GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2017
S 1
SENATE BILL 284
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Short Title: Property Insurance Fairness. |
(Public) |
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Sponsors: |
Senators Brown, Cook, Rabon (Primary Sponsors); Dunn, B. Jackson, Lee, and Sanderson. |
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Referred to: |
Rules and Operations of the Senate |
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March 16, 2017
A BILL TO BE ENTITLED
AN ACT TO INCREASE THE FAIRNESS and equity OF PROPERTY INSURANCE RATE MAKING IN NORTH CAROLINA BY requiring that CERTAIN PROPERTY INSURANCE DATA BE MADE AVAILABLE TO THE PUBLIC; by providing the North Carolina Insurance Underwriting Association the authority to HAVE issueD tax‑exempt bonds to cover loss‑related liabilities; and to remove certain obsolete references to the coastal property insurance pool.
The General Assembly of North Carolina enacts:
PART I. PROPERTY INSURANCE CLARITY
SECTION 1.(a) G.S. 58‑36‑15 is amended by adding new subsections to read:
"(d4) With respect to homeowners insurance rate filings, the Bureau shall do the following:
(1) Submit to the Department computations of the total amount of direct incurred losses, direct earned premiums, house years, and statewide expenses or expense factors for the most recent five years included in the filing.
(2) Report the computations to the Department by rate territory where available.
(3) Provide this information for each of the following policy categories where available:
a. All full homeowners policies.
b. All homeowners policies that exclude windstorm coverage.
c. All homeowners policies that only include windstorm coverage.
For the purposes of this subsection, homeowners insurance policies shall include condominium insurance and renters insurance, but shall not include creditor‑placed policies, condominium association policies, or commercial policies.
(d5) Companies shall submit to the Department and the Bureau catastrophic wind and hail information pursuant to a data call by the Department for losses caused by a specific catastrophic hurricane event.
(d6) Information provided to the Department and the Bureau under subsections (d4) and (d5) of this section shall be posted on the Department's Web site. Any information reported to the Department and the Bureau by an insurer pursuant to this subsection is considered a trade secret as defined in G.S. 66‑152 and shall be treated as confidential information by the Department. However, once the information from all property insurers is aggregated, then the Department may provide such aggregated information in accordance with this subsection. Notice of at least 10 business days shall be given to the insurer if confidential information pertaining to that insurer is ordered by a court of competent jurisdiction to be released to or by the Department."
SECTION 1.(b) This section is effective when it becomes law and applies to homeowners insurance rate filings on or after July 1, 2017.
PART II. BONDING AUTHORITY
SECTION 2.1. Chapter 58 of the General Statutes is amended by adding a new Article to read:
"Article 45A.
"Recovery Finance Authority.
"§ 58‑45A‑1. Name.
This Article shall be known as the "North Carolina Recovery Finance Authority Act."
"§ 58‑45A‑5. Legislative findings.
The General Assembly finds that the likelihood of one or more events causing sufficient damage and destruction for the Association to incur losses that exceed the combination of available surplus, reinsurance, and other sources of funding, including assessments, is significant. The General Assembly finds that it will be beneficial to the residents and property owners in this State, and will increase the insurance capacity and the overall functioning of the State's insurance industry, for all or a portion of the obligations to pay claims under policies issued by the Association and related to the event or events resulting in such excess losses to be able to be financed by a State entity through bonds paid from amounts including catastrophe recovery charges. The General Assembly therefore finds that, as an additional or alternative method to borrowing by the Association for the purpose of paying such excess losses, the creation of a State authority to acquire the obligations to pay such claims under such policies and to provide for the issuance of bonds is necessary and desirable as a mechanism for efficiently addressing losses exceeding the combination of available surplus, reinsurance, and other sources of funding available to the Association, including assessments.
The General Assembly further finds it is appropriate that bonds of this State authority be issued under the strictures of the State and Local Government Revenue Bond Act, Article 5 of Chapter 159 of the General Statutes, to incorporate the uniform system of limitations and procedures in that Act, including the necessity for application to and approval of each bond issuance by the North Carolina Local Government Commission, with the Commission considering necessity, expedience, and feasibility for such bonds as well as reasonable rates of interest, timing, and method of marketing, maturities, and credit ratings for the bonds; and the agreement of the State that the rights vested in such State authority at the time of issuance with respect to the elements of and charges for the revenues used directly or indirectly to pay such bonds will not be limited or altered during the term of such bonds.
"§ 58‑45A‑10. Definitions.
The following definitions apply to this Article:
(1) Act. The State and Local Government Revenue Bond Act, Article 5 of Chapter 159 of the General Statutes.
(2) Assessment. A nonrecoupable fee or charge levied on the Association's member companies pursuant to G.S. 58‑45‑47(a).
(3) Association. The North Carolina Insurance Underwriting Association, established under Article 45 of this Chapter.
(4) Authority Board. The governing body of the Recovery Finance Authority.
(5) Bonds. Bonds, notes, debentures, loan agreements, or other types of obligations of the Recovery Finance Authority.
(6) Catastrophe recovery charge. A catastrophe recovery charge as defined in G.S. 58‑45‑5.
(7) Deficit. The amount of losses of the Association relating to a particular event that will exceed the combination of available surplus, reinsurance, and other sources of funding, including assessments, for the Association.
(8) Event. A hurricane or other catastrophic event causing loss or loss expenses to the Association for property in the State.
(9) Losses. Losses and loss expenses, including loss adjustment expenses, of the Association.
(10) Recovery Finance Authority or Authority. The North Carolina Recovery Finance Authority, a public agency created by this Article.
"§ 58‑45A‑15. North Carolina Recovery Finance Authority.
(a) Creation. There is created a body politic and corporate to be known as the "North Carolina Recovery Finance Authority." The Recovery Finance Authority is constituted as a public agency of the State, and the exercise by the Authority of the powers conferred by this Article in the financing of a deficit of the Association related to one or more events shall be deemed and held to be the performance of an essential governmental function.
(b) Administrative Placement. The Authority shall be located within the Department for administrative purposes, but shall exercise all of its powers independently of the Department and the Association except as otherwise specified in this Article.
(c) Authority Board. The Authority shall be governed by a nine‑member Authority Board consisting of two members appointed by the General Assembly upon the recommendation of the President Pro Tempore of the Senate in accordance with G.S. 120‑121, two members appointed by the General Assembly upon the recommendation of the Speaker of the House of Representatives in accordance with G.S. 120‑121, two members appointed by the Governor, two members appointed by the Association, and the Commissioner of Insurance or the Commissioner's designee. Each appointing authority shall appoint members who reside in diverse regions of the State. The chair of the Authority Board shall be selected by the Authority Board.
(d) Staggered Terms. The initial appointments to the Authority Board by the General Assembly upon the recommendation of the President Pro Tempore of the Senate and by the Governor shall be for terms ending April 1, 2019. The initial appointments to the Authority Board by the General Assembly upon the recommendation of the Speaker of the House of Representatives and by the Association shall be appointed to terms ending April 1, 2021. The Commissioner of Insurance or the Commissioner's designee shall serve at all times as an ex officio voting member of the Board. Thereafter, at the expiration of each stipulated term of office, all appointments shall be to a term of four years from the date of the expiration of the term, provided that all members of the Authority Board shall remain in office until their successors are appointed and qualified. The appointing authority may appoint a member to serve out the unexpired term of any member appointed by such authority.
(e) Removal of Board Members. Each member of the Authority Board, notwithstanding subsection (d) of this section, shall serve at the pleasure of the respective appointing authority. A new chair of the Authority Board may be selected at any time at the pleasure of the Authority Board.
(f) Conflicts of Interest; Ethics. Members of the Authority Board shall be subject to the provisions of Chapter 138A of the General Statutes as well as any ethics or conflicts policies promulgated by the Governor for boards of State agencies in addition to the requirements of this subsection. Members of the Authority Board shall disclose to the Board and set forth in the Boards minutes direct or indirect interests in contracts with the Authority held by (i) the member or (ii) any firm or corporation, not including units of local government or the Association, that employs the member as an officer or employee or in which the member has an ownership interest. The member having an interest shall not participate on behalf of the Authority in the authorization of such contract. Other provisions of law notwithstanding, failure to take any or all actions necessary to carry out the purposes of this subsection do not affect the validity of any bonds issued under this Article. Members, officers, and employees of the Authority shall be subject to the provisions of G.S. 14‑234.
(g) Compensation. The appointed members of the Authority Board shall receive no salary for their services but shall be entitled to receive per diem and travel allowances in accordance with the provisions of G.S. 138‑5 and G.S. 138‑6, as appropriate, beginning with the first Authority meeting called to discuss a particular bond issue.
(h) Initial Meeting. The initial meeting of the Authority may be called by the Commissioner of Insurance or any other four members.
(i) Bylaws. The Authority Board shall adopt, change, or amend bylaws with respect to the calling of meetings, quorums, voting procedures, the keeping of records, and other organizational, staffing, and administrative matters as the Authority Board may determine. Any amendments to the bylaws after their initial adoption shall be submitted to the Commissioner of Insurance for review and comment at least 45 days prior to adoption by the Authority Board, unless such notice period is waived by the Commissioner of Insurance.
"§ 58‑45A‑20. Powers of the Recovery Finance Authority.
(a) The Recovery Finance Authority shall have all of the powers necessary to execute the provisions of this Article, including the following:
(1) The powers of a corporate body, including the power to sue and be sued, to make contracts, to adopt and use a common seal, and to alter the adopted seal as needed.
(2) To issue bonds as provided in this Article and use the proceeds of such bonds directly or indirectly to pay claims with respect to policies assigned to it in connection with events, with the debt service on such bonds payable from catastrophe recovery charges under G.S. 58‑45‑47, other revenues of the Authority, or other payments by the Association or its member companies. Proceeds of such bonds may be used to pay issuance expenses and interest on the bonds for a period of up to one year and to create a reserve fund for the bonds.
(3) To invest the proceeds of bonds of the Authority that are pending disbursement or other idle funds of the Authority in any investment authorized by G.S. 159‑30.
(4) To pay all necessary costs and expenses in the formation, organization, administration, and operation of the Authority with such amounts reimbursed from proceeds of bonds when issued if so determined by the Authority.
(5) To apply for, accept, and administer loans and grants of money or real or personal property from the United States of America or any federal agency, the State or its political subdivisions, local governments, or any other public or private sources available.
(6) To adopt, alter, or repeal its own bylaws or rules implementing the provisions of this Article.
(7) To contract for the services of consulting attorneys and other consultants, to employ administrative staff as may be required in the judgment of the Authority, and to fix and pay fees or compensation to the contractors and administrative employees from funds available to the Authority, provided that financial advisors, underwriters, placement agents, feasibility consultants, and bond counsel shall be selected by the Association since the cost thereof, whether paid from proceeds or otherwise, will be attributable to the deficit.
(8) To receive and use appropriations from the State and federal government.
(9) To adopt procedures to govern its procurement of services.
(10) To perform or procure any portion of services required by the Authority.
(11) To use officers, employees, agents, and facilities of the Department or the Association for the purposes and upon the terms as may be mutually agreeable.
(12) To enter into partnership agreements with the Department or the Association, agreements with political subdivisions of the State, and agreements with private entities, and to expend such funds as it deems necessary pursuant to such agreements for its purposes.
(13) To enter into swap agreements pursuant to Article 13 of Chapter 159 of the General Statutes.
(14) To receive, administer, and comply with the conditions and requirements respecting any gift, grant, or donation of any property or money.
(15) To acquire by purchase, lease, gift, or otherwise or to obtain options for the acquisition of any real or personal property or interest therein.
(16) To sell, lease, exchange, transfer, or otherwise dispose of or to grant options for any of these purposes with respect to any real or personal property or interest therein.
(17) Subject to the provisions of this Article, to pledge, assign, mortgage, or otherwise grant a security interest in any real or personal property or interest therein, including a leasehold interest or the right and power to pledge, assign, or otherwise grant a security interest in any money, rents, charges, or other revenues and any proceeds derived by the Authority from any and all sources.
(18) To request a revenue ruling from the Internal Revenue Service with respect to the issuance of bonds and the provisions for security thereof and payments thereon, among other things.
(19) To pay, from amounts transferred from the Association or other sources, any costs for bonds or associated claims incurred prior to the issuance thereof, with such amounts reimbursed from proceeds of bonds when issued.
(20) To do all acts and terms necessary, convenient, or desirable to carry out the purpose and exercise the specific powers granted to it by this Article.
"§ 58‑45A‑25. Taxation of property of Recovery Finance Authority.
Property owned by the Recovery Finance Authority is exempt from taxation in accordance with Section 2 of Article V of the North Carolina Constitution.
"§ 58‑45A‑30. Audit.
The Recovery Finance Authority shall be subject to examination by the State Auditor pursuant to Article 5A of Chapter 147 of the General Statutes.
"§ 58‑45A‑35. Recovery Finance Authority bonds.
(a) The Recovery Finance Authority shall be treated as a municipality for purposes of the Act and may issue revenue bonds pursuant to that Act to pay all or a portion of the cost of a deficit or to refund any previously issued bonds. In connection with the refunding of any bonds previously issued by the Authority, the present value of the aggregate net debt service for such refunding bonds must be less than the present value of the aggregate net debt service no longer due on the bonds being refunded with such present value calculated using the yield on the bonds being refunded as the present value factor. In connection with the issuance of revenue bonds, the Authority shall have all powers of a municipality under the Act, and revenue bonds issued by the Authority shall be entitled to the protection of all provisions of the Act.
(b) In addition to swap agreements permitted by Article 13 of Chapter 159 of the General Statutes, in connection with or incidental to the acquisition or carrying of any investment relating to bonds, program of investment relating to bonds, or carrying of bonds, the Authority may, with the approval of the Local Government Commission, enter into a contract to place the investment or obligation of the Authority, as represented by the bonds, investment, or program of investment and the contract or contracts, in whole or in part, on an interest rate, currency, cash flow, or other basis, including the following:
(1) Interest rate swap agreements, currency swap agreements, insurance agreements, forward payment conversion agreements, and futures.
(2) Contracts providing for payments based on levels of, or changes in, interest rates, currency exchange rates, event‑related indices, or stock or other indices.
(3) Contracts to exchange cash flows or a series of payments.
(4) Contracts to hedge payment, currency, rate, spread, or similar exposure, including interest rate floors or caps, options, puts, and calls.
The Authority may enter a contract of this type in connection with, or incidental to, entering into or maintaining any agreement that secures bonds. A contract shall contain the payment, security, term, default, remedy, and other terms and conditions the Authority Board considers appropriate. The Authority may enter a contract of this type with any person after giving due consideration, where applicable, to the person's creditworthiness as determined by a rating by a nationally recognized rating agency or any other criteria the Authority Board considers appropriate. In connection with, or incidental to, the issuance or carrying of bonds, or the entering into any contract described in this subsection, the Authority may enter into credit enhancement or liquidity agreements, with payment, interest rate, termination date, currency, security, default, remedy, and other terms and conditions as the Authority determines. Proceeds of bonds and any moneys set aside and pledged to secure payment of bonds or any of the contracts entered into under this subsection may be pledged to and used to service any of the contracts entered into under this section.
(c) If requested by the Association to issue bonds pursuant to G.S. 58‑45‑47(c)(2), the Authority shall do all of the following:
(1) Enter into an assignment and payment agreement with the Association as described in subsection (d) of this section.
(2) Issue bonds under a trust agreement or indenture, which may include special covenants as described in G.S. 159‑89, to finance obligations incurred under the assignment and payment agreement.
(3) Utilize catastrophe recovery charges imposed pursuant to G.S. 58‑45‑47 and transferred to the Authority under the assignment and payment agreement to provide amounts to pay such bonds.
(4) Contract with the Association to act as agent for the Authority, either within the assignment and payment agreement or separately, to collect catastrophe recovery charges imposed pursuant to G.S. 58‑45‑47 and assigned to the Authority and to take all such other actions as may be necessary in connection with the bond issuance, the catastrophe recovery charges, and related activities, including the adjustment of claims and the payment of losses and loss expenses. The Association shall not receive any payments from the Authority for its service as agent with respect to activities described by this subsection.
(5) Assign such rights and amounts as may be required as security for the bonds.
(d) An assignment and payment agreement shall be entered into between the Authority and the Association for each bond issuance, which may contain the following provisions:
(1) For the Authority to take assignment, without recourse, of the Association's obligations to pay claims with respect to insurance policies issued by the Association. The total amount of obligations to pay claims so assigned shall be in excess of the net proceeds of the bonds to be issued (after deduction of issuance expenses, funded interest, reserves and other costs to be paid or reimbursed from proceeds) but not in excess of the estimated amount of the Association's losses resulting from events in any calendar year that exceed available surplus, reinsurance, and other sources of funding of Association losses, including assessments, as a result of one or more events. If the obligations so assigned cease to comply with the amount requirements, as a result of adjustments or for other reasons, the Association will make further assignments.
(2) For the Authority to accept from the Association an assignment of catastrophe recovery charges imposed pursuant to G.S. 58‑45‑47 such that the expected annual amount of payments derived from such assigned charges will exceed the annual debt service due on the bonds in all years except the last year of the bond issue by a factor of twenty‑five percent (25%) and in that year be at least equal to debt service not already funded.
(3) For the Authority and the Association to agree that one or more obligations to pay claims may be withdrawn from the assignment for which an agreement is reached under this section and exchanged for one or more obligations to pay claims in an equal or greater amount at any time upon the request of the Association and shall be so withdrawn and exchanged at any time an obligation relates to a claim being in dispute.
(4) For the Association to fund initial expenses for the Authority or for any issue with such funding reimbursed upon issuance of the bonds.
"§ 58‑45A‑40. Sale of Recovery Finance Authority revenue bonds.
Revenue bonds of the Recovery Finance Authority issued pursuant to this Article and the Act shall be sold in accordance with and pursuant to Article 7 of Chapter 159 of the General Statutes.
"§ 58‑45A‑45. Faith and credit of State and units of local government not pledged.
Bonds issued under this Article shall not constitute a debt secured by a pledge of the faith and credit of the State or a political subdivision of the State and shall be payable solely from the revenues, property, and other funds pledged for their payment. The bonds issued by the Recovery Finance Authority shall contain a statement that the Authority is obligated to pay the bond or the interest on the bond only from the revenues, property, or other funds pledged for their payment and that neither the faith and credit nor the taxing power of the State or any political subdivision of the State is pledged as security for the payment of the principal of or the interest or premium on the bonds.
"§ 58‑45A‑50. Bonds eligible for investment.
Bonds issued under this Article are hereby made securities in which all public officers, agencies, and public bodies of the State and its political subdivisions, all insurance companies, trust companies, investment companies, banks, savings banks, building and loan associations, credit unions, pension or retirement funds, other financial institutions engaged in business in the State, executors, administrators, trustees, and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them. These bonds are hereby made securities that may properly and legally be deposited with and received by any officer or agency of the State or political subdivision of the State for any purpose for which the deposit of bonds, notes, or obligations of the State or any political subdivision of the State is authorized by law. This section does not apply to any State pension or retirement fund or a pension or retirement fund of a political subdivision of the State.
"§ 58‑45A‑55. Taxation of revenue bonds.
Any bonds issued by the Recovery Finance Authority under the provisions of this Article shall be exempt from all State, county, and municipal taxation or assessment, direct or indirect, general or special, whether imposed for the purpose of general revenue or otherwise, excluding income taxes on the gain from the transfer of bonds. The interest on bonds issued by the Recovery Finance Authority under the provisions of this Article shall not be subject to taxation as to income.
"§ 58‑45A‑60. Members not liable.
No member of the Authority Board shall be subject to any personal liability or accountability by reason of the execution of any bonds or the issuance of any bonds."
SECTION 2.2. G.S. 58‑45‑5 reads as rewritten:
"§ 58‑45‑5. Definition of terms.
As used in this Article, unless the context clearly otherwise requires:
(2a) Catastrophe recovery
charge. Any charge collected by member insurers from policyholders statewide,
including any charge collected by the Association and Fair Plan from their
policyholders, upon issuance or renewal of residential and commercial property
insurance policies, other than National Flood Insurance policies, after a
deficit event has occurred as provided in G.S. 58 45 47. The amount of the
catastrophe recovery charge collected in a particular year shall not exceed an
aggregate amount of ten percent (10%) of policy premium. The catastrophe
recovery charge shall be limited to the recovery of losses resulting from
claims for property damage, allocated loss expenses, and actual costs and
expenses directly resulting from the catastrophe recovery charge plan.plan,
including the costs of issuance, funded interest, and reserves for any bonds
issued under G.S. 58‑45A‑35.
(7a) Recovery Finance Authority or Authority. The North Carolina Recovery Finance Authority, a public agency created by Article 45A of this Chapter.
."
SECTION 2.3. G.S. 58‑45‑47 reads as rewritten:
"§ 58‑45‑47. Deficit event.
(a) In the event of Nonrecoupable
Assessment. If the Association expects to incur losses and expenses to
the Association loss expenses, including loss adjustment expenses, exceeding
available surplus, reinsurance, and other sources of funding of Association
losses, with such availability determined by taking into account sources
committed with respect to losses and expenses, including loss adjustment expenses,
expected from prior events, the Association is authorized to issue a
nonrecoupable assessment upon its members member companies in
accordance with this Article and its Plan of Operation. Member company
assessments shall not exceed one billion dollars ($1,000,000,000) for
losses incurred from any event or series of events that occur in a given
calendar year, regardless of when such assessments are actually levied on or
collected from member companies.
(b) When Deficit
Event. After the occurrence of a hurricane or other catastrophic event
causing loss or loss expenses to the Association for property in the State, if the
Association knows that it has incurred determines that it expects to
incur losses and loss expenses expenses, including loss
adjustment expenses, in a particular calendar year that will exceed the
combination of available surplus, reinsurance, and other sources of funding,
including permissible member company assessments, then the Association shall
immediately give notice of such determination to the Commissioner that
a deficit event has occurred.and the Recovery Finance Authority. With
such notice the Association shall provide evidence with respect to its
estimates of the total losses and loss expenses, including loss adjustment
expenses, the Association expects to incur within the calendar year and the
amounts available to it from surplus, reinsurance, and other sources of
funding, including member company assessments, with such availability
determined by taking into account sources committed with respect to losses and loss
expenses, including loss adjustment expenses, expected from prior events. The
Association shall make such evidence and related material available to the
Commissioner for review and verification.
(c) Imposition of
Catastrophe Recovery Charge. Upon agreement by the Commissioner with a
determination by the Association that a deficit event has occurred, described
in subsection (b) of this section, the Association shall determine, in its
discretion, the appropriate means of financing the deficit, excess
losses and loss expenses, including loss adjustment expenses, in whole or in
part, which may include, but is not limited to, the purchase of reinsurance,
arranging lines of credit, or other forms of borrowing or financing. financing,
including a Recovery Finance Authority financing as described in subdivision
(2) of this subsection, or any combination of these means. If the
Association determines that it has issued to the member companies have
paid one billion dollars ($1,000,000,000) in nonrecoupable assessments for
losses and expenses expenses, including loss adjustment expenses, incurred
in any given year pursuant to subsection (a) of this section, the Association
may, subject to the verification by the Commissioner that the dollar value of
losses and expenses loss expenses, including loss adjustment
expenses, has reached the level necessary for a catastrophe recovery
charge, authorize member companies to impose a catastrophe recovery charge on
their residential and commercial property insurance policyholders statewide.
Catastrophe recovery charges shall be charged as a uniform percentage of
written premiums as prescribed by the Commissioner and shall not exceed an
aggregate amount of ten percent (10%) of the annual policy premium on any one
policy of insurance. Catastrophe statewide, with the catastrophe recovery
charges collected under this section shall subsection to be
transferred directly to the Association on a periodic basis as determined by
the Association and ordered by the Commissioner. The Association and the FAIR
Plan also shall charge their policyholders a catastrophe recovery charge as
provided in this section.on a periodic basis, as determined by the
Association and ordered by the Commissioner, to either of the following:
(1) Directly to the Association, or, at the Association's direction, to a trustee for the Association's creditors in a financing by the Association.
(2) To a trustee for the benefit of holders of bonds issued by the Recovery Finance Authority upon the issuance of such bonds and the execution of an assignment and payment agreement as described in G.S. 58‑45A‑35.
(d) Requirements for Catastrophe Recovery Charge. Catastrophe recovery charges imposed under this section shall be charged as a uniform percentage of written premiums as prescribed by the Commissioner, shall not exceed an aggregate amount of ten percent (10%) of the annual policy premium on any one policy of insurance, and shall also be imposed upon policyholders with insurance from the Association and the FAIR Plan established under Article 46 of this Chapter. The catastrophe recovery charge shall be clearly identified to policyholders on the premium statement, declarations page, or by other appropriate electronic or written method. The identification shall refer to the post‑catastrophe loss for which the charge was imposed. Any such catastrophe recovery charge shall not be considered premium for any purpose, including premium taxes or commissions, except that failure to pay the catastrophe recovery charge shall be treated as failure to pay premium and shall be grounds for termination of insurance. The identified catastrophe recovery charge shall be accompanied by an explanation of the charge and shall appear on the medium by which the charge is conveyed to the policyholder. The explanatory language shall be prescribed by the Commissioner.
(e) Report. The
Association shall report quarterly to the Commissioner and the Recovery
Finance Authority providing all financial information for each catastrophe
recovery charge authorized by this section, including total catastrophe
recovery charge funds recovered to date and any information reasonably
requested by the Commissioner.Commissioner or the Recovery Finance
Authority.
(f) Periodic Revision of Catastrophe Recovery Charge. The Association shall recalculate the catastrophe recovery charge amount at least annually for any such charge imposed pursuant to subdivision (1) of subsection (c) of this section and, subject to a procedure approved by the Commissioner, adjust the charge percentage as needed. The Association as agent for the Recovery Finance Authority shall recalculate the catastrophe recovery charge amount at least annually for any such charge imposed pursuant to subdivision (2) of subsection (c) of this section and adjust the charge percentage as needed.
(g) Cessation; Treatment of Excess Charges. The catastrophe recovery charge amount shall continue until financing or refinancing of the deficit event has been paid in full. The State of North Carolina does pledge to and agree with any creditors of the Association under financings or refinancings pursuant to subdivision (1) of subsection (c) of this section that so long as any such financing or refinancing is outstanding and unpaid the State will not limit the rights to catastrophe recovery charges vested in the Association at the time of incurrence of its obligations under such financings. Upon order of cessation, any catastrophe recovery charge amounts imposed pursuant to subdivision (1) of subsection (c) of this section collected by member companies, the Association or the FAIR Plan that exceed amounts necessary for payment of the debt shall be remitted to the Association and added to the surplus for the purposes of offsetting future Association losses or expenses. Any catastrophe recovery charge amounts imposed pursuant to subdivision (2) of subsection (c) of this section collected by member companies, the Association, or the FAIR Plan that exceed amounts necessary for payment of the debt shall first be remitted to the Recovery Finance Authority for payment of reasonable outstanding expenses associated with the issuance and repayment of the debt and other necessary related activities of the Recovery Finance Authority. Charge amounts remaining after payment of such expenses shall be remitted to the Association to be added to surplus.
(h) Limitations. Nothing
contained in this section prohibits the Association from entering into any
financing arrangements for the purpose of financing a deficit, provided that
the pledge of catastrophe recovery charge amounts under such financing
agreements shall not result in the actual levying of any catastrophe recovery
charge until after the Association has incurred determined that it
will incur a deficit and until after the Commissioner has approved
implementation of the Association's catastrophe recovery charge plan.requirements
of this section have been met. Nothing in this section prevents the Association
from utilizing financings under both subdivisions (1) and (2) of subsection (c)
of this section or either of them in the same calendar year or there being in
existence more than one catastrophe recovery charge under either subdivision or
both subdivisions at the same time, provided that all catastrophe recovery
charges, whether imposed by the Association or the North Carolina Recovery
Finance Authority, may not in the aggregate exceed ten percent (10%) of the
annual policy premium on any one policy of insurance."
SECTION 2.4. G.S. 120‑123 is amended by adding a new subdivision to read:
"(84) The North Carolina Recovery Finance Authority."
SECTION 2.5. G.S. 159‑81(1) reads as rewritten:
"(1) "Municipality" means a county, city, town, incorporated village, sanitary district, metropolitan sewerage district, metropolitan water district, metropolitan water and sewerage district, county water and sewer district, water and sewer authority, hospital authority, hospital district, parking authority, special airport district, special district created under Article 43 of Chapter 105 of the General Statutes, regional public transportation authority, regional transportation authority, regional natural gas district, regional sports authority, airport authority, joint agency created pursuant to Part 1 of Article 20 of Chapter 160A of the General Statutes, a joint agency authorized by agreement between two cities to operate an airport pursuant to G.S. 63‑56, the North Carolina Recovery Finance Authority described in Article 45A of Chapter 58 of the General Statutes, and the North Carolina Turnpike Authority described in Article 6H of Chapter 136 of the General Statutes and transferred to the Department of Transportation pursuant to G.S. 136‑89.182(b), but not any other forms of State or local government."
SECTION 2.6. G.S. 159‑81(3) reads as rewritten:
"(3) "Revenue bond project" means any undertaking for the acquisition, construction, reconstruction, improvement, enlargement, betterment, or extension of any one or combination of the revenue‑producing utility or public service enterprise facilities or systems listed in this subdivision, to be financed through the issuance of revenue bonds, thereby providing funds to pay the costs of the undertaking or to reimburse funds loaned or advanced by or on the behalf of either the State or a municipality to pay the costs of the undertaking.
A revenue bond project shall be (i) owned or leased as lessee by the issuing unit or (ii) owned by one or more of the municipalities participating in an undertaking established pursuant to Part 1 of Article 20 of Chapter 160A of the General Statutes. If the revenue bond project is owned by one or more municipalities as provided in (ii) of this subdivision, any one or more of the participating municipalities may each be an issuing unit consistent with their agreement to establish a joint undertaking. In addition, any joint agency established by participating municipalities pursuant to Part 1 of Article 20 of Chapter 160A of the General Statutes may be an issuing unit without owning the revenue bond project or leasing it as lessee.
The cost of an undertaking may include all property, both real and personal and improved and unimproved, plants, works, appurtenances, machinery, equipment, easements, water rights, air rights, franchises, and licenses used or useful in connection with the undertaking; the cost of demolishing or moving structures from land acquired and the cost of acquiring any lands to which the structures are to be moved; financing charges; the cost of plans, specifications, surveys, and estimates of cost and revenues; administrative and legal expenses; and any other expense necessary or incident to the project.
The following facilities or systems may be revenue bond projects under this subdivision:
r. In the case of the North Carolina Recovery Finance Authority, the financing of a deficit in the North Carolina Insurance Underwriting Association pursuant to G.S. 58‑45‑47 with the repayment of that financing to come from catastrophe recovery charges pursuant to that section or other revenues of the North Carolina Recovery Finance Authority, including payments from the Association or its members."
SECTION 2.7. G.S. 159‑83 is amended by adding a new subsection to read:
"(g) The North Carolina Recovery Finance Authority, by the power to finance as a revenue project a deficit in the Association pursuant to G.S. 58‑45‑47 and for this purpose, has the power to (i) contract for the charging of catastrophe recovery charges pursuant to G.S. 58‑45‑47, including covenanting to make such charges as necessary for the payment of revenue bonds, and (ii) pledge and assign its rights to the making, revising, receiving, and enforcing of such changes as security for its revenue bonds."
SECTION 2.8. G.S. 159‑89 is amended by adding a new subdivision to read:
"(15) With respect to revenue bonds issued by the North Carolina Recovery Finance Authority, any agreements with the North Carolina Insurance Underwriting Association to (i) assign without recourse to the Recovery Finance Authority the Insurance Underwriting Association's obligation to pay claims with respect to insurance policies issued by the Insurance Underwriting Association in an amount estimated to be in excess of its losses and expenses that exceed available surplus, reinsurance, and other sources of funding of Insurance Underwriting Association losses, including permissible assessments on its members and (ii) act as agent for the Recovery Finance Authority to collect catastrophe recovery charges imposed by it under G.S. 58‑45‑47 and direct amounts so collected to the Recovery Finance Authority."
SECTION 2.9. G.S. 159‑90(a)(1) reads as rewritten:
"(1) The maturity dates may not exceed the maximum maturity periods prescribed by the Commission for general obligation bonds pursuant to G.S. 159‑122. For bonds issued in reimbursement of a loan or advance, the maximum maturity period to be used in determining the maturity dates of the bonds shall be the maximum permissible period prescribed by the Commission for the original project for which the loan or advance was expended, calculated from the date the original project is completed. For revenue bonds issued by the North Carolina Recovery Finance Authority, the maturity dates shall be related to the structuring of the repayment of the proceeds rather than the facilities financed by the bonds, subject to an overall limit of 40 years."
SECTION 2.10. G.S. 159‑93 reads as rewritten:
"§ 159‑93. Agreement of the State.
The State of North Carolina does pledge to and agree with the holders of any revenue bonds or revenue bond anticipation notes heretofore or hereafter issued by the State or any municipality in this State that so long as any such bonds or notes are outstanding and unpaid the State will not limit or alter the rights vested in the State or the municipality at the time of issuance of the bonds or notes to establish, maintain, revise, charge, and collect such rates, fees, rentals, tolls, catastrophe recovery charges, and other charges for the use, services, facilities, and commodities of or furnished by the revenue bond project in connection with which the bonds or notes, or bonds or notes refunded by the bonds or notes, were issued as shall produce revenues at least sufficient with other available funds to meet the expense of maintenance and operation of and renewal and replacements to such project, including reserves therefor, to pay when due the principal, interest, and redemption premiums (if any) of the bonds or notes, and to fulfill the terms of any agreements made with the bondholders or noteholders, nor will the State in any way impair the rights and remedies of the bondholders or noteholders until the bonds or notes and all costs and expenses in connection with any action or proceedings by or on behalf of the bondholders or noteholders, are fully paid, met, and discharged."
SECTION 2.11. G.S. 159‑95 reads as rewritten:
"§ 159‑95. Approval of State agencies.
The general design and plan of any revenue bond project undertaken for water systems or facilities or sewage disposal systems or facilities shall be subject to the approval of the Commission for Public Health or the State Environmental Management Commission to the same extent that such projects would be if they were not financed by revenue bonds, and the provisions of the revenue bond order shall be consistent with any requirements imposed on the project by the Commission for Public Health or the State Environmental Management Commission. No revenue bond project for the acquisition or construction of systems or facilities for the generation, production, or transmission of gas or electric power may be undertaken by the State or a municipality unless the State or municipality, as the case may be, shall first obtain a certificate of convenience and necessity from the North Carolina Utilities Commission. Bonds issued by the North Carolina Recovery Finance Authority do not require the approval of the Department of Insurance except to the extent catastrophe recovery charges therefore require action pursuant to G.S. 58‑45‑47."
SECTION 2.12. G.S. 159‑96 is amended by adding a new subsection to read:
"(f) Notwithstanding the other provisions of this section, there is no geographic or territorial limitation on the use of proceeds of North Carolina Recovery Finance Authority revenue bonds other than for payment of a deficit related to a catastrophic event affecting property covered under insurance policies issued by the North Carolina Insurance Underwriting Association."
PART III. AUTHORITY TO LOWER RATES
SECTION 3. G.S. 58‑36‑20 reads as rewritten:
"§ 58‑36‑20. Disapproval; hearing, order; adjustment of premium, review of filing.
(a) At any time within 50
days after the date of any filing, the Commissioner may give written notice to
the Bureau specifying in what respect and to what extent the Commissioner
contends the filing fails to comply with the requirements of this Article and
fixing a date for hearing not less than 30 days from the date of mailing of
such notice. Once begun, hearings must proceed without undue delay. At the
hearing the burden of proving that the proposed rates are not excessive,
inadequate, or unfairly discriminatory is on the Bureau. At the hearing the
factors specified in G.S. 58‑36‑10 shall be considered. If the
Commissioner after hearing finds that the filing does not comply with the
provisions of this Article, he may issue his order determining wherein and to
what extent such filing is deemed to be improper and fixing a date thereafter,
within a reasonable time, after which the filing shall no longer be effective.
In the event the Commissioner finds that the proposed rates are excessive, the
Commissioner shall specify the overall rates, between the existing rates and
the rates proposed by the Bureau filing, that may be used by the members of the
Bureau instead of the rates proposed by the Bureau filing. issue an
order disapproving the filing and specifying the appropriate rate level or
levels that may be used by the members of the Bureau instead of the rate level
or levels proposed by the Bureau filing. In any such order, the
Commissioner shall make findings of fact based on the evidence presented in the
filing and at the hearing. Any order issued after a hearing shall be issued
within 45 days after the completion of the hearing. If no order is issued
within 45 days after the completion of the hearing, the filing shall be deemed
to be approved.
."
PART IV. REMOVE CERTAIN OBSOLETE REFERENCES TO THE COASTAL PROPERTY INSURANCE POOL
SECTION 4.1. The title of Article 45 of Chapter 58 of the General Statutes reads as rewritten:
"Article 45.
"Essential Property
Insurance for Beach Area Coastal Property."
SECTION 4.2. G.S. 58‑45‑5(2c) reads as rewritten:
"(2c) Coastal Property
Insurance Pool. The name of which was formerly known as "the Beach
Plan" and which is governed by the North Carolina Insurance Underwriting
Association. All references to "the Beach Plan" shall mean the
Coastal Property Insurance Pool, which is the market of last resort which
is governed by the North Carolina Insurance Underwriting Association and is provided
by the Association to the beach area and the coastal area."
PART V. COASTAL INSURANCE POOL FLEXIBILITY
SECTION 5.(a) G.S. 58‑45‑5 is amended by adding a new subdivision to read:
"(5a) Mitigation programs. Programs, including, but not limited to, educational, incentive, and grant programs when those programs are approved by the Directors and are intended to prevent or reduce the exposure of policyholders to risk of loss."
SECTION 5.(b) G.S. 58‑45‑15 is amended by adding a new subdivision to read:
"(6) To adopt and fund mitigation programs for persons insured by the Association. These programs include, but are not limited to, the mitigation programs authorized by G.S. 58‑45‑45(e)."
SECTION 5.(c) G.S. 58‑45‑25 reads as rewritten:
"§ 58‑45‑25. Each member of Association to participate in nonrecoupable assessments.
(b1) The accumulated surplus of the Association shall be retained from year to year and used to pay losses, reinsurance costs, and other operating expenses as necessary. No member company shall be entitled to the distribution of any portion of the Association's surplus, except pursuant to judgments entered prior to August 26, 2009.
(b2) The premiums, surplus, assessments, investment income, and other revenue of the Association are funds received for the sole purpose of providing insurance coverage, paying claims for Association policyholders, purchasing reinsurance, securing and repaying debt obligations issued by the Association, funding mitigation programs, and conducting all other activities of the Association, as required or permitted by this Article. Accumulated surplus shall not be removed from the Association or used for other purposes except pursuant to judgments entered prior to August 26, 2009.
."
PART VI. HOME ELEVATION INSURANCE REQUIREMENTS
SECTION 6.(a) Chapter 66 of the General Statutes is amended by adding a new Article to read:
"Article 47.
"Home Elevation Businesses.
"§ 66‑450. Home elevation insurance requirements.
Any person, firm, or corporation that for valuable consideration engages in the home elevation business or trade shall be subject to the following insurance requirements:
(1) Comprehensive general liability insurance with a minimum coverage of three hundred fifty thousand dollars ($350,000) combined single limit of liability.
(2) All‑risk cargo insurance with a minimum coverage of one hundred percent (100%) of the value of the structure or three hundred fifty thousand dollars ($350,000), whichever is greater.
(3) Workers' compensation insurance that complies with Chapter 97 of the General Statutes for all employees engaged in the home elevation business or trade. The exemptions in G.S. 97‑13 from the provisions of Chapter 97 of the General Statutes shall not apply to employees engaged in the home elevation business or trade.
For the purposes of this section, the term "home elevation" means any activity that involves the raising or elevating of an entire residential or noncommercial structure to a higher level above the ground."
SECTION 6.(b) This section becomes effective January 1, 2018.
PART VII. INSURANCE ADJUSTER DISCLOSURE
SECTION 7. G.S. 58‑33‑30 is amended by adding a new subsection to read:
"(f1) Adjusters. Adjusters licensed under this Article shall have a duty of disclosure of the adjuster's principal and shall provide the disclosure in a form and manner specified by the Commissioner in all interactions with insureds."
PART VIII. MISCELLANEOUS PROVISIONS
SECTION 8.1. If any section or provision of this act is declared unconstitutional or invalid by the courts, such action does not affect the validity of this act as a whole or any part other than the part so declared to be unconstitutional or invalid.
SECTION 8.2. Except as otherwise provided, this act becomes effective July 1, 2017.