Bill Text: FL S2104 | 2010 | Regular Session | Introduced

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Bill Title: Citizens Property Insurance Corporation [CPSC]

Spectrum: Partisan Bill (Republican 1-0)

Status: (Failed) 2010-04-30 - Died in Committee on Banking and Insurance [S2104 Detail]

Download: Florida-2010-S2104-Introduced.html

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Florida Senate - 2010                                    SB 2104 
 
By Senator Bennett 
21-01507-10                                           20102104__ 
1                        A bill to be entitled 
2         An act relating to Citizens Property Insurance 
3         Corporation; amending s. 627.351, F.S.; revising 
4         legislative intent; requiring that the corporation 
5         achieve actuarially sound rates on or before a 
6         specified date; requiring that the corporation take 
7         certain actions to achieve actuarially sound rates; 
8         providing requirements for the determination of 
9         actuarially sound rates; requiring that the 
10         corporation file a plan of withdrawal on or before a 
11         specified date if it does not achieve actuarially 
12         sound rates by a specified deadline; establishing 
13         criteria for actuarially sound rates; prohibiting the 
14         Office of Insurance Regulation from having authority 
15         with respect to the corporation’s rates; authorizing a 
16         policyholder to challenge his or her premium in 
17         accordance with specified provisions of state law; 
18         prohibiting a challenge to the rates of the 
19         corporation; amending s. 624.430, F.S.; prohibiting 
20         the Office of Insurance Regulation from denying the 
21         corporation’s plan of withdrawal; providing an 
22         effective date. 
23 
24  Be It Enacted by the Legislature of the State of Florida: 
25 
26         Section 1. Paragraphs (a) and (n) of subsection (6) of 
27  section 627.351, Florida Statutes, are amended to read: 
28         627.351 Insurance risk apportionment plans.— 
29         (6) CITIZENS PROPERTY INSURANCE CORPORATION.— 
30         (a)1. It is the public purpose of this subsection to ensure 
31  the existence of an orderly market for property insurance for 
32  Floridians and Florida businesses. The Legislature finds that 
33  private insurers are unwilling or unable to provide affordable 
34  property insurance coverage in this state to the extent sought 
35  and needed. The absence of affordable property insurance 
36  threatens the public health, safety, and welfare and likewise 
37  threatens the economic health of the state. The state therefore 
38  has a compelling public interest and a public purpose to assist 
39  in assuring that property in the state is insured and that it is 
40  insured at affordable rates so as to facilitate the remediation, 
41  reconstruction, and replacement of damaged or destroyed property 
42  in order to reduce or avoid the negative effects otherwise 
43  resulting to the public health, safety, and welfare, to the 
44  economy of the state, and to the revenues of the state and local 
45  governments which are needed to provide for the public welfare. 
46  It is necessary, therefore, to allow the Citizens Property 
47  Insurance Corporation to be restored to its prior status as an 
48  insurer of last resort and to allow the corporation to develop 
49  actuarially sound rates over a period of time so that it can pay 
50  claims promptly and fulfill its statutory obligations. To that 
51  end, Citizens Property Insurance Corporation shall achieve 
52  actuarially sound rates within the time period specified in this 
53  subsection or must file a plan to withdraw from the state 
54  pursuant to the requirements in s. 624.430 provide affordable 
55  property insurance to applicants who are in good faith entitled 
56  to procure insurance through the voluntary market but are unable 
57  to do so. The Legislature intends by this subsection that 
58  affordable property insurance be provided and that it continue 
59  to be provided, as long as necessary, through Citizens Property 
60  Insurance Corporation, a government entity that is an integral 
61  part of the state, and that is not a private insurance company. 
62  To that end, Citizens Property Insurance Corporation shall 
63  strive to increase the availability of affordable property 
64  insurance in this state, while achieving efficiencies and 
65  economies, and while providing service to policyholders, 
66  applicants, and agents which is no less than the quality 
67  generally provided in the voluntary market, for the achievement 
68  of the foregoing public purposes. Because it is essential for 
69  this government entity to have the maximum financial resources 
70  to pay claims following a catastrophic hurricane, it is the 
71  intent of the Legislature that Citizens Property Insurance 
72  Corporation be allowed to achieve actuarially sound rates so 
73  that it can continue to be an integral part of the state and 
74  that the income of the corporation be exempt from federal income 
75  taxation and that interest on the debt obligations issued by the 
76  corporation be exempt from federal income taxation. 
77         2. The Residential Property and Casualty Joint Underwriting 
78  Association originally created by this statute shall be known, 
79  as of July 1, 2002, as the Citizens Property Insurance 
80  Corporation. The corporation shall provide insurance for 
81  residential and commercial property, for applicants who are in 
82  good faith entitled, but are unable, to procure insurance 
83  through the voluntary market. The corporation shall operate 
84  pursuant to a plan of operation approved by order of the 
85  Financial Services Commission. The plan is subject to continuous 
86  review by the commission. The commission may, by order, withdraw 
87  approval of all or part of a plan if the commission determines 
88  that conditions have changed since approval was granted and that 
89  the purposes of the plan require changes in the plan. The 
90  corporation shall continue to operate pursuant to the plan of 
91  operation approved by the Office of Insurance Regulation until 
92  October 1, 2006. For the purposes of this subsection, 
93  residential coverage includes both personal lines residential 
94  coverage, which consists of the type of coverage provided by 
95  homeowner’s, mobile home owner’s, dwelling, tenant’s, 
96  condominium unit owner’s, and similar policies, and commercial 
97  lines residential coverage, which consists of the type of 
98  coverage provided by condominium association, apartment 
99  building, and similar policies. 
100         3. Effective January 1, 2009, a personal lines residential 
101  structure that has a dwelling replacement cost of $2 million or 
102  more, or a single condominium unit that has a combined dwelling 
103  and content replacement cost of $2 million or more is not 
104  eligible for coverage by the corporation. Such dwellings insured 
105  by the corporation on December 31, 2008, may continue to be 
106  covered by the corporation until the end of the policy term. 
107  However, such dwellings that are insured by the corporation and 
108  become ineligible for coverage due to the provisions of this 
109  subparagraph may reapply and obtain coverage if the property 
110  owner provides the corporation with a sworn affidavit from one 
111  or more insurance agents, on a form provided by the corporation, 
112  stating that the agents have made their best efforts to obtain 
113  coverage and that the property has been rejected for coverage by 
114  at least one authorized insurer and at least three surplus lines 
115  insurers. If such conditions are met, the dwelling may be 
116  insured by the corporation for up to 3 years, after which time 
117  the dwelling is ineligible for coverage. The office shall 
118  approve the method used by the corporation for valuing the 
119  dwelling replacement cost for the purposes of this subparagraph. 
120  If a policyholder is insured by the corporation prior to being 
121  determined to be ineligible pursuant to this subparagraph and 
122  such policyholder files a lawsuit challenging the determination, 
123  the policyholder may remain insured by the corporation until the 
124  conclusion of the litigation. 
125         4. It is the intent of the Legislature that policyholders, 
126  applicants, and agents of the corporation receive service and 
127  treatment of the highest possible level but never less than that 
128  generally provided in the voluntary market. It also is intended 
129  that the corporation be held to service standards no less than 
130  those applied to insurers in the voluntary market by the office 
131  with respect to responsiveness, timeliness, customer courtesy, 
132  and overall dealings with policyholders, applicants, or agents 
133  of the corporation. 
134         5. Effective January 1, 2009, a personal lines residential 
135  structure that is located in the “wind-borne debris region,” as 
136  defined in s. 1609.2, International Building Code (2006), and 
137  that has an insured value on the structure of $750,000 or more 
138  is not eligible for coverage by the corporation unless the 
139  structure has opening protections as required under the Florida 
140  Building Code for a newly constructed residential structure in 
141  that area. A residential structure shall be deemed to comply 
142  with the requirements of this subparagraph if it has shutters or 
143  opening protections on all openings and if such opening 
144  protections complied with the Florida Building Code at the time 
145  they were installed. 
146         (n)1. As of January 1, 2016, the rates of the corporation 
147  shall be actuarially sound as provided in this paragraph. If the 
148  corporation does not achieve actuarially sound rates on or 
149  before January 1, 2016, it must file a plan of withdrawal 
150  pursuant to s. 624.430 by July 1, 2016. 
151         2. In order to achieve actuarially sound rates by January 
152  1, 2016, the corporation shall phase in rate changes over a 5 
153  year period beginning January 1, 2011, such that the gap between 
154  the then-current rates and the rates required to achieve 
155  actuarial soundness decreases by approximately 20 percent each 
156  year over the 5-year period. During the 5-year period, rate 
157  decreases are permitted to the extent that they are actuarially 
158  sound and phased in during that period. 
159         3. In determining the actuarial soundness of its rates, the 
160  corporation: 
161         a. May consider the applicable generally accepted and 
162  reasonable actuarial techniques as enumerated in s. 
163  627.062(2)(b)1., 2., 4., 5., 7., 9., 10., 11., 12., and 14., 
164  (e)1., 3., 4., 5., and 6., (j), and (5). 
165         b. Shall include in its rates the following factors for the 
166  cost of reinsurance to cover its projected 100-year probable 
167  maximum loss: 
168         (I) The actual cost of reinsurance purchased from the 
169  Florida Hurricane Catastrophe Fund or in the private reinsurance 
170  market; and 
171         (II) The presumed cost of reinsurance not purchased which 
172  reflects the market value of future corporation assessments 
173  against corporation and noncorporation policyholders. 
174         c. May use one or more models found to be accurate and 
175  reliable by the Florida Commission on Hurricane Loss Projection 
176  Methodology. 
177         4. The office shall have no authority with respect to the 
178  rates of the corporation. 
179         5. A policyholder may challenge his or her premium as 
180  provided in s. 627.371. The rates of the corporation may not be 
181  challenged. Rates for coverage provided by the corporation shall 
182  be actuarially sound and subject to the requirements of s. 
183  627.062, except as otherwise provided in this paragraph. The 
184  corporation shall file its recommended rates with the office at 
185  least annually. The corporation shall provide any additional 
186  information regarding the rates which the office requires. The 
187  office shall consider the recommendations of the board and issue 
188  a final order establishing the rates for the corporation within 
189  45 days after the recommended rates are filed. The corporation 
190  may not pursue an administrative challenge or judicial review of 
191  the final order of the office. 
192         6.2. In addition to the rates otherwise determined pursuant 
193  to this paragraph, the corporation shall impose and collect an 
194  amount equal to the premium tax provided for in s. 624.509 to 
195  augment the financial resources of the corporation. 
196         3. After the public hurricane loss-projection model under 
197  s. 627.06281 has been found to be accurate and reliable by the 
198  Florida Commission on Hurricane Loss Projection Methodology, 
199  that model shall serve as the minimum benchmark for determining 
200  the windstorm portion of the corporation’s rates. This 
201  subparagraph does not require or allow the corporation to adopt 
202  rates lower than the rates otherwise required or allowed by this 
203  paragraph. 
204         4. The rate filings for the corporation which were approved 
205  by the office and which took effect January 1, 2007, are 
206  rescinded, except for those rates that were lowered. As soon as 
207  possible, the corporation shall begin using the lower rates that 
208  were in effect on December 31, 2006, and shall provide refunds 
209  to policyholders who have paid higher rates as a result of that 
210  rate filing. The rates in effect on December 31, 2006, shall 
211  remain in effect for the 2007 and 2008 calendar years except for 
212  any rate change that results in a lower rate. The next rate 
213  change that may increase rates shall take effect pursuant to a 
214  new rate filing recommended by the corporation and established 
215  by the office, subject to the requirements of this paragraph. 
216         5. Beginning on July 15, 2009, and each year thereafter, 
217  the corporation must make a recommended actuarially sound rate 
218  filing for each personal and commercial line of business it 
219  writes, to be effective no earlier than January 1, 2010. 
220         6. Beginning on or after January 1, 2010, and 
221  notwithstanding the board’s recommended rates and the office’s 
222  final order regarding the corporation’s filed rates under 
223  subparagraph 1., the corporation shall implement a rate increase 
224  each year which does not exceed 10 percent for any single policy 
225  issued by the corporation, excluding coverage changes and 
226  surcharges. 
227         7. The corporation may also implement an increase to 
228  reflect the effect on the corporation of the cash buildup factor 
229  pursuant to s. 215.555(5)(b). 
230         8. The corporation’s implementation of rates as prescribed 
231  in subparagraph 6. shall cease for any line of business written 
232  by the corporation upon the corporation’s implementation of 
233  actuarially sound rates. Thereafter, the corporation shall 
234  annually make a recommended actuarially sound rate filing for 
235  each commercial and personal line of business the corporation 
236  writes. 
237         Section 2. Present subsection (9) of section 624.430, 
238  Florida Statutes, is renumbered as subsection (10), and a new 
239  subsection (9) is added to that section, to read: 
240         624.430 Withdrawal of insurer or discontinuance of writing 
241  certain kinds or lines of insurance.— 
242         (9) The office may not deny Citizens Property Insurance 
243  Corporation’s plan of withdrawal as described in s. 
244  627.351(6)(n). 
245         Section 3. This act shall take effect July 1, 2010.