The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Fiscal Policy
BILL: SB 2-A
INTRODUCER: Senator Boyd
SUBJECT: Property Insurance
DATE: December 12, 2022 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Thomas/Moody Knudson BI Favorable
2. Thomas/Moody Yeatman FP Favorable
3.
I. Summary:
Senate Bill 2-A is a comprehensive bill intended to ensure policyholders in this state have access
to quality, affordable private market property insurance. The bill also requires insurers to more
promptly communicate, investigate and pay valid claims. Anticipated shortages in the
reinsurance market are addressed through a new optional state reinsurance program. Excessive
litigation is addressed by eliminating one-way attorney fees for property insurance and instead
allowing both parties to obtain fees through the offer of judgment statute. The bill strengthens the
regulatory authority of the Office of Insurance Regulation over property insurers. Specifically,
the bill:
Florida Optional Reinsurance Assistance Program
Establishes the Florida Optional Reinsurance Assistance (FORA) Program for the 2023
hurricane season, which:
o Creates an optional hurricane reinsurance program that insurers can purchase at
“reasonable” rates. Rates vary by tier level purchased and will range from 50% to
65% rate on-line.
o Provides purchase tiers that begin at the Florida Hurricane Catastrophe Fund (FHCF)
attachment point and cumulatively are limited to no more than $5 billion below the
FHCF attachment point.
o Allows insurers that purchase FORA coverage or receive free Reinsurance to Assist
Policyholders (RAP) coverage at each tier to have the option to purchase the next tier
down.
o Maintains the Reinsurance to Assist Policyholders (RAP) program, thus allowing
those insurers and their policyholders that could not participate during 2022-2023, to
receive and benefit from RAP reinsurance in 2023-2024.
o Funds FORA coverage with $1 billion in general revenue funds and the premiums
insurers pay for FORA coverage.
BILL: SB 2-A Page 2
o Returns remaining revenue to general revenue after the FORA program ends.
Claim Filing Deadline
Reduces the deadline for policyholders to report a claim under the policy from 2 years to 1
year for a new or reopened claim, and from 3 years to 18 months for a supplemental claim.
Regulation of Insurance in Florida
Authorizes the Office of Insurance Regulation (OIR) to subject any authorized insurer to a
market conduct examination after a hurricane under certain conditions relating to property
insurance claims.
Ensures that insurers do not abuse the appraisal process under property insurance policies by:
o Specifying the OIR has discretionary authority to suspend or revoke an insurer’s
certificate of authority or issue administrative fines and restitution upon if the insurer
engages in a general business practice of, without just cause, compelling insureds to
participate in appraisal in order for the insured to secure the full payment or settlement of
a property insurance claims.
o Adding additional elements to the mandated insurer’s quarterly reports filed with the OIR
related to claims.
o Authorizing the OIR, based on finding that the insurer had exhibited a pattern or practice
of one or more willful unfair insurance trade practice violations with regard to its use of
appraisal, to withdraw OIR approval of the property insurer’s forms and, in addition to
any other authorized regulatory action, issue an order that prohibits the insurer from
invoking appraisal for up to two years.
o Adding an element to the Property Insurer Stability Unit’s required semiannual report on
the status of the homeowners’ and condominium homeowners’ insurance market to
include the name of any insurer found to have exhibited a pattern or practice of one or
more willful unfair insurance trade practice violations with regard to its use of appraisal.
The bill also requires the OIR to publish this same information on its internet webpage.
Prompt Pay Laws for Property Insurance
Amends the prompt pay laws to encourage the prompt payments of claims, as follows:
o Reduces the time for insurers to pay or deny the claim from 90 to 60 days. Allows the
Florida Office of Insurance Regulation (OIR) to extend the 60 day period up to 30
additional days if a state of emergency, cyberattack, or computer systems failure prevents
the insurer from meeting the time frames of the prompt-pay law.
o Reduces the time for insurers to review and acknowledge a claim communication from
14 days to 7 days.
o Reduces the time for insurer to begin an investigation from 14 days to 7 days.
o Reduces the time for insurer to conduct a physical inspection from 45 days to 30 days,
and applies this requirement to hurricane claims.
o Specifies insurers may use electronic methods to investigate the loss and allows
policyholders to participate in the use of such methods.
o Requires insurers to send any adjuster’s report estimating the loss to the policyholder
within 7 days after it is created.
BILL: SB 2-A Page 3
o Requires that the insurer’s claim records include various parts of the claim investigation
and their dates.
o Provides that the requirements of the section are tolled: during the pendency of any
mediation or alternative dispute resolution procedure provided in the insurance contract
and upon failure of a policyholder or representative to provide material claim information
within 10 days, if the request for such information was made within the first 45 days after
notice of the claim.
Amends the Homeowner Claim Bill of Rights to conform to the bill’s changes to the prompt
pay laws.
Amends the Unfair Insurance Trade Practices Act to conform to changes made to the prompt
pay laws by reducing the requirement to pay undisputed amounts of benefits from 90 days to
60 days and revising the factors that excuse failure to perform.
Awards of Attorney Fees in Litigation under Property Insurance Contracts
Provides that the one-way attorney fee provisions of s. 627.428, s. 626.9373, and s.
627.70152 are not applicable in a suit arising under a residential or commercial property
insurance policy.
Reinstates application of the civil offer of judgment statute to civil actions arising under a
residential or commercial property insurance policy.
o Allows joint offers of settlement in property insurance litigation contingent on acceptance
of all joint offerees.
Removes provisions regarding attorney fees relating to the alternative procedure for
resolution of disputed sinkhole insurance claims.
Assignments of Benefits
Prohibits the assignment, in whole or in part, of any post-loss insurance benefit under any
residential property insurance policy or under any commercial property insurance policy
issued on or after January 1, 2023.
Bad Faith Failure to Settle Actions against Property Insurers
Provides that bad faith litigation for failure to settle a property insurance claim may not be
filed until after the insured has established through adverse adjudication by a court that the
insurer breached the insurance contract and a final judgment or decree has been rendered
against the insurer.
Citizens Property Insurance Corporation (Citizens)
Increases the eligibility threshold for Citizens renewal personal lines policyholders. Under
the bill, such policyholders are ineligible for Citizens coverage at renewal upon receiving an
offer of comparable coverage from an authorized insurer for a premium that is not more than
20 percent greater than the Citizens renewal premium.
Increases the eligibility threshold for Citizens new policies for commercial residential
coverage from 15 percent to 20 percent, which is consistent with the current threshold for
new policies of personal residential coverage.
BILL: SB 2-A Page 4
Amends provisions on take-out offers and the Citizens clearinghouse to conform to the
increased eligibility thresholds contained in the bill.
Requires that Citizens’ rate be non-competitive with the approved rates charged in the
admitted market, in addition to being actuarially sound.
Increases the potential rates charged for coverage on risks that are not primary residences.
Defines the term “primary residences.”
Repeals language allowing policyholders to return to Citizens as a renewal if the take-out
carrier increases their rates above the Citizens’ glidepath.
Combines Citizens three accounts into a single account upon Citizens eliminating all
outstanding financing obligations. A single account structure will allow Citizens to access its
entire surplus to pay claims. Currently, surplus in a particular account may only be used to
pay claims in that account. The bill also revises the Citizens policyholder surcharge imposed
in the event of a deficit from 15 percent per account (maximum 45 percent) to 15 percent for
the single account.
Provides that Citizens personal lines residential policyholders must secure and maintain flood
insurance that meets certain requirements as a condition of eligibility for Citizens coverage.
Provides a timetable for which flood insurance coverage must be implemented for personal
lines residential Citizens policyholders.
o For risks located in areas designated by the Federal Emergency Management Agency as
special flood hazard areas, flood insurance must be secured for new Citizens policies with
an effective date on or after April 1, 2023, and at renewal for Citizens policies that renew
on or after July 1, 2023.
o For all other risks, the requirement to obtain flood insurance at policy issuance or renewal
is effective:
o March 1, 2024, for policies insuring property to a limit of $600,000 or more.
o March 1, 2025, for policies insuring property to a limit of $500,000 or more.
o March 1, 2026, for policies insuring property to a limit of $400,000 or more.
o March 1, 2027, for all other policies.
Flood Notice
Amends the mandatory flood insurance notice by requiring it to be part of the declarations
page and makes revisions to the content of notice to encourage purchase of flood insurance.
Arbitration
Provides conditions whereby a property insurer may include mandatory binding arbitration in
its policies. The insurer may not require a policyholder to participate in mandatory binding
arbitration unless specified conditions are met, including that the insurer also offer a policy
that does not have a mandatory binding arbitration clause. Insurers must also provide an
appropriate premium discount in exchange for the rights ceded by the policyholder.
Continuation of Coverage
Authorizes the OIR to extend the 30-day coverage period for policies of insolvent insurers by
an additional 15 days if the OIR reasonably believes that market conditions are such that the
policies cannot be placed with an authorized insurer within the 30-day period.
BILL: SB 2-A Page 5
Appropriations
For 2022-2023 fiscal year, appropriates $1,757,982 in recurring funds from the Insurance
Regulatory Trust Fund to the OIR with an associated salary rate of $844,464.
o Allocates the funds as follows: $1,356,615 for Salaries and Benefits, $400,000 for Other
Personal Services Category, and $1,367 to DMS. Funds also will be used for recruitment
and retention of personnel within the OIR.
Authorizes cumulative transfers from general revenue not to exceed $1 billion from the
General Revenue Fund to the Florida Optional Reinsurance Assistance (FORA) Program for
the 2022-23 contract term beginning June 1, 2023.
o Authorizes up to $6 million in transfers from general revenue to the State Board of
Administration to administer the FORA program.
See Section V. Fiscal Impact Statement.
The bill, except as otherwise provided, is effective upon becoming law.
II. Present Situation:
Market Conditions
Domestic property insurers in Florida have incurred large financial losses from 2017 to the
present. According to the Florida Office of Insurance Regulation (OIR), from 2017 to 2021,
Florida domestic property insurers had cumulative net underwriting losses in excess of negative
three billion dollars.1 In 2020 and 2021, the combined net income of these insurers was
cumulatively over a negative 1 billion dollars. The last time these carriers has a positive net
income was 2016. In 2020, property insurance claims exceeded original estimates by
approximately $676 million.2
Adverse claim development has also become an acute problem for domestic property insurers.
Insurers set a claim reserve for each claim in order to set aside the money the insurer believes
will be necessary to pay the claim. As time passes, carriers will then compare their initial
reserves to the actual cost of the claim. In 2021, when domestic property insurers looked back at
claim reserves from one year prior, the claim costs were approximately $481 million more than
estimated, and $337 million at the two-year mark.3 These losses have led to an increasing trend
of domestic property insurers filing for rate increases. Homeowners who have purchased
coverage from a private insurer have seen annual rate increases of approximately 33 percent and
are expected to see that number rise to 40 percent next year.4
1
The OIR, Property Insurance Stability Report, p. 12, Jul. 1, 2022, https://floir.com/docs-sf/default-source/property-and-
casualty/stability-unit-reports/july-2022-isu-report.pdf?sfvrsn=34f77ed6_2 (last visited Dec. 7, 2022) (hereinafter cited as
“Insurance Stability Report”).
2
Id.
3
Id.
4
WUSF, Property Insurance Market is Facing Multiple Challenges, Dec. 5, 2022 https://wusfnews.wusf.usf.edu/economy-
business/2022-12-05/florida-property-insurance-market-multiple-challenges-special-session (last visited Dec. 7, 2022).
BILL: SB 2-A Page 6
In a presentation to the Florida Senate Committee on Banking and Insurance on January 12,
2021, the State Insurance Commissioner attributed the net underwriting losses and resulting rate
increases displayed above to several related trends and behaviors present in Florida’s domestic
property insurance market:
Claims with litigation;
Claims solicitation; and
Adverse loss reserve development.5
In 2020, the OIR conducted a data call of Florida’s domestic property insurers.6 The results of
the data call showed the severity of non-weather water claims with litigation is nearly double that
of the claims that are closed without litigation.7 According to the OIR, the increased severity of
claims involving litigation is driving adverse loss reserve development, leading to high rate
filings.8 Loss reserve development is the difference between the original loss as initially reserved
by the insurer and its subsequent evaluation later or at the time of its final disposal.9
According to the OIR, these numbers reflect the high degree of uncertainty that exists in the
property insurance market, which in turn impacts reinsurance capacity and reinsurance rates for
insurers.10 To spread Florida’s significant catastrophic risk outside of Florida’s borders, insurers
turn to the global reinsurance market.11 Fitch Rat