This rule is promulgated to implement Section 215.555, Florida Statutes, regarding the Florida Hurricane Catastrophe Fund, for the 2012-2013 contract year.

 

STATE BOARD OF ADMINISTRATION

RULE NO.: RULE TITLE:
19-8.028: Reimbursement Premium Formula

PURPOSE AND EFFECT: This rule is promulgated to implement Section 215.555, Florida Statutes, regarding the Florida Hurricane Catastrophe Fund, for the 2012-2013 contract year.

SUMMARY: In accordance with Section 215.555(5), Florida Statutes, proposed amended Rule 19-8.028, F.A.C., Reimbursement Premium Formula, adopts the 2012-2013 reimbursement premium formula and 2012-2013 Reimbursement Premium Rates. In addition, obsolete or unnecessary language has been removed and in paragraph (4)(d) of the Rule, the title has been clarified and new language has been added to allow scheduled personal property with a limit equal to or exceeding $10 million dollars and which predominantly covers one or more collectible types of property to be exempt from the FHCF coverage. The proposed amendments to Rule 19-8.028, F.A.C., are necessitated by Section 215.555(5), Florida Statutes, which requires the State Board of Administration to employ an independent consultant to develop actuarially indicated premiums for the annual reimbursement contract, by the Governor’s initiative to rid rules of duplicative, obsolete or unnecessary language and by the need to add clarification to the rule.

OTHER RULES INCORPORATING THIS RULE: There are no other rules incorporating this rule. However, there are three rules which reference this rule: subparagraph 19-8.012(3)(d)2., F.A.C., paragraph 19-8.013(2)(q), F.A.C., and paragraph 19-8.030(3)(m), F.A.C.

EFFECT ON THOSE OTHER RULES: The proposed changes to this rule have no impact on any of the three rules referencing this rule.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION:

The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: Upon review of the proposed changes to the rule and the incorporated documents, the State Board of Administration of Florida has determined that the rule does not meet the statutory threshold for ratification by the legislature.

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.

RULEMAKING AUTHORITY: 215.555(3), FS.
LAW IMPLEMENTED: 215.555(2), (3) (4) (5) (6) (7) FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW (IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):

DATE AND TIME: May 29, 2012, 9:00 a.m. until conclusion of meeting

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

Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 7 days before the workshop/meeting by contacting: Tracy Allen, 1801 Hermitage Blvd., Tallahassee, FL 32308, [phone], [e-mail]. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Tracy Allen, Senior Attorney, Florida Hurricane Catastrophe Fund, State Board of Administration, P.O. Box 13300, Tallahassee, FL 32317-3300, telephone [phone], [e-mail]

THE FULL TEXT OF THE PROPOSED RULE IS:

19-8.028 Reimbursement Premium Formula.

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

(c) Citizens Property Insurance Corporation or Citizens means the entity formed under Section 627.351, FS., and refers to both Citizens Property Insurance Corporation Coastal High Risk Account and Citizens Property Insurance Corporation Personal Lines and Commercial Lines Accounts.

(d) through (e) No change.

(f) Data Call or Florida Hurricane Catastrophe Fund Data Call means the annual reporting of insured values forms. FHCF-D1A, as adopted and incorporated into Rule 19-8.029, F.A.C. These forms, incorporated into and adopted by Rule 19-8.029, F.A.C., are the FHCF-D1A for Contract Years after the 2002/2003 Contract Year and the FHCF-D1A and FHCF-D1B for the Contract Year 2002/2003 and all prior Contract Years.

(g) Excess Insurance is defined in the Reimbursement Contract adopted by and incorporated into Rule 19-8.010, F.A.C.

(g)(h) Formula or the Premium Formula means the Formula approved by the SBA for the purpose of determining the Actuarially Indicated Premium to be paid to the FHCF. The Premium Formula is defined as an approach or methodology which leads to the creation of premium rates. The resulting rates are therefore incorporated as part of the Premium Formula, and are the result of the approach or methodology employed.

(h)(i) FHCF or Fund means the Florida Hurricane Catastrophe Fund.

(i)(j) Independent Consultant or Consultant means the independent individual, firm, or organization with which the SBA contracts to prepare the Premium Formula and any other actuarial services for the FHCF, as determined under the contract with the Consultant.

(j)(k) New Participants. The term means all Companies which are granted a certificate of authority by the Department of Financial Services after the beginning of the FHCF’s Contract Year on June 1 and which write Covered Policies, or which already have a certificate of authority and begin writing Covered Policies on or after the beginning of the FHCF’s Contract Year on June 1 and did not or was not required to enter into a contract on June 1 of the Contract Year. A Company that enters into an assumption agreement with Citizens that includes Covered Policies and is effective on or after June 1 and had written no other Covered Policies on or before June 1 is also considered a New Participant.

(k)(l) Premium means the same as Reimbursement Premium, which is the Premium which is determined by multiplying each $1,000 of insured value reported by the Company in accordance with paragraph (5)(b) of the statute, by the rate as derived from the Premium Formula.

(3)(a) No change.

(b) For the 1999-2000 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 1999 Ratemaking Formula Report to the Florida State Board of Administration, March 5, 1999,” which is supplemented by the “Florida Hurricane Catastrophe Fund Addendum to the March 5, 1999 Ratemaking Report, May 26, 1999,” both of which are hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on May 11, 1999, are hereby adopted and incorporated by reference in Form FHCF-Rates 1999, “Florida Hurricane Catastrophe Fund/1999-2000 Rates,” rev. 08/99.

(c) For the 2000-2001 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2000 Ratemaking Formula Report to the Florida State Board of Administration, March 2, 2000,” and the addendum thereto, “Florida Hurricane Catastrophe Fund: Addendum to the March 2, 2000 Ratemaking Report, April 6, 2000,” are hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 25, 2000, are hereby adopted and incorporated by reference in Form FHCF-Rates 2000, “Florida Hurricane Catastrophe Fund/2000-2001 Rates,” rev. 05/00.

(d) For the 2001-2002 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2001 Ratemaking Formula Report to the Florida State Board of Administration, March 15, 2001, as revised May 4, 2001” and the “Addendum to the March 15, 2001 Ratemaking Report,” are hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on May 30, 2001, are hereby adopted and incorporated by reference in Form FHCF-Rates 2001, “Florida Hurricane Catastrophe Fund/2001-2002 Rates,” rev. 05/01.

(e) For the 2002-2003 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2002 Ratemaking Formula Report to the Florida State Board of Administration, March 28, 2002” is hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 9, 2002, are hereby adopted and incorporated by reference in Form FHCF-Rates 2002, “Florida Hurricane Catastrophe Fund Proposed 2002 Rates, March 28, 2002.”

(f) For the 2003-2004 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2003 Ratemaking Formula Report to the Florida State Board of Administration, March 18, 2003 (Revised)” is hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 8, 2003, are hereby adopted and incorporated by reference in Form FHCF-Rates 2003, “Florida Hurricane Catastrophe Fund Proposed 2003 Rates, March 18, 2003.

(b)(g) For the 2004-2005 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2004 Ratemaking Formula Report to the State Board of Administration of Florida, March 17, 2004, Revised May 11, 2004” is hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 13, 2004 and revised on May 11, 2004, are hereby adopted and incorporated by reference in Form FHCF-Rates 2004, a two-part form titled “Florida Hurricane Catastrophe Fund Proposed 2004 Rates, March 17, 2004, (Revised May 11, 2004) Layer: $11 Billion xs $4.866 Billion” and “Florida Hurricane Catastrophe Fund Proposed 2004 Rates, March 17, 2004, (Revised May 11, 2004) Layer: $15 Billion xs $4.5 Billion”.

(c)(h) For the 2005-2006 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2005 Ratemaking Formula Report to the State Board of Administration of Florida, March 16, 2005” is hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 5, 2005, are hereby adopted and incorporated by reference in Form FHCF-Rates 2005, “Florida Hurricane Catastrophe Fund Proposed 2005 Rates, March 16, 2005.” The forms may be obtained from the Fund’s Administrator at the address stated in subsection (5).

(d)(i) For the 2006-2007 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2006 Ratemaking Formula Report to the State Board of Administration of Florida, March 15, 2006” is hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 4, 2006, are hereby adopted and incorporated by reference in Form FHCF-Rates 2006, “Florida Hurricane Catastrophe Fund Proposed 2006 Rates, March 15, 2006.” The forms may be obtained from the Fund’s Administrator at the address stated in subsection (5).

(e)(j) For the 2007-2008 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2007 Ratemaking Formula Report to the State Board of Administration of Florida, March 20, 2007” is hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 3, 2007, are hereby adopted and incorporated by reference in Form FHCF-Rates 2007, “Florida Hurricane Catastrophe Fund Proposed 2007 Rates, March 20, 2007.” These incorporated documents may be obtained directly from the SBA website, www.sbafla.com/fhcf or by contacting the SBA by mail, P. O. Box 13300, Tallahassee, FL 32317-3300, with a request for the documents.

(f)(k) For the 2008-2009 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2008 Ratemaking Formula Report to the State Board of Administration of Florida, March 26, 2008” is hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 15, 2008, are hereby adopted and incorporated by reference in Form FHCF-Rates 2008, “Florida Hurricane Catastrophe Fund Proposed 2008 Rates, March 26, 2008.” These incorporated documents may be obtained directly from the SBA website, www.sbafla.com/fhcf or by contacting the SBA by mail, P. O. Box 13300, Tallahassee, FL 32317-3300, with a request for the documents.

(g)(l) For the 2009-2010 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2009 Ratemaking Formula Report to the State Board of Administration of Florida, March 20, 2009” and the Addendum to the 2009 Ratemaking Formula Report Dated May 27, 2009 are hereby adopted and incorporated by reference. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 14, 2009, are hereby adopted and incorporated by reference in Form FHCF-Rates 2009, “Florida Hurricane Catastrophe Fund Proposed 2009 Rates, March 20, 2009, revised May 27, 2009.” The Addendum to the 2009 Ratemaking Formula Report Dated May 27, 2009, was approved by the Board on May 27, 2009, and is hereby adopted and incorporated by reference. These incorporated documents may be obtained directly from the SBA website: www.sbafla.com/fhcf or by contacting the SBA by mail, P. O. Box 13300, Tallahassee, FL 32317-3300, with a request for the documents.

(h)(m) For the 2010-2011 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2010 Ratemaking Formula Report Presented to the State Board of Administration of Florida, March 18, 2010” is hereby adopted and incorporated by reference into this rule. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 13, 2010, are hereby adopted and incorporated by reference in Form FHCF-Rates 2010, “Florida Hurricane Catastrophe Fund Proposed 2010 Rates Presented to the State Board of Administration of Florida, March 18, 2010” and is hereby adopted and incorporated by reference into this rule. These incorporated documents may be obtained directly from the SBA website: www.sbafla.com/fhcf or by contacting the SBA by mail, P. O. Box 13300, Tallahassee, FL 32317-3300, with a request for the documents.

(i)(n) For the 2011-2012 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2011 Ratemaking Formula Report Presented to the State Board of Administration of Florida, March 17, 2011” is hereby adopted and incorporated by reference into this rule, http://www.flrules.org/Gateway/ reference.asp?No=ref-00275. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on May 3, 2011, are hereby adopted and incorporated by reference in Form FHCF-Rates 2011, “Florida Hurricane Catastrophe Fund Proposed 2011 Rates Presented to the State Board of Administration of Florida, March 17, 2011” is hereby adopted and incorporated by reference into this rule, http://www. flrules.org/Gateway/reference.asp?No=ref-00276 and http://www.flrules.org/Gateway/reference.asp?No=ref-00277. These incorporated documents may be obtained directly from the SBA website: www.sbafla.com/fhcf or by contacting the SBA by mail, P. O. Box 13300, Tallahassee, FL 32317-3300, with a request for the documents.

(j) For the 2012-2013 Contract Year, the Formula developed by the Board’s Independent Consultant, “Florida Hurricane Catastrophe Fund: 2012 Ratemaking Formula Report Presented to the State Board of Administration of Florida, March 22, 2012” is hereby adopted and incorporated by reference into this rule. The basic premium rates developed in accordance with the Premium Formula methodology approved by the Board on April 24, 2012, are hereby adopted and incorporated by reference in Form FHCF-Rates 2012, “Florida Hurricane Catastrophe Fund Proposed 2012 Rates Presented to the State Board of Administration of Florida, March 22, 2012” is hereby adopted and incorporated by reference into this rule. These incorporated documents may be obtained directly from the SBA website: www.sbafla.com/fhcf or by contacting the SBA by mail, P. O. Box 13300, Tallahassee, FL 32317-3300, with a request for the documents.

(4)(a) No change.

(b) Forfeiture or Surrender of Certificates of Authority; Insurers Which Do Not Have Exposure For Covered Policies For an Entire Contract Year.

1. Insurers which have forfeited their certificates of authority or which have withdrawn from the state or discontinued writing all kinds of insurance in this state after the beginning of the Contract Year shall have their Premiums determined in accordance with subsection (3), above.

2. Special recognition is not given to insurers which do not have exposure for Covered Policies for an entire Contract Year, except for New Participants as described in paragraph (c) of this subsection (4).

3.2. Any insurer which has forfeited its certificate of authority or which has discontinued writing in accordance with an order issued by the Department of Financial Services effective prior to June 1 of each calendar year shall not be required to execute a Reimbursement Contract with the Board provided that the insurer has no exposure to hurricane loss after June 1.

(c) New Participants.

1. All New Participants shall enter into a Reimbursement Contract with the Fund.

2. All New Participants shall pay a Reimbursement Premium to the Fund in accordance with the applicable subparagraphs below and in accordance with the applicable provisions of the Reimbursement Contract adopted in Rule 19-8.010, F.A.C.

3. This subparagraph applies to Companies writing new business after June 1 but prior to December 1 of the Contract Year.

a. All New Participants writing new business during the period specified above shall pay a provisional Premium of $1,000 to provide consideration for the contract.

b. On or before March 1 of the Contract Year, the Company shall report its actual exposure as of December 31 of the Contract Year to the Administrator in accordance with the Data Call on Form FHCF-D1A, “Florida Hurricane Catastrophe Fund Data Call” which is adopted and incorporated by reference in Rule 19-8.029, F.A.C., and is available from the Administrator as described in subsection (5), below. The Administrator shall calculate the Company’s actual Reimbursement Premium for the period specified in subparagraph (c)2. based on its actual exposure. To recognize that New Participants have limited exposure during this period, the actual Premium as determined by processing the Company’s exposure data shall then be divided in half, the provisional Premium shall be credited, and the resulting amount shall be the total Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Premium payment is due no later than May 1 of the Contract Year. The Company’s retention and coverage will be determined based on the total Premium due which is the Premium calculated based on the Company’s December 31 exposure and divided in half as described in this sub-subparagraph.

(c)4. through 5. No change.

(d) Specialized Fine Arts Risks. The provisions of this paragraph apply to certain policies and endorsements predominantly or exclusively covering specialized fine arts risks that are subject to loss control measures as specified in subparagraph 1. and scheduled personal property as specified in subparagraph 2.

1. Any policy or endorsement exclusively covering Specialized Fine Arts Risks and not covering any residential structure and/or contents thereof other than such specialized fine arts items covered in the fine arts policy, shall be exempt from the Fund as a risk meeting specialized loss control requirements if the insurer employs underwriting criteria that and requires its policyholders to adheres to subparagraphs a.1. through c.7., immediately below. For purposes of the exemption in this subparagraph paragraph, a Specialized Fine Arts Risk is a policy or endorsement which insures paintings, works on paper, etchings, art glass windows, pictures, statuary, sculptures, tapestries, antique furniture, antique silver, antique rugs, rare books, and other bona fide works of art, of rarity, of historic value, or artistic merit; which charges a minimum premium of $500; which insures scheduled items valued, in the aggregate, at no less than $100,000; and which requires an investment by the insured in loss control measures to protect the Specialized Fine Arts Risks being insured.

1. The policyholder must demonstrate a willingness and determination to reduce the probability of loss.

a.2. The insurer must perform a periodic and thorough specialized inspection and must provide a specialized loss prevention service designed to prevent or minimize loss.

3. Insurable values must be sufficient to produce a premium amount to warrant the furnishing of special inspection and loss prevention service by the insurer. For purposes of this rule, the insurable value of the scheduled items must be, in the aggregate, no less than $100,000 and the minimum premium amount must be no less than $500.

4. The structural design of the residence and the degree of protection, together with efficient specialized inspection and loss protection service, must have the effect of reducing the relative importance of such otherwise applicable rating factors as exposure and quality of public fire protection.

5. The structure in which the fine arts being insured are housed must be fire-resistive or incombustible, made of heavy timber or other approved construction, and in good state of preservation and repair.

b.6. The structure and its fine arts contents must be provided with satisfactory watchman or alarm service or its equivalent where necessary.

c.7. The insurer must maintain a force of trained and competent loss prevention specialists, who perform the following tasks:

(I)a. Make complete loss prevention surveys of each Specialized Fine Arts Risk;

(II)b. Make available specialized loss prevention service for the purpose of providing consultation regarding hazards to the fine arts being insured;

(III)c. Confirm through periodic and unannounced inspections that loss prevention devices are properly maintained;

(IV)d. Investigate reported losses; and

(V)e. Confer with the policyholder and confirm through periodic and unannounced inspections that recommended safety and loss control improvements are actually made.

2. Any individual policy written to solely cover scheduled personal property with a policy limit equal to or exceeding $10 million and which predominantly covers one or more classes of collectible types of property shall be exempt from coverage under the Fund. Generally such classes of collectible property have unusually high values due to their investible, artistic, or unique intrinsic nature. Additionally, such exempt policy may also include coverage for incidental items of personal property that may also be scheduled although such property may not be considered as a collectible. The predominant class of property covered under such excluded policy represents an unusually high exposure value and such policy is intended to provide coverage for a class or classes of property that is not typical for the contents coverage under residential property insurance policies. In many cases property may be located at various locations either in or outside the state of Florida or the location of the property may change from time to time.

(5) No change.

Rulemaking Authority 215.555(3) FS. Law Implemented 215.555(2) (3) (4) (5) (6) (7) FS. History–New 9-20-99, Amended 7-3-00, 9-17-01, 7-17-02, 7-2-03, 7-29-04, 7-17-05, 7-6-06, 7-17-07, 6-16-08, 8-2-09, 7-8-10, 7-3-11,________.

NAME OF PERSON ORIGINATING PROPOSED RULE: Jack E. Nicholson, FHCF Chief Operating Officer, State Board of Administration of Florida

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: The Trustees of the State Board of Administration of Florida

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: April 24, 2012

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAW: December 22, 2011, Vol. 37, No. 51