SB585: SB585 Rates, Underwriting, and Related Organizations; certain disclosures in property and casualty insurance rate filings concerning climate related risk, catastrophe modeling, and reinsurance costs; require

26 LC 65 0072 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 to1 regulation of rates, underwriting rules, and related organizati ons, so as to require certain2 disclosures in property and casualty insurance rate filings con cerning climate related risk,3 catastrophe modeling, and reinsurance costs; to require propert y and casualty insurance4 companies to submit certain information to the Department; to require such department to5 create a database; to require the Commissioner to provide a red uction in certain rates; to6 provide for public reporting; to provide for enforcement; to provide for rules and regulations;7 to provide for definitions; to provide for legislative findings and purpose; to provide for8 related matters; to provide for an effective date and applicability; to repeal conflicting laws;9 and for other purposes.10 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:11 SECTION 1.12 Chapter 9 of Title 33 of the Official Code of Georgia Annotated , relating to regulation of13 rates, underwriting rules, and related organizations, is amended by adding new Code sections14 to read as follows:15 S. B. 585 - 1 - 26 LC 65 0072 "33-9-45.16 (a)(1) The General Assembly finds and declares that the purpose of this Code section is17 to improve transparency, ensure actuarial support, and ensure mitigation and resilience18 investments are appropriately r eflected in underwriting and pri cing to improve19 availability and affordability.20 (2) Nothing in this Code section is intended to prohibit the consideration of bona fide,21 actuarially supported climate risk or catastrophe risk.22 (b) As used in this Code section, the term:23 (1) 'Catastrophe model' means a tool, instrumentality, means, or product, including a map24 based tool, a computer based tool, or a simulation, that is used by an insurer to estimate25 potential losses from catastrophic events.26 (2) 'Community level mitigation action' means a science based mitigation action as27 demonstrated by a community or neighborhood level designation o r certification or as28 undertaken by a government entity.29 (3) 'Natural disaster' means the occurrence or imminent threat of widespread catastrophic30 or severe damage, injury, or loss of life or property resulting from any natural cause,31 including, but not limited to, fire, flood, earthquake, hurrica ne, tornado, high water,32 landslide, mudslide, wind, storm, wave action, ice storm, air c ontamination, blight,33 drought, infestation, explosion, water contamination, bridge failure, or bridge collapse.34 (4) 'Natural disaster risk model' means a tool, instrumentalit y, means, or product,35 including a map based tool, a computer based tool, or a simulat ion, that is used by an36 insurer, in whole or in part, to measure or assess the natural disaster risk associated with37 a residential property or community for purposes of rating, cla ssifying, pricing, or38 underwriting, including, but not limited to, writing or renewin g insurance, based on39 natural disaster risk or estimating risks or losses corresponding to the natural disaster risk40 classifications.41 S. B. 585 - 2 - 26 LC 65 0072 (5) 'Property specific mitigation action' means a science base d mitigation action that42 includes a verification and certification process.43 (c) No later than January 30, 2027, and annually thereafter, every property and casualty44 insurance company doing business in this state shall submit the following information to45 the department:46 (1) ZIP Code level data on the following topics:47 (A) Nonrenewal rates;48 (B) Nonpayment cancellation rates;49 (C) Other cancellation rates;50 (D) Claim frequency rates;51 (E) Average claim amounts;52 (F) Paid loss ratios; and53 (G) Average premiums;54 (2) Market share data; and55 (3)(A) If utilized, the natural disaster risk model or catastr ophe model or scoring56 method used to assign risk.57 (B) The following information about a natural disaster risk model or catastrophe model58 or scoring method shall be submitted:59 (i) A description of such model or method;60 (ii) The impact of such model or method on rates;61 (iii) An actuarial justification for all rating factors, inclu ding mitigation discounts62 offered; and63 (iv) An explanation of the use of the model or method in underwriting decisions.64 (C) Any model or method submitted to the department pursuant to this paragraph shall65 be treated as a trade secret and shall not be subject to disclosure.66 (D) Any property or casualty insurance company that uses a nat ural disaster risk67 model, a catastrophe model, or a combination of models shall en sure the following68 S. B. 585 - 3 - 26 LC 65 0072 factors are either incorporated in the natural disaster risk model, catastrophe model, or69 combination of models or are otherwise demonstrably included in such property and70 casualty insurance company's underwriting and pricing:71 (i) Property specific mitigation actions such as establishing defensible space,72 incorporating building hardening measures, or receiving certification from an entity73 with experience in mitigation of properties against natural disasters; and74 (ii) Community level mitigation activities or designations, including forest treatment75 and other fuel reduction activities.76 (E) Any property and casualty insurance company that uses a natural disaster risk model77 or a catastrophe model or scoring method to assign risk shall also include the information78 required in subparagraph (A) of this paragraph in any rate fili ng submitted to the79 superintendent by such property and casualty insurance company.80 (d) The department shall create and maintain a public facing database where policy holders81 can access the market share data submitted by property and casualty insurance companies82 pursuant to paragraph (2) of subsection (c) of this Code section.83 33-9-46.84 (a) As used in this Code section, the term:85 (1) 'Community level mitigation action' means a science based mitigation action as86 demonstrated by a community or neighborhood level designation o r certification or as87 undertaken by a government entity.88 (2) 'Natural disaster' means the occurrence or imminent threat of widespread catastrophic89 or severe damage, injury, or loss of life or property resulting from any natural cause,90 including, but not limited to, fire, flood, earthquake, hurrica ne, tornado, high water,91 landslide, mudslide, wind, storm, wave action, ice storm, air c ontamination, blight,92 drought, infestation, explosion, water contamination, bridge failure, or bridge collapse.93 S. B. 585 - 4 - 26 LC 65 0072 (3) 'Natural disaster risk model' means a tool, instrumentalit y, means, or product,94 including a map based tool, a computer based tool, or a simulat ion, that is used by an95 insurer, in whole or in part, to measure or assess the natural disaster risk associated with96 a residential property or community for purposes of rating, cla ssifying, pricing, or97 underwriting, including, but not limited to, writing or renewin g insurance, based on98 natural disaster risk or estimating risks or losses corresponding to the natural disaster risk99 classifications.100 (4) 'Property specific mitigation action' means a science base d mitigation action that101 includes a verification and certification process.102 (b) The Commissioner shall provide for an actuarially appropriate reduction in the rates103 of homeowners insurance premiums and property and casualty insu rance premiums104 applicable to residential real property for policy holders who can demonstrate that property105 specific mitigation actions have been undertaken on the propert y or community level106 mitigation actions have been undertaken in sufficient proximity to the property to reduce107 the risk of loss from a natural disaster. The Commissioner shall by regulation establish a108 process for policy holders to demonstrate such mitigation actions have occurred.109 (c) An insurer shall post on its public website readily access ible information on the110 premium discounts, incentives, or other premium adjustments that are available to policy111 holders of homeowners insurance or property and casualty insura nce applicable to112 residential real property who undertake property-specific mitig ation actions or provide113 evidence of community level mitigation actions. The website shall identify, as applicable:114 (1) Property specific mitigation actions for the policy holder to undertake and115 community level mitigation actions, as determined by the Commissioner, that could result116 in a discount, incentive, or other premium adjustment; and117 (2) The amount of the discount, incentive, or other premium adjustment associated with118 each action.119 S. B. 585 - 5 - 26 LC 65 0072 (d)(1) An insurer that provides a mitigation discount or that uses a natural disaster risk120 model or risk score to underwrite, nonrenew, price, create a rate differential, or surcharge121 the premium based upon the policy holder's or applicant's natur al disaster risk shall122 provide an annual written notice to each policy holder or applicant upon application for123 insurance of the applicable mitigation discounts, the natural disaster risk score, and any124 other natural disaster risk classification used by the insurer to underwrite, nonrenew,125 price, create a rate differential, or surcharge the premium based upon the policy holder's126 or applicant's natural disaster risk.127 (2) Such notice shall include:128 (A) A plain language explanation of the natural disaster risk score or other natural129 disaster risk classification, including an explanation that ins urers may use different130 models and have different risk score changes that could result in different risk scores131 from other insurers;132 (B) The range of the scores or classifications that could potentially be assigned to the133 property;134 (C) The relative position of the score or classification assigned to the property within135 that range of possible scores or classifications provided by the insurer's risk model;136 (D) A written explanation of why the policy holder or applicant received the assigned137 score or classification that identifies the primary features of the property that influenced138 the assignment of the score or classification; and139 (E) The impact, if any, that each property specific mitigation or community level140 mitigation action could have on a natural disaster risk score or classification assigned141 to the property.142 (e) A policy holder or applicant for a policy of insurance whose natural disaster risk model143 score, natural disaster risk classification assigned to the property, or applicable mitigation144 discount is inaccurate and provides evidence of the property specific or community level145 mitigation action may appeal the score directly to the insurer. The insurer shall notify the146 S. B. 585 - 6 - 26 LC 65 0072 policy holder or applicant in writing of the right to appeal the natural disaster risk score or147 other natural disaster risk classification or applicable mitigation discount when the score148 or classification or discount is provided to the policy holder or applicant as required by this149 subsection. If the policy holder or applicant appeals the natural disaster risk score or other150 natural disaster risk classification or applicable discount, th e insurer shall acknowledge151 receipt of the appeal in writing within ten calendar days after receipt of the appeal. The152 insurer shall respond to the appeal in writing with a reconsideration and decision within 30153 calendar days after receiving the appeal. If an appeal is deni ed, the insurer shall, upon154 request by the Commissioner, forward a copy of the appeal and t he insurer's response to155 the Commissioner."156 SECTION 2.157 This Act shall become effective on January 1, 2027, and shall apply to all property insurance158 rate filings submitted on or after such date.159 SECTION 3.160 All laws and parts of laws in conflict with this Act are repealed.161 S. B. 585 - 7 -