Bill Text: FL S0228 | 2014 | Regular Session | Introduced
Bill Title: Florida Hurricane Catastrophe Fund
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Failed) 2014-05-02 - Died in Banking and Insurance [S0228 Detail]
Download: Florida-2014-S0228-Introduced.html
Florida Senate - 2014 SB 228
By Senator Ring
29-00064-14 2014228__
1 A bill to be entitled
2 An act relating to the Florida Hurricane Catastrophe
3 Fund; amending s. 215.555, F.S.; revising definitions
4 for the terms “losses” and “retention”; revising
5 requirements for reimbursement contracts; revising
6 provisions relating to times and circumstances wherein
7 the State Board of Administration publishes certain
8 statements and notices relating to the fund; requiring
9 the board to negotiate a line of credit to reimburse
10 insurers under certain circumstances; deleting a
11 requirement that the formula for determining premiums
12 to be paid to the fund include a cash build-up factor;
13 deleting obsolete provisions; providing an effective
14 date.
15
16 Be It Enacted by the Legislature of the State of Florida:
17
18 Section 1. Paragraphs (d) and (e) of subsection (2),
19 paragraphs (c) and (d) of subsection (4), and paragraph (b) of
20 subsection (5) of section 215.555, Florida Statutes, are amended
21 to read:
22 215.555 Florida Hurricane Catastrophe Fund.—
23 (2) DEFINITIONS.—As used in this section:
24 (d) “Losses” means all incurred losses under covered
25 policies, including additional living expenses of up to not to
26 exceed 40 percent of the insured value of a residential
27 structure or its contents, allocated loss adjustment expenses,
28 and amounts paid as fees on behalf of or inuring to the benefit
29 of a policyholder. The term does not include:
30 1. Losses for fair rental value, loss of rent or rental
31 income, or business interruption losses;
32 2. Losses under liability coverages;
33 3. Property losses that are proximately caused by any peril
34 other than a covered event, including, but not limited to, fire,
35 theft, flood or rising water, or windstorm that does not
36 constitute a covered event;
37 4. Amounts paid as the result of a voluntary expansion of
38 coverage by the insurer, including, but not limited to, a waiver
39 of an applicable deductible; or
40 5. Amounts paid to reimburse a policyholder for condominium
41 association or homeowners’ association loss assessments or under
42 similar coverages for contractual liabilities;
43 6. Amounts paid as bad faith awards, punitive damage
44 awards, or other court-imposed fines, sanctions, or penalties;
45 7. Amounts in excess of the coverage limits under the
46 covered policy; or
47 8. Allocated or Unallocated loss adjustment expenses.
48 (e) “Retention” means the amount of losses below which an
49 insurer is not entitled to reimbursement from the fund. An
50 insurer’s retention shall be calculated as follows:
51 1. The board shall calculate and report to each insurer
52 the retention multiples for each that year. For the contract
53 year. The beginning June 1, 2005, the retention multiple shall
54 be equal to $4.5 billion divided by the total estimated
55 reimbursement premium for the contract year; for subsequent
56 years, the retention multiple must shall be equal to $4.5
57 billion, adjusted based upon the reported exposure for the
58 contract year occurring 2 years before the particular contract
59 year to reflect the percentage growth in exposure to the fund
60 for covered policies since 2004, divided by the total estimated
61 reimbursement premium for the contract year. Total reimbursement
62 premium for purposes of the calculation under this subparagraph
63 shall be estimated using the assumption that all insurers have
64 selected the 90-percent coverage level. Effective June 1, 2015,
65 the aggregate retention level may not exceed $5 billion.
66 2. The retention multiple as determined under subparagraph
67 1. shall be adjusted to reflect the coverage level elected by
68 the insurer. For insurers electing the 90-percent coverage
69 level, the adjusted retention multiple is 100 percent of the
70 amount determined under subparagraph 1. For insurers electing
71 the 75-percent coverage level, the retention multiple is 120
72 percent of the amount determined under subparagraph 1. For
73 insurers electing the 45-percent coverage level, the adjusted
74 retention multiple is 200 percent of the amount determined under
75 subparagraph 1.
76 3. An insurer shall determine its provisional retention by
77 multiplying its provisional reimbursement premium by the
78 applicable adjusted retention multiple and shall determine its
79 actual retention by multiplying its actual reimbursement premium
80 by the applicable adjusted retention multiple.
81 4. For insurers who experience multiple covered events
82 causing loss during the contract year, beginning June 1, 2005,
83 each insurer’s full retention shall be applied to each of the
84 covered events causing the two largest losses for that insurer.
85 For each other covered event resulting in losses, the insurer’s
86 retention shall be reduced to one-third of the full retention.
87 The reimbursement contract shall provide for the reimbursement
88 of losses for each covered event based on the full retention
89 with adjustments made to reflect the reduced retentions on or
90 after January 1 of the contract year provided the insurer
91 reports its losses as specified in the reimbursement contract.
92 (4) REIMBURSEMENT CONTRACTS.—
93 (c)1. The contract must shall also provide that the
94 obligation of the board with respect to all contracts covering a
95 particular contract year be shall not exceed the actual claims
96 paying capacity of the fund up to a limit of $17 billion for
97 that contract year, unless the board determines that there is
98 sufficient estimated claims-paying capacity to provide $17
99 billion of capacity for the current contract year and an
100 additional $17 billion of capacity for subsequent contract
101 years. If the board makes such a determination, the estimated
102 claims-paying capacity for the particular contract year shall be
103 determined by adding to the $17 billion limit one-half of the
104 fund’s estimated claims-paying capacity in excess of $34
105 billion. However, the dollar growth in the limit may not
106 increase in any year by an amount greater than the dollar growth
107 of the balance of the fund as of December 31, less any premiums
108 or interest attributable to optional coverage, as defined by
109 rule which occurred over the prior calendar year.
110 2. Each January In May and October of the contract year,
111 the board shall publish in the Florida Administrative Register a
112 statement of the fund’s estimated borrowing capacity and, the
113 fund’s estimated claims-paying capacity, and the projected
114 balance of the fund as of December 31. Upon completing the
115 estimation of the fund’s claims-paying capacity After the end of
116 each calendar year, the board shall notify insurers of the
117 estimated borrowing capacity, the estimated claims-paying
118 capacity, and the balance of the fund as of December 31 to
119 provide insurers with data necessary to assist them in
120 determining their retention and projected payout from the fund
121 for loss reimbursement purposes. In conjunction with the
122 development of the premium formula, as provided for in
123 subsection (5), the board shall publish factors or multiples
124 that assist insurers in determining their retention and
125 projected payout for the next contract year. For all regulatory
126 and reinsurance purposes, an insurer may calculate its projected
127 payout from the fund as its share of the total fund premium for
128 the current contract year multiplied by the sum of the projected
129 balance of the fund as of December 31 and the estimated
130 borrowing capacity for that contract year as reported under this
131 subparagraph. The statement must include an estimate for a
132 minimum of 3 years of bonding capacity.
133 (d)1. For purposes of determining potential liability and
134 to aid in the sound administration of the fund, the contract
135 must shall require each insurer to report such insurer’s losses
136 from each covered event on an interim basis, as directed by the
137 board. The contract must shall require the insurer to report to
138 the board by no later than December 31 of each year, and
139 quarterly thereafter, its reimbursable losses from covered
140 events for the year. The contract must shall require the board
141 to determine and pay, as soon as practicable after receiving
142 these reports of reimbursable losses, the initial amount of
143 reimbursement due and adjustments to this amount based on later
144 loss information. The adjustments to reimbursement amounts must
145 shall require the board to pay, or the insurer to return,
146 amounts reflecting the most recent calculation of losses.
147 2. In determining reimbursements pursuant to this
148 subsection, the contract must shall provide that the board shall
149 pay to each insurer the such insurer’s projected payout, which
150 is the amount of reimbursement it is owed, up to an amount equal
151 to the insurer’s share of the actual premium paid for that
152 contract year, multiplied by the insurer’s share of the limit
153 specified in subparagraph (c)1 actual claims-paying capacity
154 available for that contract year.
155 3. The board may reimburse insurers for amounts up to the
156 published factors or multiples for determining each
157 participating insurer’s retention and projected payout derived
158 as a result of the development of the premium formula in those
159 situations in which the total reimbursement of losses to such
160 insurers would not exceed the estimated claims-paying capacity
161 of the fund. Otherwise, the projected payout factors or
162 multiples shall be reduced uniformly among all insurers to
163 reflect the estimated claims-paying capacity.
164 4. The board shall negotiate a line of credit to reimburse
165 insurers if payments exceed available assets and bonding
166 receipts. The line of credit must be sufficient to cover
167 projected receipts from a minimum of 3 years’ bonding and for
168 second-event catastrophes. The line of credit must be closed by
169 July 1, 2015.
170 (5) REIMBURSEMENT PREMIUMS.—
171 (b) The State Board of Administration shall select an
172 independent consultant to develop a formula for determining the
173 actuarially indicated premium to be paid to the fund. The
174 formula shall specify, for each zip code or other limited
175 geographical area, the amount of premium to be paid by an
176 insurer for each $1,000 of insured value under covered policies
177 in that zip code or other area. In establishing premiums, the
178 board shall consider the coverage elected under paragraph (4)(b)
179 and any factors that tend to enhance the actuarial
180 sophistication of ratemaking for the fund, including
181 deductibles, type of construction, type of coverage provided,
182 relative concentration of risks, and other such factors deemed
183 appropriate by the board to be appropriate. The formula must
184 provide for a cash build-up factor. For the 2009-2010 contract
185 year, the factor is 5 percent. For the 2010-2011 contract year,
186 the factor is 10 percent. For the 2011-2012 contract year, the
187 factor is 15 percent. For the 2012-2013 contract year, the
188 factor is 20 percent. For the 2013-2014 contract year and
189 thereafter, the factor is 25 percent. The formula may provide
190 for a procedure for determining to determine the premiums to be
191 paid by new insurers that begin writing covered policies after
192 the beginning of a contract year, taking into consideration when
193 the insurer starts writing covered policies, the potential
194 exposure of the insurer, the potential exposure of the fund, the
195 administrative costs to the insurer and to the fund, and any
196 other factors deemed appropriate by the board. The formula must
197 be approved by unanimous vote of the board. The board may, at
198 any time, revise the formula pursuant to the procedure provided
199 in this paragraph.
200 Section 2. This act shall take effect July 1, 2014.
