Bill Amendment: FL S1334 | 2020 | Regular Session
NOTE: For additional amemendments please see the Bill Drafting List
Bill Title: Financial Services
Status: 2020-03-14 - Died in Banking and Insurance [S1334 Detail]
Download: Florida-2020-S1334-Senate_Committee_Amendment_647130.html
Bill Title: Financial Services
Status: 2020-03-14 - Died in Banking and Insurance [S1334 Detail]
Download: Florida-2020-S1334-Senate_Committee_Amendment_647130.html
Florida Senate - 2020 COMMITTEE AMENDMENT Bill No. SB 1334 Ì647130rÎ647130 LEGISLATIVE ACTION Senate . House . . . . . ————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————— The Committee on Banking and Insurance (Rouson) recommended the following: 1 Senate Amendment (with directory and title amendments) 2 3 Delete lines 149 - 163 4 and insert: 5 (b) The State Board of Administration shall select an 6 independent consultant to develop a formula for determining the 7 actuarially indicated premium to be paid to the fund. The rate 8 formula mustshallspecify, for each zip code or other limited 9 geographical area, the amount of premium to be paid by an 10 insurer for each $1,000 of insured value under covered policies 11 in that zip code or other area. In establishing premiums, the 12 board shall consider the coverage elected under paragraph (4)(b) 13 and any factors that tend to enhance the actuarial 14 sophistication of ratemaking for the fund, including 15 deductibles, type of construction, type of coverage provided, 16 relative concentration of risks, and other such factors deemed 17 by the board to be appropriate. Beginning in the 2020-2021 18 contract year, the fund’s formula may provide for a rapid cash 19 build-up factor of up to 25 percent only when the available cash 20 balance as of December 31 of the previous year is less than 70 21 percent of the statutory capacity. For the purpose of 22 calculating the rapid cash build-up factor trigger, the 23 available cash balance may not be reduced by reserves for 24 projected participating insurer reimbursementsThe formula must25provide for a cash build-up factor.For the 2009-2010 contract26year, the factor is 5 percent. For the 2010-2011 contract year,27the factor is 10 percent. For the 2011-2012 contract year, the28factor is 15 percent. For the 2012-2013 contract year, the29factor is 20 percent. For the 2013-2014 contract year and30thereafter, the factor is 25 percent.The rate formula may 31 provide for a procedure to determine the premiums to be paid by 32 new insurers that begin writing covered policies after the 33 beginning of a contract year, taking into consideration when the 34 insurer starts writing covered policies, the potential exposure 35 of the insurer, the potential exposure of the fund, the 36 administrative costs to the insurer and to the fund, and any 37 other factors deemed appropriate by the board. The formula must 38 be approved by unanimous vote of the board. The board may, at 39 any time, revise the formula pursuant to the procedure provided 40 in this paragraph. 41 (f) The Office of Insurance Regulation shall retain an 42 independent consultant to audit the formula developed under this 43 subsection beginning with the 2021 contract year and every 3 44 years thereafter. The audit may not be performed by the 45 independent consultant who developed the formula. The audit must 46 evaluate whether the formula uses actuarially sound principles 47 and whether insurers are paying an actuarially indicated 48 premium. The Office of Insurance Regulation shall also recommend 49 factors, if any, which would enhance the actuarial 50 sophistication of ratemaking for the fund. The Office of 51 Insurance Regulation shall report the findings of the audit and 52 any recommendation to the Financial Services Commission, the 53 President of the Senate, and the Speaker of the House of 54 Representatives on or before March 1 of the year after the 55 contract year audited. 56 (17) TEMPORARY EMERGENCY OPTIONS FOR ADDITIONAL COVERAGE.— 57 (a) Findings and intent.— 58 1. The Legislature finds that: 59 a. Because of temporary disruptions in the market for 60 catastrophic reinsurance, many property insurers were unable to 61 procure affordable reinsurance for the 2019 hurricane season 62 with an attachment point below the insurers’ respective Florida 63 Hurricane Catastrophe Fund attachment points, were unable to 64 procure sufficient amounts of such reinsurance, or were able to 65 procure such reinsurance only by incurring substantially higher 66 costs than in prior years. 67 b. The reinsurance market problems were responsible, at 68 least in part, for substantial premium increases to many 69 consumers and potential increases in the number of policies 70 issued by the Citizens Property Insurance Corporation. 71 c. It is likely that the reinsurance market disruptions 72 will not significantly abate before the 2020 hurricane season. 73 2. It is the intent of the Legislature to create a 74 temporary emergency program, applicable to the 2020, 2021, and 75 2022 hurricane seasons, to address these market disruptions and 76 enable insurers, at their option, to procure additional coverage 77 from the Florida Hurricane Catastrophe Fund. 78 (b) Applicability of other provisions of this section.—All 79 other provisions of this section and the rules adopted under 80 this section apply to the program created by this subsection 81 unless specifically superseded by this subsection. 82 (c) Optional coverage.—For the contract year commencing 83 June 1, 2020, and ending May 31, 2021, the contract year 84 commencing June 1, 2021, and ending May 31, 2022, and the 85 contract year commencing June 1, 2022, and ending May 31, 2023, 86 the board shall offer for each of such years the optional 87 coverage as provided in this subsection. 88 (d) Additional definitions.—As used in this subsection, the 89 term: 90 1. “TEACO addendum” means an addendum to the reimbursement 91 contract reflecting the obligations of the fund and TEACO 92 insurers under the program created by this subsection. 93 2. “TEACO insurer” means an insurer that has opted to 94 obtain coverage under the TEACO options in addition to the 95 coverage provided to the insurer under its reimbursement 96 contract. 97 3. “TEACO options” means the temporary emergency additional 98 coverage options created under this subsection. 99 4. “TEACO reimbursement premium” means the premium charged 100 by the fund for coverage provided under the TEACO options. 101 5. “TEACO retention” means the amount of losses below which 102 a TEACO insurer is not entitled to reimbursement from the fund 103 under the TEACO option selected. A TEACO insurer’s retention 104 options shall be calculated as follows: 105 a. The board shall calculate and report to each TEACO 106 insurer the TEACO retention multiples. There shall be three 107 TEACO retention multiples for defining coverage. Each multiple 108 shall be calculated by dividing $3 billion, $4 billion, or $5 109 billion by the total estimated TEACO reimbursement premium, 110 assuming all insurers selected that option. The total estimated 111 TEACO reimbursement premium, for purposes of the calculation 112 under this sub-subparagraph, shall be calculated using the 113 assumption that all insurers have selected a specific TEACO 114 retention multiple option and have selected the 90-percent 115 coverage level. 116 b. The TEACO retention multiples as determined under sub 117 subparagraph a. shall be adjusted to reflect the coverage level 118 elected by the insurer. For insurers electing the 90-percent 119 coverage level, the adjusted retention multiple is 100 percent 120 of the amount determined under sub-subparagraph a. For insurers 121 electing the 75-percent coverage level, the retention multiple 122 is 120 percent of the amount determined under sub-subparagraph 123 a. For insurers electing the 45-percent coverage level, the 124 adjusted retention multiple is 200 percent of the amount 125 determined under sub-subparagraph a. 126 c. An insurer shall determine its provisional TEACO 127 retention by multiplying its provisional TEACO reimbursement 128 premium by the applicable adjusted TEACO retention multiple and 129 shall determine its actual TEACO retention by multiplying its 130 actual TEACO reimbursement premium by the applicable adjusted 131 TEACO retention multiple. 132 d. For a TEACO insurer that experiences multiple covered 133 events causing loss during the contract year, the insurer’s full 134 TEACO retention shall be applied to each of the covered events 135 causing the two largest losses for that insurer. For other 136 covered events resulting in losses, the TEACO option does not 137 apply and the insurer’s retention shall be one-third of the full 138 retention as calculated under paragraph (2)(e). 139 (e) TEACO addendum.— 140 1. The TEACO addendum shall provide for reimbursement of 141 TEACO insurers for covered events occurring during the contract 142 year in exchange for the TEACO reimbursement premium paid into 143 the fund under paragraph (f). Any insurer writing covered 144 policies has the option of choosing to accept the TEACO addendum 145 for any of the three contract years that the coverage is 146 offered. 147 2. The TEACO addendum shall contain a promise by the board 148 to reimburse the TEACO insurer for 45 percent, 75 percent, or 90 149 percent of its losses from each covered event in excess of the 150 insurer’s TEACO retention, plus 10 percent of the reimbursed 151 losses to cover loss adjustment expenses. The percentage shall 152 be the same as the coverage level selected by the insurer under 153 paragraph (4)(b). 154 3. The TEACO addendum shall provide that reimbursement 155 amounts shall not be reduced by reinsurance paid or payable to 156 the insurer from other sources. 157 4. The TEACO addendum shall also provide that the 158 obligation of the board with respect to all TEACO addenda shall 159 not exceed an amount equal to two times the difference between 160 the industry retention level calculated under paragraph (2)(e) 161 and the $3 billion, $4 billion, or $5 billion industry TEACO 162 retention level options actually selected, but in no event may 163 the board’s obligation exceed the actual claims-paying capacity 164 of the fund plus the additional capacity created in paragraph 165 (g). If the actual claims-paying capacity and the additional 166 capacity created under paragraph (g) fall short of the board’s 167 obligations under the reimbursement contract, each insurer’s 168 share of the fund’s capacity shall be prorated based on the 169 premium an insurer pays for its normal reimbursement coverage 170 and the premium paid for its optional TEACO coverage as each 171 such premium bears to the total premiums paid to the fund times 172 the available capacity. 173 5. The priorities, schedule, and method of reimbursements 174 under the TEACO addendum shall be the same as provided under 175 subsection (4). 176 6. A TEACO insurer’s maximum reimbursement under the TEACO 177 addendum shall be calculated by multiplying the insurer’s share 178 of the estimated total TEACO reimbursement premium as calculated 179 under sub-subparagraph (d)5.a. by an amount equal to two times 180 the difference between the industry retention level calculated 181 under paragraph (2)(e) and the $3 billion, $4 billion, or $5 182 billion industry TEACO retention level specified in sub 183 subparagraph (d)5.a. as selected by the TEACO insurer. 184 (f) TEACO reimbursement premiums.— 185 1. Each TEACO insurer shall pay to the fund, in the manner 186 and at the time provided in the reimbursement contract for 187 payment of reimbursement premiums, a TEACO reimbursement premium 188 calculated as specified in this paragraph. 189 2. The TEACO reimbursement premiums shall be calculated 190 based on the assumption that if all insurers entering into 191 reimbursement contracts under subsection (4) also accepted the 192 TEACO option: 193 a. The industry TEACO reimbursement premium associated with 194 the $3 billion retention option would be equal to 85 percent of 195 the difference between the industry retention level calculated 196 under paragraph (2)(e) and the $3 billion industry TEACO 197 retention level. 198 b. The TEACO reimbursement premium associated with the $4 199 billion retention option would be equal to 80 percent of the 200 difference between the industry retention level calculated under 201 paragraph (2)(e) and the $4 billion industry TEACO retention 202 level. 203 c. The TEACO reimbursement premium associated with the $5 204 billion retention option would be equal to 75 percent of the 205 difference between the industry retention level calculated under 206 paragraph (2)(e) and the $5 billion industry TEACO retention 207 level. 208 3. Each insurer’s TEACO reimbursement premium shall be 209 calculated based on its share of the total TEACO reimbursement 210 premiums based on its coverage selection under the TEACO 211 addendum. 212 (g) Effect on claims-paying capacity of the fund.—For the 213 contract term commencing June 1, 2020, the contract year 214 commencing June 1, 2021, and the contract term beginning June 1, 215 2022, the program created by this subsection shall increase the 216 claims-paying capacity of the fund as provided in subparagraph 217 (4)(c)1. by an amount equal to two times the difference between 218 the industry retention level calculated under paragraph (2)(e) 219 and the $3 billion industry TEACO retention level specified in 220 sub-subparagraph (d)5.a. The additional capacity shall apply 221 only to the additional coverage provided by the TEACO option and 222 shall not otherwise affect any insurer’s reimbursement from the 223 fund. 224 225 ====== D I R E C T O R Y C L A U S E A M E N D M E N T ====== 226 And the directory clause is amended as follows: 227 Delete lines 97 - 99 228 and insert: 229 Section 1. Paragraph (c) of subsection (2) and paragraph 230 (b) of subsection (5) of section 215.555, Florida Statutes, are 231 amended, and paragraph (f) of subsection (5) and subsection (17) 232 are added to that section, to read: 233 234 ================= T I T L E A M E N D M E N T ================ 235 And the title is amended as follows: 236 Delete lines 6 - 12 237 and insert: 238 policies; providing that the fund’s rate formula may 239 provide for a rapid cash build-up factor only if 240 certain conditions are met; specifying a limitation on 241 calculating the trigger for the cash build-up factor; 242 requiring the Office of Insurance Regulation to retain 243 an independent consultant to audit the fund’s 244 reimbursement premium formula at specified intervals; 245 specifying requirements for the audit; requiring the 246 office to report audit findings and certain 247 recommendations to the Financial Services Commission 248 and the Legislature; providing legislative findings 249 and intent; providing applicability; requiring the 250 State Board of Administration to offer temporary 251 emergency additional coverage options (TEACO) to 252 insurers during specified contract years; defining 253 terms; specifying requirements for the TEACO addendum 254 to the reimbursement contract; specifying requirements 255 for, and calculations of, TEACO reimbursement 256 premiums; specifying the effect of the TEACO program 257 on the fund’s claims-paying capacity; amending s. 258 319.30,