Bill Text: FL S0542 | 2014 | Regular Session | Comm Sub
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Flood Insurance
Spectrum: Moderate Partisan Bill (Republican 18-2)
Status: (Passed) 2014-06-13 - Chapter No. 2014-80, companion bill(s) passed, see SB 1262 (Ch. 2014-98) [S0542 Detail]
Download: Florida-2014-S0542-Comm_Sub.html
Bill Title: Flood Insurance
Spectrum: Moderate Partisan Bill (Republican 18-2)
Status: (Passed) 2014-06-13 - Chapter No. 2014-80, companion bill(s) passed, see SB 1262 (Ch. 2014-98) [S0542 Detail]
Download: Florida-2014-S0542-Comm_Sub.html
Florida Senate - 2014 CS for CS for CS for SB 542 By the Committees on Banking and Insurance; Appropriations; and Banking and Insurance; and Senators Brandes, Simpson, Benacquisto, Galvano, Bradley, and Latvala 597-02468-14 2014542c3 1 A bill to be entitled 2 An act relating to flood insurance; amending s. 3 627.062, F.S.; adding projected flood losses to the 4 factors that must be considered by the Office of 5 Insurance Regulation in reviewing certain rate 6 filings; amending s. 627.0628, F.S.; requiring the 7 commission to adopt standards and guidelines relating 8 to flood loss by a certain date; creating s. 627.715, 9 F.S.; authorizing insurers to offer flood insurance on 10 residential property in this state; requiring the 11 insurer to also offer coverage equivalent to that 12 provided by the National Flood Insurance Program 13 (NFIP); defining the term “flood”; establishing the 14 minimum coverage requirements for a flood insurance 15 policy; providing coverage limitations that an insurer 16 may include in such policies; requiring that certain 17 limitations and notices be noted on the policy 18 declarations or face page; requiring the insurer to 19 obtain a signed acknowledgement from the applicant 20 which provides certain specified information; 21 providing the insurer with rate options; authorizing 22 the office to conduct an examination with respect to 23 any rate change; authorizing an insurer to export a 24 contract or endorsement to a surplus lines insurer 25 without meeting certain requirements; requiring prior 26 notice for cancellation or nonrenewal of a policy; 27 providing additional requirements with respect to 28 notifying the Office of Insurance Regulation before 29 writing flood insurance, filing a plan of operation 30 with the office, using forms that have been approved 31 by the office, and filing reinsurance contracts before 32 a certain date; prohibiting Citizens Property 33 Insurance Corporation from writing flood insurance; 34 prohibiting the Florida Hurricane Catastrophe Fund 35 from reimbursing losses caused by flooding; providing 36 certain exemptions; preempting any conflicts with 37 other provisions of the Florida Insurance Code; 38 providing that the Commissioner of the Office of 39 Insurance Regulation may provide certification that a 40 condition qualifies for flood insurance or disaster 41 assistance; providing that such certification is not 42 subject to ch. 120, F.S.; providing an effective date. 43 44 Be It Enacted by the Legislature of the State of Florida: 45 46 Section 1. Paragraph (b) of subsection (2) of section 47 627.062, Florida Statutes, is amended to read: 48 627.062 Rate standards.— 49 (2) As to all such classes of insurance: 50 (b) Upon receiving a rate filing, the office shall review 51 the filing to determine if a rate is excessive, inadequate, or 52 unfairly discriminatory. In making that determination, the 53 office shall, in accordance with generally accepted and 54 reasonable actuarial techniques, consider the following factors: 55 1. Past and prospective loss experience within and without 56 this state. 57 2. Past and prospective expenses. 58 3. The degree of competition among insurers for the risk 59 insured. 60 4. Investment income reasonably expected by the insurer, 61 consistent with the insurer’s investment practices, from 62 investable premiums anticipated in the filing, plus any other 63 expected income from currently invested assets representing the 64 amount expected on unearned premium reserves and loss reserves. 65 The commission may adopt rules using reasonable techniques of 66 actuarial science and economics to specify the manner in which 67 insurers calculate investment income attributable to classes of 68 insurance written in this state and the manner in which 69 investment income is used to calculate insurance rates. Such 70 manner must contemplate allowances for an underwriting profit 71 factor and full consideration of investment income that produce 72which producea reasonable rate of return; however, investment 73 income from invested surplus may not be considered. 74 5. The reasonableness of the judgment reflected in the 75 filing. 76 6. Dividends, savings, or unabsorbed premium deposits 77 allowed or returned toFloridapolicyholders, members, or 78 subscribers in this state. 79 7. The adequacy of loss reserves. 80 8. The cost of reinsurance. The office may not disapprove a 81 rate as excessive solely due to the insurer having obtained 82 catastrophic reinsurance to cover the insurer’s estimated 250 83 year probable maximum loss or any lower level of loss. 84 9. Trend factors, including trends in actual losses per 85 insured unit for the insurer making the filing. 86 10. Conflagration and catastrophe hazards, if applicable. 87 11. Projected hurricane losses, if applicable, which must 88 be estimated using a model or method found to be acceptable or 89 reliable by the Florida Commission on Hurricane Loss Projection 90 Methodology, and as further provided in s. 627.0628. 91 12. Projected flood losses, if applicable, which may be 92 estimated using a model, a method, or an average of models or 93 methods determined to be acceptable or reliable by the Florida 94 Commission on Hurricane Loss Projection Methodology, and as 95 further provided in s. 627.0628. 96 13.12.A reasonable margin for underwriting profit and 97 contingencies. 98 14.13.The cost of medical services, if applicable. 99 15.14.Other relevant factors that affect the frequency or 100 severity of claims or expenses. 101 102 The provisions of this subsection do not apply to workers’ 103 compensation, employer’s liability insurance, and motor vehicle 104 insurance. 105 Section 2. Subsection (3) of section 627.0628, Florida 106 Statutes, is amended to read: 107 627.0628 Florida Commission on Hurricane Loss Projection 108 Methodology; public records exemption; public meetings 109 exemption.— 110 (3) ADOPTION AND EFFECT OF STANDARDS AND GUIDELINES.— 111 (a) The commission shall consideranyactuarial methods, 112 principles, standards, models, or output ranges that have the 113 potential for improving the accuracyofor reliability of the 114 hurricane loss projections and flood loss projections used in 115 residential property insurance rate filings. The commission 116 shall, from time to time,adopt and update findings, as needed, 117 as to the accuracy or reliability of particular methods, 118 principles, standards, models, or output ranges. 119 (b) The commission shall consideranyactuarial methods, 120 principles, standards, or models that have the potential for 121 improving the accuracyofor reliability of projecting probable 122 maximum loss levels. The commission shall adopt and update 123 findings, as needed, as to the accuracy or reliability of 124 particular methods, principles, standards, or models related to 125 probable maximum loss calculations. 126 (c) In establishing reimbursement premiums for the Florida 127 Hurricane Catastrophe Fund, the State Board of Administration 128 must, to the extent feasible, employ actuarial methods, 129 principles, standards, models, or output ranges found by the 130 commission to be accurate or reliable. 131 (d) With respect to a rate filing under s. 627.062, an 132 insurer shall employ and may not modify or adjust actuarial 133 methods, principles, standards, models, or output ranges found 134 by the commission to be accurate or reliable in determining 135 hurricane loss factors for use in a rate filing under s. 136 627.062. An insurer shall employ and may not modify or adjust 137 models found by the commission to be accurate or reliable in 138 determining probable maximum loss levels pursuant to paragraph 139 (b) with respect to a rate filing under s. 627.062 made more 140 than 60 days after the commission has made such findings. This 141 paragraph does not prohibit an insurer from averaging model 142 results or output ranges or from using an average for the 143 purpose of a flood insurance rate filing under s. 627.062. 144 (e) The commission shall adopt actuarial methods, 145 principles, standards, models, or output ranges for flood loss 146 by July 1, 2016. 147 (f)(e)The commission shall reviseadopt revisions to148 previously adopted actuarial methods, principles, standards, 149 models, or output ranges every odd-numberedoddyear. 150 (g)(f)1. A trade secret, as defined in s. 688.002, which 151thatis used in designing and constructing a hurricane loss 152 model and whichthatis provided pursuant to this section,by a 153 private company,to the commission, office, or consumer advocate 154 appointed pursuant to s. 627.0613,is confidential and exempt 155 from s. 119.07(1) and s. 24(a), Art. I of the State 156 Constitution. 157 2.a. That portion of a meeting of the commission or of a 158 rate proceeding on an insurer’s rate filing at which a trade 159 secret made confidential and exempt by this paragraph is 160 discussed is exempt from s. 286.011 and s. 24(b), Art. I of the 161 State Constitution. The closed meeting must be recorded, and no 162 portion of the closed meeting may be off the record. 163 b. The recording of a closed portion of a meeting is exempt 164 from s. 119.07(1) and s. 24(a), Art. I of the State 165 Constitution. 166 c. This subparagraph is subject to the Open Government 167 Sunset Review Act in accordance with s. 119.15 and shall stand 168 repealed on October 2, 2015, unless reviewed and saved from 169 repeal through reenactment by the Legislature. 170 Section 3. Section 627.715, Florida Statutes, is created to 171 read: 172 627.715 Flood insurance.—Subject to the requirements of 173 this section, an insurer may issue an insurance policy, 174 contract, or endorsement providing coverage for the peril of 175 flood on any residential structure or its contents in this 176 state. Such insurer must also offer coverage equivalent to that 177 provided under a standard flood insurance policy issued under 178 the National Flood Insurance Program (NFIP) 179 (1) As used in this section, the term “flood” means a 180 general and temporary condition of partial or complete 181 inundation of 2 acres or more of normally dry land area or of 182 two or more properties, at least one of which is the 183 policyholder’s property, from: 184 (a) Overflow of inland or tidal waters; 185 (b) Unusual and rapid accumulation or runoff of surface 186 waters from any source; 187 (c) Mudflow; or 188 (d) Collapse or subsidence of land along the shore of a 189 lake or similar body of water as a result of erosion or 190 undermining caused by waves or currents of water exceeding 191 anticipated cyclical levels. 192 (2) At a minimum, coverage for the peril of flood must 193 cover a flood as defined in subsection (1). Coverage for the 194 peril of flood may also include water intrusion, as defined by 195 the policy, which originates from outside the structure and is 196 not otherwise covered under the definition of flood. 197 (3) An insurer may offer a flood coverage policy, contract, 198 or endorsement that: 199 (a) Has a flood deductible based on a stated dollar amount 200 or a percentage of the coverage amount. The deductible amount 201 must be acceptable to federal mortgage and banking regulators if 202 such policy, contract, or endorsement is intended to satisfy a 203 mortgage requirement; 204 (b) Provides that any flood loss will be adjusted on the 205 basis of: 206 1. The actual cash value of the property; or 207 2. Replacement costs up to the policy limits as provided 208 under s. 627.7011(3); 209 (c) Restricts flood coverage to the principal building, as 210 defined in the applicable policy; 211 (d) Is in an agreed-upon amount, including coverage limited 212 to the amount of all outstanding mortgages applicable to the 213 covered property. However, if a policy, contract, or endorsement 214 does not limit flood coverage to the replacement cost of the 215 covered property, the policy, contract, or endorsement may not 216 include a provision penalizing the policyholder for not insuring 217 the covered property up to replacement cost; or 218 (e) As to the peril of flood, does not cover: 219 1. Additional living expenses; 220 2. Personal property or contents; or 221 3. Law and ordinance coverage. However, an insurer must 222 offer law and ordinance coverage that is comparable to the law 223 and ordinance coverage offered in the standard NFIP policy. 224 (4) The deductibles and policy limits as to the peril of 225 flood, and any other limitations on coverage required to be 226 included by the office, must be prominently disclosed on the 227 declarations page or face page of the policy in at least 12 228 point uppercase and boldfaced type and be accompanied by a 229 statement encouraging the policyholder to review the entire 230 policy carefully because it contains coverage limitations. 231 (5) Before issuing a flood insurance policy, contract, or 232 endorsement under this section, the insurance agent must obtain 233 from an applicant an acknowledgement signed by the applicant 234 that includes the following statement in at least 12-point bold, 235 uppercase type: “BY ACCEPTING THIS FLOOD INSURANCE POLICY I HAVE 236 READ AND UNDERSTAND THE LIMITATIONS THAT MAY APPLY TO MY 237 POLICY.” The signed acknowledgment must also include, in at 238 least 12-point bold, uppercase type, for a policy, contract, or 239 endorsement: 240 (a) That limits flood coverage to an amount less than the 241 full replacement cost of the property, the following statement: 242 “THIS POLICY LIMITS FLOOD COVERAGE TO LESS THAN THE FULL COST OF 243 REPLACEMENT FOR THE PROPERTY, WHICH MAY RESULT IN HIGH OUT-OF 244 POCKET EXPENSES TO YOU AND MAY PUT YOUR EQUITY IN THIS PROPERTY 245 AT RISK.” 246 (b) That insures a dwelling on the basis of actual cash 247 value, the following statement: “THIS POLICY PAYS YOU THE 248 DEPRECIATED VALUE OF YOUR PROPERTY THAT IS DAMAGED BY FLOOD, 249 WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU IF YOUR 250 PROPERTY NEEDS TO BE REPAIRED OR REPLACED.” 251 (c) The following disclosure: “FLOOD INSURANCE COVERAGE IS 252 AVAILABLE FROM THE NATIONAL FLOOD INSURANCE PROGRAM. YOU SHOULD 253 CONSULT YOUR AGENT IF YOU HAVE QUESTIONS ABOUT NATIONAL FLOOD 254 INSURANCE PROGRAM COVERAGE.” 255 (d) On a structure that was previously insured through the 256 NFIP at a subsidized rate, the following statement: “BY 257 ACCEPTING A PRIVATE FLOOD INSURANCE POLICY, YOU MAY LOSE YOUR 258 SUBSIDIZED RATE IN THE NATIONAL FLOOD INSURANCE PROGRAM IF YOU 259 RETURN TO THE NATIONAL FLOOD INSURANCE PROGRAM AT A LATER TIME.” 260 (e) That includes the law and ordinance coverage that must 261 be offered under subparagraph (3)(e)3., the following 262 disclosure: “LAW AND ORDINANCE COVERAGE UNDER THIS POLICY MIGHT 263 HAVE LIMITATIONS ON WHAT IS COVERED IN THE EVENT OF A LOSS. YOU 264 SHOULD CONSULT YOUR AGENT IF YOU HAVE QUESTIONS ABOUT THE 265 COVERAGE OFFERED UNDER THIS POLICY.” 266 267 If this form is signed, it is conclusively presumed that the 268 applicant understood and selected on behalf of all insureds the 269 limitations of coverage in the policy as compared to a flood 270 insurance policy offered by the NFIP. 271 (6) In addition to any other method authorized under the 272 Florida Insurance Code, an insurer or rating organization may 273 establish and use flood coverage rates, rating schedules, or 274 rating manuals, filed by the insurer with the office, which 275 allow the insurer a reasonable rate of return on flood coverage 276 written in this state. Flood coverage rates established under 277 this subsection are not subject to s. 627.062(2)(a) and (f). 278 (a) An insurer shall notify the office of any change to 279 rates within 30 days after the effective date of the change. The 280 notice must include the name of the insurer and the average 281 statewide percentage change in rates. 282 (b) Actuarial data with regard to rates for flood coverage 283 shall be maintained by the insurer for 2 years after the 284 effective date of such rate change and may be examined by the 285 office pursuant to s. 624.319. The office may require the 286 insurer to incur the costs associated with an examination. Upon 287 examination, the office, in accordance with generally accepted 288 and reasonable actuarial techniques, shall consider the rate 289 factors specified in s. 627.062(2)(b), (c), and (d), and 290 standards specified in s. 627.062(2)(e) to determine if the rate 291 is excessive, inadequate, or unfairly discriminatory. If the 292 office finds that the rate is excessive, inadequate, or unfairly 293 discriminatory, the office shall order the insurer to make a 294 full and complete rate filing under s. 627.062. Upon issuance of 295 the order, the insurer may not write additional flood insurance 296 coverage until the office has approved the rate. 297 (c) This subsection applies to the establishment and use of 298 flood coverage rates filed with the office before July 1, 2024. 299 (7) A surplus lines agent may export a contract or 300 endorsement to an eligible surplus lines insurer without making 301 a diligent effort to seek such coverage from three or more 302 authorized insurers under s. 626.916(1)(a). This subsection 303 expires July 1, 2017. 304 (8) The insurer shall notify the insured and any regulated 305 lending institution or federal agency mortgagee, in writing, at 306 least 60 days before the cancellation or nonrenewal of the 307 policy, contract, or endorsement providing flood coverage. An 308 insurer or insured may cancel the policy, contract, or 309 endorsement while in force or upon renewal if the cancellation 310 would be permitted under the NFIP. 311 (9) In addition to any other applicable requirements, an 312 insurer providing flood coverage under this section shall: 313 (a) Notify the office at least 30 days before writing flood 314 insurance in this state; 315 (b) File a plan of operation and financial projections or 316 revisions to such plan, as applicable, with the office; 317 (c) Offer flood insurance on a form that has been filed 318 with and approved by the office pursuant to s. 627.410. The 319 filed form may be substantially similar to the form used by the 320 NFIP; and 321 (d) File all reinsurance contracts with the office on or 322 before June 30 of each year. 323 (10) Citizens Property Insurance Corporation may not 324 provide insurance for the peril of flood. 325 (11) The Florida Hurricane Catastrophe Fund may not 326 reimburse losses proximately caused by the peril of flood, 327 including losses that occur during a covered event as defined 328 under s. 215.555(2). 329 (12) This section does not apply to: 330 (a) Policies, contracts, and endorsements that provide 331 flood coverage for commercial nonresidential properties or 332 policies that provide excess flood coverage over the amount 333 recoverable under any other policy covering the same property. 334 (b) A flood insurance policy issued by or on behalf of the 335 NFIP. 336 (13) With respect to the regulation of flood insurance 337 coverage written in this state by admitted insurers, this 338 section supersedes any other provision in the Florida Insurance 339 Code in the event of a conflict. 340 Section 4. If federal law or rule requires a certification 341 by a state insurance regulatory official as a condition of 342 qualifying for private flood insurance or disaster assistance, 343 the Commissioner of the Office of Insurance Regulation may 344 provide the certification. The certification is not subject to 345 review under chapter 120. 346 Section 5. This act shall take effect upon becoming a law.