Florida Senate - 2015                                    SB 1506
       
       
        
       By Senator Braynon
       
       
       
       
       
       36-00973-15                                           20151506__
    1                        A bill to be entitled                      
    2         An act relating to the Florida Hurricane Catastrophe
    3         Fund; amending s. 215.555, F.S.; redefining the term
    4         “retention”; revising the calculation for retention
    5         multiples; providing that the aggregate retention
    6         level may not exceed a specified amount; reducing the
    7         actual claims-paying capacity of the fund by specified
    8         amounts during a certain period until the claims
    9         paying capacity of the fund is a specified amount;
   10         requiring certain amounts to be reserved to pay
   11         specified claims; requiring the board’s reimbursement
   12         contract with insurers to require the State Board of
   13         Administration to pay the initial amount of
   14         reimbursement within a specified amount of time after
   15         receiving the reports of reimbursable losses;
   16         providing an effective date.
   17          
   18  Be It Enacted by the Legislature of the State of Florida:
   19  
   20         Section 1. Paragraph (e) of subsection (2) and subsection
   21  (4) of section 215.555, Florida Statutes, are amended to read:
   22         215.555 Florida Hurricane Catastrophe Fund.—
   23         (2) DEFINITIONS.—As used in this section:
   24         (e) “Retention” means the amount of losses below which an
   25  insurer is not entitled to reimbursement from the fund. An
   26  insurer’s retention shall be calculated as follows:
   27         1. The board shall calculate and report to each insurer the
   28  retention multiples for each that year. For the contract year.
   29  beginning June 1, 2005, the retention multiple shall be equal to
   30  $4.5 billion divided by the total estimated reimbursement
   31  premium for the contract year; for subsequent years, The
   32  retention multiple shall be equal to $4.5 billion, adjusted
   33  based upon the reported exposure for the contract year occurring
   34  2 years before the particular contract year to reflect the
   35  percentage growth in exposure to the fund for covered policies
   36  since 2004, divided by the total estimated reimbursement premium
   37  for the contract year. Total reimbursement premium for purposes
   38  of the calculation under this subparagraph shall be estimated
   39  using the assumption that all insurers have selected the 90
   40  percent coverage level. The aggregate retention level may not
   41  exceed $5 billion.
   42         2. The retention multiple as determined under subparagraph
   43  1. shall be adjusted to reflect the coverage level elected by
   44  the insurer. For insurers electing the 90-percent coverage
   45  level, the adjusted retention multiple is 100 percent of the
   46  amount determined under subparagraph 1. For insurers electing
   47  the 75-percent coverage level, the retention multiple is 120
   48  percent of the amount determined under subparagraph 1. For
   49  insurers electing the 45-percent coverage level, the adjusted
   50  retention multiple is 200 percent of the amount determined under
   51  subparagraph 1.
   52         3. An insurer shall determine its provisional retention by
   53  multiplying its provisional reimbursement premium by the
   54  applicable adjusted retention multiple and shall determine its
   55  actual retention by multiplying its actual reimbursement premium
   56  by the applicable adjusted retention multiple.
   57         4. For insurers who experience multiple covered events
   58  causing loss during the contract year, beginning June 1, 2005,
   59  each insurer’s full retention shall be applied to each of the
   60  covered events causing the two largest losses for that insurer.
   61  For each other covered event resulting in losses, the insurer’s
   62  retention shall be reduced to one-third of the full retention.
   63  The reimbursement contract must shall provide for the
   64  reimbursement of losses for each covered event based on the full
   65  retention with adjustments made to reflect the reduced
   66  retentions on or after January 1 of the contract year provided
   67  the insurer reports its losses as specified in the reimbursement
   68  contract.
   69         (4) REIMBURSEMENT CONTRACTS.—
   70         (a) The board shall enter into a contract with each insurer
   71  writing covered policies in this state to provide to the insurer
   72  the reimbursement described in paragraphs (b) and (d), in
   73  exchange for the reimbursement premium paid into the fund under
   74  subsection (5). As a condition of doing business in this state,
   75  each such insurer shall enter into such a contract.
   76         (b)1. The contract must shall contain a promise by the
   77  board to reimburse the insurer for 45 percent, 75 percent, or 90
   78  percent of its losses from each covered event in excess of the
   79  insurer’s retention, plus 5 percent of the reimbursed losses to
   80  cover loss adjustment expenses.
   81         2. The insurer must elect one of the percentage coverage
   82  levels specified in this paragraph and may, upon renewal of a
   83  reimbursement contract, elect a lower percentage coverage level
   84  if no revenue bonds issued under subsection (6) after a covered
   85  event are outstanding, or elect a higher percentage coverage
   86  level, regardless of whether the or not revenue bonds are
   87  outstanding. All members of an insurer group must elect the same
   88  percentage coverage level. A Any joint underwriting association,
   89  risk apportionment plan, or other entity created under s.
   90  627.351 must elect the 90-percent coverage level.
   91         3. The contract must shall provide that reimbursement
   92  amounts may shall not be reduced by reinsurance paid or payable
   93  to the insurer from other sources.
   94         (c)1. The contract must shall also provide that the
   95  obligation of the board with respect to all contracts covering a
   96  particular contract year may shall not exceed the actual claims
   97  paying capacity of the fund up to a limit of $17 billion for
   98  that contract year, unless the board determines that there is
   99  sufficient estimated claims-paying capacity to provide $17
  100  billion of capacity for the current contract year and an
  101  additional $17 billion of capacity for subsequent contract
  102  years. If the board makes such a determination, the estimated
  103  claims-paying capacity for the particular contract year shall be
  104  determined by adding to the $17 billion limit one-half of the
  105  fund’s estimated claims-paying capacity in excess of $34
  106  billion. However, the dollar growth in the limit may not
  107  increase in any year by an amount greater than the dollar growth
  108  of the balance of the fund as of December 31, less any premiums
  109  or interest attributable to optional coverage, as defined by
  110  rule which occurred over the prior calendar year.
  111         2. The actual claims-paying capacity for the first covered
  112  event in a contract year shall be reduced by $1 billion per
  113  contract year beginning with the 2016 contract year and by $1
  114  billion each subsequent contract year until the claims-paying
  115  capacity of the first covered event in a contract year is $8
  116  billion.
  117         3. The $1 billion reduction in the claims-paying capacity
  118  for the first covered event in a contract year must be reserved
  119  to pay claims for a second covered event in the same contract
  120  year and treated as an automatic reinstatement of the first
  121  event covered by the fund. Each $1 billion annual amount will be
  122  applied starting at the same retention as the first event and
  123  build upward until such time as the fund covers an $8 billion
  124  event with an automatic reinstatement equal to $8 billion.
  125         4. In May and October of the contract year, the board shall
  126  publish in the Florida Administrative Register a statement of
  127  the fund’s estimated borrowing capacity, the fund’s estimated
  128  claims-paying capacity, and the projected balance of the fund as
  129  of December 31. After the end of each calendar year, the board
  130  shall notify insurers of the estimated borrowing capacity,
  131  estimated claims-paying capacity, and the balance of the fund as
  132  of December 31 to provide insurers with data necessary to assist
  133  them in determining their retention and projected payout from
  134  the fund for loss reimbursement purposes. In conjunction with
  135  the development of the premium formula, as provided for in
  136  subsection (5), the board shall publish factors or multiples
  137  that assist insurers in determining their retention and
  138  projected payout for the next contract year. For all regulatory
  139  and reinsurance purposes, an insurer may calculate its projected
  140  payout from the fund as its share of the total fund premium for
  141  the current contract year multiplied by the sum of the projected
  142  balance of the fund as of December 31 and the estimated
  143  borrowing capacity for that contract year as reported under this
  144  subparagraph.
  145         (d)1. For purposes of determining potential liability and
  146  to aid in the sound administration of the fund, the contract
  147  must shall require each insurer to report the such insurer’s
  148  losses from each covered event on an interim basis, as directed
  149  by the board. The contract must shall require the insurer to
  150  report to the board no later than December 31 of each year, and
  151  quarterly thereafter, its reimbursable losses from covered
  152  events for the year. The contract must shall require the board
  153  to determine and pay, as soon as practicable and no later than
  154  15 days after receiving the these reports of reimbursable
  155  losses, the initial amount of reimbursement due and adjustments
  156  to this amount based on later loss information. The adjustments
  157  to reimbursement amounts must shall require the board to pay, or
  158  the insurer to return, amounts reflecting the most recent
  159  calculation of losses.
  160         2. In determining reimbursements pursuant to this
  161  subsection, the contract must shall provide that the board shall
  162  pay to each insurer the such insurer’s projected payout, which
  163  is the amount of reimbursement it is owed, up to an amount equal
  164  to the insurer’s share of the actual premium paid for that
  165  contract year, multiplied by the actual claims-paying capacity
  166  available for that contract year.
  167         3. The board may reimburse insurers for amounts up to the
  168  published factors or multiples for determining each
  169  participating insurer’s retention and projected payout derived
  170  as a result of the development of the premium formula in those
  171  situations in which the total reimbursement of losses to such
  172  insurers would not exceed the estimated claims-paying capacity
  173  of the fund. Otherwise, the projected payout factors or
  174  multiples shall be reduced uniformly among all insurers to
  175  reflect the estimated claims-paying capacity.
  176         (e)1. Except as provided in subparagraphs 2. and 3., the
  177  contract must shall provide that if an insurer demonstrates to
  178  the board that it is likely to qualify for reimbursement under
  179  the contract, and demonstrates to the board that the immediate
  180  receipt of moneys from the board is likely to prevent the
  181  insurer from becoming insolvent, the board shall advance the
  182  insurer, at market interest rates, the amounts necessary to
  183  maintain the solvency of the insurer, up to 50 percent of the
  184  board’s estimate of the reimbursement due the insurer. The
  185  insurer’s reimbursement shall be reduced by an amount equal to
  186  the amount of the advance and interest thereon.
  187         2. With respect only to an entity created under s. 627.351,
  188  the contract must shall also provide that the board may, upon
  189  application by such entity, advance to such entity, at market
  190  interest rates, up to 90 percent of the lesser of:
  191         a. The board’s estimate of the amount of reimbursement due
  192  to such entity; or
  193         b. The entity’s share of the actual reimbursement premium
  194  paid for that contract year, multiplied by the currently
  195  available liquid assets of the fund. In order for the entity to
  196  qualify for an advance under this subparagraph, the entity must
  197  demonstrate to the board that the advance is essential to allow
  198  the entity to pay claims for a covered event and the board must
  199  determine that the fund’s assets are sufficient and are
  200  sufficiently liquid to allow the board to make an advance to the
  201  entity and still fulfill the board’s reimbursement obligations
  202  to other insurers. The entity’s final reimbursement for any
  203  contract year in which an advance has been made under this
  204  subparagraph must be reduced by an amount equal to the amount of
  205  the advance and any interest on such advance. In order to
  206  determine what amounts, if any, are due the entity, the board
  207  may require the entity to report its exposure and its losses at
  208  any time to determine retention levels and reimbursements
  209  payable.
  210         3. The contract must shall also provide specifically and
  211  solely with respect to any limited apportionment company under
  212  s. 627.351(2)(b)3. that the board may, upon application by such
  213  company, advance to such company the amount of the estimated
  214  reimbursement payable to such company as calculated pursuant to
  215  paragraph (d), at market interest rates, if the board determines
  216  that the fund’s assets are sufficient and are sufficiently
  217  liquid to permit the board to make an advance to such company
  218  and at the same time fulfill its reimbursement obligations to
  219  the insurers that are participants in the fund. Such company’s
  220  final reimbursement for any contract year in which an advance
  221  pursuant to this subparagraph has been made shall be reduced by
  222  an amount equal to the amount of the advance and interest
  223  thereon. In order to determine what amounts, if any, are due to
  224  such company, the board may require such company to report its
  225  exposure and its losses at such times as may be required to
  226  determine retention levels and loss reimbursements payable.
  227         (f) In order to ensure that insurers have properly reported
  228  the insured values on which the reimbursement premium is based
  229  and to ensure that insurers have properly reported the losses
  230  for which reimbursements have been made, the board shall
  231  inspect, examine, and verify the records of each insurer’s
  232  covered policies at such times as the board deems appropriate
  233  and according to standards established by rule for the specific
  234  purpose of validating the accuracy of exposures and losses
  235  required to be reported under the terms and conditions of the
  236  reimbursement contract. The costs of the examinations shall be
  237  borne by the board. However, in order to remove any incentive
  238  for an insurer to delay preparations for an examination, the
  239  board shall be reimbursed by the insurer for any examination
  240  expenses incurred in addition to the usual and customary costs
  241  of the examination, which additional expenses were incurred as a
  242  result of an insurer’s failure, despite proper notice, to be
  243  prepared for the examination or as a result of an insurer’s
  244  failure to provide requested information while the examination
  245  is in progress. If the board finds any insurer’s records or
  246  other necessary information to be inadequate or inadequately
  247  posted, recorded, or maintained, the board may employ experts to
  248  reconstruct, rewrite, record, post, or maintain such records or
  249  information, at the expense of the insurer being examined, if
  250  such insurer has failed to maintain, complete, or correct such
  251  records or deficiencies after the board has given the insurer
  252  notice and a reasonable opportunity to do so. Any information
  253  contained in an examination report, which information is
  254  described in s. 215.557, is confidential and exempt from the
  255  provisions of s. 119.07(1) and s. 24(a), Art. I of the State
  256  Constitution, as provided in s. 215.557. Nothing in this
  257  paragraph expands the exemption in s. 215.557.
  258         (g) The contract must shall provide that in the event of
  259  the insolvency of an insurer, the fund shall pay directly to the
  260  Florida Insurance Guaranty Association for the benefit of
  261  Florida policyholders of the insurer the net amount of all
  262  reimbursement moneys owed to the insurer. As used in this
  263  paragraph, the term “net amount of all reimbursement moneys”
  264  means that amount which remains after reimbursement for:
  265         1. Preliminary or duplicate payments owed to private
  266  reinsurers or other inuring reinsurance payments to private
  267  reinsurers that satisfy statutory or contractual obligations of
  268  the insolvent insurer attributable to covered events to such
  269  reinsurers; or
  270         2. Funds owed to a bank or other financial institution to
  271  cover obligations of the insolvent insurer under a credit
  272  agreement that assists the insolvent insurer in paying claims
  273  attributable to covered events.
  274  
  275  The private reinsurers, banks, or other financial institutions
  276  shall be reimbursed or otherwise paid prior to payment to the
  277  Florida Insurance Guaranty Association, notwithstanding any law
  278  to the contrary. The guaranty association shall pay all claims
  279  up to the maximum amount permitted by chapter 631; thereafter,
  280  any remaining moneys shall be paid pro rata to claims not fully
  281  satisfied. This paragraph does not apply to a joint underwriting
  282  association, risk apportionment plan, or other entity created
  283  under s. 627.351.
  284         Section 2. This act shall take effect July 1, 2015.