Changes in Citizens' Assessments Methodology: The bill changes the assessment mechanism to fund any potential deficit so that a greater share of the initial financial burden is placed on Citizens' policyholders. The assessments apply to deficits in each of the insurer's three accounts, including the high risk, personal lines, and commercial lines accounts. The changes are as follows:

If there is a deficit, a 15-percent premium surcharge will be levied on Citizens' policyholders for a period of 12 months. The surcharge will be collected when a policy is issued or renewed.

If this assessment proves insufficient, a regular assessment can be levied against most lines of property insurance for up to six percent, or up to six percent of the deficit, whichever is greater. The assessment can be recouped from the insurers' policyholders. Workers' compensation and medical malpractice insurers are not liable for the surcharge.

Any remaining deficits will be funded through a bond issuance, which will be paid off by a multi-year emergency assessment of up to 10 percent, or up to 10 percent of the deficit, whichever is greater. Workers' compensation and medical malpractice insurers are not liable for the surcharge.

Eligibility for Higher-Value Homes: The bill specifies that homes with a dwelling replacement cost of $2 million or more are no longer eligible for coverage by Citizens as of January 2009, unless they are current policyholders who can prove that at least one admitted and three surplus lines carriers are unwilling to cover the property. Currently, the provision applies to homes that have an insured value of $1 million.

Citizens Property Insurance Corporation Mission Review Task Force: The bill creates an 11-member task force to study the impact of returning the insurer to its previous status as a noncompetitive market of last resort. The task force must deliver a report by January 2009 to the governor, senate president, and speaker of the house. The senate president and speaker of the house will each name two members representing the insurance industry. The chief financial officer will name two members representing agents. The governor will name three members not allied with the industry, one of which must be the state's consumer advocate. Citizens will name one member as will the insurance commissioner.

Rating Laws and Regulatory Changes

Repeal of Arbitration: The bill repeals the use of arbitration panels to resolve rate disputes between insurers and the Office of Insurance Regulation. Previously, the use of arbitration had been suspended until January 2009.

Extension of Prohibition on “Use and File”: The bill extends the current prohibition on a law that prohibits insurers from using a “use-and-file” option to implement property rate increases for another year. Under the use-and-file option, insurers had the right to raise rates prior to securing regulatory approval. If regulators found the rates were excessive, the insurer was required to return that portion of the increase to their policyholders. Under the new law, insurers must have their rates approved by regulators before they can be applied to policyholders, unless regulators failed to notify the company within 90 days that the OIR rejected the increase.

Expedited Hearings on Rate Filings: Given the rate at which arbitration is repealed, lawmakers made provisions so that insurers would have an expedited path for rate disputes to be resolved within a timely manner. Specifically, the law requires the Division of Administrative Hearings to hold a hearing within 30 days after an insurer requests a rate hearing. The DOAH judge must issue an order within 30 days of the hearing and regulators must issue their own final orders within 30 days of receiving the judge's report.

Administrative Proceeding in Rate Determinations: The bill states that an administrative law judge may make the following finding of facts in a hearing on a rate filing. The findings are as follows:

Whether the factors used in the filing are consistent with standard actuarial techniques and are based on reasonable actuarial judgments.

Whether a factor utilized to calculate an underwriting profit is reasonable or excessive.

Whether the cost of reinsurance is reasonable or excessive.

Market Conduct Exams and Claim-Handling Procedures: The new law creates greater transparency when it comes to insurers that are found to engage in unlawful claim-handling practices.

The new law allows the OIR to order an insurer to disclose its claims' handling practices as a matter of public record based on the findings of a market conduct exam.

The OIR must find that the insurer had a pattern or practice where it willfully engaged in unfair insurance trade practices that caused harm to policyholders.

The regulations are confined to only those claims' handling procedures for the line of insurance that was the subject of the market exam.

Increased Administrative Fines for Violations: The new law doubles the amount of fines that may be levied on an insurer that violates applicable insurance codes or unfair trade practices. The increases are as follows:

The fine for a willful violation is increased from $20,000 to $40,000, not to exceed $200,000 (as opposed to $100,000), for all willful violations arising from the same action.

For nonwillful violations the fine is increased from $2,500 to $5,000, not to exceed $20,000.

Increased Administrative Fines for Unfair Insurance Trade Practices: The new law doubles the existing fines that may be imposed by the OIR or the DFS against any person found engaging in an unfair or deceptive act relating to insurance. The increases are as follows:

The fine for a willful violation is increased from $20,000 to $40,000, not to exceed $200,000 (as opposed to $100,000), for all willful violations arising from the same action.

For nonwillful violations the fine is increased from $2,500 to $5,000, not to exceed $20,000.

Requirements Related to Trade Secret Documents: Lawmakers created a new section of the insurance law related to the use and handling of documents declared as trade secrets by insurers. They are as follows:

The law specifies the requirements for submitting a document to the OIR and DFS in order for it to be claimed as a trade secret.

It requires that each page be labeled as a trade secret and be submitted separately from all other documents. The submitting party must all include an affidavit certifying the trade-secret status of the documents.

The OIR may release a document marked as a trade secret to a requestor if the OIR provides the insurer with 30-days notice and an opportunity to obtain a court order blocking the action. The OIR and DFS may also disclose a trade secret to another government agency if it is within their scope of authority.

Notice of Policy Nonrenewals: An insurer that is not planning to renew more than 10,000 policies within a 12-month period must notify the OIR 90 days before sending out the first notices of nonrenewal.

Models and Mitigation

Required Use of Models Approved by Florida Commission on Hurricane Loss Projection Methodology: The bill mandates that the commission operate as a greater check on the use of hurricane models used by insurers to calculate hurricane rates. The provisions are as follows:

An insurer must use, and may not modify or adjust, a model or method found by the commission to be accurate or reliable. The bill also deletes a current law in order for an approved model to be admissible and relevant, the OIR must have access to all the assumptions and factors included in the model.

The commission must adopt findings related to a private model's method of calculating an insurer's probable maximum loss. Insurers must use the models found by the commission to be accurate or reliable in determining probable maximum loss levels for rates filings made more than 60 days after the commission issues its findings.

Allows insurance companies to use the state's Public Hurricane Loss Model to determine rate requests in advance of making a filing, but requires that the insurer pay for use of the public model. A fee schedule for use of the model will be issued by the OIR by January 2009.

Hurricane Mitigation Premium Credits Tied to Uniform Home Rating Scale: The bill sets out a timetable for the OIR to match windstorm mitigation credits that are inline with the findings of the Florida Statewide Building Code. The timelines are as follows:

By February 2011, the OIR must develop a proposed method for insurers to establish windstorm mitigation premium credits that correlate to the rating under the uniform home rating scale.

The Financial Services Commission is required to adopt rules by October 2011 to make rate filings using the OIR methodology, which are also consistent with generally accepted actuarial principles and wind loss mitigation studies.

The rules must allow a two-year period after the effective date of the credits for a property owner to obtain an inspection or otherwise qualify for the revised credit. Until the property owner takes that step, the insurer is allowed to apply the former mitigation credit.