Bill Text: FL S0346 | 2014 | Regular Session | Comm Sub
Bill Title: Florida Insurance Guaranty Association
Spectrum: Slight Partisan Bill (Republican 2-1)
Status: (Failed) 2014-05-02 - Died in Commerce and Tourism [S0346 Detail]
Download: Florida-2014-S0346-Comm_Sub.html
Florida Senate - 2014 CS for SB 346 By the Committee on Banking and Insurance; and Senator Lee 597-01863-14 2014346c1 1 A bill to be entitled 2 An act relating to the Florida Insurance Guaranty 3 Association; amending s. 631.54, F.S.; defining the 4 term “assessment year”; amending s. 631.57, F.S.; 5 revising provisions relating to the levying of 6 assessments on insurers; specifying the conditions 7 under which such assessments are paid; revising 8 procedures and timeframes for levying the assessments; 9 amending s. 631.64, F.S.; requiring charges or 10 recoupments to be displayed separately on premium 11 bills to policyholders and prohibiting their inclusion 12 in rates; amending ss. 627.727 and 631.55, F.S.; 13 conforming cross-references; providing an effective 14 date. 15 16 Be It Enacted by the Legislature of the State of Florida: 17 18 Section 1. Present subsections (2) through (9) of section 19 631.54, Florida Statutes, are renumbered as subsections (3) 20 through (10), respectively, and a new subsection (2) is added to 21 that section, to read: 22 631.54 Definitions.—As used in this part: 23 (2) “Assessment year” means the 12-month period specified 24 in an order issued by the office directing insurers to pay an 25 assessment to the association. Upon entry of the order, insurers 26 may begin collecting assessments from policyholders for the 27 assessment year. The assessment year begins on the first day of 28 each quarter, beginning January 1. 29 Section 2. Subsection (3) of section 631.57, Florida 30 Statutes, is amended to read: 31 631.57 Powers and duties of the association.— 32 (3)(a) To the extent necessary to securethefunds for the 33 respective accounts for the payment of covered claims, to pay 34 the reasonable costs to administer such accountsthe same, and 35to the extent necessaryto securethefunds for the account 36 specified in s. 631.55(2)(b) or to retire indebtedness, 37 including, without limitation, the principal, redemption 38 premium, if any, and interest on, and related costs of issuance 39 of, bonds issued under s. 631.695 and the funding ofany40 reserves and other payments required under the bond resolution 41 or trust indenture pursuant to which such bonds have been 42 issued, the office, upon certification of the board of 43 directors, shall levy assessments initially estimated in the 44 proportion that each insurer’s net direct written premiums in 45 this state in the classes protected by the account bears to the 46 total of said net direct written premiums received in this state 47 by all such insurers for the preceding calendar year for the 48 kinds of insurance included within such account. Assessments 49 shall be remitted to and administered by the board of directors 50 in the manner specified by the approved plan and paragraph (f). 51 Each insurer so assessed shall have at least 30 days’ written 52 notice as to the date the initial assessment payment is due and 53 payable. Every assessment shall bemade asa uniform percentage 54 applicable to the net direct written premiums of each insurer in 55 the kinds of insurance included within the account in which the 56 assessment is made. The assessments levied against any insurer 57 mayshallnot exceed in any one year more than 2 percent of that 58 insurer’s net direct written premiums in this state for the 59 kinds of insurance included within such account during the 60 calendar year next preceding the date of such assessments. 61 (b) If sufficient funds from such assessments, together 62 with funds previously raised, are not available in any one year 63 in the respective account to make all the payments or 64 reimbursements then owing to insurers, the funds available shall 65 be prorated and the unpaid portionshall bepaid as soon 66thereafteras funds become available. 67 (c) The Legislature finds and declares that all assessments 68 paid by an insurer or insurer group as a result of a levy by the 69 office, including assessments levied pursuant to paragraph (a) 70 and emergency assessments levied pursuant to paragraph (e), 71 constitute advances of funds from the insurer to the 72 association. An insurer may fully recoup such advances by 73 applying the uniform assessment percentage levied by the office 74 to alla separate recoupment factor to the premium ofpolicies 75 of the same kind or line as were considered by the office in 76 determining the assessment liability of the insurer or insurer 77 group as set forth in paragraph (f). 78 1. Assessments levied under subparagraph (f)1. are paid 79 before policy surcharges are collected and result in a 80 receivable for policy surcharges collected in the future. This 81 amount, to the extent it is likely that it will be realized, 82 meets the definition of an admissible asset as specified in the 83 National Association of Insurance Commissioners’ Statement of 84 Statutory Accounting Principles No. 4. The asset shall be 85 established and recorded separately from the liability 86 regardless of whether it is based on a retrospective or 87 prospective premium-based assessment. If an insurer is unable to 88 fully recoup the amount of the assessment because of a reduction 89 in writings or withdrawal from the market, the amount recorded 90 as an asset shall be reduced to the amount reasonably expected 91 to be recouped. 92 2. Assessments levied under subparagraph (f)2. are paid 93 after policy surcharges are collected so that the recognition of 94 assets is based on actual premium written offset by the 95 obligation to the association. 96 (d)NoState funds may notof any kind shallbe allocated 97 or paid to thesaidassociation or any of its accounts. 98 (e)1.a.In addition to assessmentsotherwiseauthorized in 99 paragraph (a), and to the extent necessary to secure the funds 100 for the account specified in s. 631.55(2)(b) for the direct 101 payment of covered claims of insurers rendered insolvent by the 102 effects of a hurricane and to pay the reasonable costs to 103 administer such claims, or to retire indebtedness, including, 104 without limitation, the principal, redemption premium, if any, 105 and interest on, and related costs of issuance of, bonds issued 106 under s. 631.695 and the funding of any reserves and other 107 payments required under the bond resolution or trust indenture 108 pursuant to which such bonds have been issued, the office, upon 109 certification of the board of directors, shall levy emergency 110 assessments upon insurers holding a certificate of authority. 111 The emergency assessments payable under this paragraph by any 112 insurer mayshallnot exceed in any single year more than 2 113 percent of that insurer’s direct written premiums, net of 114 refunds, in this state during the preceding calendar year for 115 the kinds of insurance within the account specified in s. 116 631.55(2)(b). 117 2.b.AnyEmergency assessments authorized under this 118 paragraph shall be levied by the office upon insurers referred 119 to in subparagraph 1.sub-subparagraph a., upon certification as 120 to the need for such assessments by the board of directors. If 121In the eventthe boardof directorsparticipates in the issuance 122 of bonds in accordance with s. 631.695, emergency assessments 123 shall be levied in each year that bonds issued under s. 631.695 124 and secured by such emergency assessments are outstanding,in 125suchamounts up to such 2-percent limit as required in order to 126 provide for the full and timely payment of the principal of, 127 redemption premium, if any, and interest on, and related costs 128 of issuance of, such bonds. The emergency assessmentsprovided129for in this paragraphare assigned and pledged to the 130 municipality, county, or legal entity issuing bonds under s. 131 631.695 for the benefit of the holders of such bonds,in order 132to enable such municipality, county, or legal entityto provide 133 for the payment of the principal of, redemption premium, if any, 134 and interest on such bonds, the cost of issuance of such bonds, 135 and the funding of any reserves and other payments required 136 under the bond resolution or trust indenture pursuant to which 137 such bonds have been issued, withoutthe necessity of any138 further action by the association, the office, or any other 139 party. IfTo the extentbonds are issued under s. 631.695 and 140 the association determines to secure such bonds by a pledge of 141 revenues received from the emergency assessments, such bonds, 142 upon such pledge of revenues, shall be secured by and payable 143 from the proceeds of such emergency assessments, and the 144 proceeds of emergency assessments levied under this paragraph 145 shall be remitted directly to and administered by the trustee or 146 custodian appointed for such bonds. 147 3.c.Emergency assessments used to defease bonds issued 148 under this partparagraphmay be payable in a single payment or, 149 at the option of the association, may be payable in 12 monthly 150 installments with the first installment being due and payable at 151 the end of the month after an emergency assessment is levied and 152 subsequent installments being due bynot later thanthe end of 153 each succeeding month. 154 4.d.If emergency assessments are imposed, the report 155 required by s. 631.695(7) mustshallinclude an analysis of the 156 revenues generated from the emergency assessments imposed under 157 this paragraph. 158 5.e.If emergency assessments are imposed, the references 159 in sub-subparagraph (1)(a)3.b. and s. 631.695(2) and (7) to 160 assessments levied under paragraph (a) mustshallinclude 161 emergency assessments imposed under this paragraph. 162 6.2.If the board of directors participates in the issuance 163 of bonds in accordance with s. 631.695, an annual assessment 164 under this paragraph shall continue while the bonds issued with 165 respect to which the assessment was imposed are outstanding, 166 including any bonds the proceeds of which were used to refund 167 bonds issued pursuant to s. 631.695, unless adequate provision 168 has been made for the payment of the bonds in the documents 169 authorizing the issuance of such bonds. 170 7.3.Emergency assessments under this paragraph are not 171 premium and are not subject to the premium tax, to any fees, or 172 to any commissions. An insurer is liable for all emergency 173 assessments that the insurer collects and shall treat the 174 failure of an insured to pay an emergency assessment as a 175 failure to pay the premium. An insurer is not liable for 176 uncollectible emergency assessments. 177 (f)The recoupment factor applied to policies in accordance178with paragraph (c) shall be selected by the insurer or insurer179group so as to provide for the probable recoupment of both180assessments levied pursuant to paragraph (a) and emergency181assessments over a period of 12 months, unless the insurer or182insurer group, at its option, elects to recoup the assessment183over a longer period. The recoupment factor shall apply to all184policies of the same kind or line as were considered by the185office in determining the assessment liability of the insurer or186insurer group issued or renewed during a 12-month period. If the187insurer or insurer group does not collect the full amount of the188assessment during one 12-month period, the insurer or insurer189group may apply recalculated recoupment factors to policies190issued or renewed during one or more succeeding 12-month191periods. If, at the end of a 12-month period, the insurer or192insurer group has collected from the combined kinds or lines of193policies subject to assessment more than the total amount of the194assessment paid by the insurer or insurer group, the excess195amount shall be disbursed as follows:196 1. The association, office, and insurers remitting 197 assessments pursuant to paragraph (a) or (e) must comply with 198 the following: 199 a. In the order levying an assessment, the office shall 200 specify the actual percentage amount to be collected uniformly 201 from all the policyholders of insurers subject to the assessment 202 and the date on which the assessment year begins, which may not 203 begin before 90 days after the association board certifies such 204 an assessment. 205 b. Insurers shall make an initial payment to the 206 association before the beginning of the assessment year, on or 207 before the date specified in the order of the office. 208 c. Insurers that have written insurance in the calendar 209 year before the year in which the assessment is certified by the 210 board shall make an initial payment based on the net direct 211 written premium amount from the prior calendar year as set forth 212 in the insurers annual statement, multiplied by the uniform 213 percentage of premium specified in the order issued by the 214 office. Insurers that have not written insurance in the prior 215 calendar year in any of the lines under the account which are 216 being assessed, but which are writing insurance as of, or after, 217 the date the board certifies the assessment to the office, shall 218 pay an amount based on a good faith estimate of the amount of 219 net direct written premium anticipated to be written in the 220 subject lines of business for the assessment year, multiplied by 221 the uniform percentage of premium specified in the order issued 222 by the office. 223 d. Insurers shall file a reconciliation report with the 224 association within 45 days after the end of the assessment year 225 which indicates the amount of the initial payment to the 226 association before the assessment year, whether such amount was 227 based on net direct written premium contained in a prior 228 calendar year annual statement or a good faith projection, the 229 amount actually collected during the assessment year, and such 230 other information contained on a form adopted by the association 231 and provided to the insurers in advance. If the insurer 232 collected from policyholders more than the amount initially 233 paid, the insurer shall pay the excess amount to the 234 association. If the insurer collected from policyholders an 235 amount which is less than the amount initially paid to the 236 association, the association shall credit the insurer that 237 amount against future assessments. Such payment reconciliation 238 report, and any payment of excess amounts collected from 239 policyholders, shall be completed and remitted to the 240 association within 90 days after the end of the assessment year. 241 The association shall send a final reconciliation report on all 242 insurers to the office within 120 days after each assessment 243 year. 244 e. Insurers remitting reconciliation reports under this 245 paragraph to the association are subject to s. 626.9541(1)(e). 246 f. Assessments levied under this subsection are levied upon 247 insurers. This subsection does not create a cause of action by a 248 policyholder with respect to the levying of, or a policyholder’s 249 duty to pay, such assessments.If the excess amount does not250exceed 15 percent of the total assessment paid by the insurer or251insurer group, the excess amount shall be remitted to the252association within 60 days after the end of the 12-month period253in which the excess recoupment charges were collected.254 2. The association may use a monthly installment method 255 instead of the method described in sub-subparagraphs (f)1.b and 256 c. or in combination thereof based on the association’s 257 projected cash flow. If the association projects that it has 258 cash on hand for the payment of anticipated claims in the 259 applicable account for at least 6 months, the board may make an 260 estimate of the assessment needed and may recommend to the 261 office the assessment percentage that may be collected as a 262 monthly assessment. The office may, in the order levying the 263 assessment on insurers, specify that the assessment is due and 264 payable monthly as the funds are collected from insureds 265 throughout the assessment year, in which case the assessment 266 shall be a uniform percentage of premium collected during the 267 assessment year and shall be collected from all policyholders 268 with policies in the classes protected by the account. All 269 insurers shall collect the assessment without regard to whether 270 the insurers reported premium in the year preceding the 271 assessment. Insurers are not required to advance funds if the 272 association and the office elect to use the monthly installment 273 option. All funds collected shall be retained by the association 274 for the payment of current or future claims.If the excess275amount exceeds 15 percent of the total assessment paid by the276insurer or insurer group, the excess amount shall be returned to277the insurer’s or insurer group’s current policyholders by278refunds or premium credits. The association shall use any279remitted excess recoupment amounts to reduce future assessments.280 (g) Amounts recouped pursuant to this subsection for 281 assessments levied under paragraph (a) due to insolvencies on or 282 after July 1, 2010, are considered premium solely for premium 283 tax purposes and are not subject to fees or commissions. 284 However, insurers shall treat the failure of an insured to pay a 285 recoupment charge as a failure to pay the premium. 286(h) At least 15 days before applying the recoupment factor287to any policies, the insurer or insurer group shall file with288the office a statement for informational purposes only setting289forth the amount of the recoupment factor and an explanation of290how the recoupment factor will be applied. Such statement shall291include documentation of the assessment paid by the insurer or292insurer group and the arithmetic calculations supporting the293recoupment factor. The insurer or insurer group may use the294recoupment factor at any time after the expiration of the 15-day295period. The insurer or insurer group need submit only one296informational statement for all lines of business using the same297recoupment factor.298 (h)(i)WithinNo later than90 days after the insurer or 299 insurer group has completed the recoupment process, the insurer 300 or insurer group shall file with the office, for information 301 purposes only, a final accounting report documenting the 302 recoupment. The report mustshallprovide the amounts of 303 assessments paid by the insurer or insurer group, the amounts 304 and percentages recouped by year from each affected line of 305 business, and the direct written premium subject to recoupment 306 by year. The insurer or insurer group need submit only one 307 report for all lines of business using the same recoupment 308 factor. 309 Section 3. Section 631.64, Florida Statutes, is amended to 310 read: 311 631.64 Recognition of assessments in rates.—The rates and 312 premiums charged for insurance policies to which this part 313 applies may include separate amounts sufficient to recoup a sum 314 equal to the amounts paid or payable to the association by the 315 member insurer less any amounts returned to the member insurer 316 by the association, and such rates mayshallnot be deemed 317 excessive because they contain an amount reasonably calculated 318 to recoup assessments paid by the member insurer. Charges or 319 recoupments shall be separately displayed on premium bills to 320 enable policyholders to determine the amount charged for 321 association assessments, and may not be included in rates filed 322 and approved by the office. 323 Section 4. Subsection (5) of section 627.727, Florida 324 Statutes, is amended to read: 325 627.727 Motor vehicle insurance; uninsured and underinsured 326 vehicle coverage; insolvent insurer protection.— 327 (5) Any person having a claim against an insolvent insurer 328 as defined in s. 631.54(6)underthe provisions ofthis section 329 shall present such claim for payment to the Florida Insurance 330 Guaranty Association only. In the event of a payment to aany331 person in settlement of a claim arising underthe provisions of332 this section, the association is not subrogated or entitled to 333anyrecovery against the claimant’s insurer. The association, 334 however, has the rights of recovery as set forth in chapter 631 335 in the proceeds recoverable from the assets of the insolvent 336 insurer. 337 Section 5. Subsection (1) of section 631.55, Florida 338 Statutes, is amended to read: 339 631.55 Creation of the association.— 340 (1) There is created a nonprofit corporation to be known as 341 the “Florida Insurance Guaranty Association, Incorporated.” All 342 insurers defined as member insurers in s. 631.54(7)shall be 343 members of the association as a condition of their authority to 344 transact insurance in this state, and, further, as a condition 345 of such authority, an insurer mustshallagree to reimburse the 346 association for all claim payments the association makes on the 347saidinsurer’s behalf if such insurer is subsequently 348 rehabilitated. The association shall perform its functions under 349 a plan of operation established and approved under s. 631.58 and 350 shall exercise its powers through a board of directors 351 established under s. 631.56. The corporation shall have all 352 those powers granted or permitted nonprofit corporations, as 353 provided in chapter 617. 354 Section 6. This act shall take effect July 1, 2014.