Florida Senate - 2014                              CS for SB 346
       
       
        
       By the Committee on Banking and Insurance; and Senator Lee
       
       
       
       
       
       597-01863-14                                           2014346c1
    1                        A bill to be entitled                      
    2         An act relating to the Florida Insurance Guaranty
    3         Association; amending s. 631.54, F.S.; defining the
    4         term “assessment year”; amending s. 631.57, F.S.;
    5         revising provisions relating to the levying of
    6         assessments on insurers; specifying the conditions
    7         under which such assessments are paid; revising
    8         procedures and timeframes for levying the assessments;
    9         amending s. 631.64, F.S.; requiring charges or
   10         recoupments to be displayed separately on premium
   11         bills to policyholders and prohibiting their inclusion
   12         in rates; amending ss. 627.727 and 631.55, F.S.;
   13         conforming cross-references; providing an effective
   14         date.
   15          
   16  Be It Enacted by the Legislature of the State of Florida:
   17  
   18         Section 1. Present subsections (2) through (9) of section
   19  631.54, Florida Statutes, are renumbered as subsections (3)
   20  through (10), respectively, and a new subsection (2) is added to
   21  that section, to read:
   22         631.54 Definitions.—As used in this part:
   23         (2) “Assessment year” means the 12-month period specified
   24  in an order issued by the office directing insurers to pay an
   25  assessment to the association. Upon entry of the order, insurers
   26  may begin collecting assessments from policyholders for the
   27  assessment year. The assessment year begins on the first day of
   28  each quarter, beginning January 1.
   29         Section 2. Subsection (3) of section 631.57, Florida
   30  Statutes, is amended to read:
   31         631.57 Powers and duties of the association.—
   32         (3)(a) To the extent necessary to secure the funds for the
   33  respective accounts for the payment of covered claims, to pay
   34  the reasonable costs to administer such accounts the same, and
   35  to the extent necessary to secure the funds for the account
   36  specified in s. 631.55(2)(b) or to retire indebtedness,
   37  including, without limitation, the principal, redemption
   38  premium, if any, and interest on, and related costs of issuance
   39  of, bonds issued under s. 631.695 and the funding of any
   40  reserves and other payments required under the bond resolution
   41  or trust indenture pursuant to which such bonds have been
   42  issued, the office, upon certification of the board of
   43  directors, shall levy assessments initially estimated in the
   44  proportion that each insurer’s net direct written premiums in
   45  this state in the classes protected by the account bears to the
   46  total of said net direct written premiums received in this state
   47  by all such insurers for the preceding calendar year for the
   48  kinds of insurance included within such account. Assessments
   49  shall be remitted to and administered by the board of directors
   50  in the manner specified by the approved plan and paragraph (f).
   51  Each insurer so assessed shall have at least 30 days’ written
   52  notice as to the date the initial assessment payment is due and
   53  payable. Every assessment shall be made as a uniform percentage
   54  applicable to the net direct written premiums of each insurer in
   55  the kinds of insurance included within the account in which the
   56  assessment is made. The assessments levied against any insurer
   57  may shall not exceed in any one year more than 2 percent of that
   58  insurer’s net direct written premiums in this state for the
   59  kinds of insurance included within such account during the
   60  calendar year next preceding the date of such assessments.
   61         (b) If sufficient funds from such assessments, together
   62  with funds previously raised, are not available in any one year
   63  in the respective account to make all the payments or
   64  reimbursements then owing to insurers, the funds available shall
   65  be prorated and the unpaid portion shall be paid as soon
   66  thereafter as funds become available.
   67         (c) The Legislature finds and declares that all assessments
   68  paid by an insurer or insurer group as a result of a levy by the
   69  office, including assessments levied pursuant to paragraph (a)
   70  and emergency assessments levied pursuant to paragraph (e),
   71  constitute advances of funds from the insurer to the
   72  association. An insurer may fully recoup such advances by
   73  applying the uniform assessment percentage levied by the office
   74  to all a separate recoupment factor to the premium of policies
   75  of the same kind or line as were considered by the office in
   76  determining the assessment liability of the insurer or insurer
   77  group as set forth in paragraph (f).
   78         1. Assessments levied under subparagraph (f)1. are paid
   79  before policy surcharges are collected and result in a
   80  receivable for policy surcharges collected in the future. This
   81  amount, to the extent it is likely that it will be realized,
   82  meets the definition of an admissible asset as specified in the
   83  National Association of Insurance Commissioners’ Statement of
   84  Statutory Accounting Principles No. 4. The asset shall be
   85  established and recorded separately from the liability
   86  regardless of whether it is based on a retrospective or
   87  prospective premium-based assessment. If an insurer is unable to
   88  fully recoup the amount of the assessment because of a reduction
   89  in writings or withdrawal from the market, the amount recorded
   90  as an asset shall be reduced to the amount reasonably expected
   91  to be recouped.
   92         2. Assessments levied under subparagraph (f)2. are paid
   93  after policy surcharges are collected so that the recognition of
   94  assets is based on actual premium written offset by the
   95  obligation to the association.
   96         (d) No State funds may not of any kind shall be allocated
   97  or paid to the said association or any of its accounts.
   98         (e)1.a. In addition to assessments otherwise authorized in
   99  paragraph (a), and to the extent necessary to secure the funds
  100  for the account specified in s. 631.55(2)(b) for the direct
  101  payment of covered claims of insurers rendered insolvent by the
  102  effects of a hurricane and to pay the reasonable costs to
  103  administer such claims, or to retire indebtedness, including,
  104  without limitation, the principal, redemption premium, if any,
  105  and interest on, and related costs of issuance of, bonds issued
  106  under s. 631.695 and the funding of any reserves and other
  107  payments required under the bond resolution or trust indenture
  108  pursuant to which such bonds have been issued, the office, upon
  109  certification of the board of directors, shall levy emergency
  110  assessments upon insurers holding a certificate of authority.
  111  The emergency assessments payable under this paragraph by any
  112  insurer may shall not exceed in any single year more than 2
  113  percent of that insurer’s direct written premiums, net of
  114  refunds, in this state during the preceding calendar year for
  115  the kinds of insurance within the account specified in s.
  116  631.55(2)(b).
  117         2.b.Any Emergency assessments authorized under this
  118  paragraph shall be levied by the office upon insurers referred
  119  to in subparagraph 1. sub-subparagraph a., upon certification as
  120  to the need for such assessments by the board of directors. If
  121  In the event the board of directors participates in the issuance
  122  of bonds in accordance with s. 631.695, emergency assessments
  123  shall be levied in each year that bonds issued under s. 631.695
  124  and secured by such emergency assessments are outstanding, in
  125  such amounts up to such 2-percent limit as required in order to
  126  provide for the full and timely payment of the principal of,
  127  redemption premium, if any, and interest on, and related costs
  128  of issuance of, such bonds. The emergency assessments provided
  129  for in this paragraph are assigned and pledged to the
  130  municipality, county, or legal entity issuing bonds under s.
  131  631.695 for the benefit of the holders of such bonds, in order
  132  to enable such municipality, county, or legal entity to provide
  133  for the payment of the principal of, redemption premium, if any,
  134  and interest on such bonds, the cost of issuance of such bonds,
  135  and the funding of any reserves and other payments required
  136  under the bond resolution or trust indenture pursuant to which
  137  such bonds have been issued, without the necessity of any
  138  further action by the association, the office, or any other
  139  party. If To the extent bonds are issued under s. 631.695 and
  140  the association determines to secure such bonds by a pledge of
  141  revenues received from the emergency assessments, such bonds,
  142  upon such pledge of revenues, shall be secured by and payable
  143  from the proceeds of such emergency assessments, and the
  144  proceeds of emergency assessments levied under this paragraph
  145  shall be remitted directly to and administered by the trustee or
  146  custodian appointed for such bonds.
  147         3.c. Emergency assessments used to defease bonds issued
  148  under this part paragraph may be payable in a single payment or,
  149  at the option of the association, may be payable in 12 monthly
  150  installments with the first installment being due and payable at
  151  the end of the month after an emergency assessment is levied and
  152  subsequent installments being due by not later than the end of
  153  each succeeding month.
  154         4.d. If emergency assessments are imposed, the report
  155  required by s. 631.695(7) must shall include an analysis of the
  156  revenues generated from the emergency assessments imposed under
  157  this paragraph.
  158         5.e. If emergency assessments are imposed, the references
  159  in sub-subparagraph (1)(a)3.b. and s. 631.695(2) and (7) to
  160  assessments levied under paragraph (a) must shall include
  161  emergency assessments imposed under this paragraph.
  162         6.2. If the board of directors participates in the issuance
  163  of bonds in accordance with s. 631.695, an annual assessment
  164  under this paragraph shall continue while the bonds issued with
  165  respect to which the assessment was imposed are outstanding,
  166  including any bonds the proceeds of which were used to refund
  167  bonds issued pursuant to s. 631.695, unless adequate provision
  168  has been made for the payment of the bonds in the documents
  169  authorizing the issuance of such bonds.
  170         7.3. Emergency assessments under this paragraph are not
  171  premium and are not subject to the premium tax, to any fees, or
  172  to any commissions. An insurer is liable for all emergency
  173  assessments that the insurer collects and shall treat the
  174  failure of an insured to pay an emergency assessment as a
  175  failure to pay the premium. An insurer is not liable for
  176  uncollectible emergency assessments.
  177         (f) The recoupment factor applied to policies in accordance
  178  with paragraph (c) shall be selected by the insurer or insurer
  179  group so as to provide for the probable recoupment of both
  180  assessments levied pursuant to paragraph (a) and emergency
  181  assessments over a period of 12 months, unless the insurer or
  182  insurer group, at its option, elects to recoup the assessment
  183  over a longer period. The recoupment factor shall apply to all
  184  policies of the same kind or line as were considered by the
  185  office in determining the assessment liability of the insurer or
  186  insurer group issued or renewed during a 12-month period. If the
  187  insurer or insurer group does not collect the full amount of the
  188  assessment during one 12-month period, the insurer or insurer
  189  group may apply recalculated recoupment factors to policies
  190  issued or renewed during one or more succeeding 12-month
  191  periods. If, at the end of a 12-month period, the insurer or
  192  insurer group has collected from the combined kinds or lines of
  193  policies subject to assessment more than the total amount of the
  194  assessment paid by the insurer or insurer group, the excess
  195  amount shall be disbursed as follows:
  196         1. The association, office, and insurers remitting
  197  assessments pursuant to paragraph (a) or (e) must comply with
  198  the following:
  199         a. In the order levying an assessment, the office shall
  200  specify the actual percentage amount to be collected uniformly
  201  from all the policyholders of insurers subject to the assessment
  202  and the date on which the assessment year begins, which may not
  203  begin before 90 days after the association board certifies such
  204  an assessment.
  205         b. Insurers shall make an initial payment to the
  206  association before the beginning of the assessment year, on or
  207  before the date specified in the order of the office.
  208         c. Insurers that have written insurance in the calendar
  209  year before the year in which the assessment is certified by the
  210  board shall make an initial payment based on the net direct
  211  written premium amount from the prior calendar year as set forth
  212  in the insurers annual statement, multiplied by the uniform
  213  percentage of premium specified in the order issued by the
  214  office. Insurers that have not written insurance in the prior
  215  calendar year in any of the lines under the account which are
  216  being assessed, but which are writing insurance as of, or after,
  217  the date the board certifies the assessment to the office, shall
  218  pay an amount based on a good faith estimate of the amount of
  219  net direct written premium anticipated to be written in the
  220  subject lines of business for the assessment year, multiplied by
  221  the uniform percentage of premium specified in the order issued
  222  by the office.
  223         d. Insurers shall file a reconciliation report with the
  224  association within 45 days after the end of the assessment year
  225  which indicates the amount of the initial payment to the
  226  association before the assessment year, whether such amount was
  227  based on net direct written premium contained in a prior
  228  calendar year annual statement or a good faith projection, the
  229  amount actually collected during the assessment year, and such
  230  other information contained on a form adopted by the association
  231  and provided to the insurers in advance. If the insurer
  232  collected from policyholders more than the amount initially
  233  paid, the insurer shall pay the excess amount to the
  234  association. If the insurer collected from policyholders an
  235  amount which is less than the amount initially paid to the
  236  association, the association shall credit the insurer that
  237  amount against future assessments. Such payment reconciliation
  238  report, and any payment of excess amounts collected from
  239  policyholders, shall be completed and remitted to the
  240  association within 90 days after the end of the assessment year.
  241  The association shall send a final reconciliation report on all
  242  insurers to the office within 120 days after each assessment
  243  year.
  244         e. Insurers remitting reconciliation reports under this
  245  paragraph to the association are subject to s. 626.9541(1)(e).
  246         f. Assessments levied under this subsection are levied upon
  247  insurers. This subsection does not create a cause of action by a
  248  policyholder with respect to the levying of, or a policyholder’s
  249  duty to pay, such assessments. If the excess amount does not
  250  exceed 15 percent of the total assessment paid by the insurer or
  251  insurer group, the excess amount shall be remitted to the
  252  association within 60 days after the end of the 12-month period
  253  in which the excess recoupment charges were collected.
  254         2. The association may use a monthly installment method
  255  instead of the method described in sub-subparagraphs (f)1.b and
  256  c. or in combination thereof based on the association’s
  257  projected cash flow. If the association projects that it has
  258  cash on hand for the payment of anticipated claims in the
  259  applicable account for at least 6 months, the board may make an
  260  estimate of the assessment needed and may recommend to the
  261  office the assessment percentage that may be collected as a
  262  monthly assessment. The office may, in the order levying the
  263  assessment on insurers, specify that the assessment is due and
  264  payable monthly as the funds are collected from insureds
  265  throughout the assessment year, in which case the assessment
  266  shall be a uniform percentage of premium collected during the
  267  assessment year and shall be collected from all policyholders
  268  with policies in the classes protected by the account. All
  269  insurers shall collect the assessment without regard to whether
  270  the insurers reported premium in the year preceding the
  271  assessment. Insurers are not required to advance funds if the
  272  association and the office elect to use the monthly installment
  273  option. All funds collected shall be retained by the association
  274  for the payment of current or future claims. If the excess
  275  amount exceeds 15 percent of the total assessment paid by the
  276  insurer or insurer group, the excess amount shall be returned to
  277  the insurer’s or insurer group’s current policyholders by
  278  refunds or premium credits. The association shall use any
  279  remitted excess recoupment amounts to reduce future assessments.
  280         (g) Amounts recouped pursuant to this subsection for
  281  assessments levied under paragraph (a) due to insolvencies on or
  282  after July 1, 2010, are considered premium solely for premium
  283  tax purposes and are not subject to fees or commissions.
  284  However, insurers shall treat the failure of an insured to pay a
  285  recoupment charge as a failure to pay the premium.
  286         (h) At least 15 days before applying the recoupment factor
  287  to any policies, the insurer or insurer group shall file with
  288  the office a statement for informational purposes only setting
  289  forth the amount of the recoupment factor and an explanation of
  290  how the recoupment factor will be applied. Such statement shall
  291  include documentation of the assessment paid by the insurer or
  292  insurer group and the arithmetic calculations supporting the
  293  recoupment factor. The insurer or insurer group may use the
  294  recoupment factor at any time after the expiration of the 15-day
  295  period. The insurer or insurer group need submit only one
  296  informational statement for all lines of business using the same
  297  recoupment factor.
  298         (h)(i)Within No later than 90 days after the insurer or
  299  insurer group has completed the recoupment process, the insurer
  300  or insurer group shall file with the office, for information
  301  purposes only, a final accounting report documenting the
  302  recoupment. The report must shall provide the amounts of
  303  assessments paid by the insurer or insurer group, the amounts
  304  and percentages recouped by year from each affected line of
  305  business, and the direct written premium subject to recoupment
  306  by year. The insurer or insurer group need submit only one
  307  report for all lines of business using the same recoupment
  308  factor.
  309         Section 3. Section 631.64, Florida Statutes, is amended to
  310  read:
  311         631.64 Recognition of assessments in rates.—The rates and
  312  premiums charged for insurance policies to which this part
  313  applies may include separate amounts sufficient to recoup a sum
  314  equal to the amounts paid or payable to the association by the
  315  member insurer less any amounts returned to the member insurer
  316  by the association, and such rates may shall not be deemed
  317  excessive because they contain an amount reasonably calculated
  318  to recoup assessments paid by the member insurer. Charges or
  319  recoupments shall be separately displayed on premium bills to
  320  enable policyholders to determine the amount charged for
  321  association assessments, and may not be included in rates filed
  322  and approved by the office.
  323         Section 4. Subsection (5) of section 627.727, Florida
  324  Statutes, is amended to read:
  325         627.727 Motor vehicle insurance; uninsured and underinsured
  326  vehicle coverage; insolvent insurer protection.—
  327         (5) Any person having a claim against an insolvent insurer
  328  as defined in s. 631.54(6) under the provisions of this section
  329  shall present such claim for payment to the Florida Insurance
  330  Guaranty Association only. In the event of a payment to a any
  331  person in settlement of a claim arising under the provisions of
  332  this section, the association is not subrogated or entitled to
  333  any recovery against the claimant’s insurer. The association,
  334  however, has the rights of recovery as set forth in chapter 631
  335  in the proceeds recoverable from the assets of the insolvent
  336  insurer.
  337         Section 5. Subsection (1) of section 631.55, Florida
  338  Statutes, is amended to read:
  339         631.55 Creation of the association.—
  340         (1) There is created a nonprofit corporation to be known as
  341  the “Florida Insurance Guaranty Association, Incorporated.” All
  342  insurers defined as member insurers in s. 631.54(7) shall be
  343  members of the association as a condition of their authority to
  344  transact insurance in this state, and, further, as a condition
  345  of such authority, an insurer must shall agree to reimburse the
  346  association for all claim payments the association makes on the
  347  said insurer’s behalf if such insurer is subsequently
  348  rehabilitated. The association shall perform its functions under
  349  a plan of operation established and approved under s. 631.58 and
  350  shall exercise its powers through a board of directors
  351  established under s. 631.56. The corporation shall have all
  352  those powers granted or permitted nonprofit corporations, as
  353  provided in chapter 617.
  354         Section 6. This act shall take effect July 1, 2014.