Florida Senate - 2014 COMMITTEE AMENDMENT
Bill No. CS for CS for SB 542
Senate . House
Comm: RCS .
1 Senate Amendment (with title amendment)
3 Delete everything after the enacting clause
4 and insert:
5 Section 1. Paragraph (b) of subsection (2) of section
6 627.062, Florida Statutes, is amended to read:
7 627.062 Rate standards.—
8 (2) As to all such classes of insurance:
9 (b) Upon receiving a rate filing, the office shall review
10 the filing to determine if a rate is excessive, inadequate, or
11 unfairly discriminatory. In making that determination, the
12 office shall, in accordance with generally accepted and
13 reasonable actuarial techniques, consider the following factors:
14 1. Past and prospective loss experience within and without
15 this state.
16 2. Past and prospective expenses.
17 3. The degree of competition among insurers for the risk
19 4. Investment income reasonably expected by the insurer,
20 consistent with the insurer’s investment practices, from
21 investable premiums anticipated in the filing, plus any other
22 expected income from currently invested assets representing the
23 amount expected on unearned premium reserves and loss reserves.
24 The commission may adopt rules using reasonable techniques of
25 actuarial science and economics to specify the manner in which
26 insurers calculate investment income attributable to classes of
27 insurance written in this state and the manner in which
28 investment income is used to calculate insurance rates. Such
29 manner must contemplate allowances for an underwriting profit
30 factor and full consideration of investment income that produce
which produce a reasonable rate of return; however, investment
32 income from invested surplus may not be considered.
33 5. The reasonableness of the judgment reflected in the
35 6. Dividends, savings, or unabsorbed premium deposits
36 allowed or returned to Florida policyholders, members, or
37 subscribers in this state.
38 7. The adequacy of loss reserves.
39 8. The cost of reinsurance. The office may not disapprove a
40 rate as excessive solely due to the insurer having obtained
41 catastrophic reinsurance to cover the insurer’s estimated 250
42 year probable maximum loss or any lower level of loss.
43 9. Trend factors, including trends in actual losses per
44 insured unit for the insurer making the filing.
45 10. Conflagration and catastrophe hazards, if applicable.
46 11. Projected hurricane losses, if applicable, which must
47 be estimated using a model or method found to be acceptable or
48 reliable by the Florida Commission on Hurricane Loss Projection
49 Methodology, and as further provided in s. 627.0628.
50 12. Projected flood losses, if applicable, which may be
51 estimated using a model, a method, or an average of models or
52 methods determined to be acceptable or reliable by the Florida
53 Commission on Hurricane Loss Projection Methodology, and as
54 further provided in s. 627.0628.
55 13. 12. A reasonable margin for underwriting profit and
57 14. 13. The cost of medical services, if applicable.
58 15. 14. Other relevant factors that affect the frequency or
59 severity of claims or expenses.
61 The provisions of this subsection do not apply to workers’
62 compensation, employer’s liability insurance, and motor vehicle
64 Section 2. Subsection (3) of section 627.0628, Florida
65 Statutes, is amended to read:
66 627.0628 Florida Commission on Hurricane Loss Projection
67 Methodology; public records exemption; public meetings
69 (3) ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.—
70 (a) The commission shall consider any actuarial methods,
71 principles, standards, models, or output ranges that have the
72 potential for improving the accuracy of or reliability of the
73 hurricane loss projections and flood loss projections used in
74 residential property insurance rate filings. The commission
75 shall , from time to time, adopt and update findings, as needed,
76 as to the accuracy or reliability of particular methods,
77 principles, standards, models, or output ranges.
78 (b) The commission shall consider any actuarial methods,
79 principles, standards, or models that have the potential for
80 improving the accuracy of or reliability of projecting probable
81 maximum loss levels. The commission shall adopt and update
82 findings, as needed, as to the accuracy or reliability of
83 particular methods, principles, standards, or models related to
84 probable maximum loss calculations.
85 (c) In establishing reimbursement premiums for the Florida
86 Hurricane Catastrophe Fund, the State Board of Administration
87 must, to the extent feasible, employ actuarial methods,
88 principles, standards, models, or output ranges found by the
89 commission to be accurate or reliable.
90 (d) With respect to a rate filing under s. 627.062, an
91 insurer shall employ and may not modify or adjust actuarial
92 methods, principles, standards, models, or output ranges found
93 by the commission to be accurate or reliable in determining
94 hurricane loss factors for use in a rate filing under s.
95 627.062. An insurer shall employ and may not modify or adjust
96 models found by the commission to be accurate or reliable in
97 determining probable maximum loss levels pursuant to paragraph
98 (b) with respect to a rate filing under s. 627.062 made more
99 than 60 days after the commission has made such findings. This
100 paragraph does not prohibit an insurer from averaging model
101 results or output ranges or from using an average for the
102 purpose of a flood insurance rate filing under s. 627.062.
103 (e) The commission shall adopt actuarial methods,
104 principles, standards, models, or output ranges for flood loss
105 by July 1, 2016.
106 (f) (e) The commission shall revise adopt revisions to
107 previously adopted actuarial methods, principles, standards,
108 models, or output ranges every odd-numbered odd year.
109 (g) (f)1. A trade secret, as defined in s. 688.002, which
110 that is used in designing and constructing a hurricane loss
111 model and which that is provided pursuant to this section , by a
112 private company , to the commission, office, or consumer advocate
113 appointed pursuant to s. 627.0613 , is confidential and exempt
114 from s. 119.07(1) and s. 24(a), Art. I of the State
116 2.a. That portion of a meeting of the commission or of a
117 rate proceeding on an insurer’s rate filing at which a trade
118 secret made confidential and exempt by this paragraph is
119 discussed is exempt from s. 286.011 and s. 24(b), Art. I of the
120 State Constitution. The closed meeting must be recorded, and no
121 portion of the closed meeting may be off the record.
122 b. The recording of a closed portion of a meeting is exempt
123 from s. 119.07(1) and s. 24(a), Art. I of the State
125 c. This subparagraph is subject to the Open Government
126 Sunset Review Act in accordance with s. 119.15 and shall stand
127 repealed on October 2, 2015, unless reviewed and saved from
128 repeal through reenactment by the Legislature.
129 Section 3. Section 627.715, Florida Statutes, is created to
131 627.715 Flood insurance.—Subject to the requirements of
132 this section, an insurer may issue an insurance policy,
133 contract, or endorsement providing coverage for the peril of
134 flood on any residential structure or its contents in this
135 state. Such insurer must also offer coverage equivalent to that
136 provided under a standard flood insurance policy issued under
137 the National Flood Insurance Program (NFIP)
138 (1) As used in this section, the term “flood” means a
139 general and temporary condition of partial or complete
140 inundation of 2 acres or more of normally dry land area or of
141 two or more properties, at least one of which is the
142 policyholder’s property, from:
143 (a) Overflow of inland or tidal waters;
144 (b) Unusual and rapid accumulation or runoff of surface
145 waters from any source;
146 (c) Mudflow; or
147 (d) Collapse or subsidence of land along the shore of a
148 lake or similar body of water as a result of erosion or
149 undermining caused by waves or currents of water exceeding
150 anticipated cyclical levels.
151 (2) At a minimum, coverage for the peril of flood must
152 cover a flood as defined in subsection (1). Coverage for the
153 peril of flood may also include water intrusion, as defined by
154 the policy, which originates from outside the structure and is
155 not otherwise covered under the definition of flood.
156 (3) An insurer may offer a flood coverage policy, contract,
157 or endorsement that:
158 (a) Has a flood deductible based on a stated dollar amount
159 or a percentage of the coverage amount. The deductible amount
160 must be acceptable to federal mortgage and banking regulators if
161 such policy, contract, or endorsement is intended to satisfy a
162 mortgage requirement;
163 (b) Provides that any flood loss will be adjusted on the
164 basis of:
165 1. The actual cash value of the property; or
166 2. Replacement costs up to the policy limits as provided
167 under s. 627.7011(3);
168 (c) Restricts flood coverage to the principal building, as
169 defined in the applicable policy;
170 (d) Is in an agreed-upon amount, including coverage limited
171 to the amount of all outstanding mortgages applicable to the
172 covered property. However, if a policy, contract, or endorsement
173 does not limit flood coverage to the replacement cost of the
174 covered property, the policy, contract, or endorsement may not
175 include a provision penalizing the policyholder for not insuring
176 the covered property up to replacement cost; or
177 (e) As to the peril of flood, does not cover:
178 1. Additional living expenses;
179 2. Personal property or contents; or
180 3. Law and ordinance coverage. However, an insurer must
181 offer law and ordinance coverage that is comparable to the law
182 and ordinance coverage offered in the standard NFIP policy.
183 (4) The deductibles and policy limits as to the peril of
184 flood, and any other limitations on coverage required to be
185 included by the office, must be prominently disclosed on the
186 declarations page or face page of the policy in at least 12
187 point uppercase and boldfaced type and be accompanied by a
188 statement encouraging the policyholder to review the entire
189 policy carefully because it contains coverage limitations.
190 (5) Before issuing a flood insurance policy, contract, or
191 endorsement under this section, the insurance agent must obtain
192 from an applicant an acknowledgement signed by the applicant
193 that includes the following statement in at least 12-point bold,
194 uppercase type: “BY ACCEPTING THIS FLOOD INSURANCE POLICY I HAVE
195 READ AND UNDERSTAND THE LIMITATIONS THAT MAY APPLY TO MY
196 POLICY.” The signed acknowledgment must also include, in at
197 least 12-point bold, uppercase type, for a policy, contract, or
199 (a) That limits flood coverage to an amount less than the
200 full replacement cost of the property, the following statement:
201 “THIS POLICY LIMITS FLOOD COVERAGE TO LESS THAN THE FULL COST OF
202 REPLACEMENT FOR THE PROPERTY, WHICH MAY RESULT IN HIGH OUT-OF
203 POCKET EXPENSES TO YOU AND MAY PUT YOUR EQUITY IN THIS PROPERTY
204 AT RISK.”
205 (b) That insures a dwelling on the basis of actual cash
206 value, the following statement: “THIS POLICY PAYS YOU THE
207 DEPRECIATED VALUE OF YOUR PROPERTY THAT IS DAMAGED BY FLOOD,
208 WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU IF YOUR
209 PROPERTY NEEDS TO BE REPAIRED OR REPLACED.”
210 (c) The following disclosure: “FLOOD INSURANCE COVERAGE IS
211 AVAILABLE FROM THE NATIONAL FLOOD INSURANCE PROGRAM. YOU SHOULD
212 CONSULT YOUR AGENT IF YOU HAVE QUESTIONS ABOUT NATIONAL FLOOD
213 INSURANCE PROGRAM COVERAGE.”
214 (d) On a structure that was previously insured through the
215 NFIP at a subsidized rate, the following statement: “BY
216 ACCEPTING A PRIVATE FLOOD INSURANCE POLICY, YOU MAY LOSE YOUR
217 SUBSIDIZED RATE IN THE NATIONAL FLOOD INSURANCE PROGRAM IF YOU
218 RETURN TO THE NATIONAL FLOOD INSURANCE PROGRAM AT A LATER TIME.”
219 (e) That includes the law and ordinance coverage that must
220 be offered under subparagraph (3)(e)3., the following
221 disclosure: “LAW AND ORDINANCE COVERAGE UNDER THIS POLICY MIGHT
222 HAVE LIMITATIONS ON WHAT IS COVERED IN THE EVENT OF A LOSS. YOU
223 SHOULD CONSULT YOUR AGENT IF YOU HAVE QUESTIONS ABOUT THE
224 COVERAGE OFFERED UNDER THIS POLICY.”
226 If this form is signed, it is conclusively presumed that the
227 applicant understood and selected on behalf of all insureds the
228 limitations of coverage in the policy as compared to a flood
229 insurance policy offered by the NFIP.
230 (6) In addition to any other method authorized under the
231 Florida Insurance Code, an insurer or rating organization may
232 establish and use flood coverage rates, rating schedules, or
233 rating manuals, filed by the insurer with the office, which
234 allow the insurer a reasonable rate of return on flood coverage
235 written in this state. Flood coverage rates established under
236 this subsection are not subject to s. 627.062(2)(a) and (f).
237 (a) An insurer shall notify the office of any change to
238 rates within 30 days after the effective date of the change. The
239 notice must include the name of the insurer and the average
240 statewide percentage change in rates.
241 (b) Actuarial data with regard to rates for flood coverage
242 shall be maintained by the insurer for 2 years after the
243 effective date of such rate change and may be examined by the
244 office pursuant to s. 624.319. The office may require the
245 insurer to incur the costs associated with an examination. Upon
246 examination, the office, in accordance with generally accepted
247 and reasonable actuarial techniques, shall consider the rate
248 factors specified in s. 627.062(2)(b), (c), and (d), and
249 standards specified in s. 627.062(2)(e) to determine if the rate
250 is excessive, inadequate, or unfairly discriminatory. If the
251 office finds that the rate is excessive, inadequate, or unfairly
252 discriminatory, the office shall order the insurer to make a
253 full and complete rate filing under s. 627.062. Upon issuance of
254 the order, the insurer may not write additional flood insurance
255 coverage until the office has approved the rate.
256 (c) This subsection applies to the establishment and use of
257 flood coverage rates filed with the office before July 1, 2024.
258 (7) A surplus lines agent may export a contract or
259 endorsement to an eligible surplus lines insurer without making
260 a diligent effort to seek such coverage from three or more
261 authorized insurers under s. 626.916(1)(a). This subsection
262 expires July 1, 2017.
263 (8) The insurer shall notify the insured and any regulated
264 lending institution or federal agency mortgagee, in writing, at
265 least 60 days before the cancellation or nonrenewal of the
266 policy, contract, or endorsement providing flood coverage. An
267 insurer or insured may cancel the policy, contract, or
268 endorsement while in force or upon renewal if the cancellation
269 would be permitted under the NFIP.
270 (9) In addition to any other applicable requirements, an
271 insurer providing flood coverage under this section shall:
272 (a) Notify the office at least 30 days before writing flood
273 insurance in this state;
274 (b) File a plan of operation and financial projections or
275 revisions to such plan, as applicable, with the office;
276 (c) Offer flood insurance on a form that has been filed
277 with and approved by the office pursuant to s. 627.410. The
278 filed form may be substantially similar to the form used by the
279 NFIP; and
280 (d) File all reinsurance contracts with the office on or
281 before June 30 of each year.
282 (10) Citizens Property Insurance Corporation may not
283 provide insurance for the peril of flood.
284 (11) The Florida Hurricane Catastrophe Fund may not
285 reimburse losses proximately caused by the peril of flood,
286 including losses that occur during a covered event as defined
287 under s. 215.555(2).
288 (12) This section does not apply to:
289 (a) Policies, contracts, and endorsements that provide
290 flood coverage for commercial nonresidential properties or
291 policies that provide excess flood coverage over the amount
292 recoverable under any other policy covering the same property.
293 (b) A flood insurance policy issued by or on behalf of the
295 (13) With respect to the regulation of flood insurance
296 coverage written in this state by admitted insurers, this
297 section supersedes any other provision in the Florida Insurance
298 Code in the event of a conflict.
299 Section 4. If federal law or rule requires a certification
300 by a state insurance regulatory official as a condition of
301 qualifying for private flood insurance or disaster assistance,
302 the Commissioner of the Office of Insurance Regulation may
303 provide the certification. The certification is not subject to
304 review under chapter 120.
305 Section 5. This act shall take effect upon becoming a law.
307 ================= T I T L E A M E N D M E N T ================
308 And the title is amended as follows:
309 Delete everything before the enacting clause
310 and insert:
311 A bill to be entitled
312 An act relating to flood insurance; amending s.
313 627.062, F.S.; adding projected flood losses to the
314 factors that must be considered by the Office of
315 Insurance Regulation in reviewing certain rate
316 filings; amending s. 627.0628, F.S.; requiring the
317 commission to adopt standards and guidelines relating
318 to flood loss by a certain date; creating s. 627.715,
319 F.S.; authorizing insurers to offer flood insurance on
320 residential property in this state; requiring the
321 insurer to also offer coverage equivalent to that
322 provided by the National Flood Insurance Program
323 (NFIP); defining the term “flood”; establishing the
324 minimum coverage requirements for a flood insurance
325 policy; providing coverage limitations that an insurer
326 may include in such policies; requiring that certain
327 limitations and notices be noted on the policy
328 declarations or face page; requiring the insurer to
329 obtain a signed acknowledgement from the applicant
330 which provides certain specified information;
331 providing the insurer with rate options; authorizing
332 the office to conduct an examination with respect to
333 any rate change; authorizing an insurer to export a
334 contract or endorsement to a surplus lines insurer
335 without meeting certain requirements; requiring prior
336 notice for cancellation or nonrenewal of a policy;
337 providing additional requirements with respect to
338 notifying the Office of Insurance Regulation before
339 writing flood insurance, filing a plan of operation
340 with the office, using forms that have been approved
341 by the office, and filing reinsurance contracts before
342 a certain date; prohibiting Citizens Property
343 Insurance Corporation from writing flood insurance;
344 prohibiting the Florida Hurricane Catastrophe Fund
345 from reimbursing losses caused by flooding; providing
346 certain exemptions; preempting any conflicts with
347 other provisions of the Florida Insurance Code;
348 providing that the Commissioner of the Office of
349 Insurance Regulation may provide certification that a
350 condition qualifies for flood insurance or disaster
351 assistance; providing that such certification is not
352 subject to ch. 120, F.S.; providing an effective date.