Bill Text: FL H0833 | 2012 | Regular Session | Introduced

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Bill Title: Florida Hurricane Catastrophe Fund

Spectrum: Bipartisan Bill

Status: (Failed) 2012-03-09 - Died in Insurance and Banking Subcommittee [H0833 Detail]

Download: Florida-2012-H0833-Introduced.html

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HB 833

1	A bill to be entitled
2	An act relating to the Florida Hurricane Catastrophe
3	Fund; amending s. 215.555, F.S.; revising the
4	definitions of "retention" and "corporation";
5	providing for calculation of an insurer's
6	reimbursement premium and retention under the
7	reimbursement contract; revising coverage levels
8	available under the reimbursement contract; revising
9	aggregate coverage limits; providing for the phase-in
10	of changes to coverage levels and limits; revising the
11	cash build-up factor included in reimbursement
12	premiums; providing for phase-in; reducing maximum
13	allowable emergency assessments; changing the name of
14	the Florida Hurricane Catastrophe Fund Finance
15	Corporation; repealing provisions related to temporary
16	emergency options for additional coverage; terminating
17	the temporary increase in coverage limits option at
18	the end of the 2011-2012 contract year; limiting to
19	the 2012-2013 contract year provisions relating to the
20	TICL options addendum, TICL reimbursement premiums,
21	and the claims-paying capacity of the fund, to
22	conform; amending s. 627.0629, F.S.; conforming a
23	cross-reference; providing an effective date.
24
25	Be It Enacted by the Legislature of the State of Florida:
26
27	Section 1.  Paragraphs (e) and (n) of subsection (2),
28	paragraphs (b) and (c) of subsection (4), paragraph (b) of
29	subsection (5), paragraphs (b) and (d) of subsection (6), and
30	subsections (16), (17), and (18) of section 215.555, Florida
31	Statutes, are amended to read:
32	215.555  Florida Hurricane Catastrophe Fund.-
33	(2)  DEFINITIONS.-As used in this section:
34	(e)  "Retention" means the amount of losses below which an
35	insurer is not entitled to reimbursement from the fund. An
36	insurer's retention shall be calculated as follows:
37	1.a.  The board shall calculate and report to each insurer
38	the retention multiples for that year.
39	(I)  For the contract year beginning June 1, 2005, the
40	retention multiple shall be equal to $4.5 billion divided by the
41	total estimated reimbursement premium for the contract year; for
42	subsequent years, up to and including the 2012-2013 contract
43	year, the retention multiple shall be equal to $4.5 billion,
44	adjusted based upon the reported exposure for the contract year
45	occurring 2 years before the particular contract year to reflect
46	the percentage growth in exposure to the fund for covered
47	policies since 2004, divided by the total estimated
48	reimbursement premium for the contract year.
49	(II)  For the contract year beginning June 1, 2013, the
50	retention multiple shall be equal to $8 billion divided by the
51	total estimated reimbursement premium for the contract year. For
52	subsequent years, the retention multiple shall be equal to $8
53	billion, adjusted based upon the reported exposure for the
54	contract year occurring 2 years before the particular contract
55	year to reflect the percentage growth in exposure to the fund
56	for covered policies since 2011, divided by the total
57	reimbursement premium for the contract year.
58	b.  For the 2012-2013 contract year, total reimbursement
59	premium for purposes of the calculation under this subparagraph
60	shall be estimated using the assumption that all insurers have
61	selected the 90-percent coverage level.
62	c.  In order to implement the phase-in of reduced coverage
63	levels as provided in paragraph (4)(b), total reimbursement
64	premium for purposes of the calculation under this subparagraph
65	shall be estimated using the following assumptions:
66	(I)  For the 2013-2014 contract year, the assumption is
67	that all insurers have selected the 85-percent coverage level.
68	(II)  For the 2014-2015 contract year, the assumption is
69	that all insurers have selected the 80-percent coverage level.
70	(III)  For the 2015-2016 contract year and subsequent
71	contract years, the assumption is that all insurers have
72	selected the 75-percent coverage level.
73	2.  The retention multiple as determined under subparagraph
74	1. shall be adjusted to reflect the coverage level elected by
75	the insurer.
76	a.  For an insurer electing the maximum coverage level
77	available under paragraph (4)(b) for a particular contract year
78	For insurers electing the 90-percent coverage level, the
79	adjusted retention multiple is 100 percent of the amount
80	determined under subparagraph 1.
81	b.  In order to implement the phase-in of reduced coverage
82	levels as provided in paragraph (4)(b), for an insurer electing
83	a coverage level other than the maximum coverage level, the
84	adjusted retention multiple is as follows:
85	(I)  With respect to the 2012-2013 contract year, for an
86	insurer For insurers electing the 75-percent coverage level, the
87	retention multiple is 90/75ths 120 percent of the amount
88	determined under subparagraph 1., and for an insurer For
89	insurers electing the 45-percent coverage level, the adjusted
90	retention multiple is 90/45ths 200 percent of the amount
91	determined under subparagraph 1.
92	(II)  With respect to the 2013-2014 contract year, for an
93	insurer electing the 75-percent coverage level, the retention
94	multiple is 85/75ths of the amount determined under subparagraph
95	1., and for an insurer electing the 45-percent coverage level,
96	the retention multiple is 85/45ths of the amount determined
97	under subparagraph 1.
98	(III)  With respect to the 2014-2015 contract year, for an
99	insurer electing the 75-percent coverage level, the retention
100	multiple is 80/75ths of the amount determined under subparagraph
101	1., and for an insurer electing the 45-percent coverage level,
102	the retention multiple is 80/45ths of the amount determined
103	under subparagraph 1.
104	(IV)  With respect to the 2015-2016 contract year and
105	subsequent contract years, for an insurer electing the 75-
106	percent coverage level, the retention multiple is the amount
107	determined under subparagraph 1., and for an insurer electing
108	the 45-percent coverage level, the retention multiple is
109	75/45ths of the amount determined under subparagraph 1.
110	3.  An insurer shall determine its provisional retention by
111	multiplying its provisional reimbursement premium by the
112	applicable adjusted retention multiple and shall determine its
113	actual retention by multiplying its actual reimbursement premium
114	by the applicable adjusted retention multiple.
115	4.  For insurers who experience multiple covered events
116	causing loss during the contract year, beginning June 1, 2005,
117	each insurer's full retention shall be applied to each of the
118	covered events causing the two largest losses for that insurer.
119	For each other covered event resulting in losses, the insurer's
120	retention shall be reduced to one-third of the full retention.
121	The reimbursement contract shall provide for the reimbursement
122	of losses for each covered event based on the full retention
123	with adjustments made to reflect the reduced retentions on or
124	after January 1 of the contract year provided the insurer
125	reports its losses as specified in the reimbursement contract.
126	(n)  "Corporation" means the State Board of Administration
127	Florida Hurricane Catastrophe Fund Finance Corporation created
128	in paragraph (6)(d).
129	(4)  REIMBURSEMENT CONTRACTS.-
130	(b)1.a.  The contract shall contain a promise by the board
131	to reimburse the insurer for a specified percentage 45 percent,
132	75 percent, or 90 percent of its losses from each covered event
133	in excess of the insurer's retention, plus 5 percent of the
134	reimbursed losses to cover loss adjustment expenses.
135	b.  The available coverage levels are as follows:
136	(I)  For the 2012-2013 contract year, 90 percent, 75
137	percent, and 45 percent.
138	(II)  For the 2013-2014 contract year, 85 percent, 75
139	percent, and 45 percent.
140	(III)  For the 2014-2015 contract year, 80 percent, 75
141	percent, and 45 percent.
142	(IV)  For the 2015-2016 contract year and subsequent
143	contract years, 75 percent and 45 percent.
144	2.a.  The insurer must elect one of the percentage coverage
145	levels specified in this paragraph and may, upon renewal of a
146	reimbursement contract, elect a lower percentage coverage level
147	if no revenue bonds issued under subsection (6) after a covered
148	event are outstanding, or elect a higher percentage coverage
149	level, regardless of whether or not revenue bonds are
150	outstanding. All members of an insurer group must elect the same
151	percentage coverage level. Any joint underwriting association,
152	risk apportionment plan, or other entity created under s.
153	627.351 must elect the maximum 90-percent coverage level
154	available under subparagraph 1.
155	b.  In order to implement the phase-in of reduced coverage
156	levels as provided in subparagraph 1., and notwithstanding any
157	provisions of sub-subparagraph a. to the contrary, if revenue
158	bonds issued under subsection (6) after a covered event are
159	outstanding and the insurer has elected the maximum coverage
160	level available under subparagraph 1., the insurer must, upon
161	renewal of the reimbursement contract, elect the maximum
162	coverage level available under subparagraph 1. for the renewal
163	contract year.
164	3.  The contract shall provide that reimbursement amounts
165	shall not be reduced by reinsurance paid or payable to the
166	insurer from other sources.
167	4.  Notwithstanding any other provision contained in this
168	section, the board shall make available to insurers that
169	purchased coverage provided by this subparagraph in 2008,
170	insurers qualifying as limited apportionment companies under s.
171	627.351(6)(c), and insurers that have been approved to
172	participate in the Insurance Capital Build-Up Incentive Program
173	pursuant to s. 215.5595 a contract or contract addendum that
174	provides an additional amount of reimbursement coverage of up to
175	$10 million. The premium to be charged for this additional
176	reimbursement coverage shall be 50 percent of the additional
177	reimbursement coverage provided, which shall include one prepaid
178	reinstatement. The minimum retention level that an eligible
179	participating insurer must retain associated with this
180	additional coverage layer is 30 percent of the insurer's surplus
181	as of December 31, 2008, for the 2009-2010 contract year; as of
182	December 31, 2009, for the 2010-2011 contract year; and as of
183	December 31, 2010, for the 2011-2012 contract year. This
184	coverage shall be in addition to all other coverage that may be
185	provided under this section. The coverage provided by the fund
186	under this subparagraph shall be in addition to the claims-
187	paying capacity as defined in subparagraph (c)1., but only with
188	respect to those insurers that select the additional coverage
189	option and meet the requirements of this subparagraph. The
190	claims-paying capacity with respect to all other participating
191	insurers and limited apportionment companies that do not select
192	the additional coverage option shall be limited to their
193	reimbursement premium's proportionate share of the actual
194	claims-paying capacity otherwise defined in subparagraph (c)1.
195	and as provided for under the terms of the reimbursement
196	contract. The optional coverage retention as specified shall be
197	accessed before the mandatory coverage under the reimbursement
198	contract, but once the limit of coverage selected under this
199	option is exhausted, the insurer's retention under the mandatory
200	coverage will apply. This coverage will apply and be paid
201	concurrently with mandatory coverage. This subparagraph expires
202	on May 31, 2012.
203	(c)1.  The contract shall also provide that the obligation
204	of the board with respect to all contracts covering a particular
205	contract year shall not exceed the actual claims-paying capacity
206	of the fund up to the limit specified in this subparagraph.
207	a.  For the 2012-2013 contract year, the limit is $17
208	billion.
209	b.  For the 2013-2014 contract year, the limit is $15.5
210	billion.
211	c.  For the 2014-2015 contract year, the limit is $14
212	billion.
213	d.  For the 2015-2016 contract year and subsequent contract
214	years, the limit is $12 billion.
215	e.  For contract years after the 2015-2016 contract year,
216	if a limit of $17 billion for that contract year, unless the
217	board determines that there is sufficient estimated claims-
218	paying capacity to provide $12 $17 billion of capacity for the
219	current contract year and an additional $12 $17 billion of
220	capacity for subsequent contract years. If the board makes such
221	a determination, the estimated claims-paying capacity for the
222	particular contract year shall be determined by adding to the
223	$12 $17 billion limit one-half of the fund's estimated claims-
224	paying capacity in excess of $24 $34 billion. However, the
225	dollar growth in the limit may not increase in any year by an
226	amount greater than the dollar growth of the balance of the fund
227	as of December 31, less any premiums or interest attributable to
228	optional coverage, as defined by rule, which occurred over the
229	prior calendar year.
230	2.  In May and October of the contract year, the board
231	shall publish in the Florida Administrative Weekly a statement
232	of the fund's estimated borrowing capacity, the fund's estimated
233	claims-paying capacity, and the projected balance of the fund as
234	of December 31. After the end of each calendar year, the board
235	shall notify insurers of the estimated borrowing capacity,
236	estimated claims-paying capacity, and the balance of the fund as
237	of December 31 to provide insurers with data necessary to assist
238	them in determining their retention and projected payout from
239	the fund for loss reimbursement purposes. In conjunction with
240	the development of the premium formula, as provided for in
241	subsection (5), the board shall publish factors or multiples
242	that assist insurers in determining their retention and
243	projected payout for the next contract year. For all regulatory
244	and reinsurance purposes, an insurer may calculate its projected
245	payout from the fund as its share of the total fund premium for
246	the current contract year multiplied by the sum of the projected
247	balance of the fund as of December 31 and the estimated
248	borrowing capacity for that contract year as reported under this
249	subparagraph.
250	(5)  REIMBURSEMENT PREMIUMS.-
251	(b)1.  The State Board of Administration shall select an
252	independent consultant to develop a formula for determining the
253	actuarially indicated premium to be paid to the fund. The
254	formula shall specify, for each zip code or other limited
255	geographical area, the amount of premium to be paid by an
256	insurer for each $1,000 of insured value under covered policies
257	in that zip code or other area. In establishing premiums, the
258	board shall consider the coverage elected under paragraph (4)(b)
259	and any factors that tend to enhance the actuarial
260	sophistication of ratemaking for the fund, including
261	deductibles, type of construction, type of coverage provided,
262	relative concentration of risks, and other such factors deemed
263	by the board to be appropriate.
264	2.  The formula must provide for a cash build-up factor as
265	specified in this subparagraph. For the 2009-2010 contract year,
266	the factor is 5 percent. For the 2010-2011 contract year, the
267	factor is 10 percent.
268	a.  For the 2011-2012 contract year, the factor is 15
269	percent.
270	b.  For the 2012-2013 contract year, the factor is 20
271	percent.
272	c.  For the 2013-2014 contract year and thereafter, the
273	factor is 25 percent.
274	d  For the 2014-2015 contract year, the factor is 30
275	percent.
276	e.  For the 2015-2016 contract year, the factor is 35
277	percent.
278	f.  For the 2016-2017 contract year, the factor is 40
279	percent.
280	g.  For the 2017-2018 contract year, the factor is 45
281	percent.
282	h.  For the 2018-2019 contract year and subsequent contract
283	years, the factor is 50 percent.
284	3.  The formula may provide for a procedure to determine
285	the premiums to be paid by new insurers that begin writing
286	covered policies after the beginning of a contract year, taking
287	into consideration when the insurer starts writing covered
288	policies, the potential exposure of the insurer, the potential
289	exposure of the fund, the administrative costs to the insurer
290	and to the fund, and any other factors deemed appropriate by the
291	board. The formula must be approved by unanimous vote of the
292	board. The board may, at any time, revise the formula pursuant
293	to the procedure provided in this paragraph.
294	(6)  REVENUE BONDS.-
295	(b)  Emergency assessments-
296	1.  If the board determines that the amount of revenue
297	produced under subsection (5) is insufficient to fund the
298	obligations, costs, and expenses of the fund and the
299	corporation, including repayment of revenue bonds and that
300	portion of the debt service coverage not met by reimbursement
301	premiums, the board shall direct the Office of Insurance
302	Regulation to levy, by order, an emergency assessment on direct
303	premiums for all property and casualty lines of business in this
304	state, including property and casualty business of surplus lines
305	insurers regulated under part VIII of chapter 626, but not
306	including any workers' compensation premiums or medical
307	malpractice premiums. As used in this subsection, the term
308	"property and casualty business" includes all lines of business
309	identified on Form 2, Exhibit of Premiums and Losses, in the
310	annual statement required of authorized insurers by s. 624.424
311	and any rule adopted under this section, except for those lines
312	identified as accident and health insurance and except for
313	policies written under the National Flood Insurance Program. The
314	assessment shall be specified as a percentage of direct written
315	premium and is subject to annual adjustments by the board in
316	order to meet debt obligations. The same percentage shall apply
317	to all policies in lines of business subject to the assessment
318	issued or renewed during the 12-month period beginning on the
319	effective date of the assessment.
320	2.a.  A premium is not subject to an annual assessment
321	under this paragraph in excess of 6 percent of premium with
322	respect to obligations arising out of losses attributable to any
323	one contract year prior to the 2015-2016 contract year, and a
324	premium is not subject to an aggregate annual assessment under
325	this paragraph in excess of 10 percent of premium if all of the
326	losses that generated the obligations were attributable to
327	contract years prior to the 2015-2016 contract year. An annual
328	assessment under this paragraph shall continue as long as the
329	revenue bonds issued with respect to which the assessment was
330	imposed are outstanding, including any bonds the proceeds of
331	which were used to refund the revenue bonds, unless adequate
332	provision has been made for the payment of the bonds under the
333	documents authorizing issuance of the bonds.
334	b.  Except as provided in sub-subparagraph a., a premium is
335	not subject to an annual assessment under this paragraph in
336	excess of 5 percent of premium with respect to obligations
337	arising out of losses attributable to any one contract year, and
338	a premium is not subject to an aggregate annual assessment under
339	this paragraph in excess of 8 percent of premium. An annual
340	assessment under this paragraph shall continue as long as the
341	revenue bonds issued with respect to which the assessment was
342	imposed are outstanding, including any bonds the proceeds of
343	which were used to refund the revenue bonds, unless adequate
344	provision has been made for the payment of the bonds under the
345	documents authorizing issuance of the bonds.
346	3.  Emergency assessments shall be collected from
347	policyholders. Emergency assessments shall be remitted by
348	insurers as a percentage of direct written premium for the
349	preceding calendar quarter as specified in the order from the
350	Office of Insurance Regulation. The office shall verify the
351	accurate and timely collection and remittance of emergency
352	assessments and shall report the information to the board in a
353	form and at a time specified by the board. Each insurer
354	collecting assessments shall provide the information with
355	respect to premiums and collections as may be required by the
356	office to enable the office to monitor and verify compliance
357	with this paragraph.
358	4.  With respect to assessments of surplus lines premiums,
359	each surplus lines agent shall collect the assessment at the
360	same time as the agent collects the surplus lines tax required
361	by s. 626.932, and the surplus lines agent shall remit the
362	assessment to the Florida Surplus Lines Service Office created
363	by s. 626.921 at the same time as the agent remits the surplus
364	lines tax to the Florida Surplus Lines Service Office. The
365	emergency assessment on each insured procuring coverage and
366	filing under s. 626.938 shall be remitted by the insured to the
367	Florida Surplus Lines Service Office at the time the insured
368	pays the surplus lines tax to the Florida Surplus Lines Service
369	Office. The Florida Surplus Lines Service Office shall remit the
370	collected assessments to the fund or corporation as provided in
371	the order levied by the Office of Insurance Regulation. The
372	Florida Surplus Lines Service Office shall verify the proper
373	application of such emergency assessments and shall assist the
374	board in ensuring the accurate and timely collection and
375	remittance of assessments as required by the board. The Florida
376	Surplus Lines Service Office shall annually calculate the
377	aggregate written premium on property and casualty business,
378	other than workers' compensation and medical malpractice,
379	procured through surplus lines agents and insureds procuring
380	coverage and filing under s. 626.938 and shall report the
381	information to the board in a form and at a time specified by
382	the board.
383	5.a.  Any assessment authority not used for a particular
384	contract year may be used for a subsequent contract year. If,
385	for a subsequent contract year, the board determines that the
386	amount of revenue produced under subsection (5) is insufficient
387	to fund the obligations, costs, and expenses of the fund and the
388	corporation, including repayment of revenue bonds and that
389	portion of the debt service coverage not met by reimbursement
390	premiums, the board shall direct the Office of Insurance
391	Regulation to levy an emergency assessment up to an amount not
392	exceeding the amount of unused assessment authority from a
393	previous contract year or years, plus an additional 4 percent,
394	if provided that the assessments in the aggregate do not exceed
395	the limits specified in subparagraph 2. and all of the losses
396	that generated the obligations were attributable to contract
397	years prior to the 2015-2016 contract year.
398	b.  Except as provided in sub-subparagraph a., any
399	assessment authority not used for a particular contract year may
400	be used for a subsequent contract year. If, for a subsequent
401	contract year, the board determines that the amount of revenue
402	produced under subsection (5) is insufficient to fund the
403	obligations, costs, and expenses of the fund and the
404	corporation, including repayment of revenue bonds and that
405	portion of the debt service coverage not met by reimbursement
406	premiums, the board shall direct the Office of Insurance
407	Regulation to levy an emergency assessment up to an amount not
408	exceeding the amount of unused assessment authority from a
409	previous contract year or years, plus an additional 3 percent,
410	if the assessments in the aggregate do not exceed the limits
411	specified in subparagraph 2.
412	6.  The assessments otherwise payable to the corporation
413	under this paragraph shall be paid to the fund unless and until
414	the Office of Insurance Regulation and the Florida Surplus Lines
415	Service Office have received from the corporation and the fund a
416	notice, which shall be conclusive and upon which they may rely
417	without further inquiry, that the corporation has issued bonds
418	and the fund has no agreements in effect with local governments
419	under paragraph (c). On or after the date of the notice and
420	until the date the corporation has no bonds outstanding, the
421	fund shall have no right, title, or interest in or to the
422	assessments, except as provided in the fund's agreement with the
423	corporation.
424	7.  Emergency assessments are not premium and are not
425	subject to the premium tax, to the surplus lines tax, to any
426	fees, or to any commissions. An insurer is liable for all
427	assessments that it collects and must treat the failure of an
428	insured to pay an assessment as a failure to pay the premium. An
429	insurer is not liable for uncollectible assessments.
430	8.  When an insurer is required to return an unearned
431	premium, it shall also return any collected assessment
432	attributable to the unearned premium. A credit adjustment to the
433	collected assessment may be made by the insurer with regard to
434	future remittances that are payable to the fund or corporation,
435	but the insurer is not entitled to a refund.
436	9.  When a surplus lines insured or an insured who has
437	procured coverage and filed under s. 626.938 is entitled to the
438	return of an unearned premium, the Florida Surplus Lines Service
439	Office shall provide a credit or refund to the agent or such
440	insured for the collected assessment attributable to the
441	unearned premium prior to remitting the emergency assessment
442	collected to the fund or corporation.
443	10.  The exemption of medical malpractice insurance
444	premiums from emergency assessments under this paragraph is
445	repealed May 31, 2013, and medical malpractice insurance
446	premiums shall be subject to emergency assessments attributable
447	to loss events occurring in the contract years commencing on
448	June 1, 2013.
449	(d)  State Board of Administration Florida Hurricane
450	Catastrophe Fund Finance Corporation.-
451	1.  In addition to the findings and declarations in
452	subsection (1), the Legislature also finds and declares that:
453	a.  The public benefits corporation created under this
454	paragraph will provide a mechanism necessary for the cost-
455	effective and efficient issuance of bonds. This mechanism will
456	eliminate unnecessary costs in the bond issuance process,
457	thereby increasing the amounts available to pay reimbursement
458	for losses to property sustained as a result of hurricane
459	damage.
460	b.  The purpose of such bonds is to fund reimbursements
461	through the Florida Hurricane Catastrophe Fund to pay for the
462	costs of construction, reconstruction, repair, restoration, and
463	other costs associated with damage to properties of
464	policyholders of covered policies due to the occurrence of a
465	hurricane.
466	c.  The efficacy of the financing mechanism will be
467	enhanced by the corporation's ownership of the assessments, by
468	the insulation of the assessments from possible bankruptcy
469	proceedings, and by covenants of the state with the
470	corporation's bondholders.
471	2.a.  There is created a public benefits corporation, which
472	is an instrumentality of the state, to be known as the State
473	Board of Administration Florida Hurricane Catastrophe Fund
474	Finance Corporation.
475	b.  The corporation shall operate under a five-member board
476	of directors consisting of the Governor or a designee, the Chief
477	Financial Officer or a designee, the Attorney General or a
478	designee, the director of the Division of Bond Finance of the
479	State Board of Administration, and the Chief Operating Officer
480	senior employee of the State Board of Administration responsible
481	for operations of the Florida Hurricane Catastrophe Fund.
482	c.  The corporation has all of the powers of corporations
483	under chapter 607 and under chapter 617, subject only to the
484	provisions of this subsection.
485	d.  The corporation may issue bonds and engage in such
486	other financial transactions as are necessary to provide
487	sufficient funds to achieve the purposes of this section.
488	e.  The corporation may invest in any of the investments
489	authorized under s. 215.47.
490	f.  There shall be no liability on the part of, and no
491	cause of action shall arise against, any board members or
492	employees of the corporation for any actions taken by them in
493	the performance of their duties under this paragraph.
494	3.a.  In actions under chapter 75 to validate any bonds
495	issued by the corporation, the notice required by s. 75.06 shall
496	be published only in Leon County and in two newspapers of
497	general circulation in the state, and the complaint and order of
498	the court shall be served only on the State Attorney of the
499	Second Judicial Circuit.
500	b.  The state hereby covenants with holders of bonds of the
501	corporation that the state will not repeal or abrogate the power
502	of the board to direct the Office of Insurance Regulation to
503	levy the assessments and to collect the proceeds of the revenues
504	pledged to the payment of such bonds as long as any such bonds
505	remain outstanding unless adequate provision has been made for
506	the payment of such bonds pursuant to the documents authorizing
507	the issuance of such bonds.
508	4.  The bonds of the corporation are not a debt of the
509	state or of any political subdivision, and neither the state nor
510	any political subdivision is liable on such bonds. The
511	corporation does not have the power to pledge the credit, the
512	revenues, or the taxing power of the state or of any political
513	subdivision. The credit, revenues, or taxing power of the state
514	or of any political subdivision shall not be deemed to be
515	pledged to the payment of any bonds of the corporation.
516	5.a.  The property, revenues, and other assets of the
517	corporation; the transactions and operations of the corporation
518	and the income from such transactions and operations; and all
519	bonds issued under this paragraph and interest on such bonds are
520	exempt from taxation by the state and any political subdivision,
521	including the intangibles tax under chapter 199 and the income
522	tax under chapter 220. This exemption does not apply to any tax
523	imposed by chapter 220 on interest, income, or profits on debt
524	obligations owned by corporations other than the State Board of
525	Administration Florida Hurricane Catastrophe Fund Finance
526	Corporation.
527	b.  All bonds of the corporation shall be and constitute
528	legal investments without limitation for all public bodies of
529	this state; for all banks, trust companies, savings banks,
530	savings associations, savings and loan associations, and
531	investment companies; for all administrators, executors,
532	trustees, and other fiduciaries; for all insurance companies and
533	associations and other persons carrying on an insurance
534	business; and for all other persons who are now or may hereafter
535	be authorized to invest in bonds or other obligations of the
536	state and shall be and constitute eligible securities to be
537	deposited as collateral for the security of any state, county,
538	municipal, or other public funds. This sub-subparagraph shall be
539	considered as additional and supplemental authority and shall
540	not be limited without specific reference to this sub-
541	subparagraph.
542	6.  The corporation and its corporate existence shall
543	continue until terminated by law; however, no such law shall
544	take effect as long as the corporation has bonds outstanding
545	unless adequate provision has been made for the payment of such
546	bonds pursuant to the documents authorizing the issuance of such
547	bonds. Upon termination of the existence of the corporation, all
548	of its rights and properties in excess of its obligations shall
549	pass to and be vested in the state.
550	7.  The State Board of Administration Finance Corporation
551	is for all purposes the successor to the Florida Hurricane
552	Catastrophe Fund Finance Corporation.
553	(16)  TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL COVERAGE.-
554	(a)  Findings and intent.-
555	1.  The Legislature finds that:
556	a.  Because of temporary disruptions in the market for
557	catastrophic reinsurance, many property insurers were unable to
558	procure reinsurance for the 2006 hurricane season with an
559	attachment point below the insurers' respective Florida
560	Hurricane Catastrophe Fund attachment points, were unable to
561	procure sufficient amounts of such reinsurance, or were able to
562	procure such reinsurance only by incurring substantially higher
563	costs than in prior years.
564	b.  The reinsurance market problems were responsible, at
565	least in part, for substantial premium increases to many
566	consumers and increases in the number of policies issued by the
567	Citizens Property Insurance Corporation.
568	c.  It is likely that the reinsurance market disruptions
569	will not significantly abate prior to the 2007 hurricane season.
570	2.  It is the intent of the Legislature to create a
571	temporary emergency program, applicable to the 2007, 2008, and
572	2009 hurricane seasons, to address these market disruptions and
573	enable insurers, at their option, to procure additional coverage
574	from the Florida Hurricane Catastrophe Fund.
575	(b)  Applicability of other provisions of this section.-All
576	provisions of this section and the rules adopted under this
577	section apply to the program created by this subsection unless
578	specifically superseded by this subsection.
579	(c)  Optional coverage.-For the contract year commencing
580	June 1, 2007, and ending May 31, 2008, the contract year
581	commencing June 1, 2008, and ending May 31, 2009, and the
582	contract year commencing June 1, 2009, and ending May 31, 2010,
583	the board shall offer for each of such years the optional
584	coverage as provided in this subsection.
585	(d)  Additional definitions.-As used in this subsection,
586	the term:
587	1.  "TEACO options" means the temporary emergency
588	additional coverage options created under this subsection.
589	2.  "TEACO insurer" means an insurer that has opted to
590	obtain coverage under the TEACO options in addition to the
591	coverage provided to the insurer under its reimbursement
592	contract.
593	3.  "TEACO reimbursement premium" means the premium charged
594	by the fund for coverage provided under the TEACO options.
595	4.  "TEACO retention" means the amount of losses below
596	which a TEACO insurer is not entitled to reimbursement from the
597	fund under the TEACO option selected. A TEACO insurer's
598	retention options shall be calculated as follows:
599	a.  The board shall calculate and report to each TEACO
600	insurer the TEACO retention multiples. There shall be three
601	TEACO retention multiples for defining coverage. Each multiple
602	shall be calculated by dividing $3 billion, $4 billion, or $5
603	billion by the total estimated mandatory FHCF reimbursement
604	premium assuming all insurers selected the 90-percent coverage
605	level.
606	b.  The TEACO retention multiples as determined under sub-
607	subparagraph a. shall be adjusted to reflect the coverage level
608	elected by the insurer. For insurers electing the 90-percent
609	coverage level, the adjusted retention multiple is 100 percent
610	of the amount determined under sub-subparagraph a. For insurers
611	electing the 75-percent coverage level, the retention multiple
612	is 120 percent of the amount determined under sub-subparagraph
613	a. For insurers electing the 45-percent coverage level, the
614	adjusted retention multiple is 200 percent of the amount
615	determined under sub-subparagraph a.
616	c.  An insurer shall determine its provisional TEACO
617	retention by multiplying its estimated mandatory FHCF
618	reimbursement premium by the applicable adjusted TEACO retention
619	multiple and shall determine its actual TEACO retention by
620	multiplying its actual mandatory FHCF reimbursement premium by
621	the applicable adjusted TEACO retention multiple.
622	d.  For TEACO insurers who experience multiple covered
623	events causing loss during the contract year, the insurer's full
624	TEACO retention shall be applied to each of the covered events
625	causing the two largest losses for that insurer. For other
626	covered events resulting in losses, the TEACO option does not
627	apply and the insurer's retention shall be one-third of the full
628	retention as calculated under paragraph (2)(e).
629	5.  "TEACO addendum" means an addendum to the reimbursement
630	contract reflecting the obligations of the fund and TEACO
631	insurers under the program created by this subsection.
632	6.  "FHCF" means the Florida Hurricane Catastrophe Fund.
633	(e)  TEACO addendum.-
634	1.  The TEACO addendum shall provide for reimbursement of
635	TEACO insurers for covered events occurring during the contract
636	year, in exchange for the TEACO reimbursement premium paid into
637	the fund under paragraph (f). Any insurer writing covered
638	policies has the option of choosing to accept the TEACO addendum
639	for any of the 3 contract years that the coverage is offered.
640	2.  The TEACO addendum shall contain a promise by the board
641	to reimburse the TEACO insurer for 45 percent, 75 percent, or 90
642	percent of its losses from each covered event in excess of the
643	insurer's TEACO retention, plus 5 percent of the reimbursed
644	losses to cover loss adjustment expenses. The percentage shall
645	be the same as the coverage level selected by the insurer under
646	paragraph (4)(b).
647	3.  The TEACO addendum shall provide that reimbursement
648	amounts shall not be reduced by reinsurance paid or payable to
649	the insurer from other sources.
650	4.  The TEACO addendum shall also provide that the
651	obligation of the board with respect to all TEACO addenda shall
652	not exceed an amount equal to two times the difference between
653	the industry retention level calculated under paragraph (2)(e)
654	and the $3 billion, $4 billion, or $5 billion industry TEACO
655	retention level options actually selected, but in no event may
656	the board's obligation exceed the actual claims-paying capacity
657	of the fund plus the additional capacity created in paragraph
658	(g). If the actual claims-paying capacity and the additional
659	capacity created under paragraph (g) fall short of the board's
660	obligations under the reimbursement contract, each insurer's
661	share of the fund's capacity shall be prorated based on the
662	premium an insurer pays for its mandatory reimbursement coverage
663	and the premium paid for its optional TEACO coverage as each
664	such premium bears to the total premiums paid to the fund times
665	the available capacity.
666	5.  The priorities, schedule, and method of reimbursements
667	under the TEACO addendum shall be the same as provided under
668	subsection (4).
669	6.  A TEACO insurer's maximum reimbursement for a single
670	event shall be equal to the product of multiplying its mandatory
671	FHCF premium by the difference between its FHCF retention
672	multiple and its TEACO retention multiple under the TEACO option
673	selected and by the coverage selected under paragraph (4)(b),
674	plus an additional 5 percent for loss adjustment expenses. A
675	TEACO insurer's maximum reimbursement under the TEACO option
676	selected for a TEACO insurer's two largest events shall be twice
677	its maximum reimbursement for a single event.
678	(f)  TEACO reimbursement premiums.-
679	1.  Each TEACO insurer shall pay to the fund, in the manner
680	and at the time provided in the reimbursement contract for
681	payment of reimbursement premiums, a TEACO reimbursement premium
682	calculated as specified in this paragraph.
683	2.  The insurer's TEACO reimbursement premium associated
684	with the $3 billion retention option shall be equal to 85
685	percent of a TEACO insurer's maximum reimbursement for a single
686	event as calculated under subparagraph (e)6. The TEACO
687	reimbursement premium associated with the $4 billion retention
688	option shall be equal to 80 percent of a TEACO insurer's maximum
689	reimbursement for a single event as calculated under
690	subparagraph (e)6. The TEACO premium associated with the $5
691	billion retention option shall be equal to 75 percent of a TEACO
692	insurer's maximum reimbursement for a single event as calculated
693	under subparagraph (e)6.
694	(g)  Effect on claims-paying capacity of the fund.-For the
695	contract term commencing June 1, 2007, the contract year
696	commencing June 1, 2008, and the contract term beginning June 1,
697	2009, the program created by this subsection shall increase the
698	claims-paying capacity of the fund as provided in subparagraph
699	(4)(c)1. by an amount equal to two times the difference between
700	the industry retention level calculated under paragraph (2)(e)
701	and the $3 billion industry TEACO retention level specified in
702	sub-subparagraph (d)4.a. The additional capacity shall apply
703	only to the additional coverage provided by the TEACO option and
704	shall not otherwise affect any insurer's reimbursement from the
705	fund.
706	(16)(17)  TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS.-
707	(a)  Findings and intent.-
708	1.  The Legislature finds that:
709	a.  Because of temporary disruptions in the market for
710	catastrophic reinsurance, many property insurers were unable to
711	procure sufficient amounts of reinsurance for the 2006 hurricane
712	season or were able to procure such reinsurance only by
713	incurring substantially higher costs than in prior years.
714	b.  The reinsurance market problems were responsible, at
715	least in part, for substantial premium increases to many
716	consumers and increases in the number of policies issued by
717	Citizens Property Insurance Corporation.
718	c.  It is likely that the reinsurance market disruptions
719	will not significantly abate prior to the 2007 hurricane season.
720	2.  It is the intent of the Legislature to create options
721	for insurers to purchase a temporary increased coverage limit
722	above the statutorily determined limit in subparagraph (4)(c)1.,
723	applicable for the 2007, 2008, 2009, 2010, 2011, 2012, and 2013
724	hurricane season seasons, to address market disruptions and
725	enable insurers, at their option, to procure additional coverage
726	from the Florida Hurricane Catastrophe Fund.
727	(b)  Applicability of other provisions of this section.-All
728	provisions of this section and the rules adopted under this
729	section apply to the coverage created by this subsection unless
730	specifically superseded by provisions in this subsection.
731	(c)  Optional coverage.-For the 2009-2010, 2010-2011, 2011-
732	2012, 2012-2013, and 2013-2014 contract year years, the board
733	shall offer, for each of such years, the optional coverage as
734	provided in this subsection.
735	(d)  Additional definitions.-As used in this subsection,
736	the term:
737	1.  "FHCF" means Florida Hurricane Catastrophe Fund.
738	2.  "FHCF reimbursement premium" means the premium paid by
739	an insurer for its coverage as a mandatory participant in the
740	FHCF, but does not include additional premiums for optional
741	coverages.
742	3.  "Payout multiple" means the number or multiple created
743	by dividing the statutorily defined claims-paying capacity as
744	determined in subparagraph (4)(c)1. by the aggregate
745	reimbursement premiums paid by all insurers estimated or
746	projected as of calendar year-end.
747	4.  "TICL" means the temporary increase in coverage limit.
748	5.  "TICL options" means the temporary increase in coverage
749	options created under this subsection.
750	6.  "TICL insurer" means an insurer that has opted to
751	obtain coverage under the TICL options addendum in addition to
752	the coverage provided to the insurer under its FHCF
753	reimbursement contract.
754	7.  "TICL reimbursement premium" means the premium charged
755	by the fund for coverage provided under the TICL option.
756	8.  "TICL coverage multiple" means the coverage multiple
757	when multiplied by an insurer's reimbursement premium that
758	defines the temporary increase in coverage limit.
759	9.  "TICL coverage" means the coverage for an insurer's
760	losses above the insurer's statutorily determined claims-paying
761	capacity based on the claims-paying limit in subparagraph
762	(4)(c)1., which an insurer selects as its temporary increase in
763	coverage from the fund under the TICL options selected. A TICL
764	insurer's increased coverage limit options shall be calculated
765	as follows:
766	a.  The board shall calculate and report to each TICL
767	insurer the TICL coverage multiples based on 12 options for
768	increasing the insurer's FHCF coverage limit. Each TICL coverage
769	multiple shall be calculated by dividing $1 billion, $2 billion,
770	$3 billion, $4 billion, $5 billion, $6 billion, $7 billion, $8
771	billion, $9 billion, $10 billion, $11 billion, or $12 billion by
772	the total estimated aggregate FHCF reimbursement premiums for
773	the 2007-2008 contract year, and the 2008-2009 contract year.
774	b.  For the 2009-2010 contract year, the board shall
775	calculate and report to each TICL insurer the TICL coverage
776	multiples based on 10 options for increasing the insurer's FHCF
777	coverage limit. Each TICL coverage multiple shall be calculated
778	by dividing $1 billion, $2 billion, $3 billion, $4 billion, $5
779	billion, $6 billion, $7 billion, $8 billion, $9 billion, and $10
780	billion by the total estimated aggregate FHCF reimbursement
781	premiums for the 2009-2010 contract year.
782	c.  For the 2010-2011 contract year, the board shall
783	calculate and report to each TICL insurer the TICL coverage
784	multiples based on eight options for increasing the insurer's
785	FHCF coverage limit. Each TICL coverage multiple shall be
786	calculated by dividing $1 billion, $2 billion, $3 billion, $4
787	billion, $5 billion, $6 billion, $7 billion, and $8 billion by
788	the total estimated aggregate FHCF reimbursement premiums for
789	the contract year.
790	d.  For the 2011-2012 contract year, the board shall
791	calculate and report to each TICL insurer the TICL coverage
792	multiples based on six options for increasing the insurer's FHCF
793	coverage limit. Each TICL coverage multiple shall be calculated
794	by dividing $1 billion, $2 billion, $3 billion, $4 billion, $5
795	billion, and $6 billion by the total estimated aggregate FHCF
796	reimbursement premiums for the 2011-2012 contract year.
797	a.e.  For the 2012-2013 contract year, the board shall
798	calculate and report to each TICL insurer the TICL coverage
799	multiples based on four options for increasing the insurer's
800	FHCF coverage limit. Each TICL coverage multiple shall be
801	calculated by dividing $1 billion, $2 billion, $3 billion, and
802	$4 billion by the total estimated aggregate FHCF reimbursement
803	premiums for the 2012-2013 contract year.
804	f.  For the 2013-2014 contract year, the board shall
805	calculate and report to each TICL insurer the TICL coverage
806	multiples based on two options for increasing the insurer's FHCF
807	coverage limit. Each TICL coverage multiple shall be calculated
808	by dividing $1 billion and $2 billion by the total estimated
809	aggregate FHCF reimbursement premiums for the 2013-2014 contract
810	year.
811	b.g.  The TICL insurer's increased coverage shall be the
812	FHCF reimbursement premium multiplied by the TICL coverage
813	multiple. In order to determine an insurer's total limit of
814	coverage, an insurer shall add its TICL coverage multiple to its
815	payout multiple. The total shall represent a number that, when
816	multiplied by an insurer's FHCF reimbursement premium for a
817	given reimbursement contract year, defines an insurer's total
818	limit of FHCF reimbursement coverage for that reimbursement
819	contract year.
820	10.  "TICL options addendum" means an addendum to the
821	reimbursement contract reflecting the obligations of the fund
822	and insurers selecting an option to increase an insurer's FHCF
823	coverage limit.
824	(e)  TICL options addendum.-
825	1.  The TICL options addendum shall provide for
826	reimbursement of TICL insurers for covered events occurring
827	during the 2009-2010, 2010-2011, 2011-2012, 2012-2013, and 2013-
828	2014 contract year years in exchange for the TICL reimbursement
829	premium paid into the fund under paragraph (f) based on the TICL
830	coverage available and selected for each respective contract
831	year. Any insurer writing covered policies has the option of
832	selecting an increased limit of coverage under the TICL options
833	addendum and shall select such coverage at the time that it
834	executes the FHCF reimbursement contract.
835	2.  The TICL addendum shall contain a promise by the board
836	to reimburse the TICL insurer for 45 percent, 75 percent, or 90
837	percent of its losses from each covered event in excess of the
838	insurer's retention, plus 5 percent of the reimbursed losses to
839	cover loss adjustment expenses. The percentage shall be the same
840	as the coverage level selected by the insurer under paragraph
841	(4)(b).
842	3.  The TICL addendum shall provide that reimbursement
843	amounts shall not be reduced by reinsurance paid or payable to
844	the insurer from other sources.
845	4.  The priorities, schedule, and method of reimbursements
846	under the TICL addendum shall be the same as provided under
847	subsection (4).
848	(f)  TICL reimbursement premiums.-Each TICL insurer shall
849	pay to the fund, in the manner and at the time provided in the
850	reimbursement contract for payment of reimbursement premiums, a
851	TICL reimbursement premium determined as specified in subsection
852	(5), except that a cash build-up factor does not apply to the
853	TICL reimbursement premiums. However, the TICL reimbursement
854	premium shall be increased in the 2009-2010 contract year by a
855	factor of two, in the 2010-2011 contract year by a factor of
856	three, in the 2011-2012 contract year by a factor of four, in
857	the 2012-2013 contract year by a factor of five, and in the
858	2013-2014 contract year by a factor of six.
859	(g)  Effect on claims-paying capacity of the fund.-For the
860	2009-2010, 2010-2011, 2011-2012, 2012-2013, and 2013-2014
861	contract year years, the program created by this subsection
862	shall increase the claims-paying capacity of the fund as
863	provided in subparagraph (4)(c)1. by an amount not to exceed $4
864	$12 billion and shall depend on the TICL coverage options
865	available and selected for the specified contract year and the
866	number of insurers that select the TICL optional coverage. The
867	additional capacity shall apply only to the additional coverage
868	provided under the TICL options and shall not otherwise affect
869	any insurer's reimbursement from the fund if the insurer chooses
870	not to select the temporary option to increase its limit of
871	coverage under the FHCF.
872	(17)(18)  FACILITATION OF INSURERS' PRIVATE CONTRACT
873	NEGOTIATIONS BEFORE THE START OF THE HURRICANE SEASON.-
874	(a)  In addition to the legislative findings and intent
875	provided elsewhere in this section, the Legislature finds that:
876	1.a.  Because a regular session of the Legislature begins
877	approximately 3 months before the start of a contract year and
878	ends approximately 1 month before the start of a contract year,
879	participants in the fund always face the possibility that
880	legislative actions will change the coverage provided or offered
881	by the fund with only a few days or weeks of advance notice.
882	b.  The timing issues described in sub-subparagraph a. can
883	create uncertainties and disadvantages for the residential
884	property insurers that are required to participate in the fund
885	when such insurers negotiate for the procurement of private
886	reinsurance or other sources of capital.
887	c.  Providing participating insurers with a greater degree
888	of certainty regarding the coverage provided or offered by the
889	fund and more time to negotiate for the procurement of private
890	reinsurance or other sources of capital will enable the
891	residential property insurance market to operate with greater
892	stability.
893	d.  Increased stability in the residential property
894	insurance market serves a primary purpose of the fund and
895	benefits Florida consumers by enabling insurers to operate more
896	economically. In years when reinsurance and capital markets are
897	experiencing a capital shortage, the last-minute rush by
898	insurers only weeks before the start of the hurricane season to
899	procure adequate coverage in order to meet their capital
900	requirements can result in higher costs that are passed on to
901	Florida consumers. However, if more time is available,
902	residential property insurers should experience greater
903	competition for their business with a corresponding beneficial
904	effect for Florida consumers.
905	2.  It is the intent of the Legislature to provide insurers
906	with the terms and conditions of the reimbursement contract well
907	in advance of the insurers' need to finalize their procurement
908	of private reinsurance or other sources of capital, and thereby
909	improve insurers' negotiating position with reinsurers and other
910	sources of capital.
911	3.  It is also the intent of the Legislature that the board
912	publish the fund's maximum statutory limit of coverage and the
913	fund's total retention early enough that residential property
914	insurers can have the opportunity to better estimate their
915	coverage from the fund.
916	(b)  The board shall adopt the reimbursement contract for a
917	particular contract year by February 1 of the immediately
918	preceding contract year. However, the reimbursement contract
919	shall be adopted as soon as possible in advance of the 2010-2011
920	contract year.
921	(c)  Insurers writing covered policies shall execute the
922	reimbursement contract by March 1 of the immediately preceding
923	contract year, and the contract shall have an effective date as
924	defined in paragraph (2)(o).
925	(d)  The board shall publish in the Florida Administrative
926	Weekly the maximum statutory adjusted capacity for the mandatory
927	coverage for a particular contract year, the maximum statutory
928	coverage for any optional coverage for the particular contract
929	year, and the aggregate fund retention used to calculate
930	individual insurer's retention multiples for the particular
931	contract year no later than January 1 of the immediately
932	preceding contract year.
933	Section 2.  Subsection (5) of section 627.0629, Florida
934	Statutes, is amended to read:
935	627.0629  Residential property insurance; rate filings.-
936	(5)  In order to provide an appropriate transition period,
937	an insurer may implement an approved rate filing for residential
938	property insurance over a period of years. Such insurer must
939	provide an informational notice to the office setting out its
940	schedule for implementation of the phased-in rate filing. The
941	insurer may include in its rate the actual cost of private
942	market reinsurance that corresponds to available coverage of the
943	Temporary Increase in Coverage Limits, TICL, from the Florida
944	Hurricane Catastrophe Fund. The insurer may also include the
945	cost of reinsurance to replace the TICL reduction implemented
946	pursuant to s. 215.555(16)(d)9 s. 215.555(17)(d)9. However, this
947	cost for reinsurance may not include any expense or profit load
948	or result in a total annual base rate increase in excess of 10
949	percent.
950	Section 3.  This act shall take effect upon becoming a law.

CODING: Words stricken are deletions; words underlined are additions.