HB 97 — Florida Hurricane Catastrophe Fund

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hb0097-00 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HB 97 2018 layer insured by another insurer.

(i)(h) "Debt service" means the amount required in any fiscal year to pay the principal of, redemption premium, if any, and interest on revenue bonds and any amounts required by the terms of documents authorizing, securing, or providing liquidity for revenue bonds necessary to maintain in effect any such liquidity or security arrangements.

(j)(i) "Debt service coverage" means the amount, if any, required by the documents under which revenue bonds are issued, which amount is to be received in any fiscal year in excess of the amount required to pay debt service for such fiscal year.

(k)(l) "Estimated claims-paying capacity" means the sum of the projected year-end balance of the fund as of December 31 of a contract year, plus any reinsurance purchased by the fund, plus the board's estimate of the board's borrowing capacity.

(l) "Fund" means the Florida Hurricane Catastrophe Fund.

(m)(j) "Local government" means a unit of general purpose local government as defined in s.

218.31(2).

(n)(d) "Losses" means all incurred losses under covered policies, including additional living expenses not to exceed 40 percent of the insured value of a residential structure or its contents and amounts paid as fees on behalf of or inuring to the benefit of a policyholder.

The term does not include:

1.

Losses for fair rental value, loss of rent or rental income, or business interruption losses;

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hb0097-00 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HB 97 2018 2.

Losses under liability coverages;

3.

Property losses that are proximately caused by any peril other than a covered event, including, but not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a covered event;

4.

Amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a waiver of an applicable deductible;

5.

Amounts paid to reimburse a policyholder for condominium association or homeowners' association loss assessments or under similar coverages for contractual liabilities;

6.

Amounts paid as bad faith awards, punitive damage awards, or other court-imposed fines, sanctions, or penalties;

7.

Amounts in excess of the coverage limits under the covered policy;

or 8.

Allocated or unallocated loss adjustment expenses.

(o)(k) "Pledged revenues" means all or any portion of revenues to be derived from reimbursement premiums under subsection (5) or from emergency assessments under paragraph (6)(b), as determined by the board.

(p)(e) "Retention" means the amount of losses below which an insurer is not entitled to reimbursement from the fund.

The board shall calculate and report to each insurer Pagethe 6retention ofmultiples 20for CODING:that year.

For the contract year beginning June 1, 2005, the retention multiple shall be equal to Page 1 of 11 CODING:

hb0097-00hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HBCS/HB 97 2018 $4.5 billion divided by the retentiontotal multiplesestimated reimbursement premium for thatthe year.contract year;

For the contract year beginning June 1, 2005, the retention multiple shall be equal to $4.5 billion divided by the total estimated reimbursement premium for the contract year;

For3. insurers electing Page 7 of 20 CODING:

An insurer shall determine its provisional retention by multiplying its provisional reimbursement premium by the Page 2 of 11 CODING:

hb0097-00hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HBCS/HB 97 2018 theapplicable 25-percentadjusted coverageretention level,multiple theand shall determine its actual retention multipleby ismultiplying 360its percentactual ofreimbursement thepremium amountby determinedthe underapplicable subparagraphadjusted 1.retention multiple.

3.

An insurer shall determine its provisional retention by multiplying its provisional reimbursement premium by the applicable adjusted retention multiple and shall determine its actual retention by multiplying its actual reimbursement premium by the applicable adjusted retention multiple.

(q) "Statutory capacity" means the total obligation of the board with respect to all contracts covering a particular contract year as established in subparagraph (4)c.1.

(r)(f) "Workers' compensation" includes both workers' compensation and excess workers' compensation insurance.

The contract shall contain a promise by the board to Pagereimburse 8the insurer for 45 percent, 60 percent, 75 percent, or 90 percent of 20its CODING:losses from each covered event in excess of the insurer's retention, plus 5 percent of the reimbursed losses to cover loss adjustment expenses.

The 60-percent coverage level is available beginning in the 2019-2020 contract year.

2.

The insurer must elect one of the percentage coverage levels specified in this paragraph and may, upon renewal of a reimbursement contract, elect a lower percentage coverage level if no revenue bonds issued under subsection (6) after a covered Page 3 of 11 CODING:

hb0097-00hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HBCS/HB 97 2018 reimburseevent theare insureroutstanding, for 25 percent, 45 percent, 60 percent, 75 percent, or 90elect percenta ofhigher itspercentage lossescoverage fromlevel, eachregardless covered event in excess of thewhether insurer'sor retention,not plusrevenue 5bonds percentare ofoutstanding. the reimbursed losses to cover loss adjustment expenses.

2.

The insurer must elect one of the percentage coverage levels specified in this paragraph and may, upon renewal of a reimbursement contract, elect a lower percentage coverage level if no revenue bonds issued under subsection (6) after a covered event are outstanding, or elect a higher percentage coverage level, regardless of whether or not revenue bonds are outstanding.

(c)1.

Effective June 1, 2019, the contract shall also provide that the obligation of the board with respect to all contracts covering a particular contract year shall be the lesser of $17 billion or the aggregate reimbursement capacity purchased by participating insurers not exceed the actual claims-paying capacity of the fund up to a limit of $17 billion for that contract year, unless the board determines that there is sufficient estimated claims-paying capacity to provide $17 Page 9 of 20 CODING:

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hb0097-00 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HB 97 2018 billion of capacity for the current contract year and an additional $17 billion of capacity for subsequent contract years.

If the board makes such a determination, the estimated claims-paying capacity for the particular contract year shall be determined by adding to the $17 billion limit one-half of the fund's estimated claims-paying capacity in excess of $34 billion.

However, the dollar growth in the limit may not increase in any year by an amount greater than the dollar growth of the balance of the fund as of December 31, less any premiums or interest attributable to optional coverage, as defined by rule which occurred over the prior calendar year.

2.

In May and October of the contract year, the board shall publish in the Florida Administrative Register a statement of the fund's estimated borrowing capacity, the fund's estimated claims-paying capacity, and the projected balance of the fund as of December 31.

After the end of each calendar year, the board shall notify insurers of the estimated borrowing capacity, estimated claims-paying capacity, and the balance of the fund as of December 31 to provide insurers with data necessary to assist them in determining their retention and projected payout from the fund for loss reimbursement purposes.

In conjunction with the development of the premium formula, as provided for in subsection (5), the board shall publish factors or multiples that assist insurers in determining their retention and projected payout for the next contract year.

For all regulatory Page 10 of 20 CODING:

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hb0097-00 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HB 97 2018 and reinsurance purposes, an insurer may calculate its projected payout from the fund as its share of the total fund premium for the current contract year multiplied by the sum of the projected balance of the fund as of December 31 and the estimated borrowing capacity for that contract year as reported under this subparagraph.

The rate formula shall specify, for each zip code or other limited geographical area, the amount of premium to be paid by an insurer for each $1,000 of insured value under covered policies in that zip code or other area.

Beginning inwith the 2018-2019premium formula for the 2019-2020 contract year, the reimbursement premium formula must includeprovide anfor additionala 10-percentcash charge.build-up factor as follows:

ThePage money4 shall be used by the Division of Emergency11 ManagementCODING: to fund and administer a mitigation program for wind and water resistance improvements to residential structures.

If the fund balance is less than $10 Page 11 of 20 CODING:

hb0097-00hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HBCS/HB 97 2018 billion1. at the end of a contract year, a 5-percent temporary rapid cash build-up factor may be reinstated, in addition to the reimbursement premium charges, for the next contract year.

SuchAs build-upused factorin mustthis increaseparagraph, bythe 5term percent"projected eachfund subsequentbalance" contractmeans yearthe untilprojected ityear-end reachesbalance 15of percentthe andfund mustas continueof atDecember 1531 percentof perthe prior contract year untilas published in the fundFlorida balanceAdministrative reachesRegister $10in billionOctober, Theadjusted formulafor mustany providechanges forin athe cashfund's build-uptotal factor.incurred losses made on or before the date on which the independent actuarial consultant signs the report of the proposed premium formula.

2.

When the projected fund balance is less than $14 billion, the factor is 25 percent.

When the projected fund balance is at least $14 billion, but less than $14.5 billion, the factor is 20 percent.

When the projected fund balance is at least $14.5 billion, but less than $15 billion, the factor is 15 percent.

When the projected fund balance is at least $15 billion, but less than $15.5 billion, the factor is 10 percent.

When the projected fund balance is at least $15.5 billion, but less than $16 billion, the factor is 5 percent.

When the projected fund balance is at least $16 billion, the factor is zero.

For the 2011-2011-2012 2012 contract year, the factor is 15 percent.

For the 2013-20142013- 2014 contract year and thereafter, the factor is 25 percent.

The3. rate formula may provide for a procedure to determine the premiums to be paid by new insurers that begin writing covered policies after the beginning of a contract year, taking into consideration when the insurer starts writing covered policies, the potential exposure of the insurer, the potential exposure of the fund, the administrative costs to the insurer and to the fund, and any other factors deemed appropriate by the board.

The formula may provide for a procedure to determine the premiums to be paid by new insurers that begin writing covered policies after the beginning of a contract year, taking Page 5 of 11 CODING:

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hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S CS/HB 97 2018 into consideration when the insurer starts writing covered policies, the potential exposure of the insurer, the potential exposure of the fund, the administrative costs to the insurer and to the fund, and any other factors deemed appropriate by the board.

(6) REVENUE BONDS.— (b) Emergency assessments.— 1.1.a.1.

If the board determines that the amount of revenue Pageproduced 12under subsection (5) is insufficient to fund the obligations, costs, and expenses of 20the CODING:fund and the corporation, including repayment of revenue bonds and that portion of the debt service coverage not met by reimbursement premiums, the board shall direct the Office of Insurance Regulation to levy, by order, an emergency assessment on direct premiums for all property and casualty lines of business in this state, including property and casualty business of surplus lines insurers regulated under part VIII of chapter 626, but not including any workers' compensation premiums or medical malpractice premiums.

b.

As used in this subsection, the term "property and casualty business" includes all lines of business identified in the on Form 2, Exhibit of Premiums and Losses, in the annual statement required of authorized property and casualty insurers Page 6 of 11 CODING:

hb0097-00hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HBCS/HB 97 2018 produced under subsection (5) is insufficient to fund the obligations, costs, and expenses of the fund and the corporation, including, but not limited to, repayment of revenue bonds and that portion of the debt service coverage not met by reimbursements. premiums, the board shall direct the Office of Insurance Regulation to levy, by order, an emergency assessment on direct premiums for all property and casualty lines of business in this state, including property and casualty business of surplus lines insurers regulated under part VIII of chapter 626, but not including any workers' compensation premiums or medical malpractice premiums.

The board may direct the Office of Insurance Regulation to levy, by order, an emergency assessment on direct premiums for all property and casualty lines of business in this state, including property and casualty business of surplus lines insurers regulated under part VIII of chapter 626, but not including any workers' compensation premiums or medical malpractice premiums, to cure any deficits needed to meet the fund's claim-paying obligations to participating insurers.

As used in this subsection, the term "property and casualty business" includes all lines of business identified on Form 2, Exhibit of Premiums and Losses, in the annual statement required of authorized insurers by s.

The assessment shall Pagebe 13specified as a percentage of 20direct CODING:written premium and is subject to annual adjustments by the board in order to meet debt obligations.

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words underlined are additions.

hb0097-00 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HB 97 2018 be specified as a percentage of direct written premium and is subject to annual adjustments by the board in order to meet debt obligations.

The office shall verify the accuratePage and7 timely collection and remittance of emergency11 assessmentsCODING: and shall report the information to the board in a form and at a time specified by the board.

Each insurer Page 14 of 20 CODING:

hb0097-00hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HBCS/HB 97 2018 collectingaccurate assessmentsand shalltimely providecollection theand informationremittance withof respectemergency toassessments premiums and collectionsshall asreport may be required by the officeinformation to enable the officeboard toin monitora form and verifyat compliancea withtime thisspecified paragraph.by the board.

Each insurer collecting assessments shall provide the information with respect to premiums and collections as may be required by the office to enable the office to monitor and verify compliance with this paragraph.

The Florida Surplus Lines Service Office shall annually calculate the aggregate written premium on property and casualty business, other than workers' compensation and medical malpractice, Page 158 of 2011 CODING:

hb0097-00hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HBCS/HB 97 2018 Surplus Lines Service Office shall annually calculate the aggregate written premium on property and casualty business, other than workers' compensation and medical malpractice, procured through surplus lines agents and insureds procuring coverage and filing under s.

If, for a subsequent contract year, the board determines that the amount of revenue produced under subsection (5) is insufficient to fund the obligations, costs, and expenses of the fund and the corporation, including,including but not limited to, repayment of revenue bonds and that portion of the debt service coverage not met by reimbursement premiums, the board shall direct the Office of Insurance Regulation to levy an emergency assessment up to an amount not exceeding the amount of unused assessment authority from a previous contract year or years, plus an additional 4 percent provided that the assessments in the aggregate do not exceed the limits specified in subparagraph 2.

The6. board may direct the Office of Insurance Regulation to levy, by order, an emergency assessment on direct premiums for all property and casualty lines of business in this state, including property and casualty business of surplus lines insurers regulated under part VIII of chapter 626, but not including any workers' compensation premiums or medical malpractice premiums, to cure any deficits needed to meet the fund's claim-paying obligations to participating insurers.

The assessments otherwise payable to the corporation under this paragraph shall be paid to the fund unless the Office of Insurance Regulation and the Florida Surplus Lines Service Office received a notice from the corporation and the fund, which shall be conclusive and upon which they may rely without Page 169 of 2011 CODING:

hb0097-00hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HBCS/HB 97 2018 6.further inquiry, that the corporation has issued bonds and the fund has no agreements in effect with local governments under paragraph (c).

The assessments otherwise payable to the corporation under this paragraph shall be paid to the fund unless the Office of Insurance Regulation and the Florida Surplus Lines Service Office received a notice from the corporation and the fund, which shall be conclusive and upon which they may rely without further inquiry, that the corporation has issued bonds and the fund has no agreements in effect with local governments under paragraph (c).

626.938 is entitled to the Pagereturn 17 of 20an CODING:unearned premium, the Florida Surplus Lines Service Office shall provide a credit or refund to the agent or such insured for the collected assessment attributable to the unearned premium before remitting the emergency assessment collected to the fund or corporation.

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hb0097-00hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HBCS/HB 97 2018 return10. of an unearned premium, the Florida Surplus Lines Service Office shall provide a credit or refund to the agent or such insured for the collected assessment attributable to the unearned premium before remitting the emergency assessment collected to the fund or corporation.

(16)The FACILITATIONintent OFof INSURERS'the PRIVATELegislature CONTRACTis NEGOTIATIONSthat BEFOREemergency THEassessments STARTbe OFlevied THEonly HURRICANEin SEASON.— (c) Insurers writing covered policies shall execute the reimbursementcontext contract by March 1 of thedebt immediatelyfinancing precedingunder contractthis year,subsection. and the contract shall have an effective date as set forth defined in paragraph (2)(e)(o).

The authority of the board to direct the Office of Insurance Regulation to levy emergency assessments under this paragraph applies only in circumstances in which debt issued under this subsection is outstanding or in which the issuance of such debt has been authorized.

SubsectionThis (10)act ofshall sectiontake 624.424,effect Floridaupon Statutes,becoming isa amendedlaw. to read:

624.424Page Annual11 statementof and11 otherCODING: information.— (10) Each insurer or insurer group doing business in this state shall file on a quarterly basis in conjunction with financial reports required by paragraph (1)(a) a supplemental report on an individual and group basis on a form prescribed by the commission with information on personal lines and commercial lines residential property insurance policies in this state.

The supplemental report shall include separate information for personal lines property policies and for commercial lines property policies and totals for each item specified, including premiums written for each of the property lines of business as described in ss.

212.555(2)(h) 215.555(2)(c) and 627.351(6)(a).

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hb0097-00hb0097-01-c1 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HB 97 2018 The report shall include the following information for each county on a monthly basis:

(a) Total number of policies in force at the end of each month.

(b) Total number of policies canceled.

(c) Total number of policies nonrenewed.

(d) Number of policies canceled due to hurricane risk.

(e) Number of policies nonrenewed due to hurricane risk.

(f) Number of new policies written.

(g) Total dollar value of structure exposure under policies that include wind coverage.

(h) Number of policies that exclude wind coverage.

Section 3.

Subsection (7) of section 627.715, Florida Statutes, is amended to read:

627.715 Flood insurance.—An authorized insurer may issue an insurance policy, contract, or endorsement providing personal lines residential coverage for the peril of flood or excess coverage for the peril of flood on any structure or the contents of personal property contained therein, subject to this section.

This section does not apply to commercial lines residential or commercial lines nonresidential coverage for the peril of flood.

An insurer may issue flood insurance policies, contracts, endorsements, or excess coverage on a standard, preferred, customized, flexible, or supplemental basis.

(7) The Florida Hurricane Catastrophe Fund may not provide Page 19 of 20 CODING:

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hb0097-00 F L O R I D A H O U S E O F R E P R E S E N T A T I V E S HB 97 2018 reimbursement for losses proximately caused by the peril of flood, including losses that occur during a covered event as defined in s.

215.555(2)(g) 215.555(2)(b).

Section 4.

This act shall take effect July 1, 2018.

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