Bill Amendment: FL S0542 | 2014 | Regular Session
NOTE: For additional amemendments please see the Bill Drafting List
Bill Title: Flood Insurance
Status: 2014-06-13 - Chapter No. 2014-80, companion bill(s) passed, see SB 1262 (Ch. 2014-98) [S0542 Detail]
Download: Florida-2014-S0542-Senate_Committee_Amendment_823760.html
Bill Title: Flood Insurance
Status: 2014-06-13 - Chapter No. 2014-80, companion bill(s) passed, see SB 1262 (Ch. 2014-98) [S0542 Detail]
Download: Florida-2014-S0542-Senate_Committee_Amendment_823760.html
Florida Senate - 2014 COMMITTEE AMENDMENT Bill No. CS for CS for SB 542 Ì823760$Î823760 LEGISLATIVE ACTION Senate . House . . . . . ————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————— following: 1 Senate Amendment (with title amendment) 2 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 18 insured. 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 31which producea 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 34 filing. 35 6. Dividends, savings, or unabsorbed premium deposits 36 allowed or returned toFloridapolicyholders, 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 56 contingencies. 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. 60 61 The provisions of this subsection do not apply to workers’ 62 compensation, employer’s liability insurance, and motor vehicle 63 insurance. 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 68 exemption.— 69 (3) ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.— 70 (a) The commission shall consideranyactuarial methods, 71 principles, standards, models, or output ranges that have the 72 potential for improving the accuracyofor 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 consideranyactuarial methods, 79 principles, standards, or models that have the potential for 80 improving the accuracyofor 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 reviseadopt revisions to107 previously adopted actuarial methods, principles, standards, 108 models, or output ranges every odd-numberedoddyear. 109 (g)(f)1. A trade secret, as defined in s. 688.002, which 110thatis used in designing and constructing a hurricane loss 111 model and whichthatis 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 115 Constitution. 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 124 Constitution. 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 130 read: 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 198 endorsement: 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.” 225 226 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 294 NFIP. 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. 306 307 ================= 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.