October 22, 2020
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_h0949__
HB 949

1
A bill to be entitled
2An act relating to the Florida Hurricane Catastrophe Fund;
3amending s. 215.555, F.S.; revising the definition of the
4term "retention"; defining the term "contract year";
5revising contract year designations for reimbursement
6contracts to conform; increasing a limitation on the
7claims-paying capacity of the fund under certain
8circumstances; authorizing the State Board of
9Administration to calculate estimated claims-paying
10capacity of the fund for specific contract years; revising
11contract year designations for reimbursement premiums to
12conform; revising contract year designations for temporary
13increase in coverage limit options and the TICL options
14addendum to conform; providing legislative intent;
15providing timing requirements for the board to adopt
16reimbursement contracts; providing timing requirements for
17insurers to execute reimbursement contracts; providing
18capacity, coverage, and retention information publication
19requirements for the board; providing an effective date.
20
21Be It Enacted by the Legislature of the State of Florida:
22
23     Section 1.  Paragraph (e) of subsection (2), paragraphs
24(b), (c), and (d) of subsection (4), paragraph (b) of subsection
25(5), and paragraphs (c) through (g) of subsection (17) of
26section 215.555, Florida Statutes, are amended, paragraph (o) is
27added to subsection (2), and subsection (18) is added to that
28section, to read:
29     215.555  Florida Hurricane Catastrophe Fund.-
30     (2)  DEFINITIONS.-As used in this section:
31     (e)  "Retention" means the amount of losses below which an
32insurer is not entitled to reimbursement from the fund. An
33insurer's retention shall be calculated as follows:
34     1.  The board shall calculate and report to each insurer
35the retention multiples for that year. For the contract year
36beginning June 1, 2005, the retention multiple shall be equal to
37$4.5 billion divided by the total estimated reimbursement
38premium for the contract year; for subsequent years, the
39retention multiple shall be equal to $4.5 billion, adjusted
40based upon the reported exposure for the contract year 2 years
41from the prior to a specific contract year to reflect the
42percentage growth in exposure to the fund for covered policies
43since 2004, divided by the total estimated reimbursement premium
44for the contract year. Total reimbursement premium for purposes
45of the calculation under this subparagraph shall be estimated
46using the assumption that all insurers have selected the 90-
47percent coverage level. In 2010, the contract year begins June
481, 2010, and ends December 31, 2010. In 2011 and thereafter, the
49contract year begins January 1 and ends December 31.
50     2.  The retention multiple as determined under subparagraph
511. shall be adjusted to reflect the coverage level elected by
52the insurer. For insurers electing the 90-percent coverage
53level, the adjusted retention multiple is 100 percent of the
54amount determined under subparagraph 1. For insurers electing
55the 75-percent coverage level, the retention multiple is 120
56percent of the amount determined under subparagraph 1. For
57insurers electing the 45-percent coverage level, the adjusted
58retention multiple is 200 percent of the amount determined under
59subparagraph 1.
60     3.  An insurer shall determine its provisional retention by
61multiplying its provisional reimbursement premium by the
62applicable adjusted retention multiple and shall determine its
63actual retention by multiplying its actual reimbursement premium
64by the applicable adjusted retention multiple.
65     4.  For insurers who experience multiple covered events
66causing loss during the contract year, beginning June 1, 2005,
67each insurer's full retention shall be applied to each of the
68covered events causing the two largest losses for that insurer.
69For each other covered event resulting in losses, the insurer's
70retention shall be reduced to one-third of the full retention.
71The reimbursement contract shall provide for the reimbursement
72of losses for each covered event based on the full retention
73with adjustments made to reflect the reduced retentions on or
74after January 1 of the contract year provided the insurer
75reports its losses as specified in the reimbursement contract.
76     (o)  "Contract year" means the period beginning on June 1
77of a calendar year and ending on May 31 of the following
78calendar year.
79     (4)  REIMBURSEMENT CONTRACTS.-
80     (b)1.  The contract shall contain a promise by the board to
81reimburse the insurer for 45 percent, 75 percent, or 90 percent
82of its losses from each covered event in excess of the insurer's
83retention, plus 5 percent of the reimbursed losses to cover loss
84adjustment expenses.
85     2.  The insurer must elect one of the percentage coverage
86levels specified in this paragraph and may, upon renewal of a
87reimbursement contract, elect a lower percentage coverage level
88if no revenue bonds issued under subsection (6) after a covered
89event are outstanding, or elect a higher percentage coverage
90level, regardless of whether or not revenue bonds are
91outstanding. All members of an insurer group must elect the same
92percentage coverage level. Any joint underwriting association,
93risk apportionment plan, or other entity created under s.
94627.351 must elect the 90-percent coverage level.
95     3.  The contract shall provide that reimbursement amounts
96shall not be reduced by reinsurance paid or payable to the
97insurer from other sources.
98     4.  Notwithstanding any other provision contained in this
99section, the board shall make available to insurers that
100purchased coverage provided by this subparagraph in 2008,
101insurers qualifying as limited apportionment companies under s.
102627.351(6)(c), and insurers that have been approved to
103participate in the Insurance Capital Build-Up Incentive Program
104pursuant to s. 215.5595 a contract or contract addendum that
105provides an additional amount of reimbursement coverage of up to
106$10 million. The premium to be charged for this additional
107reimbursement coverage shall be 50 percent of the additional
108reimbursement coverage provided, which shall include one prepaid
109reinstatement. The minimum retention level that an eligible
110participating insurer must retain associated with this
111additional coverage layer is 30 percent of the insurer's surplus
112as of December 31, 2008, for the 2009-2010 contract year; as of
113December 31, 2009, for the 2010-2011 contract year beginning
114June 1, 2010, and ending December 31, 2010; and as of December
11531, 2010, for the 2011-2012 2011 contract year. This coverage
116shall be in addition to all other coverage that may be provided
117under this section. The coverage provided by the fund under this
118subparagraph shall be in addition to the claims-paying capacity
119as defined in subparagraph (c)1., but only with respect to those
120insurers that select the additional coverage option and meet the
121requirements of this subparagraph. The claims-paying capacity
122with respect to all other participating insurers and limited
123apportionment companies that do not select the additional
124coverage option shall be limited to their reimbursement
125premium's proportionate share of the actual claims-paying
126capacity otherwise defined in subparagraph (c)1. and as provided
127for under the terms of the reimbursement contract. The optional
128coverage retention as specified shall be accessed before the
129mandatory coverage under the reimbursement contract, but once
130the limit of coverage selected under this option is exhausted,
131the insurer's retention under the mandatory coverage will apply.
132This coverage will apply and be paid concurrently with mandatory
133coverage. This subparagraph expires on May 31, 2012 December 31,
1342011.
135     (c)1.  The contract shall also provide that the obligation
136of the board with respect to all contracts covering a particular
137contract year shall not exceed the actual claims-paying capacity
138of the fund up to a limit of $17 $15 billion for that contract
139year unless the board determines that there is sufficient
140estimated claims-paying capacity to provide $17 billion of
141capacity for the current contract year and an additional $17
142billion of capacity for subsequent contract years. Upon making
143such determination, the board shall calculate the estimated
144claims-paying capacity for a specific contract year by adding to
145the $17 billion limit one-half of the fund's estimated claims-
146paying capacity in excess of $34 billion. However, adjusted
147based upon the reported exposure from the prior contract year to
148reflect the percentage growth in exposure to the fund for
149covered policies since 2003, provided the dollar growth in the
150limit may not increase in any year by an amount greater than the
151dollar growth of the balance of the fund as of December 31, less
152any premiums or interest attributable to optional coverage, as
153defined by rule which occurred over the prior calendar year.
154     2.  In May and October of the contract year, the board
155shall publish in the Florida Administrative Weekly a statement
156of the fund's estimated borrowing capacity, the fund's estimated
157claims-paying capacity, and the projected balance of the fund as
158of December 31. After the end of each calendar year, the board
159shall notify insurers of the estimated borrowing capacity,
160estimated claims-paying capacity, and the balance of the fund as
161of December 31 to provide insurers with data necessary to assist
162them in determining their retention and projected payout from
163the fund for loss reimbursement purposes. In conjunction with
164the development of the premium formula, as provided for in
165subsection (5), the board shall publish factors or multiples
166that assist insurers in determining their retention and
167projected payout for the next contract year. For all regulatory
168and reinsurance purposes, an insurer may calculate its projected
169payout from the fund as its share of the total fund premium for
170the current contract year multiplied by the sum of the projected
171balance of the fund as of December 31 and the estimated
172borrowing capacity for that contract year as reported under this
173subparagraph.
174     (d)1.  For purposes of determining potential liability and
175to aid in the sound administration of the fund, the contract
176shall require each insurer to report such insurer's losses from
177each covered event on an interim basis, as directed by the
178board. The contract shall require the insurer to report to the
179board no later than December 31 of each year, and quarterly
180thereafter, its reimbursable losses from covered events for the
181year. The contract shall require the board to determine and pay,
182as soon as practicable after receiving these reports of
183reimbursable losses, the initial amount of reimbursement due and
184adjustments to this amount based on later loss information. The
185adjustments to reimbursement amounts shall require the board to
186pay, or the insurer to return, amounts reflecting the most
187recent calculation of losses.
188     2.  In determining reimbursements pursuant to this
189subsection, the contract shall provide that the board shall pay
190to each insurer such insurer's projected payout, which is the
191amount of reimbursement it is owed, up to an amount equal to the
192insurer's share of the actual premium paid for that contract
193year, multiplied by the actual claims-paying capacity available
194for that contract year.
195     3.  The board may reimburse insurers for amounts up to the
196published factors or multiples for determining each
197participating insurer's retention and projected payout derived
198as a result of the development of the premium formula in those
199situations in which the total reimbursement of losses to such
200insurers would not exceed the estimated claims-paying capacity
201of the fund. Otherwise, the projected payout such factors or
202multiples shall be reduced uniformly among all insurers to
203reflect the estimated claims-paying capacity.
204     (5)  REIMBURSEMENT PREMIUMS.-
205     (b)  The State Board of Administration shall select an
206independent consultant to develop a formula for determining the
207actuarially indicated premium to be paid to the fund. The
208formula shall specify, for each zip code or other limited
209geographical area, the amount of premium to be paid by an
210insurer for each $1,000 of insured value under covered policies
211in that zip code or other area. In establishing premiums, the
212board shall consider the coverage elected under paragraph (4)(b)
213and any factors that tend to enhance the actuarial
214sophistication of ratemaking for the fund, including
215deductibles, type of construction, type of coverage provided,
216relative concentration of risks, and other such factors deemed
217by the board to be appropriate. The formula must provide for a
218cash build-up factor. For the 2009-2010 contract year, the
219factor is 5 percent. For the 2010-2011 contract year beginning
220June 1, 2010, and ending December 31, 2010, the factor is 10
221percent. For the 2011-2012 2011 contract year, the factor is 15
222percent. For the 2012-2013 2012 contract year, the factor is 20
223percent. For the 2013-2014 2013 contract year and thereafter,
224the factor is 25 percent. The formula may provide for a
225procedure to determine the premiums to be paid by new insurers
226that begin writing covered policies after the beginning of a
227contract year, taking into consideration when the insurer starts
228writing covered policies, the potential exposure of the insurer,
229the potential exposure of the fund, the administrative costs to
230the insurer and to the fund, and any other factors deemed
231appropriate by the board. The formula must be approved by
232unanimous vote of the board. The board may, at any time, revise
233the formula pursuant to the procedure provided in this
234paragraph.
235     (17)  TEMPORARY INCREASE IN COVERAGE LIMIT OPTIONS.-
236     (c)  Optional coverage.-For the 2009-2010, 2010-2011, 2011-
2372012, 2012-2013, and 2013-2014 contract years year commencing
238June 1, 2007, and ending May 31, 2008, the contract year
239commencing June 1, 2008, and ending May 31, 2009, the contract
240year commencing June 1, 2009, and ending May 31, 2010, the
241contract year commencing June 1, 2010, and ending December 31,
2422010, the contract year commencing January 1, 2011, and ending
243December 31, 2011, the contract year commencing January 1, 2012,
244and ending December 31, 2012, and the contract year commencing
245January 1, 2013, and ending December 31, 2013, the board shall
246offer, for each of such years, the optional coverage as provided
247in this subsection.
248     (d)  Additional definitions.-As used in this subsection,
249the term:
250     1.  "FHCF" means Florida Hurricane Catastrophe Fund.
251     2.  "FHCF reimbursement premium" means the premium paid by
252an insurer for its coverage as a mandatory participant in the
253FHCF, but does not include additional premiums for optional
254coverages.
255     3.  "Payout multiple" means the number or multiple created
256by dividing the statutorily defined claims-paying capacity as
257determined in subparagraph (4)(c)1. by the aggregate
258reimbursement premiums paid by all insurers estimated or
259projected as of calendar year-end.
260     4.  "TICL" means the temporary increase in coverage limit.
261     5.  "TICL options" means the temporary increase in coverage
262options created under this subsection.
263     6.  "TICL insurer" means an insurer that has opted to
264obtain coverage under the TICL options addendum in addition to
265the coverage provided to the insurer under its FHCF
266reimbursement contract.
267     7.  "TICL reimbursement premium" means the premium charged
268by the fund for coverage provided under the TICL option.
269     8.  "TICL coverage multiple" means the coverage multiple
270when multiplied by an insurer's reimbursement premium that
271defines the temporary increase in coverage limit.
272     9.  "TICL coverage" means the coverage for an insurer's
273losses above the insurer's statutorily determined claims-paying
274capacity based on the claims-paying limit in subparagraph
275(4)(c)1., which an insurer selects as its temporary increase in
276coverage from the fund under the TICL options selected. A TICL
277insurer's increased coverage limit options shall be calculated
278as follows:
279     a.  The board shall calculate and report to each TICL
280insurer the TICL coverage multiples based on 12 options for
281increasing the insurer's FHCF coverage limit. Each TICL coverage
282multiple shall be calculated by dividing $1 billion, $2 billion,
283$3 billion, $4 billion, $5 billion, $6 billion, $7 billion, $8
284billion, $9 billion, $10 billion, $11 billion, or $12 billion by
285the total estimated aggregate FHCF reimbursement premiums for
286the 2007-2008 contract year, and the 2008-2009 contract year.
287     b.  For the 2009-2010 contract year, the board shall
288calculate and report to each TICL insurer the TICL coverage
289multiples based on 10 options for increasing the insurer's FHCF
290coverage limit. Each TICL coverage multiple shall be calculated
291by dividing $1 billion, $2 billion, $3 billion, $4 billion, $5
292billion, $6 billion, $7 billion, $8 billion, $9 billion, and $10
293billion by the total estimated aggregate FHCF reimbursement
294premiums for the 2009-2010 contract year.
295     c.  For the 2010-2011 contract year beginning June 1, 2010,
296and ending December 31, 2010, the board shall calculate and
297report to each TICL insurer the TICL coverage multiples based on
298eight options for increasing the insurer's FHCF coverage limit.
299Each TICL coverage multiple shall be calculated by dividing $1
300billion, $2 billion, $3 billion, $4 billion, $5 billion, $6
301billion, $7 billion, and $8 billion by the total estimated
302aggregate FHCF reimbursement premiums for the contract year.
303     d.  For the 2011-2012 2011 contract year, the board shall
304calculate and report to each TICL insurer the TICL coverage
305multiples based on six options for increasing the insurer's FHCF
306coverage limit. Each TICL coverage multiple shall be calculated
307by dividing $1 billion, $2 billion, $3 billion, $4 billion, $5
308billion, and $6 billion by the total estimated aggregate FHCF
309reimbursement premiums for the 2011-2012 2011 contract year.
310     e.  For the 2012-2013 2012 contract year, the board shall
311calculate and report to each TICL insurer the TICL coverage
312multiples based on four options for increasing the insurer's
313FHCF coverage limit. Each TICL coverage multiple shall be
314calculated by dividing $1 billion, $2 billion, $3 billion, and
315$4 billion by the total estimated aggregate FHCF reimbursement
316premiums for the 2012-2013 2012 contract year.
317     f.  For the 2013-2014 2013 contract year, the board shall
318calculate and report to each TICL insurer the TICL coverage
319multiples based on two options for increasing the insurer's FHCF
320coverage limit. Each TICL coverage multiple shall be calculated
321by dividing $1 billion and $2 billion by the total estimated
322aggregate FHCF reimbursement premiums for the 2013-2014 2013
323contract year.
324     g.  The TICL insurer's increased coverage shall be the FHCF
325reimbursement premium multiplied by the TICL coverage multiple.
326In order to determine an insurer's total limit of coverage, an
327insurer shall add its TICL coverage multiple to its payout
328multiple. The total shall represent a number that, when
329multiplied by an insurer's FHCF reimbursement premium for a
330given reimbursement contract year, defines an insurer's total
331limit of FHCF reimbursement coverage for that reimbursement
332contract year.
333     10.  "TICL options addendum" means an addendum to the
334reimbursement contract reflecting the obligations of the fund
335and insurers selecting an option to increase an insurer's FHCF
336coverage limit.
337     (e)  TICL options addendum.-
338     1.  The TICL options addendum shall provide for
339reimbursement of TICL insurers for covered events occurring
340during the 2009-2010, 2010-2011, 2011-2012, 2012-2013, and 2013-
3412014 contract years between June 1, 2007, and May 31, 2008,
342between June 1, 2008, and May 31, 2009, between June 1, 2009,
343and May 31, 2010, between June 1, 2010, and December 31, 2010,
344between January 1, 2011, and December 31, 2011, between January
3451, 2012, and December 31, 2012, or between January 1, 2013, and
346December 31, 2013, in exchange for the TICL reimbursement
347premium paid into the fund under paragraph (f) based upon the
348TICL coverage available and selected for each respective
349contract year. Any insurer writing covered policies has the
350option of selecting an increased limit of coverage under the
351TICL options addendum and shall select such coverage at the time
352that it executes the FHCF reimbursement contract.
353     2.  The TICL addendum shall contain a promise by the board
354to reimburse the TICL insurer for 45 percent, 75 percent, or 90
355percent of its losses from each covered event in excess of the
356insurer's retention, plus 5 percent of the reimbursed losses to
357cover loss adjustment expenses. The percentage shall be the same
358as the coverage level selected by the insurer under paragraph
359(4)(b).
360     3.  The TICL addendum shall provide that reimbursement
361amounts shall not be reduced by reinsurance paid or payable to
362the insurer from other sources.
363     4.  The priorities, schedule, and method of reimbursements
364under the TICL addendum shall be the same as provided under
365subsection (4).
366     (f)  TICL reimbursement premiums.-Each TICL insurer shall
367pay to the fund, in the manner and at the time provided in the
368reimbursement contract for payment of reimbursement premiums, a
369TICL reimbursement premium determined as specified in subsection
370(5), except that a cash build-up factor does not apply to the
371TICL reimbursement premiums. However, the TICL reimbursement
372premium shall be increased in the 2009-2010 contract year 2009-
3732010 by a factor of two, in the 2010-2011 contract year
374beginning June 1, 2010, and ending December 31, 2010, by a
375factor of three, in the 2011-2012 2011 contract year by a factor
376of four, in the 2012-2013 2012 contract year by a factor of
377five, and in the 2013-2014 2013 contract year by a factor of
378six.
379     (g)  Effect on claims-paying capacity of the fund.-For the
3802009-2010, 2010-2011, 2011-2012, 2012-2013, and 2013-2014
381contract years terms commencing June 1, 2007, June 1, 2008, June
3821, 2009, June 1, 2010, January 1, 2011, January 1, 2012, and
383January 1, 2013, the program created by this subsection shall
384increase the claims-paying capacity of the fund as provided in
385subparagraph (4)(c)1. by an amount not to exceed $12 billion and
386shall depend on the TICL coverage options available and selected
387for the specified contract year and the number of insurers that
388select the TICL optional coverage. The additional capacity shall
389apply only to the additional coverage provided under the TICL
390options and shall not otherwise affect any insurer's
391reimbursement from the fund if the insurer chooses not to select
392the temporary option to increase its limit of coverage under the
393FHCF.
394     (18)  FACILITATION OF INSURERS' PRIVATE CONTRACT
395NEGOTIATIONS PRIOR TO THE START OF THE HURRICANE SEASON.-
396     (a)1.  In addition to the legislative findings and intent
397provided in this section, the Legislature finds that:
398     a.  Because a Regular Session of the Legislature begins
399approximately 3 months before the start of a contract year and
400ends approximately 1 month before the start of a contract year,
401participants in the fund always face the possibility that
402legislative actions will change the coverage provided or offered
403by the fund with only a few days or weeks of advance notice.
404     b.  The timing issues described in sub-subparagraph a. can
405create uncertainties and disadvantages for the residential
406property insurers that are required to participate in the fund
407when they negotiate for the procurement of private reinsurance
408or other sources of capital.
409     c.  Providing participating insurers with a greater degree
410of certainty regarding the coverage provided or offered by the
411fund and more time to negotiate for the procurement of private
412reinsurance or other sources of capital will enable the
413residential property insurance market to operate with greater
414stability.
415     d.  Increased stability in the residential property
416insurance market serves a primary purpose of the fund and
417benefits consumers in this state by enabling insurers to operate
418more economically. In years when reinsurance and capital markets
419experience a capital shortage, the last-minute rush by insurers
420only weeks before the start of the hurricane season to procure
421adequate coverage in order to meet their capital requirements
422can result in higher costs that are passed on to consumers in
423this state. However, if more time is available, residential
424property insurers should experience greater competition for
425their business with a corresponding beneficial effect for
426consumers in this state.
427     2.  It is the intent of the Legislature to provide insurers
428with the terms and conditions of the reimbursement contract well
429in advance of the insurers' need to finalize their procurement
430of private reinsurance or other sources of capital, and thereby
431to improve insurers' negotiating position with reinsurers and
432other sources of capital.
433     3.  It is also the intent of the Legislature that the board
434publish the fund's maximum statutory limit of coverage and the
435fund's total retention early enough that residential property
436insurers have the opportunity to better estimate their coverage
437from the fund.
438     (b)  The board shall adopt the reimbursement contract for a
439particular contract year by February 1 of the immediately
440preceding contract year. However, the reimbursement contract
441shall be adopted as soon as possible in advance of the 2010-2011
442contract year.
443     (c)  Insurers writing covered policies shall execute the
444reimbursement contract by March 1 of the immediately preceding
445contract year and the contract shall have an effective date for
446the contract year as defined in paragraph (2)(o).
447     (d)  The board shall publish in the Florida Administrative
448Weekly the maximum statutorily adjusted capacity for the
449mandatory coverage for a particular contract year, the maximum
450statutory coverage for any optional coverage for the particular
451contract year, and the aggregate fund retention used to
452calculate individual insurer's retention multiples for the
453particular contract year, no later than January 1 of the
454immediately preceding contract year.
455     Section 2.  This act shall take effect upon becoming a law.


CODING: Words stricken are deletions; words underlined are additions.
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