase in
762 coverage from the fund under the TICL options selected. A TICL
763 insurer’s increased coverage limit options shall be calculated
764 as follows:
765 a. The board shall calculate and report to each TICL
766 insurer the TICL coverage multiples based on 12 options for
767 increasing the insurer’s FHCF coverage limit. Each TICL coverage
768 multiple shall be calculated by dividing $1 billion, $2 billion,
769 $3 billion, $4 billion, $5 billion, $6 billion, $7 billion, $8
770 billion, $9 billion, $10 billion, $11 billion, or $12 billion by
771 the total estimated aggregate FHCF reimbursement premiums for
772 the 2007-2008 contract year, and the 2008-2009 contract year.
773 b. For the 2009-2010 contract year, the board shall
774 calculate and report to each TICL insurer the TICL coverage
775 multiples based on 10 options for increasing the insurer’s FHCF
776 coverage limit. Each TICL coverage multiple shall be calculated
777 by dividing $1 billion, $2 billion, $3 billion, $4 billion, $5
778 billion, $6 billion, $7 billion, $8 billion, $9 billion, and $10
779 billion by the total estimated aggregate FHCF reimbursement
780 premiums for the 2009-2010 contract year.
781 c. For the 2010-2011 contract year, the board shall
782 calculate and report to each TICL insurer the TICL coverage
783 multiples based on eight options for increasing the insurer’s
784 FHCF coverage limit. Each TICL coverage multiple shall be
785 calculated by dividing $1 billion, $2 billion, $3 billion, $4
786 billion, $5 billion, $6 billion, $7 billion, and $8 billion by
787 the total estimated aggregate FHCF reimbursement premiums for
788 the contract year.
789 d. For the 2011-2012 contract year, the board shall
790 calculate and report to each TICL insurer the TICL coverage
791 multiples based on six options for increasing the insurer’s FHCF
792 coverage limit. Each TICL coverage multiple shall be calculated
793 by dividing $1 billion, $2 billion, $3 billion, $4 billion, $5
794 billion, and $6 billion by the total estimated aggregate FHCF
795 reimbursement premiums for the 2011-2012 contract year.
796 a.e. For the 2012-2013 contract year, the board shall
797 calculate and report to each TICL insurer the TICL coverage
798 multiples based on four options for increasing the insurer’s
799 FHCF coverage limit. Each TICL coverage multiple shall be
800 calculated by dividing $1 billion, $2 billion, $3 billion, and
801 $4 billion by the total estimated aggregate FHCF reimbursement
802 premiums for the 2012-2013 contract year.
803 f. For the 2013-2014 contract year, the board shall
804 calculate and report to each TICL insurer the TICL coverage
805 multiples based on two options for increasing the insurer’s FHCF
806 coverage limit. Each TICL coverage multiple shall be calculated
807 by dividing $1 billion and $2 billion by the total estimated
808 aggregate FHCF reimbursement premiums for the 2013-2014 contract
809 year.
810 b.g. The TICL insurer’s increased coverage shall be the
811 FHCF reimbursement premium multiplied by the TICL coverage
812 multiple. In order to determine an insurer’s total limit of
813 coverage, an insurer shall add its TICL coverage multiple to its
814 payout multiple. The total shall represent a number that, when
815 multiplied by an insurer’s FHCF reimbursement premium for a
816 given reimbursement contract year, defines an insurer’s total
817 limit of FHCF reimbursement coverage for that reimbursement
818 contract year.
819 10. “TICL options addendum” means an addendum to the
820 reimbursement contract reflecting the obligations of the fund
821 and insurers selecting an option to increase an insurer’s FHCF
822 coverage limit.
823 (e) TICL options addendum.—
824 1. The TICL options addendum shall provide for
825 reimbursement of TICL insurers for covered events occurring
826 during the 2009-2010, 2010-2011, 2011-2012, 2012-2013, and 2013
827 2014 contract year years in exchange for the TICL reimbursement
828 premium paid into the fund under paragraph (f) based on the TICL
829 coverage available and selected for each respective contract
830 year. Any insurer writing covered policies has the option of
831 selecting an increased limit of coverage under the TICL options
832 addendum and shall select such coverage at the time that it
833 executes the FHCF reimbursement contract.
834 2. The TICL addendum shall contain a promise by the board
835 to reimburse the TICL insurer for 45 percent, 75 percent, or 90
836 percent of its losses from each covered event in excess of the
837 insurer’s retention, plus 5 percent of the reimbursed losses to
838 cover loss adjustment expenses. The percentage shall be the same
839 as the coverage level selected by the insurer under paragraph
840 (4)(b).
841 3. The TICL addendum shall provide that reimbursement
842 amounts shall not be reduced by reinsurance paid or payable to
843 the insurer from other sources.
844 4. The priorities, schedule, and method of reimbursements
845 under the TICL addendum shall be the same as provided under
846 subsection (4).
847 (f) TICL reimbursement premiums.—Each TICL insurer shall
848 pay to the fund, in the manner and at the time provided in the
849 reimbursement contract for payment of reimbursement premiums, a
850 TICL reimbursement premium determined as specified in subsection
851 (5), except that a cash build-up factor does not apply to the
852 TICL reimbursement premiums. However, the TICL reimbursement
853 premium shall be increased in the 2009-2010 contract year by a
854 factor of two, in the 2010-2011 contract year by a factor of
855 three, in the 2011-2012 contract year by a factor of four, in
856 the 2012-2013 contract year by a factor of five, and in the
857 2013-2014 contract year by a factor of six.
858 (g) Effect on claims-paying capacity of the fund.—For the
859 2009-2010, 2010-2011, 2011-2012, 2012-2013, and 2013-2014
860 contract year years, the program created by this subsection
861 shall increase the claims-paying capacity of the fund as
862 provided in subparagraph (4)(c)1. by an amount not to exceed $4
863 $12 billion and shall depend on the TICL coverage options
864 available and selected for the specified contract year and the
865 number of insurers that select the TICL optional coverage. The
866 additional capacity shall apply only to the additional coverage
867 provided under the TICL options and shall not otherwise affect
868 any insurer’s reimbursement from the fund if the insurer chooses
869 not to select the temporary option to increase its limit of
870 coverage under the FHCF.
871 (17)(18) FACILITATION OF INSURERS’ PRIVATE CONTRACT
872 NEGOTIATIONS BEFORE THE START OF THE HURRICANE SEASON.—
873 (a) In addition to the legislative findings and intent
874 provided elsewhere in this section, the Legislature finds that:
875 1.a. Because a regular session of the Legislature begins
876 approximately 3 months before the start of a contract year and
877 ends approximately 1 month before the start of a contract year,
878 participants in the fund always face the possibility that
879 legislative actions will change the coverage provided or offered
880 by the fund with only a few days or weeks of advance notice.
881 b. The timing issues described in sub-subparagraph a. can
882 create uncertainties and disadvantages for the residential
883 property insurers that are required to participate in the fund
884 when such insurers negotiate for the procurement of private
885 reinsurance or other sources of capital.
886 c. Providing participating insurers with a greater degree
887 of certainty regarding the coverage provided or offered by the
888 fund and more time to negotiate for the procurement of private
889 reinsurance or other sources of capital will enable the
890 residential property insurance market to operate with greater
891 stability.
892 d. Increased stability in the residential property
893 insurance market serves a primary purpose of the fund and
894 benefits Florida consumers by enabling insurers to operate more
895 economically. In years when reinsurance and capital markets are
896 experiencing a capital shortage, the last-minute rush by
897 insurers only weeks before the start of the hurricane season to
898 procure adequate coverage in order to meet their capital
899 requirements can result in higher costs that are passed on to
900 Florida consumers. However, if more time is available,
901 residential property insurers should experience greater
902 competition for their business with a corresponding beneficial
903 effect for Florida consumers.
904 2. It is the intent of the Legislature to provide insurers
905 with the terms and conditions of the reimbursement contract well
906 in advance of the insurers’ need to finalize their procurement
907 of private reinsurance or other sources of capital, and thereby
908 improve insurers’ negotiating position with reinsurers and other
909 sources of capital.
910 3. It is also the intent of the Legislature that the board
911 publish the fund’s maximum statutory limit of coverage and the
912 fund’s total retention early enough that residential property
913 insurers can have the opportunity to better estimate their
914 coverage from the fund.
915 (b) The board shall adopt the reimbursement contract for a
916 particular contract year by February 1 of the immediately
917 preceding contract year. However, the reimbursement contract
918 shall be adopted as soon as possible in advance of the 2010-2011
919 contract year.
920 (c) Insurers writing covered policies shall execute the
921 reimbursement contract by March 1 of the immediately preceding
922 contract year, and the contract shall have an effective date as
923 defined in paragraph (2)(o).
924 (d) The board shall publish in the Florida Administrative
925 Weekly the maximum statutory adjusted capacity for the mandatory
926 coverage for a particular contract year, the maximum statutory
927 coverage for any optional coverage for the particular contract
928 year, and the aggregate fund retention used to calculate
929 individual insurer’s retention multiples for the particular
930 contract year no later than January 1 of the immediately
931 preceding contract year.
932 Section 2. Subsection (5) of section 627.0629, Florida
933 Statutes, is amended to read:
934 627.0629 Residential property insurance; rate filings.—
935 (5) In order to provide an appropriate transition period,
936 an insurer may implement an approved rate filing for residential
937 property insurance over a period of years. Such insurer must
938 provide an informational notice to the office setting out its
939 schedule for implementation of the phased-in rate filing. The
940 insurer may include in its rate the actual cost of private
941 market reinsurance that corresponds to available coverage of the
942 Temporary Increase in Coverage Limits, TICL, from the Florida
943 Hurricane Catastrophe Fund. The insurer may also include the
944 cost of reinsurance to replace the TICL reduction implemented
945 pursuant to s. 215.555(16)(d)9 s. 215.555(17)(d)9. However, this
946 cost for reinsurance may not include any expense or profit load
947 or result in a total annual base rate increase in excess of 10
948 percent.
949 Section 3. This act shall take effect upon becoming a law.