The State Board of Administration, Florida Hurricane Catastrophe Fund, is proposing to amend the following rules in order to implement Section 215.555, Florida Statutes, regarding the Florida Hurricane Catastrophe Fund, for the 2006-2007 Contract ...

Florida Hurricane Catastrophe Fund

RULE NOS.: RULE TITLES:

19-8.010 Reimbursement Contract

19-8.012 Procedures to Determine Ineligibility for Participation in the Florida Hurricane Catastrophe Fund and to Determine Exemption from Participation in the Florida Hurricane Catastrophe Fund Due to Limited Exposure

19-8.013 Revenue Bonds Issued Pursuant to Section 215.555(6), Florida Statutes

19-8.029 Insurer Reporting Requirements

19-8.030 Insurer Responsibilities

PURPOSE AND EFFECT: The State Board of Administration, Florida Hurricane Catastrophe Fund, is proposing to amend the following rules in order to implement Section 215.555, Florida Statutes, regarding the Florida Hurricane Catastrophe Fund, for the 2006-2007 Contract Year: Rules 19-8.010, 19-8.012, 19-8.013, 19-8.029 and 19-8.030, F.A.C.

SUMMARY: Proposed amended Rule 19-8.010, F.A.C., adopts the reimbursement contract for the Contract Year 2006-2007. The proposed amendments to Rule 19-8.012, F.A.C. clarifies the exemption requirements. The proposed amendments to Rule 19-8.013, F.A.C., are both clarification and implementation of Section 215.555(3), F.S. Proposed amended Rule 19-8.029, F.A.C., adopts forms for insurer reporting to the Florida Hurricane Catastrophe Fund for the 2006-2007 Contract Year and updates incorporated forms. The proposed amendments to Rule 19-8.030, F.A.C. consist of clarifications and amendments necessitated by the losses experienced during the 2004 and 2005 hurricane seasons.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS: With respect to the rules proposed for amendment, the Board has prepared a statement and found the cost to be minimal. Any person who wishes to provide information regarding the statement of estimated regulatory costs or to 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.

REGARDLESS OF WHETHER OR NOT REQUESTED, A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW:

DATE AND TIME: March 20, 2006, 1:00 p.m.–4:00 p.m.

PLACE: Room 116 (Hermitage Conference Room), 1801 Hermitage Blvd., Tallahassee, FL 32308.

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULES IS: Jack E. Nicholson, Senior FHCF Officer, State Board of Administration, P.O. Box 13300, Tallahassee, FL 32317-3300; telephone [phone].

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 [phone] or by mail at P.O. Box 13300, Tallahassee, FL 32317-3300.

THE FULL TEXT OF THE PROPOSED RULES:

 

19-8.010 Reimbursement Contract.

(1) through (11) No Change.

(12) The reimbursement contract for the 2006-2007 contract year 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)(12) Copies of the reimbursement contract may be obtained from the State Board of Administration. The mailing address is P. O. Box 13300, Tallahassee, FL 32317-3300. The street address is 1801 Hermitage Blvd., Tallahassee, Florida 32308, [phone].

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, _____.

 

19-8.012 Procedures to Determine Ineligibility for Participation in the Florida Hurricane Catastrophe Fund and to Determine Exemption from Participation in the Florida Hurricane Catastrophe Fund due to Limited Exposure.

(1) through (2)(b) No Change.

1. A detailed explanation of any premium appearing on the insurer’s Florida Statutory Page 14, Exhibit of Premiums and Losses Form 2 of the National Association of Insurance Commissioners annual statement for lines of business which may contain covered policies. These lines are: Fire, Allied Lines, Homeowners Multiple Peril, Commercial Multiple Peril (non-liability portion), Inland Marine, Farmowners Multiple Peril.

2. A copy of the insurer’s Statutory Page 14, Exhibit of Premiums and Losses Form 2 of the annual statement, required by Section 624.424, F.S., and any rules adopted thereunder, for the State of Florida for the applicable year.

3. Form FHCF-E1, “Statement related to Covered Policies as defined in Section 215.555(2)(c), F.S.,” rev. 5/200605, signed by two executive officers attesting to the fact that the insurer writes no covered policies. Form FHCF-E1 is hereby adopted and incorporated by reference. The form may be obtained from the Fund’s Administrator at the address stated in this paragraph.

(c)1. through 3. No Change.

(3) Procedures to Determine Exemption from the Fund Due to Limited Exposure.

(a) An insurer requesting exemption from participation in the Fund because its exposure for covered policies, as defined in Section 215.555(2)(c), F.S., and in Article V of the reimbursement contract, as adopted and incorporated by reference in Rule 19-8.010, F.A.C., is less than $10 million in the aggregate shall submit a written request for a determination regarding such an exemption no later than June 1 of the upcoming contract year. The request shall be sent to the Fund’s Administrator, Paragon Strategic Solutions Inc., at 3600 American Boulevard West, Suite 700, Minneapolis, Minnesota 55431. The insurer shall submit the following information no later than June 30 of the upcoming contract year:

1. A detailed explanation of any premium appearing on the insurer’s Florida Statutory Page 14, Exhibit of Premiums and Losses Form 2 of the National Association of Insurance Commissioners annual statement for lines of business which may contain covered policies. These lines are: Fire, Allied Lines, Homeowners Multiple Peril, Commercial Multiple Peril (non-liability portion), Inland Marine, Farmowners Multiple Peril.

2. A copy of the insurer’s Statutory Page 14, Exhibit of Premiums and Losses Form 2 of the annual statement, required by Section 624.424, F.S. and any rules adopted thereunder, for the State of Florida for the applicable year.

3. Form FHCF-E2, “Information regarding FHCF Covered Policies In-force at May 31, ____,” rev. 5/200605. Form FHCF-E2 is hereby adopted and incorporated by reference. The form may be obtained from the Fund’s Administrator at the address stated in this paragraph.

4. Form FHCF-E3, “Statement related to Aggregate Exposure for Covered Policies as defined in Section 215.555(2)(c), F.S., on behalf of _____,” rev. 5/200605, signed by two executive officers attesting to the fact that the insurer writes no covered policies with an aggregate exposure of $10 million or more. Form FHCF-E3 rev. 5/200605, is hereby adopted and incorporated by reference. The form may be obtained from the Fund’s Administrator at the address stated in this paragraph.

(b)1. through 3. No change.

4. The exemption for minimal exposure permitted by Section 215.555(3), F.S., is optional for the insurer but, once the exemption is requested, cannot be withdrawn by the insurer. An insurer with less than $10 million in aggregate exposure for covered policies is not required to ask for an exemption from the Fund. Such an insurer may continue to participate in the Fund if it so desires. An insurer which has been granted an exemption from the Fund may request to be reinstated in the Fund as a participating member. However, such a request must be made no later than June 1 of each contract year. No insurer which has been granted an exemption under this subsection shall be reinstated during the Atlantic Hurricane Season, which begins June 1 and ends November 30 of each year, so long as its aggregate exposure remains below $10 million.

5. No change.

Specific Authority 215.555(3) FS. Law Implemented 215.555(2)(c), (3), (4), (5) FS. History–New 2-17-97; Amended 6-02-02, 5-13-03, 5-19-04, 5-29-05_____.

 

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 sentence, 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 as part of the premium that are attributable to the rapid cash buildup factor, as permitted by Section 215.555(5)(b), Florida Statutes may be used to pay for losses attributable to prior Contract years. Pursuant to Section 215.555(6)(a)1., F.S., Reimbursement Premiums, or 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 Changes

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 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 Changes.

(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 prior 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) No change.

(d) Lines of Business Subject to Assessment.

1. The lines of business described in subparagraph 2., below, are the lines of business subject to the Emergency Assessment under Section 215.555(6)(b)(1)., F.S.. For ease of reference, the lines of business are written and listed as they appear on Form 2 Statutory Page 14 Exhibit of Premiums and Losses in the property and casualty annual statement of the National Association of Insurance Commissioners required to be filed by authorized insurers pursuant to Section 624.424, F.S.

2. 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, ____.

 

19-8.029 Insurer Reporting Requirements.

(1) through (2)(a) No change.

(b)Commutation means that period of time which is not less than 36 months or more than 60 months after the end of the Contract Year during which the loss occurrence took place.

(c)(b) Contract Year means the time period which begins June 1 of each calendar year and ends May 31 of the following calendar year.

(d)(e) Covered Policy is defined in Section 215.555(2)(c), F.S., and the Reimbursement Contract adopted by and incorporated into Rule 19-8.010, F.A.C.

(e)(d) Data Call means the annual reporting of insured values forms. These forms are the FHCF-D1A for Contract Years after the 2002/2003 year and the FHCF-D1A and FHCF- D1B for the Contract Year 2002/2003 and all prior years.

(f)(e) FHCF or Fund means the Florida Hurricane Catastrophe Fund.

(g)(f) Independent Consultant means the independent individual, firm, or organization with which the State Board of Administration of Florida (Board) contracts to prepare the premium formula and any other actuarial services for the FHCF, as determined under the contract with the consultant.

(h)(g) Loss Reporting Forms mean the FHCF-L1A and FHCF-L1B for Contract Years after the 2002/2003 Contract Year and means the FHCF-L1A, FHCF-L1B and FHCF-L1C for the Contract Years 2002/2003 and all prior years.

(i)(h) Office of Insurance Regulation means that office within the Department of Financial Services and which was created in Section 20.121(3), F.S.

(3) through (4)(g) No change.

(h) For the 2006/2007 Contract Year, the reporting shall be in accordance with Form FHCF-D1A, “Florida Hurricane Catastrophe Fund 2006 Data Call,” rev. 05/2006, hereby adopted and incorporated by reference. The form may be obtained from the Fund’s Administrator at the address stated in subsection (6) below. A new participant writing covered policies on or after June 1 but prior to December 1, shall report its actual exposure as of December 31 of the Contract Year on or before March 1 of the Contract Year, to the Administrator.

(5) Loss Reimbursement Reporting Requirements.

(a) As directed by the Board, after a covered event occurs, insurers shall report all their estimated ultimate net losses (as defined in the Reimbursement Contract, adopted and incorporated into Rule 19-8.010, F.A.C.) for Covered Policies on Form FHCF-L1A, “Florida Hurricane Catastrophe Fund Interim Loss Report,” rev. 05/2006 05/2005, which is hereby adopted and incorporated by reference, in no less than fourteen days from the date of the notice from the Board that such a report is required. The Board may request subsequent Interim Loss Reports. To obtain copies of this form, see paragraph (6), below. Prompt reporting in the format requested will aid the Board in determining whether to seek additional sources of funds to pay for reimbursable losses. The losses reported on the Interim Loss Report Form FHCF-L1A are expected to result from a good faith effort on the part of the insurer to report as accurately as possible. Preliminary reports will not be binding. Reimbursements by the Fund will be made on the basis of Form FHCF-L1B the Proof of Loss Report, adopted in (b) below.

(b) If an insurer expects covered losses to exceed its retention, it shall report its paid and outstanding covered losses for each occurrenceas of month-end by the fifteenth of the following month in accordance with the table below:

 

Submit Form FHCF-L1A Monthly

 

 

For Losses under Covered Events prior to:	File by:
June 30/XXXX	July 15/XXXX, and on the 15th of each month through November
July 31/XXXX	August 15/XXXX, and on the 15th of each month through November
August 31/XXXX	September 15/XXXX, and on the 15th of each month through November
September 30/XXXX	October 15/XXXX and November 15/XXXX
October 31/XXXX	November 15/XXXX

 

(b)(c) Insurers shall report their ultimate net losses (as defined in the Reimbursement Contract, adopted and incorporated into Rule 19-8.010, F.A.C.) for each loss occurrence on Form FHCF-L1B, “Florida Hurricane Catastrophe Fund Proof of Loss Report,” rev.05/2006 5/2005, which is hereby adopted and incorporated by reference. To obtain copies of this form, see paragraph (6), below. To qualify for reimbursement, the Proof of Loss Report must have the original signatures of two executive officers authorized by the Company to sign the report. Proof of Loss Reports may be faxed only if the Company does not qualify for a reimbursement.

While a Company may submit a Proof of Loss Report requesting reimbursement at any time following a lLoss oOccurrence, all Companies shall submit a mandatory Proof of Loss Report for each lLoss oOccurrence no earlier than December 15 and no later than December 31 of the Contract Year during which the Covered Event(s) occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of loss reimbursements or advances already received. Reports may be faxed only if the Company does not qualify for a reimbursement. Annually, all Companies shall submit a mandatory year-end Proof of Loss Report for each Loss Occurrence, using the most current data available unless the Company has no losses. This Proof of Loss Report shall be filed no earlier than December 15 and no later than December 31 of each year and shall continue until the earlier of the expiration of the commutation period or until all claims and losses resulting from the Loss Occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries. “Commutation” shall mean that period of time which is not less than 36 months or more than 60 months after the end of the Contract Year during which the Loss Occurrence took place In reporting losses, deductibles or attachment points shall be applied first to the coverages provided by the FHCF. After the mandatory December Proof of Loss Report, quarterly Proof of Loss Reports are required. For purposes of this rule, quarterly Proof of Loss Reports shall be those reports submitted at each quarter end date after December 31 of the Contract Year in which the loss occurrence occurs and continuing until all claims and losses resulting from loss occurrences commencing during the Contract Year are fully discharged in accordance with the reporting requirements in this paragraph. “Fully Discharged” means the earlier of the date on which the insurer has paid its policyholders in full or the commutation clause, in Article X of the Reimbursement Contract, adopted in Rule 19-8.010, F.A.C., takes effect. For the quarterly report due on 3/31, any insurer whose losses reach or exceed 50% of its FHCF retention for a specific loss occurrence shall report its losses on Form FHCF-L1B submit a Proof of Loss Report for that loss occurrence. For the quarterly report due on 6/30, any insurer whose losses reach or exceed 75% of its FHCF retention for a specific loss occurrence shall report its losses on Form FHCF L1B submit a Proof of Loss Report for that loss occurrence. For the quarterly reports due on 9/30 and thereafter, any insurer which anticipates that its losses will reach 100% or more of exceed its FHCF retention for a specific loss occurrence shall report its losses on Form FHCF L1B submit quarterly Proof of Loss Reports until all its losses are paid to its policyholders and the insurer has received reimbursement from the Fund. For purposes of this rule, quarterly Loss Reports shall be those reports submitted at each quarter end date after December 31 of the Contract Year in which the covered event occurs and continuing until all claims and losses resulting from loss occurrences commencing during the Contract Year are fully discharged in accordance with the reporting requirements in this paragraph. “Fully Discharged” means the earlier of the date on which the insurer has paid its policyholders in full or the commutation clause, in Article X of the Reimbursement Contract, adopted in Rule 19-8.010, F.A.C., takes effect.

Annually, all Companies which experienced losses for a specific loss occurrence, but are not required to report quarterly loss reports for that loss occurrence because they do not meet the quarterly requirements outlined in this section, shall submit a mandatory year-end Proof of Loss Report for each loss occurrence, using the most current data available unless the Company has no losses. This Proof of Loss Report shall be filed no earlier than December 1 and no later than December 31 of each year and shall continue until the earlier of the expiration of the commutation period or until all claims and losses resulting from the loss occurrence are fully discharged including any adjustments to such losses due to salvage or other recoveries.

(c)(d) As a result of reports submitted on Form FHCF-L1B, reimbursements to insurers shall be adjusted in accordance with Section 215.555(4)(d)1., F.S., which requires the Fund to pay additional amounts to insurers and insurers to return overpayments to the Fund, based on the most recent calculation of losses.

(6) No change.

Specific Authority 215.555(3) FS. Law Implemented 215.555(2), (3), (4), (5), (6), (7),

(15) FS. History–New 5-17-99, Amended 6-19-00, 6-3-01,6-2-02, 11-12-02, 5-13-03, 5-19-04,8-29-04, 5-29-05, ___.

 

19-8.030 Insurer Responsibilities

(1) through (4)(a) No change.

(b) New Participants during the period of June 1 through November 30: Those Insurers that first begin writing Covered Policies from June 1 through November 30 of a Contract Year are “New Participants.” New Participants must designate a coverage level in the annual Reimbursement Contract, make any required selections therein, and execute the Contract simultaneously with issuing the first Covered Policy. The completed and executed Reimbursement Contract, including all required selections and schedules, must be returned no later than 30 days after the effective date of the first Covered Policy. is issued.

(c) through (6) No change.

(7) Examination Requirements. Company is required to prepare and retain an exam file in accordance with the specifications outlined in the Data Call instructions and a detailed claims listing to support losses reported on the Proof of Loss Report. Such records must be retained until the FHCF has completed its examination of a Company’s exposure submission and any loss reports applicable to the Data Call Contract Year. The records provided for examination must be from the exam file as originally prepared unless a subsequent resubmission was sent to the FHCF. Note that both Citizens and Insurers participating in Quota Share Primary Insurance Arrangements must keep complete and accurate records, including copies of policy declaration pages and supporting claims documents, for the purpose of exposure and loss reimbursement examinations by the FHCF.

(a) Advance Examination Record Requirements: Within 30 days from the date on the letter from the FHCF, Companies are required to provide the FHCF with the records indicated in Form FHCF-EAP1AP1, “Exposure Examination Advance Preparation Instructions” rev. 05/2006 5/05 or in Form FHCF-LAP1 “Loss Reimbursement Examination Advance Preparation Instructions”, 05/2006. An extension of 30 days may be granted if the Insurer can show that the need for the additional time is due to circumstances beyond the reasonable control of the participant. These forms are is form is hereby adopted and incorporated by reference into this rule. Copies of these forms this form may be obtained from the FHCF website, www.sbafla.com/fhcf or by contacting the State Board of Administration. The mailing address is P. O. Box 13300, Tallahassee, FL 32317-3300. The street address is 1801 Hermitage Blvd., Tallahassee, Florida 32308.

(b) On-site Examination Record Requirements: The FHCF-EAP1AP1, “Exposure Examination Advance Preparation Instructions” form and the FHCF-LAP1, “Loss Reimbursement Examination Advance Preparation Instructions” each contains a list of the information that the Companies must have available, on-site, on the date the exposure or loss examination is to begin. These records must be made available to the FHCF examiner upon request.

(c) Response to the FHCF Examination Report: Within 30 days from the date of the letter accompanying the examination report, a Company must provide a written response to the FHCF. The response must indicate whether the Company agrees with the recommendation of the examination report. If the Company disagrees with the examination findings, the reason for the disagreement will be outlined in the response and the Company will provide supporting information to support its objection.

(d) Resubmissions/Updates as a Result of a Completed Examination: A Company required to resubmit exposure data or update a Proof of Loss Report as a result of the examination must do so within 30 days of the date on the letter from the FHCF notifying the Company of the need to resubmit. An extension of 30 days will be granted if the Company can show that the need for additional time is due to circumstances beyond the reasonable control of the Company.

(8) Loss Reporting. Participating Insurers are required to file the following two types of loss reports at the times prescribed in Rule 19-8.029, F.A.C. Form FHCF-L1A, “Florida Hurricane Catastrophe Fund Interim Loss Report,” rev. 05/2006 5/05 and Form FHCF-L1B, “Florida Hurricane Catastrophe Fund Proof of Loss Report, rev. 05/2006 5/05. Both of these forms are hereby adopted and incorporated by reference into this rule.

(9) through (b) No change.

(c) Consequences for Failure to meet the requirements contained in the FHCF-EAP1, “Exposure Examination Advance Preparation Instructions” the FHCF-LAP1, “Loss Reimbursement Examination Advance Preparation Instructions” or the on-site examination record requirements in a timely manner: In addition to other penalties or consequences, the FHCF has the authority, pursuant to Section 215.555(4)(f), F.S., to require that the Insurer pay for the following services under the circumstances outlined below:

1. through 3. No change.

(10) No Change.

Specific Authority 215.555(3); FS. Law Implemented 215.555 FS. History–New 5-13-03, Amended, 5-19-04, 5-29-05, ____.

 

 

NAME OF PERSON ORIGINATING PROPOSED RULES: Jack E. Nicholson, Senior FHCF Officer, State Board of Administration.

NAME OF SUPERVISOR OR PERSON WHO APPROVED THE PROPOSED RULES: The Trustees of the State Board of Administration of Florida.

DATE PROPOSED RULES WERE APPROVED BY AGENCY HEAD: February 14, 2006.

DATE NOTICE OF PROPOSED RULE DEVELOPMENT WAS PUBLISHED IN FAW: December 23, 2005, Vol. 31, No. 51 as to all rules but Rule 19-8.012, F.A.C. This notice was published on December 30, 2005, Vol. 31, No. 52.

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