Comprehensive Florida Property Insurance Committee Legislation Receives New Bill Number, Committee Reference Correction

Filed by the Senate Committee on Banking and Insurance on March 8, 2013, SB 1770 (formerly SPB 7018) would enact changes to Florida’s property insurance laws, including those relating to Citizens Property Insurance Corporation (“Citizens”).

Initially, the bill received references to the Senate Committee on Agriculture and the Committee on Appropriations.  However, the Agriculture reference changed was changed today, March 12, 2013, to reflect a correction to the Senate Appropriations Subcommittee on General Government.

Heavily amended during its initial hearing as SPB 7018, the bill (now SB 1770) carries an effective date of July 1, 2013, unless otherwise provided.

To view complete bill information on SB 1770, click here.

If enacted, SB 1770 would effect the following:

• Rename the Florida Hurricane Catastrophe Fund (“FHCF”) Finance Corporation as the “State Board of Administration Finance Corporation”
• Create a Florida Catastrophe Risk Capital Access Facility within the State Board of Administration to help insurers identify global capital available for additional coverage options around the various layers of the FHCF
• Subject Citizens to bad faith claims
• Exempt Citizens from “exchange of business” restrictions to facilitate the operations of the proposed clearinghouse
• Require the Florida Office of Insurance Regulation (“OIR”) to calculate and publish an annual property insurance inflation factor in instances where property insurance rates filed below the inflation factor are to be deemed non-excessive by the OIR
• Allow insurance companies to include in rate filings reinsurance that is purchased to cover potential shortfalls in the FHCF
• Require the Florida Commission on Hurricane Loss Projection Methodology to review the accuracy of hurricane models used to establish wind mitigation discounts
• Allow the OIR to hold a public hearing for a rate filing when the filing exceeds 15 percent in counties where the OIR determines there is not a reasonable degree of competition
• Allow insurers to use Consent to Rate for up to 10 percent of commercial policies in force and up to 5 percent for personal policies in counties where the OIR determines there is not a reasonable degree of competition
• Redefine Citizens’ mission to be non-competitive through the use of a clearinghouse to ensure Citizens’ coverage is only available to eligible applicants
• Restructure the Citizens’ Executive Director’s authority in relation to Citizens’ Board of Governors
• Require Florida Senate confirmation of Citizens’ Board members, except those appointed by the Speaker of the House of Representatives
• Reduce the maximum Citizens policy limit from $2 million to $1 million and further reduce this amount by $100,000 a year for five years
• Prohibit Citizens from covering structures on which construction is commenced after July 1, 2013 that are seaward of the coastal construction control line, unless built to Code-plus
• Allow Citizens to enter into risk-sharing agreements with private insurers
• Clarify that a private insurer’s rate offer within 15 percent of Citizens’ rate makes both new and renewal policies ineligible for Citizens
• Require agents to certify and document a continued effort to seek private market placement for their policyholders who are in Citizens
• Prohibit agent commissions on ineligible policies placed in Citizens after January 1, 2014
• Require that Citizens disclose its potential surcharge and assessment liabilities with each renewal notice
• Expand the Florida Auditor General’s operational audit and require it to be conducted annually
• Require Citizens’ Board to contract with an independent auditing firm to perform a full management audit of Citizens on a bi-annual basis
• Allow Citizens to consider any non-discriminatory approaches to reducing policies, including a surplus notes program with participation by mutual companies
• Subject Citizens to the requirements of s.287.057, F.S., which pertains to the procurement of commodities or contractual services
• Require that Citizens’ rates must be actuarially sound, include an appropriate risk load factor and not compete with the private market. A non-competitive rate is would be defined as the highest rate among the top 20 insurers writing in a given territory. In circumstances where the OIR sees that no competitive market exists, rates must be actuarially sound.
• Require that all new policies; all personal lines residential non-wind policies that are non-homestead, non-renter-occupied homes with a replacement cost over $300,000; and non-residential commercial policies be placed at the top-20 rate or be actuarially sound-whichever is higher
• Require that rates for personal lines residential wind-only policies that are non-homestead, non-renter-occupied homes with a replacement cost over $1 million on July 1, 2013; $800,000 on January 1, 2014; and $600,000 on January 1, 2015 be placed at the top-20 rate or be actuarially sound-whichever is higher
• Apply the glide path percentage by territory and not policy
• Implementation of a rate increase of up to 3 percent, to be used to purchase catastrophe reinsurance or other risk transfer mechanisms. The increase would reflect the actual cost of the catastrophe reinsurance or other risk transfer mechanisms. In any year for which this 3 percent increase is imposed, Citizens would allow a corresponding 3 percent decrease, 1 percent per account, from the Citizens policyholder surcharge, if any is imposed.
• Citizens’ Board must recommend to the Legislature a process through which policyholders with documented financial needs can receive rate relief
• Require that all new and renewal applications, excluding commercial residential, must be submitted to the (proposed) clearinghouse before Citizens can bind or renew coverage
• Require that any assignment of benefits for property insurance must comply with the policy conditions
• Provide for an additional process by which the OIR may approve property and casualty forms, except for workers’ compensation filings