19-8.010: Reimbursement Contract
19-8.013: Revenue Bonds Issued Pursuant to Section 215.555(6), F.S
PURPOSE AND EFFECT: The State Board of Administration, Florida Hurricane Catastrophe Fund, is proposing to amend the following rules in order to implement changes made by CS/CS/SB 1980 during the 2006 legislative session.
SUMMARY: Rule 19-8.010, F.A.C.: Proposed amended Rule 19-8.010, F.A.C., adopts the Reimbursement Contract for the Contract Year 2006-2007 in paragraph (12). This paragraph has been amended to reflect that the Reimbursement Contract now includes three addenda. The changes made to the contract are summarized as follows:
Addendum No. 1: The definition of “losses” in Article VI(4) is amended to clarify that losses covered by the FHCF do not include “rent or rental income.” The language in Article X, which quoted language in Section 215.555(4)(d)2., F.S., which was stricken in CS/CS/SB 1980 was removed and the references to the rapid cash build-up in Articles V(16) and Article X were amended to reflect the amendments to Section 215.555(5)(b), F.S., which requires the inclusion of a 25% rapid cash build-up factor in the reimbursement premium formula.
Addendum No. 2: This Addendum, which addresses a new option created in CS/CS/SB 1980 which allows limited apportionment companies to obtain up to $10 million dollars in additional FHCF coverage, must be completed by all limited apportionment companies and allows them to select from $0 up to $10 million in additional coverage. The Addendum also provides information on the cost and payment timeline for such additional coverage and clarifies that other provisions of the Reimbursement Contract, to which the Addendum is attached are applicable to the Addendum.
Addendum No. 3: This Addendum addresses the changes to Section 215.555(5), F.S., which created a procedure by which Citizens Property Insurance Corporation (“Citizens”) could obtain FHCF coverage for policies when Citizens takes over policies from a liquidated insurer. The law allows Citizens to choose whether to include such policies under its Reimbursement Contract with the FHCF or to accept an assignment of the liquidated insurer’s Reimbursement Contract with the FHCF. Addendum No. 3 provides the information on these new options, provides the form on which to make the option and provides the requirements, procedures and timeframes for selecting the option with respect to each transfer of policies from a liquidated insurer to Citizens.
SUMMARY: Rule 19-8.013, F.A.C.: The proposed amendments to Rule 19-8.013, F.A.C., add clarifications regarding the use of reimbursement premiums and rapid cash build-up from Contract Year 2006-2007 to pay losses, add clarifications to the grounds for adjusting the emergency assessment percentage, and add clarifications to address the emergency assessment payment calculations.
SUMMARY OF ESTIMATED REGULATORY COSTS: No Statement of Estimated Regulatory Cost was prepared.
Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.
SPECIFIC AUTHORITY: 215.555(3) FS.
LAW IMPLEMENTED: 215.555(2), (3), (4), (5), (6), (7), (10) FS.
IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE SCHEDULED AND ANNOUNCED IN FAW.
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Jack E. Nicholson, Senior FHCF Officer, State Board of Administration, P. O. Box 13300, Tallahassee, FL 32317-3300; telephone (850)413-1340
Any person requiring special accommodations to participate in this proceeding is asked to advise Patti Elsbernd at least five (5) calendar days before such proceeding.
Patti Elsbernd may be reached by telephone at (850)413-1346 or by mail at P. O. Box 13300, Tallahassee, FL 32317-3300.
THE FULL TEXT OF THE PROPOSED RULE IS:
19-8.010 Reimbursement Contract.
(1) through (11) No change.
(12) The reimbursement contract for the 2006-2007 contract year, as amended by Addendums 1., 2., and 3., required by Section 215.555(4), F.S., which is called Form FHCF-2006K – “Reimbursement Contract” or “Contract” between (name of insurer) (the “Company”)/NAIC #( ) and The State Board of Administration of the State of Florida (“SBA”) which Administers the Florida Hurricane Catastrophe Fund (“FHCF”), is hereby adopted and incorporated by reference into this rule. This contract is effective from June 1, 2006 through May 31, 2007.
(13) No change.
Specific Authority 215.555(3) FS. Law Implemented 215.555 FS. History–New 5-31-94, Amended 8-29-95, 5-19-96, 6-19-97, 5-28-98, 5-17-99, 9-13-99, 6-19-00, 6-3-01, 6-2-02, 11-12-02, 5-13-03, 5-19-04, 8-29-04, 5-29-05, 11-13-05, 5-10-06,_______.
19-8.013, Revenue Bonds Issued Pursuant to Section 215.555(6), F.S.
(1) through (4)(c)1. No change.
2. Except as required by Section 215.555(7)(c), F.S., or as described in the following two sentences, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for losses attributable to Covered Events occurring in that Contract Year or for losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past losses or for debt service on revenue bonds. Amounts collected in Contract Year 2006-2007 as part of the premium that are attributable to the rapid cash buildup factor, as permitted by Section 215.555(5)(b), F.S., Florida Statutes may be used to pay for losses attributable to prior Contract Yyears. Pursuant to Section 215.555(6)(a)1., F.S., Reimbursement Premiums, earnings thereon or amounts collected as part of the premium that are attributable to the rapid cash buildup factor, may be used for payments relating to revenue bonds in the event Emergency Assessments are insufficient. If Reimbursement Premiums are used for debt service, then the amount of the Reimbursement Premiums, earnings thereon, or amounts collected as part of the premium that are attributable to the rapid cash buildup factor so used shall be returned, without interest, to the Fund when Emergency Assessments remain available after making payments relating to the revenue bonds and any other purposes for which Emergency Assessments were levied.
(d) through (e)2. No change.
3. The emergency assessment is subject to interest on delinquent remittances at the average rate earned by the SBA for the FHCF for the first five months of the Contract Year for which such information is available plus 5%. The emergency assessment is also subject to annual adjustments by the Board to reflect changes in premiums subject to assessments in order to meet debt obligations.
(5)(a) No change.
(b) Pursuant to the Order issued by the Office of Insurance Regulation levying the Emergency Assessment, each Assessable Insurer shall remit to the entity identified in the Order, an amount equal to the required percentage of its direct written premium for the preceding calendar quarter calendar year to which the assessment applies from all Assessable Lines. Medical malpractice is an Assessable Line of business but only as to covered events occurring on or after June 1, 2007. In addition, pursuant to the doctrine of federal pre-emption, policies issued as part of the National Flood Insurance Program are not subject to the Emergency Assessment. The required percentage will be determined in accordance with Section 215.555(6)(b), F.S., and the procedures set out in subsection (4) of this rule.
(c) Pursuant to the Order issued by the Office of Insurance Regulation levying the Emergency Assessment, each Assessable Insured shall remit and each surplus lines agent shall collect an amount equal to the required percentage of its direct written premium from all Assessable Lines. Surplus lines agents shall collect the Emergency Assessment at the same time as the surplus lines agent collects the surplus lines tax required by Section 626.932, F.S. and remit to the Florida Surplus Lines Service Office at the same time as the agent remits the surplus lines tax to that Office. The Emergency Assessment on each insured procuring coverage and filing under Section 626.938, F.S., shall be an amount equal to the required percentage of its direct written premium from all Assessable Lines and shall be remitted by the insured to the Florida Surplus Lines Service Office at the time the insured pays the surplus lines tax to that Office. The Florida Surplus Lines Service Office shall remit the Emergency Assessments received as directed by the Office of Insurance Regulation.
(d) No change.
Specific Authority 215.555(3) FS. Law Implemented 215.555(2), (3), (4), (5), (6), (7) FS. History–New 9-18-97, Amended 12-3-98, 9-12-00, 6-01-03, 5-19-04, 5-29-05, 5-10-06, __________.