SB 585: Rates, Underwriting, and Related Organizations; certain disclosures in property and casualty insurance rate filings concerning climate related risk, catastrophe modeling, and reinsurance costs; require

Senate Bill 585

By: Senators Parkes of the 7th, Orrock of the 36th, Jones II of the 22nd, Wicks of the 34th, Merritt of the 9th and others

A BILL TO BE ENTITLED

AN ACT

To amend Chapter 9 of Title 33 of the Official Code of Georgia Annotated, relating to regulation of rates, underwriting rules, and related organizations, so as to require certain disclosures in property and casualty insurance rate filings concerning climate related risk, catastrophe modeling, and reinsurance costs; to require property and casualty insurance companies to submit certain information to the Department; to require such department to create a database; to require the Commissioner to provide a reduction in certain rates; to provide for public reporting; to provide for enforcement; to provide for rules and regulations; to provide for definitions; to provide for legislative findings and purpose; to provide for related matters; to provide for an effective date and applicability; to repeal conflicting laws; and for other purposes.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:

SECTION 1.

Chapter 9 of Title 33 of the Official Code of Georgia Annotated, relating to regulation of rates, underwriting rules, and related organizations, is amended by adding new Code sections to read as follows:

"33-9-45.

(a)(1) The General Assembly finds and declares that the purpose of this Code section is to improve transparency, ensure actuarial support, and ensure mitigation and resilience investments are appropriately reflected in underwriting and pricing to improve availability and affordability.

(2) Nothing in this Code section is intended to prohibit the consideration of bona fide, actuarially supported climate risk or catastrophe risk.

(b) As used in this Code section, the term:

(1) 'Catastrophe model' means a tool, instrumentality, means, or product, including a map based tool, a computer based tool, or a simulation, that is used by an insurer to estimate potential losses from catastrophic events.

(2) 'Community level mitigation action' means a science based mitigation action as demonstrated by a community or neighborhood level designation or certification or as undertaken by a government entity.

(3) 'Natural disaster' means the occurrence or imminent threat of widespread catastrophic or severe damage, injury, or loss of life or property resulting from any natural cause, including, but not limited to, fire, flood, earthquake, hurricane, tornado, high water, landslide, mudslide, wind, storm, wave action, ice storm, air contamination, blight, drought, infestation, explosion, water contamination, bridge failure, or bridge collapse.

(4) 'Natural disaster risk model' means a tool, instrumentality, means, or product, including a map based tool, a computer based tool, or a simulation, that is used by an insurer, in whole or in part, to measure or assess the natural disaster risk associated with a residential property or community for purposes of rating, classifying, pricing, or underwriting, including, but not limited to, writing or renewing insurance, based on natural disaster risk or estimating risks or losses corresponding to the natural disaster risk classifications.

(5) 'Property specific mitigation action' means a science based mitigation action that includes a verification and certification process.

(c) No later than January 30, 2027, and annually thereafter, every property and casualty insurance company doing business in this state shall submit the following information to the department:

(1) ZIP Code level data on the following topics:

(A) Nonrenewal rates;

(B) Nonpayment cancellation rates;

(C) Other cancellation rates;

(D) Claim frequency rates;

(E) Average claim amounts;

(F) Paid loss ratios; and

(G) Average premiums;

(2) Market share data; and

(3)(A) If utilized, the natural disaster risk model or catastrophe model or scoring method used to assign risk.

(B) The following information about a natural disaster risk model or catastrophe model or scoring method shall be submitted:

(i) A description of such model or method;

(ii) The impact of such model or method on rates;

(iii) An actuarial justification for all rating factors, including mitigation discounts offered; and

(iv) An explanation of the use of the model or method in underwriting decisions.

(C) Any model or method submitted to the department pursuant to this paragraph shall be treated as a trade secret and shall not be subject to disclosure.

(D) Any property or casualty insurance company that uses a natural disaster risk model, a catastrophe model, or a combination of models shall ensure the following factors are either incorporated in the natural disaster risk model, catastrophe model, or combination of models or are otherwise demonstrably included in such property and casualty insurance company's underwriting and pricing:

(i) Property specific mitigation actions such as establishing defensible space, incorporating building hardening measures, or receiving certification from an entity with experience in mitigation of properties against natural disasters; and

(ii) Community level mitigation activities or designations, including forest treatment and other fuel reduction activities.

(E) Any property and casualty insurance company that uses a natural disaster risk model or a catastrophe model or scoring method to assign risk shall also include the information required in subparagraph (A) of this paragraph in any rate filing submitted to the superintendent by such property and casualty insurance company.

(d) The department shall create and maintain a public facing database where policy holders can access the market share data submitted by property and casualty insurance companies pursuant to paragraph (2) of subsection (c) of this Code section.

33-9-46.

(a) As used in this Code section, the term:

(1) 'Community level mitigation action' means a science based mitigation action as demonstrated by a community or neighborhood level designation or certification or as undertaken by a government entity.

(2) 'Natural disaster' means the occurrence or imminent threat of widespread catastrophic or severe damage, injury, or loss of life or property resulting from any natural cause, including, but not limited to, fire, flood, earthquake, hurricane, tornado, high water, landslide, mudslide, wind, storm, wave action, ice storm, air contamination, blight, drought, infestation, explosion, water contamination, bridge failure, or bridge collapse.

(3) 'Natural disaster risk model' means a tool, instrumentality, means, or product, including a map based tool, a computer based tool, or a simulation, that is used by an insurer, in whole or in part, to measure or assess the natural disaster risk associated with a residential property or community for purposes of rating, classifying, pricing, or underwriting, including, but not limited to, writing or renewing insurance, based on natural disaster risk or estimating risks or losses corresponding to the natural disaster risk classifications.

(4) 'Property specific mitigation action' means a science based mitigation action that includes a verification and certification process.

(b) The Commissioner shall provide for an actuarially appropriate reduction in the rates of homeowners insurance premiums and property and casualty insurance premiums applicable to residential real property for policy holders who can demonstrate that property specific mitigation actions have been undertaken on the property or community level mitigation actions have been undertaken in sufficient proximity to the property to reduce the risk of loss from a natural disaster. The Commissioner shall by regulation establish a process for policy holders to demonstrate such mitigation actions have occurred.

(c) An insurer shall post on its public website readily accessible information on the premium discounts, incentives, or other premium adjustments that are available to policy holders of homeowners insurance or property and casualty insurance applicable to residential real property who undertake property-specific mitigation actions or provide evidence of community level mitigation actions. The website shall identify, as applicable:

(1) Property specific mitigation actions for the policy holder to undertake and community level mitigation actions, as determined by the Commissioner, that could result in a discount, incentive, or other premium adjustment; and

(2) The amount of the discount, incentive, or other premium adjustment associated with each action.

(d)(1) An insurer that provides a mitigation discount or that uses a natural disaster risk model or risk score to underwrite, nonrenew, price, create a rate differential, or surcharge the premium based upon the policy holder's or applicant's natural disaster risk shall provide an annual written notice to each policy holder or applicant upon application for insurance of the applicable mitigation discounts, the natural disaster risk score, and any other natural disaster risk classification used by the insurer to underwrite, nonrenew, price, create a rate differential, or surcharge the premium based upon the policy holder's or applicant's natural disaster risk.

(2) Such notice shall include:

(A) A plain language explanation of the natural disaster risk score or other natural disaster risk classification, including an explanation that insurers may use different models and have different risk score changes that could result in different risk scores from other insurers;

(B) The range of the scores or classifications that could potentially be assigned to the property;

(C) The relative position of the score or classification assigned to the property within that range of possible scores or classifications provided by the insurer's risk model;

(D) A written explanation of why the policy holder or applicant received the assigned score or classification that identifies the primary features of the property that influenced the assignment of the score or classification; and

(E) The impact, if any, that each property specific mitigation or community level mitigation action could have on a natural disaster risk score or classification assigned to the property.

(e) A policy holder or applicant for a policy of insurance whose natural disaster risk model score, natural disaster risk classification assigned to the property, or applicable mitigation discount is inaccurate and provides evidence of the property specific or community level mitigation action may appeal the score directly to the insurer. The insurer shall notify the policy holder or applicant in writing of the right to appeal the natural disaster risk score or other natural disaster risk classification or applicable mitigation discount when the score or classification or discount is provided to the policy holder or applicant as required by this subsection. If the policy holder or applicant appeals the natural disaster risk score or other natural disaster risk classification or applicable discount, the insurer shall acknowledge receipt of the appeal in writing within ten calendar days after receipt of the appeal. The insurer shall respond to the appeal in writing with a reconsideration and decision within 30 calendar days after receiving the appeal. If an appeal is denied, the insurer shall, upon request by the Commissioner, forward a copy of the appeal and the insurer's response to the Commissioner."

SECTION 2.

This Act shall become effective on January 1, 2027, and shall apply to all property insurance rate filings submitted on or after such date.

SECTION 3.

All laws and parts of laws in conflict with this Act are repealed.