Bill Amendment: FL S0542 | 2014 | Regular Session
NOTE: For additional amemendments please see the Bill Drafting List
Bill Title: Flood Insurance
Status: 2014-06-13 - Chapter No. 2014-80, companion bill(s) passed, see SB 1262 (Ch. 2014-98) [S0542 Detail]
Download: Florida-2014-S0542-Senate_Committee_Amendment_906790.html
Bill Title: Flood Insurance
Status: 2014-06-13 - Chapter No. 2014-80, companion bill(s) passed, see SB 1262 (Ch. 2014-98) [S0542 Detail]
Download: Florida-2014-S0542-Senate_Committee_Amendment_906790.html
Florida Senate - 2014 COMMITTEE AMENDMENT Bill No. SB 542 Ì9067909Î906790 LEGISLATIVE ACTION Senate . House . . . . . ————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————— following: 1 Senate Amendment (with title amendment) 2 3 Delete everything after the enacting clause 4 and insert: 5 Section 1. Paragraph (b) of subsection (2) of section 6 627.062, Florida Statutes, is amended to read: 7 627.062 Rate standards.— 8 (2) As to all such classes of insurance: 9 (b) Upon receiving a rate filing, the office shall review 10 the filing to determine if a rate is excessive, inadequate, or 11 unfairly discriminatory. In making that determination, the 12 office shall, in accordance with generally accepted and 13 reasonable actuarial techniques, consider the following factors: 14 1. Past and prospective loss experience within and without 15 this state. 16 2. Past and prospective expenses. 17 3. The degree of competition among insurers for the risk 18 insured. 19 4. Investment income reasonably expected by the insurer, 20 consistent with the insurer’s investment practices, from 21 investable premiums anticipated in the filing, plus any other 22 expected income from currently invested assets representing the 23 amount expected on unearned premium reserves and loss reserves. 24 The commission may adopt rules using reasonable techniques of 25 actuarial science and economics to specify the manner in which 26 insurers calculate investment income attributable to classes of 27 insurance written in this state and the manner in which 28 investment income is used to calculate insurance rates. Such 29 manner must contemplate allowances for an underwriting profit 30 factor and full consideration of investment income that produces 31which producea reasonable rate of return; however, investment 32 income from invested surplus may not be considered. 33 5. The reasonableness of the judgment reflected in the 34 filing. 35 6. Dividends, savings, or unabsorbed premium deposits 36 allowed or returned toFloridapolicyholders, members, or 37 subscribers in this state. 38 7. The adequacy of loss reserves. 39 8. The cost of reinsurance. The office may not disapprove a 40 rate as excessive solely due to the insurer having obtained 41 catastrophic reinsurance to cover the insurer’s estimated 250 42 year probable maximum loss or any lower level of loss. 43 9. Trend factors, including trends in actual losses per 44 insured unit for the insurer making the filing. 45 10. Conflagration and catastrophe hazards, if applicable. 46 11. Projected hurricane losses, if applicable, which must 47 be estimated using a model or method found to be acceptable or 48 reliable by the Florida Commission on Hurricane Loss Projection 49 Methodology, and as further provided in s. 627.0628. 50 12. Projected flood losses, if applicable, which may be 51 estimated using a model, a method, or an average of models or 52 methods determined to be acceptable or reliable by the Florida 53 Commission on Hurricane Loss Projection Methodology, and as 54 further provided in s. 627.0628. 55 13.12.A reasonable margin for underwriting profit and 56 contingencies. 57 14.13.The cost of medical services, if applicable. 58 15.14.Other relevant factors that affect the frequency or 59 severity of claims or expenses. 60 61 The provisions of this subsection do not apply to workers’ 62 compensation, employer’s liability insurance, and motor vehicle 63 insurance. 64 Section 2. Paragraph (b) of subsection (2) and subsection 65 (3) of section 627.0628, Florida Statutes, are amended to read: 66 627.0628 Florida Commission on Hurricane Loss Projection 67 Methodology; public records exemption; public meetings 68 exemption.— 69 (2) COMMISSION CREATED.— 70 (b) The commission shall consist of the following 141271 members: 72 1. The insurance consumer advocate. 73 2. The senior employee of the State Board of Administration 74 responsible for the operations of the Florida Hurricane 75 Catastrophe Fund. 76 3. The Executive Director of the Citizens Property 77 Insurance Corporation. 78 4. The Director of the Division of Emergency Management. 79 5. The actuary member of the Florida Hurricane Catastrophe 80 Fund Advisory Council. 81 6. An employee of the office who is an actuary responsible 82 for property insurance rate filings and who is appointed by the 83 director of the office. 84 7. SevenFivemembers appointed by the Chief Financial 85 Officer, as follows: 86 a. An actuary who is employed full time by a property and 87 casualty insurer that was responsible for at least 1 percent of 88 the aggregate statewide direct written premium for homeowner’s 89 insurance in the calendar year preceding the member’s 90 appointment to the commission. 91 b. An expert in insurance finance who is a full-time member 92 of the faculty of the State University System and who has a 93 background in actuarial science. 94 c. An expert in statistics who is a full-time member of the 95 faculty of the State University System and who has a background 96 in insurance. 97 d. An expert in computer system design who is a full-time 98 member of the faculty of the State University System. 99 e. An expert in meteorology who is a full-time member of 100 the faculty of the State University System and who specializes 101 in hurricanes. 102 f. A licensed professional engineer who is an expert in 103 floodplain management and who is not regularly retained by or on 104 behalf of a property and casualty insurer. 105 g. A meteorologist who specializes in floods. 106 8. A licensed professional structural engineer who is a 107 full-time faculty member in the State University System and who 108 has expertise in wind mitigation techniques. This appointment 109 shall be made by the Governor. 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 accuracy of or 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 to the 117 accuracy or reliability of particular methods, principles, 118 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 accuracy of or reliability of projecting probable 122 maximum loss levels. The commission shall adopt and update 123 findings as to the accuracy or reliability of particular 124 methods, principles, standards, or models related to probable 125 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 using an average for the purpose of 143 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, 2015. 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 structure or on the contents of personal property 176 on a form that has been filed with and approved by the office 177 pursuant to s. 627.410(2) and that may be substantially similar 178 to the form used by the National Flood Insurance Program (NFIP). 179 (1) The Legislature finds that: 180 (a) The National Flood Insurance Program is a federal 181 program that enables property owners in participating 182 communities to purchase flood insurance. A community 183 participates in the federal program by adopting and enforcing 184 floodplain management regulations that meet or exceed federal 185 floodplain management criteria designed to reduce future flood 186 risk to new construction in floodplains. The program was created 187 by Congress in 1968 because insurance covering the peril of 188 flood was often unavailable in the private insurance market and 189 was intended to reduce the amount of financial aid paid by the 190 Federal Government in the aftermath of flood-related disasters. 191 After the creation of the NFIP, flood insurance coverage 192 continued to be generally unavailable for purchase from private 193 market insurance companies. 194 (b) The Biggert-Waters Flood Insurance Reform Act of 2012 195 reauthorized and revised the NFIP. The act increases flood 196 insurance premiums purchased through the program for second 197 homes, business properties, severe repetitive loss properties, 198 and substantially improved damaged properties by requiring 199 premium increases of 25 percent per year until premiums meet the 200 full actuarial cost. Most residences lose their subsidized rates 201 if the property is sold, the policy lapses, repeated and severe 202 flood losses occur, or a new policy is purchased. Policyholders 203 whose communities adopt a new, updated Flood Insurance Rate Map 204 (FIRM) that results in higher rates will experience a 5-year 205 phase-in of rate increases to achieve required rate levels. 206 (c) The Biggert-Waters Flood Insurance Reform Act of 2012 207 also encourages the use and acceptance of private market flood 208 insurance. The Legislature finds, however, that there has been a 209 long-term inadequacy of private market flood insurance available 210 in this state. Such inadequacy suggests that the private market 211 in this state is unlikely to expand unless the Legislature 212 provides multiple options for the regulation of flood insurance. 213 The Legislature also finds that the consumers of this state 214 would benefit from the availability of competitively priced 215 private market flood insurance due to the continued availability 216 of NFIP flood insurance, the likely availability of alternative 217 private market flood insurance coverage options, and the 218 oversight of the Office of Insurance Regulation. 219 (d) The NFIP, as amended by the Biggert-Waters Flood 220 Insurance Reform Act of 2012, will prevent many property owners 221 from obtaining affordable flood insurance coverage in this 222 state. The absence of affordable flood insurance threatens the 223 public health, safety, and welfare and the economic health of 224 this state. Therefore, the state has a compelling public purpose 225 and interest in providing alternatives to coverage from NFIP by 226 promoting the availability of flood insurance from private 227 market insurers at potentially lower premium rates so as to 228 facilitate the remediation, reconstruction, and replacement of 229 damaged or destroyed property in order to reduce or avoid harm 230 to the public health, safety, and welfare, to the economy of 231 this state, and to the revenues of state and local governments 232 which are needed to provide for the public welfare. 233 (2) As used in this section, the term “flood” means a 234 general and temporary condition of partial or complete 235 inundation of 2 acres or more of normally dry land area or of 236 two or more properties, at least one of which is the 237 policyholder’s property, from: 238 (a) Overflow of inland or tidal waters; 239 (b) Unusual and rapid accumulation or runoff of surface 240 waters from any source; 241 (c) Mudflow; or 242 (d) Collapse or subsidence of land along the shore of a 243 lake or similar body of water as a result of erosion or 244 undermining caused by waves or currents of water exceeding 245 anticipated cyclical levels which result in a flood. 246 (3) At a minimum, coverage for the peril of flood must 247 cover a flood as defined in subsection (2). Coverage for the 248 peril of flood may also include water intrusion, as defined by 249 the policy, which originates from outside the structure and is 250 not otherwise covered under the definition of flood. 251 (4) An insurer may offer a flood coverage policy, contract, 252 or endorsement: 253 (a) That has a flood deductible based on a stated dollar 254 amount or a percentage of the coverage amount. At a minimum, an 255 insurer must offer deductible amounts applicable to flood losses 256 that equal the standard deductibles offered under the National 257 Flood Insurance Program; 258 (b) That provides that any flood loss will be adjusted on 259 the basis of: 260 1. The actual cash value of the property; or 261 2. Replacement costs up to the policy limits as provided 262 under s. 627.7011(3); 263 (c) That restricts flood coverage to the principal 264 building, as defined in the applicable policy; 265 (d) In an agreed-upon amount, including coverage limited to 266 the amount of all outstanding mortgages applicable to the 267 covered property. However, if a policy, contract, or endorsement 268 does not limit flood coverage to the replacement cost of the 269 covered property, the contract or endorsement may not include a 270 provision penalizing the policyholder for not insuring the 271 covered property up to replacement cost; or 272 (e) That, as to the peril of flood, does not cover: 273 1. Additional living expenses; 274 2. Personal property or contents; or 275 3. Law and ordinance coverage. However, an insurer, must 276 offer law and ordinance coverage that is comparable to the law 277 and ordinance coverage offered in the standard NFIP policy. A 278 policy, endorsement, or contract that includes the law and 279 ordinance coverage that must be offered under this paragraph 280 must include the following disclosure in uppercase bold 281 lettering of at least 12-point type: LAW AND ORDINANCE COVERAGE 282 UNDER THIS POLICY MIGHT HAVE LIMITATIONS ON WHAT IS COVERED IN 283 THE EVENT OF A LOSS. YOU SHOULD CONSULT WITH YOUR AGENT IF YOU 284 HAVE QUESTIONS ABOUT THE COVERAGE OFFERED UNDER THIS POLICY. 285 (5) Any limitations on flood coverage or policy limits as 286 to the peril of flood, including, but not limited to, flood 287 deductibles or flood coverage limited to the amount of all 288 outstanding mortgages, must be prominently disclosed on the 289 declarations page or face page of the policy in uppercase bold 290 lettering of at least 12-point type and be sufficiently clear so 291 as to be readily understandable by both the agent and the 292 property owner. 293 (a) A policy that limits flood coverage to the amount of 294 all outstanding mortgages must include the statement: “THIS 295 POLICY LIMITS FLOOD COVERAGE TO THE AMOUNT OF THE OUTSTANDING 296 MORTGAGES ON THE PROEPRTY, WHICH MAY RESULT IN HIGH OUT-OF 297 POCKET EXPENSES TO YOU AND MAY PUT YOUR EQUITY IN THIS PROPERTY 298 AT RISK.” 299 (b) A policy that insures a dwelling on the basis of actual 300 cash value must in include the statement: “THIS POLICY PAYS YOU 301 THE DEPRECIATED VALUE OF YOUR PROPERTY THAT IS DAMAGED BY FLOOD, 302 WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU IF YOUR 303 PROPERTY NEEDS TO BE REPAIRED OR REPLACED.” 304 (6) An insurer may establish and use flood coverage rates 305 in accordance with the rate standards under s. 627.062. For 306 flood coverage rates filed with the office before July 1, 2017, 307 the insurer may also elect one or more of the following options: 308 (a) In accordance with the rates, rating schedules, or 309 rating manuals filed by the insurer with the office which allow 310 the insurer a reasonable rate of return on flood coverage 311 written in this state. Flood coverage rates established under 312 this paragraph are not subject to s. 627.062(2)(a) and (f). An 313 insurer shall notify the office of any change to rates within 30 314 days after the effective date of the change. The notice must 315 include the name of the insurer and the average statewide 316 percentage change in rates. Actuarial data with regard to rates 317 for flood coverage must be maintained by the insurer for 2 years 318 after the effective date of such rate change and is subject to 319 examination by the office. The office may require the insurer to 320 incur the costs associated with an examination. Upon 321 examination, the office, in accordance with generally accepted 322 and reasonable actuarial techniques, shall consider the rate 323 factors and standards specified in s. 627.062 to determine if 324 the rate is excessive, inadequate, or unfairly discriminatory. 325 (b) Through individual risk rating as provided in s. 326 627.062(3)(a) and (b). 327 (c) With the written consent of the insured signed before 328 the policy inception date and filed with the insurer, using a 329 flood coverage rate that has not been approved by the office. 330 The signed consent form must notify the insured that the rate is 331 not subject to the approval of the office. A copy of the form 332 shall be maintained by the insurer for 3 years and must be 333 available for review by the office. An insurer is not required 334 to obtain subsequent written consents upon renewal, but shall 335 provide notice at each renewal that the rate is not subject to 336 office approval. 337 (7) A policy, endorsement, or contract providing coverage 338 for the peril of flood must provide notice that flood insurance 339 coverage is available from the NFIP. 340 (8) A surplus lines agent may export a contract or 341 endorsement providing flood coverage of $1 million or more to an 342 eligible surplus lines insurer without making a diligent effort 343 to seek such coverage from three or more authorized insurers 344 under s. 626.916(1)(a). This subsection expires July 1, 2017. 345 (9) A policy, endorsement, or contract providing coverage 346 for the peril of flood must require the insurer to give 45 days’ 347 prior written notice of cancellation or nonrenewal to the 348 insured and any regulated lending institution or federal agency 349 that is a mortgagee. An insurer or insured may cancel during the 350 term of the policy or upon renewal if the cancellation is for a 351 valid reason under the NFIP. 352 (10) In addition to any other applicable requirements, an 353 insurer providing flood coverage in this state must: 354 (a) Notify the office at least 30 days before writing flood 355 insurance in this state; and 356 (b) File a plan of operation and financial projections or 357 revisions to such plan, as applicable, with the office, unless 358 the insurer maintains at least $35 million in surplus and 359 provides coverage as an endorsement to an existing property 360 insurance form. 361 (11) With respect to the regulation of flood insurance 362 coverage written in this state by private insurers, this section 363 supersedes any other provision in the Florida Insurance Code in 364 the event of a conflict. 365 Section 4. If federal law or rule requires a certification 366 by a state insurance regulatory official as a condition of 367 qualifying for private flood insurance or disaster assistance, 368 the Commissioner of the Office of Insurance Regulation shall 369 provide such certification, and such certification is not 370 subject to review under chapter 120. 371 Section 5. This act shall take effect upon becoming a law. 372 373 ================= T I T L E A M E N D M E N T ================ 374 And the title is amended as follows: 375 Delete everything before the enacting clause 376 and insert: 377 A bill to be entitled 378 An act relating to flood insurance; amending s. 379 627.062, F.S.; adding projected flood losses to the 380 factors that must be considered by the Office of 381 Insurance Regulation in reviewing certain rate 382 filings; amending s. 627.0628, F.S.; increasing the 383 membership of the Florida Commission on Hurricane Loss 384 Projection Methodology to include an engineer who is 385 an expert in floodplain management and a meteorologist 386 who specializes in floods; requiring the commission to 387 adopt standards and guidelines relating to flood loss 388 by a certain date; creating s. 627.715, F.S.; 389 authorizing insurers to offer flood insurance in this 390 state; providing legislative findings; defining the 391 term “flood”; establishing the minimum coverage 392 requirements for such policies; providing coverage 393 limitations that an insurer may include in such 394 policies; requiring that certain limitations be noted 395 on the policy declarations or face page; providing the 396 insurer with rate options; requiring the insurer to 397 provide notice that flood insurance is available from 398 the National Flood Insurance Program; allowing an 399 insurer to export a contract or endorsement of a 400 certain amount to a surplus lines insurer without 401 meeting certain requirements; providing prior notice 402 requirements for cancellation or nonrenewal of a 403 policy; requiring the insurer to notify the office 404 before writing flood insurance and to file a plan of 405 operation with the office; providing that any 406 conflicts with other provisions of the Florida 407 Insurance Code are preempted by this section; 408 requiring the Commissioner of the Office of Insurance 409 Regulation to provide certification that a condition 410 qualifies for flood insurance or disaster assistance; 411 providing an effective date.