SESSION WATCH
THE BILL ITSELF

HB 1053

Insurers

VERSION H 1053 Filed · BACK TO THE SUMMARY · OFFICIAL RECORD

underlined language is being added; struck language is being deleted. Line numbers are the Legislature's own — the same ones amendments cite.

1 A bill to be entitled
2 An act relating to insurers; reenacting and amending
3 s. 215.555, F.S.; revising the definition of the term
4 "retention" for the purpose of reimbursement from the
5 Florida Hurricane Catastrophe Fund; revising the
6 reimbursement amount promised by the board in the
7 contract with property insurers; revising the minimum
8 of loss adjustment expenses; providing the hurricane
9 loss portion of the formula that determines the
10 actuarially indicated premiums to be paid to the fund;
11 authorizing, rather than requiring, such formula to
12 provide for cash build-up factors; removing obsolete
13 language; revising the cash build-up factor for a
14 specified contract year; amending s. 627.944, F.S.;
15 providing that risk retention groups registered to do
16 business in this state are deemed insurance companies
17 authorized to do business in this state; reenacting s.
18 215.5551(3)(b), F.S., relating to Reinsurance to
19 Assist Policyholders program, to incorporate the
20 amendments made to s. 215.555, F.S., in a reference
21 thereto; providing an effective date.
23 Be It Enacted by the Legislature of the State of Florida:
25 Section 1. Paragraph (e) of subsection (2), paragraph (b)
26 of subsection (4), and paragraph (b) of subsection (5) of
27 section 215.555, Florida Statutes, are amended, and paragraphs
28 (c), (d), and (e) of subsection (4), paragraph (c) of subsection
29 (5), and paragraphs (a) and (d) of subsection (16) of that section are reenacted, to read:
31 215.555 Florida Hurricane Catastrophe Fund.—
32 (2) DEFINITIONS.—As used in this section:
33 (e) "Retention" means the amount of losses below which an
34 insurer is not entitled to reimbursement from the fund. An
35 insurer's retention shall be calculated as follows:
36 1. The board shall calculate and report to each insurer
37 the retention multiples for that year. For the contract year
38 beginning June 1, 2026 2005, the retention multiple must shall
39 be equal to $4.5 billion divided by the total estimated
40 reimbursement premium for the contract year; for subsequent
41 years, the retention multiple shall be equal to $4.5 billion,
42 adjusted based upon the reported exposure for the contract year
43 occurring 2 years before the particular contract year to reflect
44 the percentage growth in exposure to the fund for covered
45 policies since 2004, divided by the total estimated
46 reimbursement premium for the contract year. Total reimbursement
47 premium for purposes of the calculation under this subparagraph
48 shall be estimated using the assumption that all insurers have
49 selected the 90-percent coverage level.
50 2. The retention multiple as determined under subparagraph
51 1. shall be adjusted to reflect the coverage level elected by
52 the insurer. For insurers electing the 90-percent coverage
53 level, the adjusted retention multiple is 100 percent of the
54 amount determined under subparagraph 1. For insurers electing
55 the 75-percent coverage level, the retention multiple is 120
56 percent of the amount determined under subparagraph 1. For
57 insurers electing the 45-percent coverage level, the adjusted
58 retention multiple is 200 percent of the amount determined under
59 subparagraph 1.
60 3. An insurer shall determine its provisional retention by
61 multiplying its provisional reimbursement premium by the
62 applicable adjusted retention multiple and shall determine its
63 actual retention by multiplying its actual reimbursement premium
64 by the applicable adjusted retention multiple.
65 4. For insurers who experience multiple covered events
66 causing loss during the contract year, beginning June 1, 2005,
67 each insurer's full retention shall be applied to each of the
68 covered events causing the two largest losses for that insurer.
69 For each other covered event resulting in losses, the insurer's
70 retention shall be reduced to one-third of the full retention.
71 The reimbursement contract shall provide for the reimbursement
72 of losses for each covered event based on the full retention
73 with adjustments made to reflect the reduced retentions on or
74 after January 1 of the contract year provided the insurer
75 reports its losses as specified in the reimbursement contract.
76 (4) REIMBURSEMENT CONTRACTS.—
77 (b)1. The contract shall contain a promise by the board to
78 reimburse the insurer for 45 percent, 75 percent, or 90 percent
79 of its losses and applicable loss adjustment expenses from each
80 covered event in excess of the insurer's retention, plus 5
81 percent of the reimbursed losses to cover loss adjustment
82 expenses. For contracts and rates effective on or after June 1,
83 2026 2019, the loss adjustment expense included reimbursement
84 must be the lesser of 15 10 percent of the total subject losses
85 before reimbursement or the total subject actual loss adjustment
86 expenses reimbursed losses.
87 2. The insurer must elect one of the percentage coverage
88 levels specified in this paragraph and may, upon renewal of a
89 reimbursement contract, elect a lower percentage coverage level
90 if no revenue bonds issued under subsection (6) after a covered
91 event are outstanding, or elect a higher percentage coverage
92 level, regardless of whether or not revenue bonds are
93 outstanding. All members of an insurer group must elect the same
94 percentage coverage level. Any joint underwriting association,
95 risk apportionment plan, or other entity created under s.
96 627.351 must elect the 90-percent coverage level.
97 3. The contract shall provide that reimbursement amounts
98 shall not be reduced by reinsurance paid or payable to the
99 insurer from other sources.
100 (c)1. The contract shall also provide that the obligation
101 of the board with respect to all contracts covering a particular
102 contract year shall not exceed the actual claims-paying capacity
103 of the fund up to a limit of $17 billion for that contract year,
104 unless the board determines that there is sufficient estimated
105 claims-paying capacity to provide $17 billion of capacity for
106 the current contract year and an additional $17 billion of
107 capacity for subsequent contract years. If the board makes such
108 a determination, the estimated claims-paying capacity for the
109 particular contract year shall be determined by adding to the
110 $17 billion limit one-half of the fund's estimated claims-paying
111 capacity in excess of $34 billion. However, the dollar growth in
112 the limit may not increase in any year by an amount greater than
113 the dollar growth of the balance of the fund as of December 31,
114 less any premiums or interest attributable to optional coverage,
115 as defined by rule which occurred over the prior calendar year.
116 2. In May and October of the contract year, the board
117 shall publish in the Florida Administrative Register a statement
118 of the fund's estimated borrowing capacity, the fund's estimated
119 claims-paying capacity, and the projected balance of the fund as
120 of December 31. After the end of each calendar year, the board
121 shall notify insurers of the estimated borrowing capacity,
122 estimated claims-paying capacity, and the balance of the fund as
123 of December 31 to provide insurers with data necessary to assist
124 them in determining their retention and projected payout from
125 the fund for loss reimbursement purposes. In conjunction with
126 the development of the premium formula, as provided for in
127 subsection (5), the board shall publish factors or multiples
128 that assist insurers in determining their retention and
129 projected payout for the next contract year. For all regulatory
130 and reinsurance purposes, an insurer may calculate its projected
131 payout from the fund as its share of the total fund premium for
132 the current contract year multiplied by the sum of the projected
133 balance of the fund as of December 31 and the estimated
134 borrowing capacity for that contract year as reported under this
135 subparagraph.
136 (d)1. For purposes of determining potential liability and
137 to aid in the sound administration of the fund, the contract
138 shall require each insurer to report such insurer's losses from
139 each covered event on an interim basis, as directed by the
140 board. The contract shall require the insurer to report to the
141 board no later than December 31 of each year, and quarterly
142 thereafter, its reimbursable losses from covered events for the
143 year. The contract shall require the board to determine and pay,
144 as soon as practicable after receiving these reports of
145 reimbursable losses, the initial amount of reimbursement due and
146 adjustments to this amount based on later loss information. The
147 adjustments to reimbursement amounts shall require the board to
148 pay, or the insurer to return, amounts reflecting the most
149 recent calculation of losses.
150 2. In determining reimbursements pursuant to this
151 subsection, the contract shall provide that the board shall pay
152 to each insurer such insurer's projected payout, which is the
153 amount of reimbursement it is owed, up to an amount equal to the
154 insurer's share of the actual premium paid for that contract
155 year, multiplied by the actual claims-paying capacity available
156 for that contract year.
157 3. The board may reimburse insurers for amounts up to the
158 published factors or multiples for determining each
159 participating insurer's retention and projected payout derived
160 as a result of the development of the premium formula in those
161 situations in which the total reimbursement of losses to such
162 insurers would not exceed the estimated claims-paying capacity
163 of the fund. Otherwise, the projected payout factors or
164 multiples shall be reduced uniformly among all insurers to
165 reflect the estimated claims-paying capacity.
166 (e)1. Except as provided in subparagraphs 2. and 3., the
167 contract shall provide that if an insurer demonstrates to the
168 board that it is likely to qualify for reimbursement under the
169 contract, and demonstrates to the board that the immediate
170 receipt of moneys from the board is likely to prevent the
171 insurer from becoming insolvent, the board shall advance the
172 insurer, at market interest rates, the amounts necessary to
173 maintain the solvency of the insurer, up to 50 percent of the
174 board's estimate of the reimbursement due the insurer. The
175 insurer's reimbursement shall be reduced by an amount equal to
176 the amount of the advance and interest thereon.
177 2. With respect only to an entity created under s.
178 627.351, the contract shall also provide that the board may,
179 upon application by such entity, advance to such entity, at
180 market interest rates, up to 90 percent of the lesser of:
181 a. The board's estimate of the amount of reimbursement due
182 to such entity; or
183 b. The entity's share of the actual reimbursement premium
184 paid for that contract year, multiplied by the currently
185 available liquid assets of the fund. In order for the entity to
186 qualify for an advance under this subparagraph, the entity must
187 demonstrate to the board that the advance is essential to allow
188 the entity to pay claims for a covered event and the board must
189 determine that the fund's assets are sufficient and are
190 sufficiently liquid to allow the board to make an advance to the
191 entity and still fulfill the board's reimbursement obligations
192 to other insurers. The entity's final reimbursement for any
193 contract year in which an advance has been made under this
194 subparagraph must be reduced by an amount equal to the amount of
195 the advance and any interest on such advance. In order to
196 determine what amounts, if any, are due the entity, the board
197 may require the entity to report its exposure and its losses at
198 any time to determine retention levels and reimbursements
199 payable.
200 3. The contract shall also provide specifically and solely
201 with respect to any limited apportionment company under s.
202 627.351(2)(b)3. that the board may, upon application by such
203 company, advance to such company the amount of the estimated
204 reimbursement payable to such company as calculated pursuant to
205 paragraph (d), at market interest rates, if the board determines
206 that the fund's assets are sufficient and are sufficiently
207 liquid to permit the board to make an advance to such company
208 and at the same time fulfill its reimbursement obligations to
209 the insurers that are participants in the fund. Such company's
210 final reimbursement for any contract year in which an advance
211 pursuant to this subparagraph has been made shall be reduced by
212 an amount equal to the amount of the advance and interest
213 thereon. In order to determine what amounts, if any, are due to
214 such company, the board may require such company to report its
215 exposure and its losses at such times as may be required to
216 determine retention levels and loss reimbursements payable.
217 (5) REIMBURSEMENT PREMIUMS.—
218 (b) The State Board of Administration shall select an
219 independent consultant to develop a formula for determining the
220 actuarially indicated premium to be paid to the fund. The
221 hurricane loss portion of the formula must be determined by
222 averaging the results of all the catastrophe models accepted by
223 the Florida Commission on Hurricane Loss Projection Methodology.
224 The formula shall specify, for each zip code or other limited
225 geographical area, the amount of premium to be paid by an
226 insurer for each $1,000 of insured value under covered policies
227 in that zip code or other area. In establishing premiums, the
228 board shall consider the coverage elected under paragraph (4)(b)
229 and any factors that tend to enhance the actuarial
230 sophistication of ratemaking for the fund, including
231 deductibles, type of construction, type of coverage provided,
232 relative concentration of risks, and other such factors deemed
233 by the board to be appropriate. The formula may must provide for
234 a cash build-up factor. For the 2009-2010 contract year, the
235 factor is 5 percent. For the 2010-2011 contract year, the factor
236 is 10 percent. For the 2011-2012 contract year, the factor is 15
237 percent. For the 2012-2013 contract year, the factor is 20
238 percent. For the 2013-2014 contract year and thereafter, the
239 factor is 25 percent; however, the cash build-up factor must be
240 zero in the 2026-2027 contract year. The formula may provide for
241 a procedure to determine the premiums to be paid by new insurers
242 that begin writing covered policies after the beginning of a
243 contract year, taking into consideration when the insurer starts
244 writing covered policies, the potential exposure of the insurer,
245 the potential exposure of the fund, the administrative costs to
246 the insurer and to the fund, and any other factors deemed
247 appropriate by the board. The formula must be approved by
248 unanimous vote of the board. The board may, at any time, revise
249 the formula pursuant to the procedure provided in this
250 paragraph.
251 (c) No later than September 1 of each year, each insurer
252 shall notify the board of its insured values under covered
253 policies by zip code, as of June 30 of that year. On the basis
254 of these reports, the board shall calculate the premium due from
255 the insurer, based on the formula adopted under paragraph (b).
256 The insurer shall pay the required annual premium pursuant to a
257 periodic payment plan specified in the contract. The board shall
258 provide for payment of reimbursement premium in periodic
259 installments and for the adjustment of provisional premium
260 installments collected prior to submission of the exposure
261 report to reflect data in the exposure report. The board shall
262 collect interest on late reimbursement premium payments
263 consistent with the assumptions made in developing the premium
264 formula in accordance with paragraph (b).
265 (16) FACILITATION OF INSURERS' PRIVATE CONTRACT
266 NEGOTIATIONS BEFORE THE START OF THE HURRICANE SEASON.—
267 (a) In addition to the legislative findings and intent
268 provided elsewhere in this section, the Legislature finds that:
269 1.a. Because a regular session of the Legislature begins
270 approximately 3 months before the start of a contract year and
271 ends approximately 1 month before the start of a contract year,
272 participants in the fund always face the possibility that
273 legislative actions will change the coverage provided or offered
274 by the fund with only a few days or weeks of advance notice.
275 b. The timing issues described in sub-subparagraph a. can
276 create uncertainties and disadvantages for the residential
277 property insurers that are required to participate in the fund
278 when such insurers negotiate for the procurement of private
279 reinsurance or other sources of capital.
280 c. Providing participating insurers with a greater degree
281 of certainty regarding the coverage provided or offered by the
282 fund and more time to negotiate for the procurement of private
283 reinsurance or other sources of capital will enable the
284 residential property insurance market to operate with greater
285 stability.
286 d. Increased stability in the residential property
287 insurance market serves a primary purpose of the fund and
288 benefits Florida consumers by enabling insurers to operate more
289 economically. In years when reinsurance and capital markets are
290 experiencing a capital shortage, the last-minute rush by
291 insurers only weeks before the start of the hurricane season to
292 procure adequate coverage in order to meet their capital
293 requirements can result in higher costs that are passed on to
294 Florida consumers. However, if more time is available,
295 residential property insurers should experience greater
296 competition for their business with a corresponding beneficial
297 effect for Florida consumers.
298 2. It is the intent of the Legislature to provide insurers
299 with the terms and conditions of the reimbursement contract well
300 in advance of the insurers' need to finalize their procurement
301 of private reinsurance or other sources of capital, and thereby
302 improve insurers' negotiating position with reinsurers and other
303 sources of capital.
304 3. It is also the intent of the Legislature that the board
305 publish the fund's maximum statutory limit of coverage and the
306 fund's total retention early enough that residential property
307 insurers can have the opportunity to better estimate their
308 coverage from the fund.
309 (d) The board shall publish in the Florida Administrative
310 Register the maximum statutory adjusted capacity for the
311 mandatory coverage for a particular contract year, the maximum
312 statutory coverage for any optional coverage for the particular
313 contract year, and the aggregate fund retention used to
314 calculate individual insurer's retention multiples for the
315 particular contract year no later than January 1 of the
316 immediately preceding contract year.
317 Section 2. Section 627.944, Florida Statutes, is amended
318 to read:
319 627.944 Risk retention groups not certificated in this
320 state.—Risk retention groups registered to do business in this
321 state pursuant to this section are deemed insurance companies
322 authorized to do business in this state. Risk retention groups
323 certificated or licensed in states other than this state and
324 seeking to do business as a risk retention group in this state
325 must observe and abide by the laws of this state as follows:
326 (1) NOTICE OF OPERATIONS AND DESIGNATION OF CHIEF
327 FINANCIAL OFFICER AS AGENT.—Before offering insurance in this
328 state, a risk retention group shall submit to the office:
329 (a) A statement identifying the state or states in which
330 the risk retention group is certificated or licensed as a
331 liability insurance company, date of certification or licensing,
332 its principal place of business, and such other information,
333 including information on its membership, as the office may
334 require to verify that the risk retention group is qualified as
335 a risk retention group under the provisions of this part.
336 (b) A copy of its plan of operations or a feasibility
337 study and revisions of such plan or study submitted to its state
338 of domicile; provided, however, that the provision relating to
339 the submission of a plan of operation or a feasibility study
340 shall not apply with respect to any line or classification of
341 liability insurance which was defined in the Product Liability
342 Risk Retention Act of 1981 before October 27, 1986, and which
343 was offered before such date by any risk retention group which
344 had been certificated or licensed and operating for not less
345 than 3 years before such date.
346 (c) A statement of registration which designates the Chief
347 Financial Officer or her or his designee as its agent for the
348 purpose of receiving service of legal documents of process.
349 (2) FINANCIAL CONDITION.—Any risk retention group doing
350 business in this state shall submit to the office:
351 (a) A copy of the group's financial statement submitted to
352 its state of domicile, which shall be certified by an
353 independent public accountant and contain a statement of opinion
354 on loss and loss adjustment expense reserves made by a member of
355 the American Academy of Actuaries or a qualified loss reserve
356 specialist under criteria established by rule of the commission
357 after considering any criteria established by the National
358 Association of Insurance Commissioners.
359 (b) A copy of each examination of the risk retention group
360 as certified by the insurance commissioner or public official
361 conducting the examination.
362 (c) Upon request by the office, a copy of any audit
363 performed with respect to the risk retention group.
364 (d) Such information as may be required to verify its
365 continuing qualification as a risk retention group under the
366 provisions of this part.
367 (3) TAXATION.—All premiums paid for insurance or coverages
368 on risks located within this state to a risk retention group
369 shall be subject to taxation at the same rate and subject to the
370 same interest, fines, and penalties for nonpayment as that
371 applicable to eligible surplus lines insurers. Each agent
372 utilized in any transaction shall report and pay the taxes for
373 the premiums for risks which they have placed with or on behalf
374 of a risk retention group not certificated in this state. In the
375 event that an agent fails to pay the tax, each risk retention
376 group shall pay the tax for insured or covered risks located
377 within this state. Further, each risk retention group shall
378 report all premiums paid to it for insured or covered risks
379 located within this state.
380 (4) COMPLIANCE WITH UNFAIR CLAIM SETTLEMENT PRACTICES
381 LAW.—Any risk retention group, its agents, and its
382 representatives shall comply with the unfair claim settlement
383 practices law of this state as set forth in s. 626.9541(1)(i).
384 (5) DECEPTIVE, FALSE, OR FRAUDULENT PRACTICES.—Any risk
385 retention group shall comply with and be subject to the laws of
386 this state regarding deceptive, false, or fraudulent acts or
387 practices, including the provisions of part IX of chapter 626.
388 If the office seeks an injunction regarding conduct in violation
389 of these laws, the injunction may be obtained from any Florida
390 court of competent jurisdiction.
391 (6) EXAMINATION REGARDING FINANCIAL CONDITION.—Any risk
392 retention group must submit to an examination by the office to
393 determine its financial condition if the insurance commissioner
394 of the jurisdiction in which the group is certificated or
395 licensed has not initiated an examination or does not initiate
396 an examination within 30 days after a request by the office. Any
397 examination shall be coordinated to avoid unjustified repetition
398 and conducted in an expeditious manner.
399 (7) NOTICE TO PURCHASERS.—Any policy issued by a risk
400 retention group shall contain in 10-point type on the front page
401 and the declaration page, the following provision:
402 "Notice, this policy is issued by your risk retention group.
403 Your risk retention group may not be subject to all of the
404 insurance laws and regulations of your state. State insurance
405 insolvency guaranty funds are not available for your risk
406 retention group."
407 (8) PROHIBITED ACTS REGARDING SOLICITATION OR SALE.—The
408 following acts by a risk retention group are hereby prohibited:
409 (a) The solicitation or sale of insurance by a risk
410 retention group to any person who is not eligible for membership
411 in the group.
412 (b) The solicitation or sale of insurance by, or operation
413 of, a risk retention group that is in a hazardous financial
414 condition or is financially impaired.
415 (9) PROHIBITED OWNERSHIP BY AN INSURANCE COMPANY.—No risk
416 retention group shall be allowed to do business in this state if
417 an insurer is directly or indirectly a member or owner of the
418 risk retention group, other than in the case of a risk retention
419 group all of whose members are insurers.
420 (10) PROHIBITED COVERAGE.—No risk retention group may
421 offer insurance coverage prohibited by the Florida Insurance
422 Code or declared unlawful by the highest court of this state.
423 (11) DELINQUENCY PROCEEDINGS.—A risk retention group not
424 domiciled in this state but doing business in this state shall
425 comply with a lawful order issued in a voluntary dissolution
426 proceeding or in a delinquency proceeding commenced by the
427 office if there has been a finding of financial impairment after
428 an examination under subsection (6).
429 (12) UTILIZATION OF AGENT.—A risk retention group shall
430 utilize an agent licensed and appointed in this state in order
431 to solicit, transact, underwrite, or provide insurance on a risk
432 of a group member, which risk is located in this state.
433 Section 3. For the purpose of incorporating the amendment
434 made by this act to section 215.555, Florida Statutes, in a
435 reference thereto, paragraph (b) of subsection (3) of section
436 215.5551, Florida Statutes, is reenacted to read:
437 215.5551 Reinsurance to Assist Policyholders program.—
438 (3) COVERAGE.—
439 (b) The board shall provide a reimbursement layer of $2
440 billion below the FHCF retention prior to the third event
441 dropdown of the FHCF retention set forth in s. 215.555(2)(e).
442 Subject to the mandatory notice provisions in subsection (5),
443 the board shall enter into a RAP reimbursement contract with
444 each eligible RAP insurer writing covered policies in this state
445 to provide to the insurer the reimbursement described in this
446 section.
447 Section 4. This act shall take effect July 1, 2026.