Florida Senate - 2014                        COMMITTEE AMENDMENT
       Bill No. CS for SB 542
                              LEGISLATIVE ACTION                        
                    Senate             .             House              
                  Comm: RCS            .                                
                  02/06/2014           .                                

       recommended the following:
    1         Senate Amendment (with title amendment)
    3         Delete lines 98 - 398
    4  and insert:
    5         Section 2. Subsection (3) of section 627.0628, Florida
    6  Statutes, is amended to read:
    7         627.0628 Florida Commission on Hurricane Loss Projection
    8  Methodology; public records exemption; public meetings
    9  exemption.—
   11         (a) The commission shall consider any actuarial methods,
   12  principles, standards, models, or output ranges that have the
   13  potential for improving the accuracy of or reliability of the
   14  hurricane loss projections and flood loss projections used in
   15  residential property insurance rate filings. The commission
   16  shall, from time to time, adopt and update findings, as needed,
   17  as to the accuracy or reliability of particular methods,
   18  principles, standards, models, or output ranges.
   19         (b) The commission shall consider any actuarial methods,
   20  principles, standards, or models that have the potential for
   21  improving the accuracy of or reliability of projecting probable
   22  maximum loss levels. The commission shall adopt and update
   23  findings, as needed, as to the accuracy or reliability of
   24  particular methods, principles, standards, or models related to
   25  probable maximum loss calculations.
   26         (c) In establishing reimbursement premiums for the Florida
   27  Hurricane Catastrophe Fund, the State Board of Administration
   28  must, to the extent feasible, employ actuarial methods,
   29  principles, standards, models, or output ranges found by the
   30  commission to be accurate or reliable.
   31         (d) With respect to a rate filing under s. 627.062, an
   32  insurer shall employ and may not modify or adjust actuarial
   33  methods, principles, standards, models, or output ranges found
   34  by the commission to be accurate or reliable in determining
   35  hurricane loss factors for use in a rate filing under s.
   36  627.062. An insurer shall employ and may not modify or adjust
   37  models found by the commission to be accurate or reliable in
   38  determining probable maximum loss levels pursuant to paragraph
   39  (b) with respect to a rate filing under s. 627.062 made more
   40  than 60 days after the commission has made such findings. This
   41  paragraph does not prohibit an insurer from averaging model
   42  results or output ranges or from using an average for the
   43  purpose of a flood insurance rate filing under s. 627.062.
   44         (e) The commission shall adopt actuarial methods,
   45  principles, standards, models, or output ranges for flood loss
   46  by July 1, 2016.
   47         (f)(e) The commission shall revise adopt revisions to
   48  previously adopted actuarial methods, principles, standards,
   49  models, or output ranges every odd-numbered odd year.
   50         (g)(f)1. A trade secret, as defined in s. 688.002, which
   51  that is used in designing and constructing a hurricane loss
   52  model and which that is provided pursuant to this section, by a
   53  private company, to the commission, office, or consumer advocate
   54  appointed pursuant to s. 627.0613, is confidential and exempt
   55  from s. 119.07(1) and s. 24(a), Art. I of the State
   56  Constitution.
   57         2.a. That portion of a meeting of the commission or of a
   58  rate proceeding on an insurer’s rate filing at which a trade
   59  secret made confidential and exempt by this paragraph is
   60  discussed is exempt from s. 286.011 and s. 24(b), Art. I of the
   61  State Constitution. The closed meeting must be recorded, and no
   62  portion of the closed meeting may be off the record.
   63         b. The recording of a closed portion of a meeting is exempt
   64  from s. 119.07(1) and s. 24(a), Art. I of the State
   65  Constitution.
   66         c. This subparagraph is subject to the Open Government
   67  Sunset Review Act in accordance with s. 119.15 and shall stand
   68  repealed on October 2, 2015, unless reviewed and saved from
   69  repeal through reenactment by the Legislature.
   70         Section 3. Section 627.715, Florida Statutes, is created to
   71  read:
   72         627.715Flood insurance.—Subject to the requirements of
   73  this section, an insurer may issue an insurance policy,
   74  contract, or endorsement providing coverage for the peril of
   75  flood on any structure or on the contents of personal property
   76  in this state.
   77         (1) The Legislature finds that:
   78         (a) The National Flood Insurance Program (NFIP) is a
   79  federal program that enables property owners in participating
   80  communities to purchase flood insurance. A community
   81  participates in the federal program by adopting and enforcing
   82  floodplain management regulations that meet or exceed federal
   83  floodplain management criteria designed to reduce future flood
   84  risk to new construction in floodplains. The program was created
   85  by Congress in 1968 because insurance covering the peril of
   86  flood was often unavailable in the private insurance market and
   87  was intended to reduce the amount of financial aid paid by the
   88  Federal Government in the aftermath of flood-related disasters.
   89  After the creation of the NFIP, flood insurance coverage
   90  continued to be generally unavailable for purchase from private
   91  market insurance companies.
   92         (b) The Biggert-Waters Flood Insurance Reform Act of 2012
   93  reauthorized and revised the NFIP. The act increased flood
   94  insurance premiums purchased through the program for second
   95  homes, business properties, severe repetitive loss properties,
   96  and substantially improved damaged properties by requiring
   97  premium increases of 25 percent per year until premiums meet the
   98  full actuarial cost. Most residences lose their subsidized rates
   99  if the property is sold, the policy lapses, repeated and severe
  100  flood losses occur, or a new policy is purchased. Policyholders
  101  whose communities adopt a new, updated Flood Insurance Rate Map
  102  (FIRM) that results in higher rates will experience a 5-year
  103  phase in of rate increases to achieve required rate levels.
  104         (c) The Biggert-Waters Flood Insurance Reform Act of 2012
  105  also encourages the use and acceptance of private market flood
  106  insurance. The Legislature finds, however, that there has been a
  107  long-term inadequacy of private market flood insurance available
  108  in this state. Such inadequacy suggests that the private market
  109  in this state is unlikely to expand unless the Legislature
  110  provides multiple options for the regulation of flood insurance.
  111  The Legislature also finds that the consumers of this state
  112  would benefit from the availability of competitively priced
  113  private market flood insurance due to the continued availability
  114  of the NFIP flood insurance, the likely availability of
  115  alternative private market flood insurance coverage options, and
  116  the oversight of the Office of Insurance Regulation.
  117         (d) The NFIP, as amended by the Biggert-Waters Flood
  118  Insurance Reform Act of 2012, is likely to prevent many property
  119  owners from obtaining affordable flood insurance coverage in
  120  this state. The absence of affordable flood insurance threatens
  121  the public health, safety, and welfare and the economic health
  122  of this state. Therefore, the state has a compelling public
  123  purpose and interest in providing alternatives to coverage from
  124  the NFIP by promoting the availability of flood insurance from
  125  private market insurers at potentially lower premium rates in an
  126  effort to facilitate the remediation, reconstruction, and
  127  replacement of damaged or destroyed property in order to reduce
  128  or avoid harm to public health, safety, and welfare, to the
  129  economy of this state, and to the revenues of state and local
  130  governments which are needed to provide for the public welfare.
  131         (2) As used in this section, the term “flood” means a
  132  general and temporary condition of partial or complete
  133  inundation of 2 acres or more of normally dry land area or of
  134  two or more properties, at least one of which is the
  135  policyholder’s property, from:
  136         (a) Overflow of inland or tidal waters;
  137         (b) Unusual and rapid accumulation or runoff of surface
  138  waters from any source;
  139         (c) Mudflow; or
  140         (d) Collapse or subsidence of land along the shore of a
  141  lake or similar body of water as a result of erosion or
  142  undermining caused by waves or currents of water exceeding
  143  anticipated cyclical levels.
  144         (3)At a minimum, coverage for the peril of flood must
  145  cover a flood as defined in subsection (2). Coverage for the
  146  peril of flood may also include water intrusion, as defined by
  147  the policy, which originates from outside the structure and is
  148  not otherwise covered under the definition of flood.
  149         (4) An insurer may offer a flood coverage policy, contract,
  150  or endorsement that:
  151         (a) Has a flood deductible based on a stated dollar amount
  152  or a percentage of the coverage amount. The deductible amount
  153  must be acceptable to federal mortgage and banking regulators if
  154  such policy, contract, or endorsement is intended to satisfy a
  155  mortgage requirement;
  156         (b) Provides that any flood loss will be adjusted on the
  157  basis of:
  158         1. The actual cash value of the property; or
  159         2. Replacement costs up to the policy limits as provided
  160  under s. 627.7011(3);
  161         (c) Restricts flood coverage to the principal building, as
  162  defined in the applicable policy;
  163         (d) Is in an agreed-upon amount, including coverage limited
  164  to the amount of all outstanding mortgages applicable to the
  165  covered property. However, if a policy, contract, or endorsement
  166  does not limit flood coverage to the replacement cost of the
  167  covered property, the policy, contract, or endorsement may not
  168  include a provision penalizing the policyholder for not insuring
  169  the covered property up to replacement cost; or
  170         (e) As to the peril of flood, does not cover:
  171         1.Additional living expenses;
  172         2.Personal property or contents; or
  173         3. Law and ordinance coverage. However, an insurer must
  174  offer law and ordinance coverage that is comparable to the law
  175  and ordinance coverage offered in the standard NFIP policy. A
  176  policy, contract, or endorsement that includes the law and
  177  ordinance coverage that must be offered under this paragraph
  178  must include the following disclosure in at least 12-point
  179  uppercase and boldfaced type: “LAW AND ORDINANCE COVERAGE UNDER
  183         (5) Any limitations on flood coverage or policy limits as
  184  to the peril of flood, including, but not limited to, flood
  185  deductibles or flood coverage limited to the amount of all
  186  outstanding mortgages, must be prominently disclosed on the
  187  declarations page or face page of the policy in at least 12
  188  point uppercase and boldfaced type and be sufficiently clear so
  189  as to be readily understandable by the agent and the property
  190  owner.
  191         (a) A policy that limits flood coverage to an amount less
  192  than the full replacement cost of the property must include the
  193  following statement: “THIS POLICY LIMITS FLOOD COVERAGE TO LESS
  197         (b) A policy that insures a dwelling on the basis of actual
  198  cash value must include the following statement: “THIS POLICY
  202         (6) An insurer may establish and use flood coverage rates
  203  in accordance with the rate standards under s. 627.062. For
  204  flood coverage rates filed with the office before July 1, 2024,
  205  the insurer may also elect one or more of the following options:
  206         (a) In accordance with the rates, rating schedules, or
  207  rating manuals filed by the insurer with the office which allow
  208  the insurer a reasonable rate of return on flood coverage
  209  written in this state. Flood coverage rates established under
  210  this paragraph are not subject to s. 627.062(2)(a) and (f). An
  211  insurer shall notify the office of any change to rates within 30
  212  days after the effective date of the change. The notice must
  213  include the name of the insurer and the average statewide
  214  percentage change in rates. Actuarial data with regard to rates
  215  for flood coverage must be maintained by the insurer for 2 years
  216  after the effective date of such rate change and is subject to
  217  examination by the office. The office may require the insurer to
  218  incur the costs associated with an examination. Upon
  219  examination, the office, in accordance with generally accepted
  220  and reasonable actuarial techniques, shall consider the rate
  221  factors and standards specified in s. 627.062 to determine if
  222  the rate is excessive, inadequate, or unfairly discriminatory.
  223         (b) Through individual risk rating as provided in s.
  224  627.062(3)(a) and (b).
  225         (c) With the written consent of the insured signed before
  226  the policy inception date and filed with the insurer, using a
  227  flood coverage rate that has not been approved by the office.
  228  The signed consent form must notify the insured that the rate is
  229  not subject to the approval of the office. A copy of the form
  230  shall be maintained by the insurer for 3 years and must be
  231  available for review by the office. An insurer is not required
  232  to obtain subsequent written consents upon renewal, but shall
  233  provide notice at each renewal that the rate is not subject to
  234  office approval. Section 627.171(2) does not apply to policies
  235  issued under this section.
  236         (7) A policy, contract, or endorsement providing coverage
  237  for the peril of flood must provide notice that flood insurance
  238  coverage is available from the NFIP.
  239         (8) A surplus lines agent may export a contract or
  240  endorsement to an eligible surplus lines insurer without making
  241  a diligent effort to seek such coverage from three or more
  242  authorized insurers under s. 626.916(1)(a). This subsection
  243  expires July 1, 2017.
  244         (9) A policy, contract, or endorsement providing coverage
  245  for the peril of flood must require the insurer to give 45 days’
  246  written notice before cancellation or nonrenewal to the insured
  247  and any regulated lending institution or federal agency that is
  248  a mortgagee. An insurer or insured may cancel during the term of
  249  the policy or upon renewal if the cancellation is for a valid
  250  reason under the NFIP.
  251         (10) In addition to any other applicable requirements, an
  252  insurer providing flood coverage under this section must:
  253         (a) Notify the office at least 30 days before writing flood
  254  insurance in this state;
  255         (b) File a plan of operation and financial projections or
  256  revisions to such plan, as applicable, with the office unless
  257  the insurer maintains at least $35 million in surplus. For
  258  purposes of this paragraph, an insurer may demonstrate such
  259  surplus if the insurer group surplus is used to support covered
  260  flood insurance risks through a pooling arrangement or
  261  intercompany reinsurance;
  262         (c) Offer flood insurance on a form that has been filed
  263  with and approved by the office pursuant to s. 627.410. If an
  264  insurer files a form with the office that is substantially
  265  similar to a form used by the NFIP, the office may not extend
  266  the 30-day period as provided under s. 627.410(2); and
  267         (d) File all reinsurance contracts with the office on or
  268  before June 30 of each year.
  269         (11)For a policy on a structure that was previously
  270  insured through the NFIP at a subsidized rate, the policy must
  271  include the following statement: “BY ACCEPTING A PRIVATE FLOOD
  275         (12) Citizens Property Insurance Corporation may not
  276  provide insurance for the peril of flood.
  277         (13) The Florida Hurricane Catastrophe Fund may not provide
  278  reimbursement for losses proximately caused by the peril of
  279  flood, including losses that occur during a covered event as
  280  defined under s. 215.555(2).
  281  (14) With respect to the regulation of flood insurance coverage
  282  written in this state by private insurers, this section
  283  supersedes any other provision in the Florida Insurance Code in
  284  the event of a conflict.
  286  ================= T I T L E  A M E N D M E N T ================
  287  And the title is amended as follows:
  288         Delete lines 6 - 31
  289  and insert:
  290         filings; amending s. 627.0628, F.S.; requiring the
  291         commission to adopt standards and guidelines relating
  292         to flood loss by a certain date; creating s. 627.715,
  293         F.S.; authorizing insurers to offer flood insurance in
  294         this state; providing legislative findings; defining
  295         the term “flood”; establishing the minimum coverage
  296         requirements for a flood insurance policy; providing
  297         coverage limitations that an insurer may include in
  298         such policies; requiring that certain limitations be
  299         noted on the policy declarations or face page;
  300         providing the insurer with rate options; requiring the
  301         insurer to provide notice that flood insurance is
  302         available from the National Flood Insurance Program;
  303         authorizing an insurer to export a contract or
  304         endorsement to a surplus lines insurer without meeting
  305         certain requirements; requiring prior notice for
  306         cancellation or nonrenewal of a policy; providing
  307         additional requirements with respect to notifying the
  308         Office of Insurance Regulation before writing flood
  309         insurance, filing a plan of operation with the office,
  310         using forms that have been approved by the office, and
  311         filing reinsurance contracts before a certain date;
  312         requiring that policies replacing subsidized policies
  313         include a statement that the subsidized rate may be
  314         lost; prohibiting Citizens Property Insurance
  315         Corporation from writing flood insurance; prohibiting
  316         the Florida Hurricane Catastrophe Fund from
  317         reimbursing losses caused by flooding; preempting any
  318         conflicts with other provisions of the Florida
  319         Insurance Code;