1. (1) (a) An actuarial opinion and memorandum supporting the opinion shall state that the rates are not excessive, inadequate, or unfairly discriminatory and comply with the laws of this state.
2. (b) If the opinion cannot be given, a complete explanation of the reason or qualifications shall be provided.
3. (c) If the opinion and memorandum are prepared by a different individual from the person who prepared the prior filing, an explanation of the reason for this change shall be provided.
4. (2) (a) The memorandum, along with any required online data and rate submission material, shall support and document the basis of the opinion.
5. (b) It is not necessary to repeat, within the memorandum, any data that has been submitted through the online collection system; however, the memorandum shall so indicate and shall provide any necessary explanation.
6. (c) If an insurer, in addition to the completion of the required rate indications component of the I-File System, chooses to develop the proposed rates by using data or a method that is different from that which underlies the rate indications component of the I-File System, the memorandum shall contain detailed documentation and development of the method, assumptions and proposed rates, detailed documentation that the method is consistent with generally accepted and reasonable actuarial techniques, and that the resulting rates are not excessive, inadequate or unfairly discriminatory. The insurer may also provide any explanation for the Office to consider in the review of the filing pursuant to Section 627.062 or 627.0651, F.S., as to why it believes that the methodology or technique used in the filing is more appropriate for the filing than the methodology or technique used in the I-File System indications. The use of different data or method does not create a presumption of the appropriateness or inappropriateness of either method.
7. (d) The memorandum shall be such that an actuary qualified in the same practice area in which the filing is made could evaluate the reasonableness of the work.

8. (e) Each of the following items that are pertinent to the filing shall be identified and discussed:

   1. The source and description of the experience data used, including homogeneity and reasonableness of the data used as a statistical basis to measure the expected claim costs over the rating period;

   2. Verification that the data used does not include punitive damage awards;

   3. Operational issues, including changes in underwriting guidelines as indicated in paragraph 69O-170.006(4)(b), F.A.C., and other influences on the experience data that will impact the expected experience during the rating period, including large non-recurring claims and loss experience pertaining to actual catastrophic events, how these compare to expected, and how they are incorporated into the rate development;

   4. Premium and loss trends;

   5. Basis of the credibility standard for complementing the experience data, along with support for the selection of that standard whenever the standard has changed from the previous filing;

   6. Average statewide rate change, and an exhibit showing the ranges of impact on policyholders of the changes proposed in the current filing and the factors affecting the range of impact;

   7. The effect of reinsurance or any other method of smoothing claim volatility and how it was included in the rate development;

   8. Expense experience and anticipated expense needs for the rating period;

   9. Analysis of investment income and return on surplus and how it was included in the rate analysis, including demonstration of compliance with the provisions of Rule 69O-170.003 or 69O-175.001, F.A.C.;

   10. Disclosure and explanation of the basis of judgment made on assumptions or resulting rates; and

   11. The expense factors in each rate filing, which shall be divided into the following categories:

   a. Commissions and brokerage;

   b. Other acquisition expenses;

   c. General expenses;

   d. Premium taxes;

   e. Miscellaneous licenses and fees;

   f. Profit and contingencies;

   g. Reinsurance costs; and

   h. Other expenses.

9. (3) Standards.

   1. (a) Premium on-leveling methodology and calculations shall be clearly documented. An overall rate level history for the pertinent past shall be provided. Insurers not using this history in their calculations shall fully describe the method used. The insurer shall provide the policy term distribution, e.g., what percentage of the policies have been annual policies versus six-month policies.
   2. (b) If a model accepted by the Florida Commission on Hurricane Loss Projection Methodology is used, it shall be the current version of the model, however, the immediate prior version of the model accepted by the Commission of the model may be used if the filing is submitted no more than three months after the date the current version is accepted by the Commission. If the insurer is using an averaged model under section 627.062(2)(j)2., F.S., the actuarial memorandum must state that the same averaged model is being used throughout the state and indicate if a weighted average is being used. If a weighted average is used the memorandum must also include an actuarial justification for using that weighted average which shows that it results in a rate that is reasonable, fair, and adequate.

   3. (c) The use of contingent commissions as supporting data for rate changes is prohibited unless:

      1. There is a contractual arrangement between the insurer and its agents concerning the payment of contingent commissions; and

      2. The insurer demonstrates that it is not paying contingent commissions from profits higher than anticipated in its filings.

   4. (d) The ultimate incurred losses shall be based on best estimate assumptions, i.e., the assumptions the actuary expects to be realized over the period for which the rates are anticipated to be in effect.

Rulemaking Authority 624.308(1) FS. Law Implemented 624.307, 627.062, 627.0651 FS. History–New 9-5-07, Amended 9-26-24.