Senate Bill sb2972
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Florida Senate - 2004 SB 2972
By Senator Alexander
17-1777-04
1 A bill to be entitled
2 An act relating to insurance; amending s.
3 624.316, F.S.; extending the interval at which
4 insurers must be examined by the Office of
5 Insurance Regulation; deleting provisions
6 allowing the office to accept an audit report
7 from a certified public accountant in lieu of
8 conducting its own examination; revising
9 guidelines for conducting such examinations;
10 amending s. 624.319, F.S.; requiring an insurer
11 to provide copies of documents to examiners;
12 creating s. 624.4051, F.S.; requiring entities
13 issued a certificate by the office to comply
14 with specified federal legislation; amending s.
15 624.4095, F.S.; providing additional
16 restrictions with respect to premiums written
17 when both a parent company and its subsidiary
18 are insurers; amending s. 624.413, F.S.;
19 requiring additional documentation from
20 applicants for a certificate of authority;
21 amending s. 624.418, F.S.; prescribing
22 additional grounds for suspension or revocation
23 of a certificate of authority; amending s.
24 624.424, F.S.; prescribing additional actuarial
25 certification that may be required by the
26 office of an insurer; amending s. 624.4622,
27 F.S.; prescribing additional requirements for
28 local government self-insurance funds;
29 requiring statements of financial condition,
30 transactions, and affairs; creating s.
31 624.4691, F.S.; prescribing restrictions and
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1 limits on premiums written by a commercial
2 self-insurance fund; requiring certain excess
3 of loss reinsurance; amending s. 624.610, F.S.;
4 revising provisions relating to reinsurance;
5 amending s. 625.121, F.S.; revising standard
6 mortality tables, tables of disablement, and
7 tables of accidental death benefits to be used
8 in determining standard valuation; amending s.
9 625.131, F.S.; revising provisions relating to
10 reserves for credit life and disability
11 policies; amending s. 625.304, F.S.; providing
12 for investment plans by insurers' boards of
13 directors; amending s. 625.326, F.S.; revising
14 limits on foreign investments by insurers;
15 amending s. 626.88, F.S.; redefining the terms
16 "administrator" and "insurer"; defining
17 "affiliate," "control," and "GAAP"; amending s.
18 626.8805, F.S.; requiring additional
19 information of applicants for a certificate of
20 authority to act as an administrator; creating
21 s. 626.8817, F.S.; revising responsibilities of
22 an insurance company with respect to use of an
23 administrator; amending s. 626.89, F.S.;
24 requiring additional information in
25 administrators' annual reports; amending s.
26 626.901, F.S.; revising exemptions from the
27 prohibition against representing or aiding an
28 unauthorized insurer; amending s. 626.902,
29 F.S.; providing an exemption from the penalty
30 for representing an unauthorized insurer;
31 amending s. 626.9913, F.S.; providing for
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1 viatical settlement providers to submit reports
2 electronically; creating s. 627.0646, F.S.;
3 providing for the adoption of flex rate
4 adjustment factors the use of which will allow
5 insurers to adjust rates based on uniform
6 factors with a simplified review process;
7 prescribing requirements for such rate filings
8 and for determining such factors; amending s.
9 627.351, F.S.; creating separate accounts under
10 the Medical Malpractice Risk Apportionment plan
11 and providing for payments from the respective
12 accounts; amending s. 627.476, F.S.; providing
13 mortality tables that may be used to calculate
14 premiums and present values under the Standard
15 Nonforfeiture Law for Life Insurance; amending
16 s. 627.836, F.S.; providing for premium finance
17 companies to submit certain information
18 electronically; creating s. 627.8401, F.S.;
19 prohibiting certain investments and loans by
20 premium finance companies; amending s. 627.915,
21 F.S.; revising the method for calculating
22 exemption from insurer experience reporting
23 requirements; amending s. 627.943, F.S.;
24 revising standards for feasibility studies by
25 risk retention groups; prescribing grounds for
26 exemption from risk retention group
27 certificates of authority; amending s. 628.071,
28 F.S.; prescribing additional grounds on
29 issuance of a permit to form an insurer;
30 creating s. 628.072, F.S.; requiring domestic
31 insurers to establish and maintain corporate
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1 good governance procedures; prescribing
2 elements of such procedures; amending s.
3 628.371, F.S.; revising conditions on payment
4 of dividends; amending s. 628.461, F.S.;
5 providing additional grounds for exemption from
6 provisions relating to acquisition of
7 controlling stock; amending s. 628.4615, F.S.;
8 providing additional grounds for exemption from
9 provisions relating to acquisition of
10 controlling stock in a specialty insurer;
11 amending s. 628.709, F.S.; revising provisions
12 relating to formation of a mutual insurance
13 holding company; creating s. 634.042, F.S.;
14 prohibiting certain investments and loans by
15 motor vehicle service agreement companies;
16 creating s. 634.3076, F.S.; prohibiting certain
17 investments and loans by home warranty
18 associations; creating s. 634.4062, F.S.;
19 prohibiting certain investments and loans by
20 service warranty associations; amending s.
21 636.043, F.S.; revising provisions relating to
22 annual, quarterly, and miscellaneous reports by
23 prepaid limited health service organizations;
24 amending s. 641.22, F.S.; providing additional
25 conditions on issuance of a certificate of
26 authority to operate a health maintenance
27 organization; creating s. 641.23, F.S.;
28 providing additional grounds for revocation or
29 cancellation of a certificate of a health
30 maintenance organization or prepaid health
31 clinic; amending s. 641.27, F.S.; increasing
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1 the interval at which the office examines
2 health maintenance organizations; amending s.
3 641.30, F.S.; providing requirements for health
4 maintenance organizations relating to corporate
5 good governance; amending s. 641.309, F.S.;
6 revising requirements for prepaid health
7 clinics with respect to insolvency protection;
8 amending ss. 651.026, 651.0261, F.S.; providing
9 for continuing care providers to submit certain
10 information electronically; creating s.
11 651.0271, F.S.; prohibiting certain investments
12 and loans by continuing care providers;
13 amending s. 651.033, F.S.; revising provisions
14 relating to escrow accounts; amending s.
15 766.105, F.S.; redefining the term "fund" for
16 purposes of the Florida Patient's Compensation
17 Fund; revising provisions relating to coverage;
18 revising purposes of the fund; revising claim
19 procedures; providing applicability; providing
20 effective dates.
21
22 Be It Enacted by the Legislature of the State of Florida:
23
24 Section 1. Subsection (2) of section 624.316, Florida
25 Statutes, is amended to read:
26 624.316 Examination of insurers.--
27 (2)(a) Except as provided in paragraph (f), the office
28 may examine each insurer as often as may be warranted for the
29 protection of the policyholders and in the public interest,
30 and shall examine each domestic insurer not less frequently
31 than once every 5 3 years. The examination shall cover the
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1 preceding 5 3 fiscal years of the insurer and shall be
2 commenced within 12 months after the end of the most recent
3 fiscal year being covered by the examination. The examination
4 may cover any period of the insurer's operations since the
5 last previous examination. The examination may include
6 examination of events subsequent to the end of the most recent
7 fiscal year and the events of any prior period that affect the
8 present financial condition of the insurer. In lieu of making
9 its own examination, the office may accept an independent
10 certified public accountant's audit report prepared on a
11 statutory basis consistent with the Florida Insurance Code on
12 that specific company. The office may not accept the report in
13 lieu of the requirement imposed by paragraph (1)(b). When an
14 examination is conducted by the office for the sole purpose of
15 examining the 3 preceding fiscal years of the insurer within
16 12 months after the opinion date of an independent certified
17 public accountant's audit report prepared on a statutory basis
18 on that specific company consistent with the Florida Insurance
19 Code, the cost of the examination as charged to the insurer
20 pursuant to s. 624.320 shall be reduced by the cost to the
21 insurer of the independent certified public accountant's audit
22 reports. Requests for the reduction in cost of examination
23 must be submitted to the office in writing no later than 90
24 days after the conclusion of the examination and shall include
25 sufficient documentation to support the charges incurred for
26 the statutory audit performed by the independent certified
27 public accountant.
28 (b) The office shall examine each insurer applying for
29 an initial certificate of authority to transact insurance in
30 this state before granting the initial certificate.
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1 (c) In lieu of making its own examination, the office
2 may accept a full report of the last recent examination of a
3 foreign insurer, certified to by the insurance supervisory
4 official of another state.
5 (d) The examination by the office of an alien insurer
6 shall be limited to the alien insurer's insurance transactions
7 and affairs in the United States, except as otherwise required
8 by the office.
9 (e) The commission shall adopt rules providing that,
10 upon agreement between the office and the insurer, an
11 examination under this section may be conducted by independent
12 certified public accountants, actuaries meeting criteria
13 specified by rule, investment specialists, information
14 technology specialists, and reinsurance specialists meeting
15 criteria specified by rule. The rules shall provide:
16 1. That the agreement of the insurer is not required
17 if the office reasonably suspects criminal misconduct on the
18 part of the insurer.
19 2. That the office shall provide the insurer with a
20 list of three firms acceptable to the office, and that the
21 insurer shall select the firm to conduct the examination from
22 the list provided by the office.
23 1.3. That the insurer being examined must make payment
24 for the examination directly to the firm performing the
25 examination in accordance with the rates and terms established
26 agreed to by the office, the insurer, and the firm performing
27 the examination.
28 2. That the rates charged to the insurer being
29 examined are consistent with rates charged by other firms in a
30 similar profession.
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1 3. That the firm selected by the office to perform the
2 examination has no conflicts of interest that might affect its
3 ability to independently perform its responsibilities on the
4 examination.
5 4. That if the examination is conducted without the
6 consent of the insurer, the insurer must pay all reasonable
7 charges of the examining firm if the examination finds
8 impairment, insolvency, or criminal misconduct on the part of
9 the insurer.
10 (f)1.a. An examination under this section must be
11 conducted at least once every year with respect to a domestic
12 insurer that has continuously held a certificate of authority
13 for less than 3 years. The examination must cover the
14 preceding fiscal year or the period since the last examination
15 of the insurer. The office may limit the scope of the
16 examination.
17 b. The office may not accept an independent certified
18 public accountant's audit report in lieu of an examination
19 required by this subparagraph.
20 c. An insurer may not be required to pay more than
21 $25,000 to cover the costs of any one examination under this
22 subparagraph.
23 2. An examination under this section must be conducted
24 not less frequently than once every 5 years with respect to an
25 insurer that has continuously held a certificate of authority,
26 without a change in ownership subject to s. 624.4245 or s.
27 628.461, for more than 15 years. The examination must cover
28 the preceding 5 fiscal years of the insurer or the period
29 since the last examination of the insurer. This subparagraph
30 does not limit the ability of the office to conduct more
31 frequent examinations.
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1 Section 2. Subsection (1) of section 624.319, Florida
2 Statutes, is amended to read:
3 624.319 Examination and investigation reports.--
4 (1) The department or office or its examiner shall
5 make a full and true written report of each examination. The
6 examination report shall contain only information obtained
7 from examination of the records, accounts, files, and
8 documents of or relative to the insurer examined or from
9 testimony of individuals under oath, together with relevant
10 conclusions and recommendations of the examiner based thereon.
11 The insurer shall provide copies of documents upon request by
12 the examiner. The department or office shall furnish a copy of
13 the examination report to the insurer examined not less than
14 30 days prior to filing the examination report in its office.
15 If such insurer so requests in writing within such 30-day
16 period, the department or office shall grant a hearing with
17 respect to the examination report and shall not so file the
18 examination report until after the hearing and after such
19 modifications have been made therein as the department or
20 office deems proper.
21 Section 3. Section 624.4051, Florida Statutes, is
22 created to read:
23 624.4051 Compliance with certain federal laws.--Any
24 entity issued a certificate of authority by the office, or
25 otherwise regulated by the office under the Insurance Code or
26 any part thereof, when such entity is subject to compliance
27 with 115 Stat. 272 (commonly known as the "Uniting and
28 Strengthening America by Providing Appropriate Tools Required
29 to Intercept and Obstruct Terrorism (USA PATRIOT Act) Act of
30 2001"), may be examined or investigated by the office to
31 determine compliance with the USA PATRIOT Act. The office may
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1 report and provide evidence to the appropriate federal
2 authorities of any possible violations that are discovered,
3 and may cooperate with any subsequent federal investigation.
4 Section 4. Subsection (7) is added to section
5 624.4095, Florida Statutes, to read:
6 624.4095 Premiums written; restrictions.--
7 (7) When the parent company and its subsidiary are
8 both insurers, in addition to individual insurer compliance
9 pursuant to subsection (1), the parent company must also
10 maintain compliance with this section using consolidated
11 direct and net premium compared to the parent company's
12 surplus.
13 Section 5. Paragraph (k) is added to subsection (1) of
14 section 624.413, Florida Statutes, to read:
15 624.413 Application for certificate of authority.--
16 (1) To apply for a certificate of authority, an
17 insurer shall file its application therefor with the office,
18 upon a form adopted by the commission and furnished by the
19 office, showing its name; location of its home office and, if
20 an alien insurer, its principal office in the United States;
21 kinds of insurance to be transacted; state or country of
22 domicile; and such additional information as the commission
23 reasonably requires, together with the following documents:
24 (k) If a domestic stock or mutual insurer, documents
25 that demonstrate the ability to comply with s. 628.072 and
26 rules adopted thereunder.
27 Section 6. Paragraph (e) is added to subsection (1) of
28 section 624.418, Florida Statutes, to read:
29 624.418 Suspension, revocation of certificate of
30 authority for violations and special grounds.--
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1 (1) The office shall suspend or revoke an insurer's
2 certificate of authority if it finds that the insurer:
3 (e) If a domestic stock or mutual insurer, failed to
4 maintain and demonstrate compliance with s. 628.072 and rules
5 adopted thereunder.
6 Section 7. Paragraph (b) of subsection (1) of section
7 624.424, Florida Statutes, is amended to read:
8 624.424 Annual statement and other information.--
9 (1)
10 (b) Each insurer's annual statement must contain a
11 statement of opinion on loss and loss adjustment expense
12 reserves made by a member of the American Academy of Actuaries
13 or by a qualified loss reserve specialist, under criteria
14 established by rule of the commission. In adopting the rule,
15 the commission must consider any criteria established by the
16 National Association of Insurance Commissioners. The office
17 may require an insurer to submit an actuarial certification
18 prepared by an independent actuary and semiannual updates of
19 the annual statement of opinion as to a particular insurer if
20 the office has reasonable cause to believe that such reserves
21 are understated to the extent of materially misstating the
22 financial position of the insurer. Workpapers in support of
23 the statement of opinion must be provided to the office upon
24 request. This paragraph does not apply to life insurance or
25 title insurance.
26 Section 8. Section 624.4622, Florida Statutes, is
27 amended to read:
28 624.4622 Local government self-insurance funds.--
29 (1) Any two or more local governmental entities may
30 enter into interlocal agreements for the purpose of securing
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1 the payment of benefits under chapter 440, provided the local
2 government self-insurance fund that is created must:
3 (a) Have annual normal premiums in excess of $5
4 million;
5 (b) Maintain a continuing program of excess insurance
6 coverage and reserve evaluation to protect the financial
7 stability of the fund in an amount and manner determined by a
8 qualified and independent actuary;
9 (c) Submit annually an audited fiscal year-end
10 financial statement by an independent certified public
11 accountant within 6 months after the end of the fiscal year to
12 the office; and
13 (d) Have a governing body which is comprised entirely
14 of local elected officials.
15 (2) A local government self-insurance fund that meets
16 the requirements of this section is not subject to s. 624.4621
17 and is not required to file any report with the office under
18 s. 440.38(2)(b) which is uniquely required of group
19 self-insurer funds qualified under s. 624.4621. If any of the
20 requirements of this section are not met, the local government
21 self-insurance fund is subject to the requirements of s.
22 624.4621.
23 (3) Notwithstanding the provisions of subsection (2)
24 to the contrary, a local government self-insurance fund
25 created under this section after October 1, 2004, shall
26 initially be organized as either a commercial self-insurance
27 fund under s. 624.462, or a group self-insurance fund under s.
28 624.4621, and, for the first 5 years of its existence, is
29 subject to all the requirements applied to commercial
30 self-insurance funds or to group self-insurance funds.
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1 (4)(a) A local government self-insurance fund formed
2 after January 1, 2005, shall, for its first 5 fiscal years,
3 file with the office full and true statements of its financial
4 condition, transactions, and affairs. An annual statement
5 covering the preceding fiscal year shall be filed within 60
6 days after the end of the fiscal year, and quarterly
7 statements shall be filed within 45 days after the end of each
8 quarter. The office may, for good cause, grant an extension of
9 time for filing an annual or quarterly statement. The
10 statements shall contain information generally included in
11 insurers' financial statements prepared in accordance with
12 generally accepted insurance accounting principles and
13 practices and in a form generally used by insurers for
14 financial statements, sworn to by at least two executive
15 officers of the self-insurance fund. The form for financial
16 statements shall be the form currently approved by the
17 National Association of Insurance Commissioners for use by
18 property and casualty insurers.
19 (b) Each annual statement must contain a statement of
20 opinion on loss and loss adjustment expense reserves made by a
21 member of the American Academy of Actuaries. Workpapers in
22 support of the statement of opinion must be provided to the
23 office upon request.
24 (5) A local government self-insurance fund shall
25 maintain surplus to policyholders in a positive amount.
26 Section 9. Section 624.4691, Florida Statutes, is
27 created to read:
28 624.4691 Premiums written; restrictions.--
29 (1) If, during the first 6 full calendar years of its
30 operation, a commercial self-insurance fund's actual or
31 projected annual earned premiums exceed four times the sum of
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1 10 percent of the fund's statutory unearned premium as
2 reported in its most recent report made pursuant to s.
3 624.470(2)(a) plus the aggregate excess of loss reinsurance
4 limits available for the year reported, established in
5 accordance with subsection (2), the department may establish
6 by order maximum net annual premiums to be written by the fund
7 consistent with maintaining this ratio between actual or
8 projected earned premiums and unearned premiums and aggregate
9 excess of loss reinsurance, unless the fund demonstrates to
10 the department's satisfaction that exceeding such limitations
11 does not endanger the financial condition of the fund or
12 endanger the interest of the fund's members or that the fund's
13 operation is and will be actuarially sound without obtaining
14 excess reinsurance. Such orders shall be in effect no longer
15 than the end of the current calendar year. The fund's
16 self-funded reinsurance, if any, shall be included as
17 aggregate excess of loss reinsurance at an amount that will be
18 sufficient to cover unpaid losses as actuarially determined.
19 (2) With respect to subsection (1), the aggregate
20 excess of loss reinsurance shall attach at a point not greater
21 than the loss ratio, above which an assessment would be
22 indicated pursuant to rules of the department adopted under
23 the authority of this chapter. As a minimum, the aggregate
24 excess of loss reinsurance shall also provide coverage for 100
25 percent of the losses between the attachment point required by
26 this section and a loss ratio of 100 percent.
27 (3) After the 6th full calendar year of operation, a
28 commercial self-insurance fund may, instead of limiting actual
29 or projected premium to the ratio specified in subsection (1),
30 maintain aggregate excess of loss reinsurance limits, subject
31 to minimum limits enumerated in subsection (4), equal to the
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1 difference between the loss ratio at which an assessment would
2 be indicated pursuant to rules adopted by the department and a
3 loss ratio 10 percentage points higher than the highest loss
4 ratio from the most recent 6 calendar years as indicated on
5 the property and casualty annual statement report, after
6 including excess statutory reserves over statement reserves,
7 for auto liability, other liability, medical malpractice,
8 workers' compensation, and credit insurance. For commercial
9 lines of business other than auto liability, other liability,
10 medical malpractice, workers' compensation, and credit, the
11 amount required by Schedule P will be calculated in the same
12 manner as auto liability and shall be calculated for each line
13 of business individually. However, if a fund fails or chooses
14 not to maintain the aggregate excess reinsurance as specified
15 in this subsection, it shall be subject to the provisions of
16 subsection (1).
17 (4) A commercial self-insurance fund maintaining
18 aggregate excess of loss reinsurance pursuant to subsection
19 (3) must, as a minimum, maintain dollar limits of aggregate
20 excess of loss reinsurance as follows:
21 (a) For funds with actual or projected earned premiums
22 of $5 million or less, the minimum shall be equal to either 25
23 percent of actual or projected earned premiums or $500,000,
24 whichever is greater.
25 (b) For funds with actual or projected earned premiums
26 greater than $5 million, the minimum shall be:
27
28 Actual or Projected Percent of Earned
29 Earned Premiums Premium
30
31 $5,000,000.01-$10,000,000 22 percent
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1 $10,000,000.01-$25,000,000 19 percent
2 $25,000,000.01-$50,000,000 16 percent
3 $50,000,000.01-$100,000,000 13 percent
4 $100,000,000.01-$250,000,000 10 percent
5 $250,000,000.01 and greater 7 percent
6
7 (5) Notwithstanding the other provisions of this
8 section, the department may, by order, establish maximum gross
9 or net annual premiums to be written if the department, for
10 good cause shown, finds that the actual or projected premium
11 volume of the fund endangers the interests of the fund's
12 policyholders or the financial condition of the fund.
13 Section 10. Paragraph (c) of subsection (3) of section
14 624.610, Florida Statutes, is amended to read:
15 624.610 Reinsurance.--
16 (3)
17 (c)1. Credit must be allowed when the reinsurance is
18 ceded to an assuming insurer that maintains a trust fund in a
19 qualified United States financial institution, as defined in
20 paragraph (5)(b), for the payment of the valid claims of its
21 United States ceding insurers and their assigns and successors
22 in interest. To enable the office to determine the sufficiency
23 of the trust fund, the assuming insurer shall report annually
24 to the office information substantially the same as that
25 required to be reported on the NAIC Annual Statement form by
26 authorized insurers. The assuming insurer shall submit to
27 examination of its books and records by the office and bear
28 the expense of examination.
29 2.a. Credit for reinsurance must not be granted under
30 this subsection unless the form of the trust and any
31 amendments to the trust have been approved by:
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1 (I) The insurance regulator of the state in which the
2 trust is domiciled; or
3 (II) The insurance regulator of another state who,
4 pursuant to the terms of the trust instrument, has accepted
5 principal regulatory oversight of the trust.
6 b. The form of the trust and any trust amendments must
7 be filed with the insurance regulator of every state in which
8 the ceding insurer beneficiaries of the trust are domiciled.
9 The trust instrument must provide that contested claims are
10 valid and enforceable upon the final order of any court of
11 competent jurisdiction in the United States. The trust must
12 vest legal title to its assets in its trustees for the benefit
13 of the assuming insurer's United States ceding insurers and
14 their assigns and successors in interest. The trust and the
15 assuming insurer are subject to examination as determined by
16 the insurance regulator.
17 c. The trust remains in effect for as long as the
18 assuming insurer has outstanding obligations due under the
19 reinsurance agreements subject to the trust. No later than
20 February 28 of each year, the trustee of the trust shall
21 report to the insurance regulator in writing the balance of
22 the trust and list the trust's investments at the preceding
23 year end, and shall certify that the trust will not expire
24 prior to the following December 31.
25 3. The following requirements apply to the following
26 categories of assuming insurer:
27 a. The trust fund for a single assuming insurer
28 consists of funds in trust in an amount not less than the
29 assuming insurer's liabilities attributable to reinsurance
30 ceded by United States ceding insurers, and, in addition, the
31 assuming insurer shall maintain a trusteed surplus of not less
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1 than $20 million. Not less than 50 percent of the funds in the
2 trust covering the assuring insurer's liabilities attributable
3 to reinsurance ceded by United States ceding insurers and
4 trusteed surplus shall consist of assets of a quality
5 substantially similar to that required in part II of chapter
6 625. Clean, irrevocable, unconditional, and evergreen letters
7 of credit, issued or conformed by a qualified United States
8 financial institution, as defined in paragraph (5)(a),
9 effective no later than December 31 of the year for which the
10 filing is made, and in the possession of the trust on or
11 before the filing date of its annual statement, may be used to
12 fund the remainder of the trust and trusteed surplus.
13 b.(I) In the case of a group including incorporated
14 and individual unincorporated underwriters:
15 (A) For reinsurance ceded under reinsurance agreements
16 with an inception, amendment, or renewal date on or after
17 August 1, 1995, the trust consists of a trusteed account in an
18 amount not less than the group's several liabilities
19 attributable to business ceded by United States domiciled
20 ceding insurers to any member of the group;
21 (B) For reinsurance ceded under reinsurance agreements
22 with an inception date on or before July 31, 1995, and not
23 amended or renewed after that date, notwithstanding the other
24 provisions of this section, the trust consists of a trusteed
25 account in an amount not less than the group's several
26 insurance and reinsurance liabilities attributable to business
27 written in the United States; and
28 (C) In addition to these trusts, the group shall
29 maintain in trust a trusteed surplus of which $100 million
30 must be held jointly for the benefit of the United States
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1 domiciled ceding insurers of any member of the group for all
2 years of account.
3 (II) The incorporated members of the group must not be
4 engaged in any business other than underwriting of a member of
5 the group, and are subject to the same level of regulation and
6 solvency control by the group's domiciliary regulator as the
7 unincorporated members.
8 (III) Within 90 days after its financial statements
9 are due to be filed with the group's domiciliary regulator,
10 the group shall provide to the insurance regulator an annual
11 certification by the group's domiciliary regulator of the
12 solvency of each underwriter member or, if a certification is
13 unavailable, financial statements, prepared by independent
14 public accountants, of each underwriter member of the group.
15 Section 11. Paragraphs (a), (e), and (f) of subsection
16 (5) of section 625.121, Florida Statutes, are amended, and
17 paragraphs (k) and (l) are added to that subsection, to read:
18 625.121 Standard Valuation Law; life insurance.--
19 (5) MINIMUM STANDARD FOR VALUATION OF POLICIES AND
20 CONTRACTS ISSUED ON OR AFTER OPERATIVE DATE OF STANDARD
21 NONFORFEITURE LAW.--Except as otherwise provided in paragraph
22 (h) and subsections (6), (11), and (14), the minimum standard
23 for the valuation of all such policies and contracts issued on
24 or after the operative date of s. 627.476 (Standard
25 Nonforfeiture Law for Life Insurance) shall be the
26 commissioners' reserve valuation method defined in subsections
27 (7), (11), and (14); 5 percent interest for group annuity and
28 pure endowment contracts and 3.5 percent interest for all
29 other such policies and contracts, or in the case of life
30 insurance policies and contracts, other than annuity and pure
31 endowment contracts, issued on or after July 1, 1973, 4
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1 percent interest for such policies issued prior to October 1,
2 1979, and 4.5 percent interest for such policies issued on or
3 after October 1, 1979; and the following tables:
4 (a) For all ordinary policies of life insurance issued
5 on the standard basis, excluding any disability and accidental
6 death benefits in such policies:
7 1. For policies issued prior to the operative date of
8 s. 627.476(9), the commissioners' 1958 Standard Ordinary
9 Mortality Table; except that, for any category of such
10 policies issued on female risks, modified net premiums and
11 present values, referred to in subsection (7), may be
12 calculated according to an age not more than 6 years younger
13 than the actual age of the insured; and
14 2. For policies issued on or after the operative date
15 of s. 627.476(9), the commissioners' 1980 Standard Ordinary
16 Mortality Table or, at the election of the insurer for any one
17 or more specified plans of life insurance, the commissioners'
18 1980 Standard Ordinary Mortality Table with Ten-Year Select
19 Mortality Factors; and.
20 (3) For policies issued on or after July 1, 2004,
21 ordinary mortality tables, adopted after 1980 by the National
22 Association of Insurance Commissioners, adopted by rule by the
23 commission for use in determining the minimum standard of
24 valuation for such policies.
25 (e) For total and permanent disability benefits in or
26 supplementary to ordinary policies or contracts:
27 1. For policies or contracts issued on or after
28 January 1, 1966, the tables of period 2 disablement rates and
29 the 1930 to 1950 termination rates of the 1952 disability
30 study of the Society of Actuaries, with due regard to the type
31 of benefit;
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1 2. For policies or contracts issued on or after
2 January 1, 1961, and prior to January 1, 1966, either those
3 tables or, at the option of the insurer, the class three
4 disability table (1926); and
5 3. For policies issued prior to January 1, 1961, the
6 class three disability table (1926); and.
7 4. For policies or contracts issued on or after July
8 1, 2004, tables of disablement rates and termination rates
9 adopted after 1980 by the National Association of Insurance
10 Commissioners, adopted by rule by the commission for use in
11 determining the minimum standard of valuation for those
12 policies or contracts.
13
14 Any such table for active lives shall be combined with a
15 mortality table permitted for calculating the reserves for
16 life insurance policies.
17 (f) For accidental death benefits in or supplementary
18 to policies:
19 1. For policies issued on or after January 1, 1966,
20 the 1959 Accidental Death Benefits Table;
21 2. For policies issued on or after January 1, 1961,
22 and prior to January 1, 1966, either that table or, at the
23 option of the insurer, the Intercompany Double Indemnity
24 Mortality Table; and
25 3. For policies issued prior to January 1, 1961, the
26 Intercompany Double Indemnity Mortality Table; and.
27 4. For policies issued on or after July 1, 2004,
28 tables of accidental death benefits adopted after 1980 by the
29 National Association of Insurance Commissioners, adopted by
30 rule by the commission for use in determining the minimum
31 standard of valuation for those policies.
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1
2 Either table shall be combined with a mortality table
3 permitted for calculating the reserves for life insurance
4 policies.
5 (k) For individual annuity and pure endowment
6 contracts issued on or after July 1, 2004, excluding any
7 disability and accidental death benefits purchased under those
8 contracts, individual annuity mortality tables adopted after
9 1980 by the National Association of Insurance Commissioners,
10 adopted by rule by the commission for use in determining the
11 minimum standard of valuation for those contracts.
12 (l) For all annuities and pure endowments purchased on
13 or after July 1, 2004, under group annuity and pure endowment
14 contracts, excluding any disability and accidental death
15 benefits purchased under those contracts, group annuity
16 mortality tables adopted after 1980 by the National
17 Association of Insurance Commissioners, adopted by rule by the
18 commission for use in determining the minimum standard of
19 valuation for those contracts.
20 Section 12. Section 625.131, Florida Statutes, is
21 amended to read:
22 625.131 Credit life and disability policies, special
23 reserve bases.--
24 (1) The minimum reserve for single-premium credit
25 disability insurance, monthly premium credit life insurance
26 and monthly premium credit disability insurance shall be the
27 unearned gross premium.
28 (2) As to single-premium credit life insurance
29 policies, the insurer shall establish and maintain reserves
30 which are not less than the value, at the valuation date, of
31 the risk for the unexpired portion of the period for which the
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1 premium has been paid as computed on the basis of the National
2 Association of Insurance Commissioners' 1980 Standard Ordinary
3 Mortality Table and 3.5 percent interest. At the discretion of
4 the office, the insurer may make a reasonable assumption as to
5 the ages at which net premiums are to be determined. In lieu
6 of the foregoing basis, reserves based upon unearned gross
7 premiums may be used at the option of the insurer.
8 (3) As to single-premium credit life insurance
9 policies issued on or after July 1, 2004, the insurer shall
10 establish and maintain reserves that are not less than the
11 value, at the valuation date, of the risk for the unexpired
12 portion of the period for which the premium has been paid as
13 computed on the basis of ordinary mortality tables adopted
14 after 1980 by the National Association of Insurance
15 Commissioners which are adopted by rule by the commission and
16 3.5 percent interest. At the discretion of the office, the
17 insurer may make a reasonable assumption as to the ages at
18 which net premiums are to be determined. In lieu of the
19 foregoing basis, reserves based upon unearned gross premiums
20 may be used at the option of the insurer.
21 Section 13. Section 625.304, Florida Statutes, is
22 amended to read:
23 625.304 Authorization of investment.--
24 (1) An insurer shall not make any investment or loan,
25 other than a policy loan or annuity contract loan of a life
26 insurer, unless the same is authorized or approved by the
27 insurer's board of directors or by a committee authorized by
28 such board and charged with the supervision or making of such
29 investment or loan. The minutes of any such committee shall
30 be recorded and regular reports of such committee shall be
31 submitted to the board of directors.
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1 (2) An insurer's board of directors shall adopt a
2 written plan for acquiring and holding investments and for
3 engaging in investment practices which specifies guidelines as
4 to the quality, maturity, and diversification of investments
5 and other specifications, including investment strategies
6 intended to assure that the investments and investment
7 practices are appropriate for the business conducted by the
8 insurer, its liquidity needs, and its capital and surplus. The
9 board shall review and assess the insurer's technical
10 investment and administrative capabilities and expertise
11 before adopting a written plan concerning an investment
12 strategy or investment practice.
13 (3) Investments acquired and held under this section
14 shall be acquired and held under the supervision and direction
15 of the board of directors of the insurer. The board of
16 directors shall evidence by formal resolution, at least
17 annually, that it has determined whether all investments have
18 been made in accordance with delegations, standards,
19 limitations, and investment objectives prescribed by the board
20 or a committee of the board charged with the responsibility to
21 direct its investments.
22 (4) No less frequently than quarterly, and more often
23 if deemed appropriate, an insurer's board of directors or
24 committee of the board of directors shall:
25 (a) Receive and review a summary report on the
26 insurer's investment portfolio, its investment activities, and
27 its investment practices engaged in under delegated authority,
28 in order to determine whether the investment activity of the
29 insurer is consistent with its written plan; and
30 (b) Review and revise, as appropriate, the written
31 plan.
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1 (5) In discharging its duties under this section, the
2 board of directors shall require that records of any
3 authorizations or approvals, other documentation as the board
4 requires, and reports of any action taken under authority
5 delegated under the plan referred to in subsection (2) be made
6 available regularly to the board of directors.
7 (6) In discharging their duties under this section,
8 the directors of an insurer shall perform their duties in good
9 faith and with that degree of care that ordinarily prudent
10 individuals in like positions would use under similar
11 circumstances.
12 (7) If an insurer does not have a board of directors,
13 all references to the board of directors in this section shall
14 be deemed to be references to the governing body of the
15 insurer having authority equivalent to that of a board of
16 directors.
17 Section 14. Subsection (2) of section 625.326, Florida
18 Statutes, is amended to read:
19 625.326 Foreign investments.--An insurer authorized to
20 transact insurance in a foreign country may have funds
21 invested in such securities as may be required for such
22 authority and for the transaction of such business. Canadian
23 securities eligible for investment under other provisions of
24 this part are not subject to this section. Subject to the
25 approval of the office:
26 (2) In addition to Canadian securities eligible for
27 investment and to investments in countries in which an insurer
28 transacts insurance, an insurer may invest in bonds, notes, or
29 stocks of any foreign country or corporation if such
30 securities meet security meets the general requirements of s.
31 625.303 and in the aggregate do does not exceed 10, in total,
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1 5 percent of admitted assets, subject to the following
2 limitations:.
3 (a) No more than 3 percent of the insurer's assets may
4 be invested in any security not rated by the Security
5 Valuation Office of the National Association of Insurance
6 Commissioners as 1 or 2, except that securities rated as 5 or
7 6 by the Security Valuation Office of the National Association
8 of Insurance Commissioners may not exceed 1.5 percent of
9 assets in total with mo more than 0.5 percent of assets in
10 securities that have been given a rating of 6.
11 (b) No more than 3 percent of the insurer's assets may
12 be invested in the common stock of any one corporation.
13
14 In determining the financial condition of an insurer, any
15 amounts that exceed the limitations in valuation in this
16 subsection will be considered as nonadmitted assets unless the
17 investments otherwise qualify under the provision of s.
18 625.331(1).
19 Section 15. Section 626.88, Florida Statutes, is
20 amended to read:
21 626.88 Definitions of "administrator" and "insurer".--
22 (1) For the purposes of this part, an "administrator"
23 is any person who directly or indirectly solicits or effects
24 coverage of, collects charges or premiums from, or adjusts or
25 settles claims on residents of this state in connection with
26 authorized commercial self-insurance funds or with insured or
27 self-insured programs which provide life or health insurance
28 coverage or coverage of any other expenses described in s.
29 624.33(1) or any person who, through a health care risk
30 contract as defined in s. 641.234 with an insurer or health
31 maintenance organization, provides billing and collection
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1 services to health insurers and health maintenance
2 organizations on behalf of health care providers, other than
3 any of the following persons:
4 (a) An employer or wholly owned direct or indirect
5 subsidiary of an employer, on behalf of such employer's
6 employees or the employees of one or more subsidiary or
7 affiliated corporations of such employer.
8 (b) A union on behalf of its members.
9 (c) An insurance company which is either authorized to
10 transact insurance in this state or is acting as an insurer
11 with respect to a policy lawfully issued and delivered by such
12 company in and pursuant to the laws of a state in which the
13 insurer was authorized to transact an insurance business.
14 (d) A health care services plan, health maintenance
15 organization, professional service plan corporation, or person
16 in the business of providing continuing care, possessing a
17 valid certificate of authority issued by the office, and the
18 sales representatives thereof, if the activities of such
19 entity are limited to the activities permitted under the
20 certificate of authority.
21 (e) An administrator who is affiliated with an insurer
22 and who only performs the contractual duties (between the
23 administrator and the insurer) of an administrator for the
24 direct and assumed insurance business of the affiliated
25 insurer. The insurer is responsible for the acts of the
26 administrator and is responsible for providing all of the
27 administrator's books and records to the insurance
28 commissioner, upon a request from the insurance commissioner.
29 For purposes of this paragraph, the term "insurer" means a
30 licensed insurance company, prepaid hospital or medical care
31 plan, or health maintenance organization.
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1 (f) A nonresident administrator licensed in its state
2 of domicile if the administrator's duties in this state are
3 limited to the administration of a group policy or plan of
4 insurance and no more than a total of 100 lives for all plans
5 reside in this state.
6 (g)(e) An insurance agent licensed in this state whose
7 activities are limited exclusively to the sale of insurance.
8 (h) A person licensed as a managing general agent in
9 this state, whose activities are limited exclusively to the
10 scope of activities conveyed under such license.
11 (i)(f) An adjuster licensed in this state whose
12 activities are limited to the adjustment of claims.
13 (j)(g) A creditor on behalf of such creditor's debtors
14 with respect to insurance covering a debt between the creditor
15 and its debtors.
16 (k)(h) A trust and its trustees, agents, and employees
17 acting pursuant to such trust established in conformity with
18 29 U.S.C. s. 186.
19 (l)(i) A trust exempt from taxation under s. 501(a) of
20 the Internal Revenue Code, a trust satisfying the requirements
21 of ss. 624.438 and 624.439, or any governmental trust as
22 defined in s. 624.33(3), and the trustees and employees acting
23 pursuant to such trust, or a custodian and its agents and
24 employees, including individuals representing the trustees in
25 overseeing the activities of a service company or
26 administrator, acting pursuant to a custodial account which
27 meets the requirements of s. 401(f) of the Internal Revenue
28 Code.
29 (m)(j) A financial institution which is subject to
30 supervision or examination by federal or state authorities or
31 a mortgage lender licensed under chapter 494 who collects and
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1 remits premiums to licensed insurance agents or authorized
2 insurers concurrently or in connection with mortgage loan
3 payments.
4 (n)(k) A credit card issuing company which advances
5 for and collects premiums or charges from its credit card
6 holders who have authorized such collection if such company
7 does not adjust or settle claims.
8 (o)(l) A person who adjusts or settles claims in the
9 normal course of such person's practice or employment as an
10 attorney at law and who does not collect charges or premiums
11 in connection with life or health insurance coverage.
12 (p)(m) A person approved by the department who
13 administers only self-insured workers' compensation plans.
14 (q)(n) A service company or service agent and its
15 employees, authorized in accordance with ss. 626.895-626.899,
16 serving only a single employer plan, multiple-employer welfare
17 arrangements, or a combination thereof.
18 (r)(o) Any provider or group practice, as defined in
19 s. 456.053, providing services under the scope of the license
20 of the provider or the member of the group practice.
21 (s)(p) Any hospital providing billing, claims, and
22 collection services solely on its own and its physicians'
23 behalf and providing services under the scope of its license.
24
25 A person who provides billing and collection services to
26 health insurers and health maintenance organizations on behalf
27 of health care providers shall comply with the provisions of
28 ss. 627.6131, 641.3155, and 641.51(4).
29 (2) For the purposes of this part, the term:
30 (a) an "Insurer" includes an authorized commercial
31 self-insurance fund and includes any person undertaking to
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1 provide life or health insurance coverage or coverage of any
2 of the other expenses described in s. 624.33(1).
3 (b) "Affiliate" or "affiliated" means an entity or
4 person who directly or indirectly through one or more
5 intermediaries controls, is controlled by, or is under common
6 control with a specified entity or person.
7 (c) "Control" (including the terms "controlling,"
8 "controlled by," and "under common control with") means the
9 possession, direct or indirect, of the power to direct or
10 cause the direction of the management and policies of a
11 person, whether through the ownership of voting securities, by
12 contract other than a commercial contract for goods or
13 nonmanagement services, or otherwise, unless the power is the
14 result of an official position with or corporate office held
15 by the person. Control shall be presumed to exist if any
16 person directly or indirectly owns, controls, holds with the
17 power to vote, or holds proxies representing 10 percent or
18 more of the voting securities of any other person.
19 (d) "GAAP" means United States generally accepted
20 accounting principles consistently applied.
21 Section 16. Subsection (2) of section 626.8805,
22 Florida Statutes, is amended to read:
23 626.8805 Certificate of authority to act as
24 administrator.--
25 (2) The administrator shall file with the office an
26 application for a certificate of authority upon a form to be
27 adopted by the commission and furnished by the office, which
28 application shall include or have attached the following
29 information and documents:
30 (a) All basic organizational documents of the
31 administrator, such as the articles of incorporation, articles
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1 of association, partnership agreement, trade name certificate,
2 trust agreement, shareholder agreement, and other applicable
3 documents, and all amendments to those documents.
4 (b) The bylaws, rules, and regulations or similar
5 documents regulating the conduct or the internal affairs of
6 the administrator.
7 (c) The names, addresses, official positions, and
8 professional qualifications of the individuals who are
9 responsible for the conduct of the affairs of the
10 administrator, including all members of the board of
11 directors, board of trustees, executive committee, or other
12 governing board or committee, the principal officers in the
13 case of a corporation, the partners or members in the case of
14 a partnership or association, and any other person who
15 exercises control or influence over the affairs of the
16 administrator.
17 (d) Audited annual financial statements for the 2 most
18 recent fiscal years which prove that the applicant has a
19 positive net worth. If the applicant has been in existence for
20 less than 2 fiscal years, the application shall include
21 financial statements or reports, certified by an officer of
22 the applicant and prepared in accordance with GAAP, for any
23 completed fiscal years and for any month during the current
24 fiscal year for which such financial statements or reports
25 have been completed. An audited financial statement or report
26 prepared on a consolidated basis shall include a columnar
27 consolidating or combining worksheet that shall be filed with
28 the report and include the following:
29 1. Amounts shown on the consolidated audited financial
30 report shall be shown on the worksheet;
31
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1 2. Amounts for each entity shall be stated separately;
2 and
3 3. Explanations of consolidating and eliminating
4 entries.
5
6 The applicant shall also include such other information as the
7 office requires in order to review the current financial
8 condition of the applicant. Annual statements or reports for
9 the 3 most recent years, or such other information as the
10 office may require in order to review the current financial
11 condition of the applicant.
12 (e) A statement describing the business plan,
13 including information on staffing levels and activities
14 proposed in this state and nationwide. The plan shall provide
15 details setting forth the applicant's capability for providing
16 a sufficient number of experienced and qualified personnel in
17 the areas of claims processing, recordkeeping, and
18 underwriting.
19 (f)(e) If the applicant is not currently acting as an
20 administrator, a statement of the amounts and sources of the
21 funds available for organization expenses and the proposed
22 arrangements for reimbursement and compensation of
23 incorporators or other principals.
24 Section 17. Section 626.8817, Florida Statutes, is
25 amended to read:
26 626.8817 Responsibilities of insurance company with
27 respect to administration of coverage insured.--
28 (1) If an insurer uses the services of an
29 administrator, the insurer shall be responsible for
30 determining the benefits, premium rates, underwriting
31 criteria, and claims payment procedures applicable to the
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1 coverage and for securing reinsurance, if any. The rules
2 pertaining to these matters shall be provided, in writing, by
3 the insurer to the administrator. The responsibilities of the
4 administrator as to any of these matters shall be set forth in
5 the written agreement between the administrator and the
6 insurer.
7 (2) It is the sole responsibility of the insurer to
8 provide for competent administration of its programs.
9 (3) In cases in which an administrator administers
10 benefits for more than 100 certificateholders on behalf of an
11 insurer, the insurer shall, at least semiannually, conduct a
12 review of the operations of the administrator. At least one
13 such review must be an on-site audit of the operations of the
14 administrator.
15 (4) For purposes of this section, the term "insurer"
16 means a licensed insurance company, health maintenance
17 organization, prepaid limited health service, organization, or
18 prepaid health clinic. As to the administration of coverage
19 insured by an insurance company, the insurance company, and
20 not the administrator, shall be responsible for determining
21 the benefits, rates, underwriting criteria, and claims payment
22 procedures applicable to such coverage and for securing
23 reinsurance, if any.
24 Section 18. Section 626.89, Florida Statutes, is
25 amended to read:
26 626.89 Annual financial statement and filing fee;
27 notice of change of ownership.--
28 (1) Each authorized administrator shall file with the
29 office a full and true statement of its financial condition,
30 transactions, and affairs. The statement shall be filed
31 annually on or before March 1 or within such extension of time
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1 therefor as the office for good cause may have granted and
2 shall be for the preceding calendar year. The statement shall
3 be in such form and contain such matters as the commission
4 prescribes and shall be verified by at least two officers of
5 such administrator.
6 (2) The annual report shall include an audited
7 financial statement performed by an independent certified
8 public accountant. An audited financial or annual report
9 prepared on a consolidated basis shall include a columnar
10 consolidating or combining worksheet that shall be filed with
11 the report and include the following:
12 (a) Amounts shown on the consolidated audited
13 financial report shall be shown on the worksheet;
14 (b) Amounts for each entity shall be stated
15 separately; and
16 (c) Explanations of consolidating and eliminating
17 entries shall be included.
18 (3)(2) At the time of filing its annual statement, the
19 administrator shall pay a filing fee in the amount specified
20 in s. 624.501 for the filing of an annual statement by an
21 insurer.
22 (4)(3) In addition, the administrator shall
23 immediately notify the office of any material change in its
24 ownership.
25 (5) The commission may by rule require all or part of
26 the reports or filings required under this section to be
27 submitted by electronic means in a computer-readable form
28 compatible with the electronic data format specified by the
29 commission.
30 Section 19. Subsection (4) of section 626.901, Florida
31 Statutes, is amended to read:
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1 626.901 Representing or aiding unauthorized insurer
2 prohibited.--
3 (4) This section does not apply to:
4 (a) Matters authorized to be done by the office under
5 the Unauthorized Insurers Process Law, ss. 626.904-626.912.
6 (b) Surplus lines insurance when written pursuant to
7 the Surplus Lines Law, ss. 626.913-626.937.
8 (c) Transactions as to which a certificate of
9 authority is not required of an insurer, as stated in s.
10 624.402.
11 (d) Independently procured coverage written pursuant
12 to s. 626.938 which is not solicited, marketed, negotiated or
13 sold in this state.
14 Section 20. Subsection (3) is added to section
15 626.902, Florida Statutes, to read:
16 626.902 Penalty for representing unauthorized
17 insurer.--
18 (3) This section does not apply to matters authorized
19 to be done by the office under the Unauthorized Insurers
20 Process Law, ss. 626.904-626.912.
21 Section 21. Subsection (2) of section 626.9913,
22 Florida Statutes, is amended to read:
23 626.9913 Viatical settlement provider license
24 continuance; annual report; fees; deposit.--
25 (2) Annually, on or before March 1, the viatical
26 settlement provider licensee shall file a statement containing
27 information the commission requires and shall pay to the
28 office a license fee in the amount of $500. A viatical
29 settlement provider shall include in all statements filed with
30 the office all information requested by the office regarding a
31 related provider trust established by the viatical settlement
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1 provider. The office may require more frequent reporting.
2 Failure to timely file the annual statement or to timely pay
3 the license fee is grounds for immediate suspension of the
4 license. The commission may by rule require all or part of the
5 reports or filings required under this section to be submitted
6 by electronic means in a computer-readable form compatible
7 with the electronic data format specified by the commission.
8 Section 22. Section 627.0646, Florida Statutes, is
9 created to read:
10 627.0646 Uniform and flex rate adjustment factors.--
11 (1)(a) The office may examine trends in premiums and
12 trends in average cost and frequency of claims and develop and
13 recommend for adoption by the commission uniform rate
14 adjustment factors that are reflective thereof for personal
15 lines homeowners insurance and private passenger motor vehicle
16 insurance. The purpose of the uniform rate adjustment factors
17 is to allow insurers to submit rate filings adjusting their
18 rates by incremental measures for changes in the cost and
19 frequency of claims, if any, without having to provide
20 supporting data for the proposed rates. Subject to the
21 requirements of this section, insurers may submit a filing
22 seeking to adjust rates by no more than the amount of the
23 uniform rate adjustment factors.
24 (b)1. The submission of a rate filing seeking to
25 adjust rates by the application of the uniform rate adjustment
26 factors may not include any other changes. The office shall
27 approve or disapprove the filing within 30 days of its
28 receipt.
29 2. Submission of a rate filing seeking to adjust rates
30 by the application of the uniform rate adjustment factors
31 precludes the insurer from submitting any subsequent rate
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1 filing the effective dates of which are sooner than 6 months
2 following the uniform rate adjustment factors filing effective
3 dates. This limitation does not apply to recoupment filings
4 submitted pursuant to ss. 627.062, 627.3512, and 631.64.
5 3. The submission of a rate filing seeking to adjust
6 rates by the application of the uniform rate adjustment
7 factors shall be accompanied by a certification by an actuary,
8 by an experienced insurance company rate maker, or by a
9 consultant that the filing seeks to implement a rate that is
10 actuarially sound and not inadequate. Such certification shall
11 satisfy the rate filing requirement pursuant to s. 627.0645.
12 4. In order to develop uniform rate adjustment
13 factors, the office may annually solicit from insurers
14 information on trends that the insurers are experiencing.
15 Insurers from whom data are solicited must provide the
16 solicited information to the office within 30 days of the date
17 of the request. The office shall determine the type of data
18 necessary and the format of this data for their examination
19 and, when rulemaking is required, submit its recommendation to
20 the commission for consideration and rule adoption.
21 5. The uniform rate adjustment factor shall be applied
22 uniformly to all subject policies in force on the filing's
23 effective date at renewal and to all new business written on
24 or after the uniform rates effective date by any insurer that
25 has submitted such a filing, provided that the requisite
26 statutory notice is given.
27 6. The first uniform rate adjustment factors filing
28 permitted for an insurer by this section may be submitted at
29 any time after the publication of the initial uniform rate
30 adjustment factors. A rate determined by a subsequent uniform
31 rate adjustment factors filing of an insurer shall not be
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1 effective any sooner than 12 months from the effective date of
2 the previous uniform rate adjustment factors filing effective
3 date.
4
5 Neither the calculation nor the publication of the factors by
6 the office constitutes an order or a rule that is subject to
7 chapter 120. Nothing in this section precludes the office from
8 requesting necessary information on a case-by-case basis from
9 an insurer submitting a filing pursuant to this section.
10 (c) The commission may adopt rules and forms necessary
11 to implement this section.
12 (d) This section does not affect the application of s.
13 627.066.
14 (2)(a) This section applies to commercial property,
15 casualty, and surety insurance on subjects of insurance
16 resident, located, or to be performed in this state. Medical
17 malpractice insurance, title insurance, workers' compensation
18 and employer's liability insurance, commercial property and
19 casualty insurance issued to condominium associations, and
20 such commercial insurance exempted from the scope of this
21 chapter under s. 627.021(2) are exempt from this section.
22 (b) The purpose of this section is to enhance
23 competition and reduce the frictional costs associated with
24 rate filings for insurance subject to this section through the
25 use of flex rate filings, which do not require submission of
26 supporting data for the proposed rates. Submission of a flex
27 rate filing precludes the insurer from submitting any
28 subsequent rate filing whose effective dates are sooner than 6
29 months following the flex filing effective dates. This
30 limitation does not apply to recoupment filings submitted
31 pursuant to ss. 627.062, 627.3512, and 631.64.
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1 (c) The submission of a rate filing seeking to adjust
2 rates by the application of the flex rate filing may not
3 include any other changes. A flex rate filing shall be
4 effective on or after the date of filing as specified by the
5 filer and is exempt from any otherwise applicable provision of
6 this part requiring office approval of the filing prior to its
7 implementation.
8 (d) The submission of a flex rate filing satisfies the
9 annual rate filing requirement pursuant to s. 627.0645, if
10 applicable.
11 (e) In order to evaluate the impact of flex rate
12 filings on compliance with s. 627.062, the office may annually
13 solicit from insurers information concerning compliance by
14 insurers. Insurers from whom data are solicited must provide
15 the solicited information to the office within 30 days of the
16 date of the request. The office shall determine the type of
17 data necessary and the format of this data for their
18 examination.
19 (f) The rate set forth in the flex rate filing shall
20 be applied by the insurer uniformly to all policies within the
21 class of insurance to which it applies which are in force on
22 the filing's effective date at renewal and all new business
23 written on or after the filing's effective date by any insurer
24 that has submitted such a filing, provided that the insurer
25 provides the policyholder with notice of the renewal premium
26 as required by s. 627.4133 or any other applicable provision
27 of the Florida Insurance Code or rules of the office.
28 (g) The commission may establish by rule the
29 procedures the office will use to evaluate the marketplace
30 with respect to the effect flex rates are having on whether
31 the resultant rates are excessive, inadequate, or unfairly
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1 discriminatory. The rules may specify data collection
2 requirements for insurers to provide to the office and related
3 forms.
4 (h)1. The first flex rate filing permitted by this
5 section may be submitted at any time after the effective date
6 of this act. Subsequent flex rate filings shall not be
7 effective any sooner than 12 months from the effective dates
8 of the previous flex rate filing. An insurer may submit a
9 maximum of three consecutive flex rate filings before it must
10 submit a complete rate revision as specified by s. 627.062 and
11 the rules of the office.
12 2. For rate filings involving reference to approved
13 loss costs filed by a licensed advisory organization or
14 licensed rating organization, the commission shall develop by
15 rule a procedure which establishes an average loss cost
16 multiplier based on average insurer expenses and a reasonable
17 margin for profit and contingencies for each type of loss
18 cost. The office shall publish annually by a method set forth
19 by rule adopted by the commission a list of average loss cost
20 multipliers for each type of loss cost. If an insurer files to
21 adopt a loss cost multiplier for a particular type of loss
22 cost which is within 15 percent of the most recent average
23 loss cost multiplier published by the office for that
24 particular type of loss cost, the proposed loss cost
25 multiplier shall be approved or disapproved within 30 days of
26 its receipt.
27 3. For all other rate filings made pursuant to this
28 subsection, a flex rate filing may not provide a rate change
29 greater than 7 percent from the rate in effect at the time of
30 the flex rate filing.
31
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1 (i) A flex rate filing may not provide a rate that is
2 excessive, inadequate, or unfairly discriminatory.
3 (j) The commission may adopt rules or forms necessary
4 to implement this section.
5 Section 23. Subsection (4) of section 627.351, Florida
6 Statutes, is amended to read:
7 627.351 Insurance risk apportionment plans.--
8 (4) MEDICAL MALPRACTICE RISK APPORTIONMENT.--
9 (a) The office shall, after consultation with insurers
10 as set forth in paragraph (b), adopt a joint underwriting plan
11 as set forth in paragraph (d). Additionally, effective July 1,
12 2004, the Joint Underwriting Association established pursuant
13 to this subsection shall include a separate and discrete
14 account known as the Florida Patient's Compensation Fund
15 Account for the assets, liabilities, rights, obligations, and
16 members of the fund created pursuant to s. 766.105.
17 (b) Entities licensed to issue casualty insurance as
18 defined in s. 624.605(1)(b), (k), and (q) and self-insurers
19 authorized to issue medical malpractice insurance under s.
20 627.357 shall participate in the plan as set forth in
21 paragraph (d) and shall be members of a separate and discrete
22 account within the Joint Underwriting Association known as the
23 Coverage Account. The policies, assets, liabilities, rights,
24 and obligations of the Joint Underwriting Association as of
25 June 30, 2004, are transferred to the Coverage Account
26 effective July 1, 2004. In no instance shall the assets or
27 revenues of the Coverage Account be used to satisfy or secure
28 any debt, obligation, or expense of the Florida Patient's
29 Compensation Fund Account, nor shall the assets or revenues of
30 the Florida Patient's Compensation Fund Account be used to
31
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1 satisfy or secure any debt, obligation, or expense of the
2 Coverage Account.
3 (c) The Coverage Account and Florida Patient's
4 Compensation Fund Account of the Joint Underwriting
5 Association shall operate subject to the supervision and
6 approval of a board of governors consisting of representatives
7 of five of the insurers participating in the Joint
8 Underwriting Association Coverage Account, an attorney to be
9 named by The Florida Bar, a physician to be named by the
10 Florida Medical Association, a dentist to be named by the
11 Florida Dental Association, and a hospital representative to
12 be named by the Florida Hospital Association. The Chief
13 Financial Officer shall select the representatives of the five
14 insurers. One insurer representative shall be selected from
15 recommendations of the American Insurance Association. One
16 insurer representative shall be selected from recommendations
17 of the Alliance of American Insurers. One insurer
18 representative shall be selected from recommendations of the
19 National Association of Independent Insurers. Two insurer
20 representatives shall be selected to represent insurers that
21 are not affiliated with these associations. The board of
22 governors shall choose, during the first meeting of the board
23 after June 30 of each year, one of its members to serve as
24 chair of the board and another member to serve as vice chair
25 of the board. There shall be no liability on the part of, and
26 no cause of action of any nature shall arise against, any
27 member insurer, self-insurer, or its agents or employees, the
28 Joint Underwriting Association or its agents or employees,
29 members of the board of governors, or the office or its
30 representatives for any action taken by them in the
31 performance of their powers and duties under this subsection.
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1 (d) The plan shall provide coverage through the
2 Coverage Account for claims arising out of the rendering of,
3 or failure to render, medical care or services and, in the
4 case of health care facilities, coverage for bodily injury or
5 property damage to the person or property of any patient
6 arising out of the insured's activities, in appropriate policy
7 forms for all health care providers as defined in paragraph
8 (h). The Coverage Account provisions plan shall include, but
9 shall not be limited to:
10 1. Classifications of risks and rates for the Coverage
11 Account which reflect past and prospective loss and expense
12 experience in different areas of practice and in different
13 geographical areas. To assure that plan rates for the
14 Coverage Account are adequate to pay claims and expenses, the
15 Joint Underwriting Association shall develop a means of
16 obtaining loss and expense experience; and the plan shall file
17 such experience, when available, with the office in sufficient
18 detail to make a determination of rate adequacy. Within 60
19 days after a rate filing, the office shall approve such rates
20 or rate revisions as are fully supported by the filing. In
21 addition to provisions for claims and expenses, the ratemaking
22 formula may include a factor for projected claims trending and
23 a margin for contingencies. The use of trend factors shall not
24 be found to be inappropriate.
25 2. A Coverage Account rating plan which reasonably
26 recognizes the prior claims experience of insureds.
27 3. Provisions as to Coverage Account rates for:
28 a. Insureds who are retired or semiretired.
29 b. The estates of deceased insureds.
30 c. Part-time professionals.
31
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1 4. Coverage Account protection in an amount not to
2 exceed $250,000 per claim, $750,000 annual aggregate for
3 health care providers other than hospitals and in an amount
4 not to exceed $1.5 million per claim, $5 million annual
5 aggregate for hospitals. Such coverage for health care
6 providers other than hospitals shall be available as primary
7 coverage and as excess coverage for the layer of coverage
8 between the primary coverage and the total limits of $250,000
9 per claim, $750,000 annual aggregate. The plan shall also
10 provide tail coverage in these amounts to insureds whose
11 claims-made coverage with another insurer or trust has or will
12 be terminated. Such tail coverage shall provide coverage for
13 incidents that occurred during the claims-made policy period
14 for which a claim is made after the policy period.
15 5. A risk management program for insureds of the
16 association Coverage Account. This program shall include, but
17 not be limited to: investigation and analysis of frequency,
18 severity, and causes of adverse or untoward medical injuries;
19 development of measures to control these injuries; systematic
20 reporting of medical incidents; investigation and analysis of
21 patient complaints; and auditing of association members to
22 assure implementation of this program. The plan may refuse to
23 insure any insured who refuses or fails to comply with the
24 risk management program implemented by the association. Prior
25 to cancellation or refusal to renew an insured, the
26 association shall provide the insured 60 days' notice of
27 intent to cancel or nonrenew and shall further notify the
28 insured of any action which must be taken to be in compliance
29 with the risk management program.
30 (e) In the event an underwriting deficit exists in the
31 Coverage Account for any policy year the plan is in effect,
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1 any surplus which has accrued from previous years and is not
2 projected within reasonable actuarial certainty to be needed
3 for payment of claims in the year the surplus arose shall be
4 used to offset the deficit to the extent available.
5 1. As to remaining deficit, except those relating to
6 deficit assessment coverage, each Coverage Account
7 policyholder shall pay to the association a premium
8 contingency assessment not to exceed one-third of the premium
9 payment paid by such policyholder to the association for that
10 policy year. The association shall pay no further claims on
11 any policy for the policyholder who fails to pay the premium
12 contingency assessment.
13 2. If there is any remaining deficit under the plan
14 for the Coverage Account after maximum collection of the
15 premium contingency assessment, such deficit shall be
16 recovered from the companies participating in the plan
17 Coverage Account in the proportion that the net direct
18 premiums of each such member written during the calendar year
19 immediately preceding the end of the policy year for which
20 there is a deficit assessment bear to the aggregate net direct
21 premiums written in this state by all members of the
22 association. The term "premiums" as used herein means
23 premiums for the lines of insurance defined in s.
24 624.605(1)(b), (k), and (q), including premiums for such
25 coverage issued under package policies.
26 (f) The plan, for Coverage Account claims, shall
27 provide for one or more insurers able and willing to provide
28 policy service through licensed resident agents and claims
29 service on behalf of all other insurers participating in the
30 plan. The plan shall also provide for Florida Patient's
31 Compensation Fund claims to be serviced by the Joint
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1 Underwriting Association or through contracts with
2 claims-handling entities. In the event no insurer is able and
3 willing to provide such services, the Joint Underwriting
4 Association is authorized to perform any and all such
5 services.
6 (g) All books, records, documents, or audits relating
7 to the Joint Underwriting Association or its operation shall
8 be open to public inspection, except that a claim file in the
9 possession of the Joint Underwriting Association is
10 confidential and exempt from the provisions of s. 119.07(1)
11 during the processing of that claim. Any information
12 contained in these files that identifies an injured person is
13 confidential and exempt from the provisions of s. 119.07(1).
14 (h) For purposes of the Coverage Account, the term As
15 used in this subsection:
16 1. "Health care provider" means hospitals licensed
17 under chapter 395; physicians licensed under chapter 458;
18 osteopathic physicians licensed under chapter 459; podiatric
19 physicians licensed under chapter 461; dentists licensed under
20 chapter 466; chiropractic physicians licensed under chapter
21 460; naturopaths licensed under chapter 462; nurses licensed
22 under part I of chapter 464; midwives licensed under chapter
23 467; clinical laboratories registered under chapter 483;
24 physician assistants licensed under chapter 458 or chapter
25 459; physical therapists and physical therapist assistants
26 licensed under chapter 486; health maintenance organizations
27 certificated under part I of chapter 641; ambulatory surgical
28 centers licensed under chapter 395; other medical facilities
29 as defined in subparagraph 2.; blood banks, plasma centers,
30 industrial clinics, and renal dialysis facilities; or
31 professional associations, partnerships, corporations, joint
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1 ventures, or other associations for professional activity by
2 health care providers.
3 2. "Other medical facility" means a facility the
4 primary purpose of which is to provide human medical
5 diagnostic services or a facility providing nonsurgical human
6 medical treatment, to which facility the patient is admitted
7 and from which facility the patient is discharged within the
8 same working day, and which facility is not part of a
9 hospital. However, a facility existing for the primary
10 purpose of performing terminations of pregnancy or an office
11 maintained by a physician or dentist for the practice of
12 medicine shall not be construed to be an "other medical
13 facility."
14 3. "Health care facility" means any hospital licensed
15 under chapter 395, health maintenance organization
16 certificated under part I of chapter 641, ambulatory surgical
17 center licensed under chapter 395, or other medical facility
18 as defined in subparagraph 2.
19 (i) The manager of the plan or the manager's assistant
20 is the agent for service of process for the plan.
21 Section 24. Paragraph (h) of subsection (9) of section
22 627.476, Florida Statutes, is amended to read:
23 627.476 Standard Nonforfeiture Law for Life
24 Insurance.--
25 (9) CALCULATION OF ADJUSTED PREMIUMS AND PRESENT
26 VALUES FOR POLICIES ISSUED AFTER OPERATIVE DATE OF THIS
27 SUBSECTION.--
28 (h) All adjusted premiums and present values referred
29 to in this section shall for all policies of ordinary
30 insurance be calculated on the basis of the Commissioners'
31 1980 Standard Ordinary Mortality Table or, at the election of
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1 the insurer for any one or more specified plans of life
2 insurance, the Commissioners' 1980 Standard Ordinary Mortality
3 Table with Ten-Year Select Mortality Factors; shall for all
4 policies of industrial insurance be calculated on the basis of
5 the Commissioners' 1961 Standard Industrial Mortality Table;
6 and shall for all policies issued in a particular calendar
7 year be calculated on the basis of a rate of interest not
8 exceeding the nonforfeiture interest rate as defined in this
9 subsection for policies issued in that calendar year. However:
10 1. At the option of the insurer, calculations for all
11 policies issued in a particular calendar year may be made on
12 the basis of a rate of interest not exceeding the
13 nonforfeiture interest rate, as defined in this subsection,
14 for policies issued in the immediately preceding calendar
15 year.
16 2. Under any paid-up nonforfeiture benefit, including
17 any paid-up dividend additions, any cash surrender value
18 available, whether or not required by subsection (2), shall be
19 calculated on the basis of the mortality table and rate of
20 interest used in determining the amount of such paid-up
21 nonforfeiture benefit and paid-up dividend additions, if any.
22 3. An insurer may calculate the amount of any
23 guaranteed paid-up nonforfeiture benefit, including any
24 paid-up additions under the policy, on the basis of an
25 interest rate no lower than that specified in the policy for
26 calculating cash surrender values.
27 4. In calculating the present value of any paid-up
28 term insurance with accompanying pure endowment, if any,
29 offered as a nonforfeiture benefit, the rates of mortality
30 assumed may be not more than those shown in the Commissioners'
31 1980 Extended Term Insurance Table for policies of ordinary
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1 insurance and not more than the Commissioners' 1961 Industrial
2 Extended Term Insurance Table for policies of industrial
3 insurance.
4 5. In lieu of the mortality tables specified in this
5 section, at the option of the insurance company and subject to
6 rules adopted by the commission, the insurance company may
7 substitute:
8 a. The 1958 CSO or CET Smoker and Nonsmoker Mortality
9 Tables, whichever is applicable, for policies issued on or
10 after the operative date of this subsection and before January
11 1, 1989;
12 b. The 1980 CSO or CET Smoker and Nonsmoker Mortality
13 Tables, whichever is applicable, for policies issued on or
14 after the operative date of this subsection;
15 c. A mortality table that is a blend of the
16 sex-distinct 1980 CSO or CET mortality table standard,
17 whichever is applicable, or a mortality table that is a blend
18 of the sex-distinct 1980 CSO or CET smoker and nonsmoker
19 mortality table standards, whichever is applicable, for
20 policies that are subject to the United States Supreme Court
21 decision in Arizona Governing Committee v. Norris to prevent
22 unfair discrimination in employment situations.
23 6. Ordinary mortality tables, adopted after 1980 by
24 the National Association of Insurance Commissioners, adopted
25 by rule by the commission for use in determining the minimum
26 nonforfeiture standard may be substituted for the
27 Commissioners 1980 Standard Ordinary Mortality Table with or
28 without Ten-Year Select Mortality Factors or for the
29 Commissioners 1980 Extended Term Insurance Table.
30 7.6. For insurance issued on a substandard basis, the
31 calculation of any such adjusted premiums and present values
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1 may be based on appropriate modifications of the
2 aforementioned tables.
3 Section 25. Subsection (2) of section 627.836, Florida
4 Statutes, is amended to read:
5 627.836 Licensee's books and records; reports.--
6 (2) Each licensee shall annually, on or before March
7 1, file a report with the office giving such information as
8 the office may require. The report shall be made under oath
9 and in the form prescribed by the commission and shall be
10 accompanied by the annual report filing fee specified in s.
11 627.849. The office may make and publish annually an analysis
12 and recapitulation of such reports. In addition, the office
13 may require such additional regular or special reports as it
14 deems may deem necessary. The commission may by rule require
15 all or part of the reports or filings required under this
16 section to be submitted by electronic means in a
17 computer-readable form compatible with the electronic data
18 format specified by the commission.
19 Section 26. Section 627.8401, Florida Statutes, is
20 created to read:
21 627.8401 Prohibited investments and loans.--A premium
22 finance company may not directly or indirectly invest in or
23 lend its funds upon the security of any note or other evidence
24 of indebtedness of any director, officer, or controlling
25 stockholder of the premium finance company.
26 Section 27. Subsection (6) of section 627.915, Florida
27 Statutes, is amended to read:
28 627.915 Insurer experience reporting.--
29 (5) Any insurer or insurer group which does not write
30 at least 0.5 percent of the Florida market based on premiums
31 written shall not have to file any report required by
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1 subsection (2) other than a report indicating its percentage
2 of the market share. That percentage shall be calculated by
3 dividing the insurer's preceding year's current premiums
4 written by the preceding year's total premiums written in the
5 state for that line of insurance.
6 Section 28. Subsection (2) of section 627.943, Florida
7 Statutes, is amended, and subsections (6) and (7) are added to
8 that section, to read:
9 627.943 Risk retention groups certified in Florida.--
10 (2) Before it may offer insurance in any state, each
11 risk retention group shall also submit for approval to the
12 office a plan of operation or a feasibility study. The
13 feasibility study shall be prepared by an independent
14 qualified actuary or an independent certified public
15 accountant and address market potential, market penetration,
16 market competition, operating expenses, gross revenues,
17 minimum capital and surplus required, net income, total assets
18 and liabilities, cash flow, and such other items as the office
19 requires. The study shall be for the greater of 3 years or
20 until the arrangement has been projected to be profitable for
21 12 consecutive months. The feasibility study must demonstrate
22 the financial ability of the fund to meet its claims and
23 obligations and reflect and support all premium, reserve, and
24 other financial requirements with which the risk retention
25 group must comply. Before additional lines of liability
26 insurance are offered in this or any other state approval
27 shall be obtained from the office.
28 (6) Domestic risk retention groups shall periodically
29 update the feasibility study required pursuant to s.
30 627.943(2), if so requested by the office.
31
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1 (7) An application for a domestic risk retention group
2 certificate of authority may be exempted from the requirements
3 of ss. 624.407 and 624.408 upon the determination by the
4 office that the feasibility study required pursuant to
5 subsection (2) adequately addresses minimum capital and
6 surplus. Prior to such an exemption, the office may engage an
7 independent expert to review the feasibility study. In making
8 the determination, the office shall consider the applicant's:
9 (a) Line of business;
10 (b) Business plan, including premium volume;
11 (c) Scope of coverage and coverage limits; and
12 (d) Other relevant factors.
13 Section 29. Subsection (1) of section 628.071, Florida
14 Statutes, is amended to read:
15 628.071 Granting, denial of permit.--
16 (1) The office shall expeditiously examine and
17 investigate the application for a permit as referred to in s.
18 628.051. If the office finds that:
19 (a) The application is complete;
20 (b) The documents therewith filed are in compliance
21 with law;
22 (c) None of the stockholders, organizers,
23 incorporators, subscribers, and other persons who directly or
24 indirectly exercise or have the ability to exercise effective
25 control of the proposed insurer or who will be involved in its
26 management have been found guilty of, or have pleaded guilty
27 or nolo contendere to, a felony or a crime punishable by
28 imprisonment of 1 year or more under the law of the United
29 States or any state thereof, or under the law of any other
30 country, which involves moral turpitude, without regard to
31
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1 whether a judgment of conviction has been entered by the court
2 having jurisdiction of such cases;
3 (d) The proposed financial structure is adequate; and
4 (e) All stockholders, organizers, incorporators,
5 subscribers, and other persons who directly or indirectly
6 exercise or have the ability to exercise effective control of
7 the proposed insurer or who will be involved in management of
8 the proposed insurer possess the financial standing and
9 business experience to form an insurer; and
10 (f) The applicant, if a domestic stock or mutual
11 insurer, has demonstrated the ability to comply with s.
12 628.072 and rules adopted thereunder,
13
14 it shall issue to the applicant a permit to form the proposed
15 insurer.
16 Section 30. Section 628.072, Florida Statutes, is
17 created to read:
18 628.072 Domestic insurers; corporate good
19 governance.--
20 (1) Each domestic stock or domestic mutual insurer
21 shall establish and maintain corporate good governance
22 procedures as a condition to obtain or retain a certificate of
23 authority.
24 (2) Each domestic stock or domestic mutual insurer
25 shall annually demonstrate to the office adherence to the
26 requirements of this section. The method of demonstration
27 shall be on a form or in accordance with rules adopted by the
28 commission.
29 (3) A publicly traded domestic stock insurer, in lieu
30 of complying with subsection (4), may satisfy the requirements
31
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1 of this section by demonstrating compliance with the
2 applicable provisions of 15 U.S.C. s. 7201.
3 (4) The commission shall adopt rules providing for
4 corporate good governance practices to be met by all domestic
5 insurers. In adopting the rules, the commission shall
6 consider:
7 (a) Practices that avoid fraud;
8 (b) Corporate accountability and transparency with
9 respect to the fiduciary responsibilities of officers and
10 board of directors;
11 (c) Controls with respect to insurer operations and
12 other management practices to avoid waste or misuse of the
13 insurer's assets;
14 (d) With respect to corporate directors:
15 1. Requiring board meetings at least quarterly or more
16 frequently as prudent;
17 2. Requiring the insurer to have at least one
18 independent director;
19 3. Requiring the board of directors to review and
20 approve minutes of any audit committee, with the board's
21 review and approval being reflected in board's minutes;
22 (e) With respect to management:
23 1. Requiring a written code of ethics and conduct
24 addressing director and officer conflicts of interest and
25 corporate, director, and officer compliance with statutes and
26 rules;
27 2. Requiring approval by the corporate chief executive
28 officer and chief financial officer of all annual and
29 quarterly financial reports, attesting that he or she reviewed
30 the report, that to the best of his or her knowledge the
31 report fairly represents the financial condition of the
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1 insurer, and that the financial statements do not, to the
2 officer's best knowledge, contain a misstatement of material
3 fact or omission of material fact;
4 (f) With respect to the corporate audit committee:
5 1. Requiring that the audit committee chair have
6 accounting or financial management experience;
7 2. Requiring that the audit committee members be
8 financially literate:
9 3. Requiring that the audit committee meet at least
10 quarterly, and more frequently as prudent;
11 4. Prohibiting payments by the insurer to any audit
12 committee member except for services on the board and audit
13 committee;
14 5. Requiring an audit committee charter and specifying
15 requirements therefor;
16 6. Requiring, with respect to the audit committee,
17 that the committee must:
18 a. Approve all related party transactions;
19 b. Meet in executive session regularly and as often as
20 prudent;
21 c. Oversee the internal audit functions, including
22 reporting and personnel matters;
23 d. Oversee performance evaluations and compensation of
24 the internal audit director;
25 e. Oversee the outside auditor, including recommending
26 the firm, evaluating the auditor's performance, and the
27 rotation of the senior audit personnel;
28 f. Oversee the financial reporting process;
29 g. Certify in correspondence to the office and signed
30 by all the audit committee members that they have reviewed the
31 financials and, to the best of their knowledge, quarterly and
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1 annual financial statements submitted to the office contain no
2 material omissions or inaccuracies and reflect no questionable
3 accounting practices, the frequency of such certification to
4 be governed by rule of the commission;
5 (g) With respect to the outside auditor, require:
6 1. That the outside auditor report directly to the
7 audit committee or to the full board if there is no audit
8 committee (in which case, the board shall act as the audit
9 committee and meet all requirements of the audit committee as
10 set forth by rule of the commission);
11 2. That outside firms provide a concurring or second
12 partner review of audit reports;
13 3. That outside auditors should limit their nonaudit
14 services to a client to avoid conflicts;
15 (h) With respect to audit reports, that the outside
16 audit report shall describe the extent of testing of internal
17 controls;
18 (i) A requirement that the insurer establish an
19 internal audit function either in house or outside which is
20 independent from the regular outside auditor;
21 (j) A requirement that the insurer should establish
22 internal policies and procedures that encourage employees to
23 come forward with allegations of misconduct without fear of
24 retribution; and
25 (k) Requiring other procedures that provide
26 substantially equivalent safeguards as those specified within
27 this subsection standards where appropriate to operate in lieu
28 thereof.
29
30 In adopting the rules, the commission shall consider the good
31 governance practices set forth in 15 U.S.C. s. 7201 to the
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1 degree they may be applied to mutual domestic insurers or
2 publicly traded or closely held stock domestic insurers;
3 however, a rule that is applicable to a publicly traded
4 domestic stock insurer may not conflict with the provisions of
5 15 U.S.C. s. 7201. The commission may adopt forms necessary to
6 implement this section.
7 Section 31. Section 628.371, Florida Statutes, is
8 amended to read:
9 628.371 Dividends to stockholders.--
10 (1) A domestic stock insurer shall not pay any
11 dividend or distribute cash or other property to stockholders
12 except out of that part of its available and accumulated
13 surplus funds which is derived from realized net operating
14 profits on its business and net realized capital gains.
15 (2)(a) No domestic insurer shall pay any extraordinary
16 dividend or make any other extraordinary distribution to its
17 shareholders until 30 days after the office has received
18 notice of the declaration thereof and has not within that
19 period disapproved the payment or until the office has
20 approved the payment within the 30-day period.
21 (b) For purposes of this section, an extraordinary
22 dividend or distribution includes any dividend or distribution
23 of cash or other property whose fair market value, together
24 with that of other dividends or distributions made within the
25 preceding 12 months, exceeds the lesser of:
26 1. Ten percent of the insurer's surplus as regards
27 policyholders as of the date of the most recent quarterly
28 statement filed with the office; or
29 2. The net gain from operations of the insurer, if the
30 insurer is a life insurer, or the net income, if the insurer
31 is not a life insurer, not including realized capital gains,
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1 for the 12-month period ending the 31st day of December next
2 preceding, but shall not include pro rata distributions of any
3 class of the insurer's own securities.
4 (c) In determining whether a dividend or distribution
5 is extraordinary, an insurer other than a life insurer may
6 carry forward net income from the previous 2 calendar years
7 that has not already been paid out as dividends. This
8 carryforward shall be computed by taking the net income from
9 the 2nd and 3rd preceding calendar years, not including
10 realized capital gains, less dividends paid in the 2nd and
11 immediate preceding calendar years.
12 (d) Notwithstanding any other provision of law, an
13 insurer may declare an extraordinary dividend or distribution
14 that is conditional upon the approval of the office, and the
15 declaration shall confer no rights upon shareholders until:
16 1. The office has approved the payment of the dividend
17 or distribution, or
18 2. The office has not disapproved the payment within
19 the 30-day period pursuant to paragraph (a). Dividend payments
20 or distributions to stockholders, without prior written
21 approval of the office, shall not exceed the larger of:
22 (a) The lesser of 10 percent of surplus or net gain
23 from operations (life and health companies) or net income
24 (property and casualty companies), not including realized
25 capital gains, plus a 2-year carryforward for property and
26 casualty companies;
27 (b) Ten percent of surplus, with dividends payable
28 constrained to unassigned funds minus 25 percent of unrealized
29 capital gains;
30 (c) The lesser of 10 percent of surplus or net
31 investment income (net gain before capital gains for life and
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1 health companies) plus a 3-year carryforward (2-year
2 carryforward for life and health companies) with dividends
3 payable constrained to unassigned funds minus 25 percent of
4 unrealized capital gains.
5 (3) In lieu of the provisions in subsection (2), an
6 insurer may pay a dividend or make a distribution without the
7 prior written approval of the office when:
8 (a) The dividend is equal to or less than the greater
9 of:
10 1. Ten percent of the insurer's surplus as to
11 policyholders derived from realized net operating profits on
12 its business and net realized capital gains; or
13 2. The insurer's entire net operating profits and
14 realized net capital gains derived during the immediately
15 preceding calendar year; and
16 (b) The insurer will have surplus as to policyholders
17 equal to or exceeding 115 percent of the minimum required
18 statutory surplus as to policyholders after the dividend or
19 distribution is made; and
20 (c) The insurer has filed notice with the office at
21 least 10 business days prior to the dividend payment or
22 distribution, or such shorter period of time as approved by
23 the office on a case-by-case basis. Such notice shall not
24 create a right in the office to approve or disapprove a
25 dividend otherwise properly payable hereunder; and
26 (d) The notice includes a certification by an officer
27 of the insurer attesting that after payment of the dividend or
28 distribution the insurer will have at least 115 percent of
29 required statutory surplus as to policyholders.
30 (3)(4) The office shall not approve a dividend or
31 distribution in excess of the maximum amount allowed in
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1 subsection (1) unless, considering the following factors, it
2 determines that the distribution or dividend would not
3 jeopardize the financial condition of the insurer based upon a
4 review of the following factors:
5 (a) The liquidity, quality, and diversification of the
6 insurer's assets and the effect on its ability to meet its
7 obligations.
8 (b) Reduction of investment portfolio and investment
9 income.
10 (c) Effects on the written premium to surplus ratios
11 as required by the Florida Insurance Code.
12 (d) Industrywide financial conditions.
13 (e) Prior dividend distributions of the insurer.
14 (f) Whether the dividend is only a "pass-through"
15 dividend from a subsidiary of the insurer.
16 (g) Risk-based capital of the insurer.
17 (h) Any other relevant factor.
18 Section 32. Subsection (2) of section 628.461, Florida
19 Statutes, is amended to read:
20 628.461 Acquisition of controlling stock.--
21 (2) This section does not apply to any acquisition of
22 voting securities of a domestic stock insurer or of a
23 controlling company by any person who, on July 1, 1976, is the
24 owner of a majority of such voting securities or who, on or
25 after July 1, 1976, becomes the owner of a majority of such
26 voting securities with the approval of the office pursuant to
27 this section. Further, this section does not apply to a change
28 of ownership of a domestic insurer resulting from changes
29 within an insurance holding company of which the insurer is a
30 member, provided that the insurer establishes that no new
31 person or entity will have the ability to influence or control
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1 the activities of the insurer and that the reorganization will
2 not result in any changes in the officers, directors, or
3 business plan of the domestic insurer.
4 Section 33. Subsection (3) of section 628.4615,
5 Florida Statutes, is amended to read:
6 628.4615 Specialty insurers; acquisition of
7 controlling stock, ownership interest, assets, or control;
8 merger or consolidation.--
9 (3) This section does not apply to any acquisition of
10 voting securities or ownership interest of a specialty insurer
11 or of a controlling company by any person who, on July 9,
12 1986, is the owner of a majority of such voting securities or
13 ownership interest or who, on or after July 9, 1986, becomes
14 the owner of a majority of such voting securities or ownership
15 interest with the approval of the office pursuant to this
16 section. Further, this section does not apply to a change of
17 ownership of a specialty insurer resulting from changes within
18 a holding company of which the specialty insurer is a member,
19 provided the specialty insurer establishes that no new person
20 or entity will have the ability to influence or control the
21 activities of the specialty insurer and that the
22 reorganization will not result in any changes in the officers,
23 directors, or business plan of the specialty insurer.
24 Section 34. Subsection (1) of section 628.709, Florida
25 Statutes, is amended to read:
26 628.709 Formation of a mutual insurance holding
27 company.--
28 (1) A domestic mutual insurance company, other than a
29 mutual insurer that issued assessable policies as a mutual
30 insurer and which held a certificate of authority in this
31 state on July 1, 1997, may, pursuant to a plan of
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1 reorganization, reorganize as a mutual insurance holding
2 company system that must consist of a mutual insurance holding
3 company and one or more controlled subsidiaries and which may
4 consist of one or more intermediate stock holding companies
5 and other subsidiaries. The reorganization may be effected by
6 the organization of one or more companies, amendment or
7 restatement of the articles of incorporation and bylaws of one
8 or more companies, transfer of assets and liabilities among
9 two or more companies, issuance, acquisition or transfer of
10 capital stock of one or more companies, or merger or
11 consolidation of two or more companies. On and after the
12 effective date of a plan of reorganization, the mutual
13 insurance holding company shall at all times have the power,
14 directly or indirectly, to cast at least a majority of the
15 votes for the election of the board of directors of each
16 controlled subsidiary and any intermediate stock holding
17 company.
18 Section 35. Section 634.042, Florida Statutes, is
19 created to read:
20 634.042 Prohibited investments and loans.--A motor
21 vehicle service agreement company shall not directly or
22 indirectly invest in or lend its funds upon the security of
23 any note or other evidence of indebtedness of any director,
24 officer, or controlling stockholder of the motor vehicle
25 service agreement company.
26 Section 36. Section 634.3076, Florida Statutes, is
27 created to read:
28 634.3076 Prohibited investments and loans.--A home
29 warranty association shall not directly or indirectly invest
30 in or lend its funds upon the security of any note or other
31 evidence of indebtedness of any director.
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1 Section 37. Section 634.4062, Florida Statutes, is
2 created to read:
3 634.4062 Prohibited investments and loans.--A service
4 warranty association shall not directly or indirectly invest
5 in or lend its funds upon the security of any note or other
6 evidence of indebtedness of any director, officer, or
7 controlling stockholder of the service warranty association.
8 Section 38. Section 636.043, Florida Statutes, is
9 amended to read:
10 (Substantial rewording of section. See
11 s. 636.043, F.S., for present text.)
12 636.043 Annual, quarterly, and miscellaneous
13 reports.--
14 (1) Every prepaid limited health service organization
15 shall, annually within 3 months after the end of the calendar
16 year, or within an extension of time therefor as the office,
17 for good cause, grants, in a form prescribed by the
18 commission, file a report with the office, verified by the
19 oath of two officers of the corporation or, if not a
20 corporation, of two persons who are principal managing
21 directors of the organization or are principal managing
22 directors of the affairs of the organization, properly
23 notarized, showing its condition on the last day of the
24 immediately preceding reporting period. Such report must
25 include:
26 (a) A financial statement of the prepaid limited
27 health service organization, filed by electronic means in a
28 computer-readable form using a format acceptable to the
29 office.
30
31
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1 (b) A financial statement of the prepaid limited
2 health service organization, filed on forms acceptable to the
3 office.
4 (c) An audited financial statement of the prepaid
5 limited health service organization, including its balance
6 sheet and a statement of operations for the preceding year
7 certified by an independent certified public accountant,
8 prepared in accordance with statutory accounting principles.
9 (d) The number of prepaid limited health service
10 contracts issued and outstanding and the number of prepaid
11 limited health service organization contracts terminated.
12 (e) The number and amount of damage claims for medical
13 injury initiated against the prepaid limited health service
14 organization and any of the providers engaged by it during the
15 reporting year, broken down into claims with and without
16 formal legal process, and the disposition, if any, of each
17 such claim.
18 (f) An actuarial certification that:
19 1. The prepaid limited health service organization is
20 actuarially sound, which certification shall consider the
21 rates, benefits, and expenses of, and any other funds
22 available for the payment of obligations of, the organization.
23 2. The rates being charged or to be charged are
24 actuarially adequate to the end of the period for which rates
25 have been guaranteed.
26 3. Incurred but not reported claims and claims
27 reported but not fully paid have been adequately provided for.
28 4. The prepaid limited health service organization has
29 adequately provided for all obligations required by s.
30 641.35(3)(a).
31
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1 (g) A report prepared by the certified public
2 accountant and filed with the office describing material
3 weaknesses in the prepaid limited health service
4 organization's internal control structure as noted by the
5 certified public accountant during the audit. The report must
6 be filed with the annual audited financial report as required
7 in paragraph (c). The prepaid limited health service
8 organization shall provide a description of remedial actions
9 taken or proposed to correct material weaknesses, if the
10 actions are not described in the independent certified public
11 accountant's report.
12 (h) Such other information relating to the performance
13 of prepaid limited health service organizations as is required
14 by the commission or office.
15 (2) The office may require updates of the actuarial
16 certification as to a particular prepaid limited health
17 service organization if the office has reasonable cause to
18 believe that such reserves are understated to the extent of
19 materially misstating the financial position of the prepaid
20 limited health service organization. Workpapers in support of
21 the statement of the updated actuarial certification must be
22 provided to the office upon request.
23 (3) Every prepaid limited health service organization
24 shall file quarterly, for the first three calendar quarters of
25 each year, an unaudited financial statement of the
26 organization as described in paragraphs (1)(a) and (b). The
27 statement for the quarter ending March 31 shall be filed on or
28 before May 15, the statement for the quarter ending June 30
29 shall be filed on or before August 15, and the statement for
30 the quarter ending September 30 shall be filed on or before
31
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1 November 15. The quarterly report shall be verified by the
2 oath of two officers of the organization, properly notarized.
3 (4) Any prepaid limited health service organization
4 that neglects to file an annual report or quarterly report in
5 the form and within the time required by this section shall
6 forfeit up to $1,000 for each day for the first 10 days during
7 which the neglect continues and shall forfeit up to $2,000 for
8 each day after the first 10 days during which the neglect
9 continues; and, upon notice by the office to that effect, the
10 organization's authority to enroll new subscribers or to do
11 business in this state shall cease while such default
12 continues. The office shall deposit all sums collected by it
13 under this section to the credit of the Insurance Regulatory
14 Trust Fund. The office may not collect more than $100,000 for
15 each report.
16 (5) Each authorized prepaid limited health service
17 organization shall retain an independent certified public
18 accountant, referred to in this section as "CPA," who agrees
19 by written contract with the prepaid limited health service
20 organization to comply with the provisions of this part.
21 (a) The CPA shall provide to the prepaid limited
22 health service organization audited financial statements
23 consistent with this part.
24 (b) Any determination by the CPA that the prepaid
25 limited health service organization does not meet minimum
26 surplus requirements as set forth in this part shall be stated
27 by the CPA, in writing, in the audited financial statement.
28 (c) The completed work papers and any written
29 communications between the CPA firm and the prepaid limited
30 health service organization relating to the audit of the
31 prepaid limited health service organization shall be made
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1 available for review on a visual-inspection-only basis by the
2 office at the offices of the prepaid limited health service
3 organization, at the office, or at any other reasonable place
4 as mutually agreed between the office and the prepaid limited
5 health service organization. The CPA must retain for review
6 the work papers and written communications for a period of not
7 less than 6 years.
8 (d) The CPA shall provide to the office a written
9 report describing material weaknesses in the prepaid limited
10 health service organization's internal control structure as
11 noted during the audit.
12 (6) To facilitate uniformity in financial statements
13 and to facilitate office analysis, the commission may by rule
14 adopt the form for financial statements of a prepaid limited
15 health service organization, including supplements as approved
16 by the National Association of Insurance Commissioners in
17 2004; may adopt subsequent amendments thereto if the
18 methodology remains substantially consistent; and may by rule
19 require each prepaid limited health service organization to
20 submit to the office all or part of the information contained
21 in the annual statement in a computer-readable form compatible
22 with the electronic data processing system specified by the
23 office.
24 (7) In addition to information called for and
25 furnished in connection with its annual or quarterly
26 statements, the prepaid limited health service organization
27 shall furnish to the office as soon as reasonably possible
28 such information as to its material transactions which, in the
29 office's opinion, may have a material adverse effect on the
30 prepaid limited health service organization's financial
31 condition, as the office requests in writing. All such
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1 information furnished pursuant to the office's request must be
2 verified by the oath of two executive officers of the prepaid
3 limited health service organization.
4 (8) Each prepaid limited health service organization
5 shall file one copy of its annual statement convention blank
6 in electronic form, along with such additional filings as
7 prescribed by the commission for the preceding calendar year
8 or quarter, with the National Association of Insurance
9 Commissioners. Each prepaid limited health service
10 organization shall pay fees assessed by the National
11 Association of Insurance Commissioners to cover costs
12 associated with the filing and analysis of the documents by
13 the National Association of Insurance Commissioners.
14 (9) The office may require monthly reports if the
15 financial condition of the prepaid limited health service
16 organization has deteriorated from previous periods or if the
17 financial condition of the organization is such that it may be
18 hazardous to subscribers if not monitored more frequently.
19 Section 39. Subsection (10) is added to section
20 641.22, Florida Statutes, to read:
21 641.22 Issuance of certificate of authority.--The
22 office shall issue a certificate of authority to any entity
23 filing a completed application in conformity with s. 641.21,
24 upon payment of the prescribed fees and upon the office's
25 being satisfied that:
26 (10) The health maintenance organization has
27 demonstrated that it will meet the applicable requirements of
28 ss. 641.30(6) and 628.072.
29 Section 40. Subsection (2) of section 641.23, Florida
30 Statutes, is amended to read:
31
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1 641.23 Revocation or cancellation of certificate of
2 authority; suspension of enrollment of new subscribers; terms
3 of suspension.--
4 (2) The office may suspend the authority of a health
5 maintenance organization to enroll new subscribers or revoke
6 any certificate issued to a health maintenance organization,
7 or order compliance within 30 days, if it finds that any of
8 the following conditions exists:
9 (a) The organization is not operating in compliance
10 with this part;
11 (b) The plan is no longer actuarially sound or the
12 organization does not have the minimum surplus as required by
13 this part;
14 (c) The existing contract rates are excessive,
15 inadequate, or unfairly discriminatory;
16 (d) The organization has advertised, merchandised, or
17 attempted to merchandise its services in such a manner as to
18 misrepresent its services or capacity for service or has
19 engaged in deceptive, misleading, or unfair practices with
20 respect to advertising or merchandising; or
21 (e) The organization is insolvent; or.
22 (f) The organization has failed to meet and maintain
23 the applicable requirements of ss. 641.30(6) and 628.072.
24 Section 41. Subsection (1) of section 641.27, Florida
25 Statutes, is amended to read:
26 641.27 Examination by the department.--
27 (1) The office shall examine the affairs,
28 transactions, accounts, business records, and assets of any
29 health maintenance organization as often as it deems it
30 expedient for the protection of the people of this state, but
31 not less frequently than once every 5 3 years. In lieu of
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1 making its own financial examination, the office may accept an
2 independent certified public accountant's audit report
3 prepared on a statutory accounting basis consistent with this
4 part. However, except when the medical records are requested
5 and copies furnished pursuant to s. 456.057, medical records
6 of individuals and records of physicians providing service
7 under contract to the health maintenance organization shall
8 not be subject to audit, although they may be subject to
9 subpoena by court order upon a showing of good cause. For the
10 purpose of examinations, the office may administer oaths to
11 and examine the officers and agents of a health maintenance
12 organization concerning its business and affairs. The
13 examination of each health maintenance organization by the
14 office shall be subject to the same terms and conditions as
15 apply to insurers under chapter 624. In no event shall
16 expenses of all examinations exceed a maximum of $20,000 for
17 any 1-year period. Any rehabilitation, liquidation,
18 conservation, or dissolution of a health maintenance
19 organization shall be conducted under the supervision of the
20 department, which shall have all power with respect thereto
21 granted to it under the laws governing the rehabilitation,
22 liquidation, reorganization, conservation, or dissolution of
23 life insurance companies.
24 Section 42. Subsection (6) is added to section 641.30,
25 Florida Statutes, to read:
26 641.30 Construction and relationship to other laws.--
27 (6) Every health maintenance organization shall comply
28 with the applicable provisions of s. 628.072 and rules adopted
29 thereunder. Applicability shall be based on the organizational
30 structure of the health maintenance organization.
31
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1 Section 43. Present subsection (3) of section 641.309,
2 Florida Statutes, is renumbered as (4) and amended, and a new
3 subsection (3) is added to that section, to read:
4 641.409 Insolvency protection.--
5 (3) In lieu of the surety bond required under
6 paragraph (1)(b), the prepaid health clinic may deposit with
7 the office the amount determined in subsection (2). The
8 deposit shall not be considered as an admitted asset in
9 determining the statutory financial condition of the prepaid
10 health clinic. The deposit shall be released to the prepaid
11 health clinic if replaced by a surety bond that meets the
12 requirements of subsection (2).
13 (4)(3) Every prepaid health clinic shall deposit with
14 the department a cash deposit in the amount of $50,000 $30,000
15 to guarantee that the obligations to the subscribers will be
16 performed.
17 Section 44. Subsection (9) is added to section
18 651.026, Florida Statutes, to read:
19 651.026 Annual reports.--
20 (9) The commission may by rule require all or part of
21 the reports or filings required under this section to be
22 submitted by electronic means in a computer-readable form
23 compatible with the electronic data format specified by the
24 commission.
25 Section 45. Section 651.0261, Florida Statutes, is
26 amended to read:
27 651.0261 Quarterly statements.--If the office finds,
28 pursuant to rules of the commission, that such information is
29 needed to properly monitor the financial condition of a
30 provider or facility or is otherwise needed to protect the
31 public interest, the office may require the provider to file,
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1 within 45 days after the end of each fiscal quarter, a
2 quarterly unaudited financial statement of the provider or of
3 the facility in the form prescribed by the commission by rule.
4 The commission may by rule require all or part of the reports
5 or filings required under this section to be submitted by
6 electronic means in a computer-readable form compatible with
7 the electronic data format specified by the commission.
8 Section 46. Section 651.0271, Florida Statutes, is
9 created to read:
10 651.0271 Prohibited investments and loans.--A provider
11 may not directly or indirectly invest in or lend its funds
12 upon the security of any note or other evidence of
13 indebtedness of any director, officer, or controlling
14 stockholder of the provider.
15 Section 47. Paragraph (a) of subsection (1) of section
16 651.033, Florida Statutes, is amended to read:
17 651.033 Escrow accounts.--
18 (1) When funds are required to be deposited in an
19 escrow account pursuant to s. 651.022, s. 651.023, s. 651.035,
20 or s. 651.055:
21 (a) The escrow account shall be established in a
22 federal or state chartered Florida bank, Florida savings and
23 loan association, or Florida trust company having a physical
24 presence and doing business in this state and otherwise
25 acceptable to the office or on deposit with the department;
26 and the funds deposited therein shall be kept and maintained
27 in an account separate and apart from the provider's business
28 accounts.
29 Section 48. Paragraph (a) of subsection (1),
30 paragraphs (b) and (c) of subsection (2), and paragraphs (a),
31
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1 (b), (c), and (f) of subsection (3) of section 766.105,
2 Florida Statutes, are amended to read:
3 766.105 Florida Patient's Compensation Fund.--
4 (1) DEFINITIONS.--The following definitions apply in
5 the interpretation and enforcement of this section:
6 (a) Effective July 1, 2004, the term "fund" means the
7 Florida Patient's Compensation Fund Account within the medical
8 malpractice risk apportionment plan adopted pursuant to s.
9 627.351(4). The fund account is not a state agency, board, or
10 commission. However, for the purposes of s. 199.183(1) only,
11 the fund account shall be considered a political subdivision
12 of this state.
13 (2) COVERAGE.--
14 (b) Whenever a claim covered under subsection (3)
15 results in a settlement or judgment against a health care
16 provider, the fund shall pay to the extent of its coverage if
17 the health care provider has paid the fees and any assessments
18 required pursuant to subsection (3) for the year in which the
19 incident occurred for which the claim is filed, provides an
20 adequate defense for the fund, and pays the initial amount of
21 the claim up to the applicable amount set forth in paragraph
22 (f) or the maximum limit of the underlying coverage maintained
23 by the health care provider on the date when the incident
24 occurred for which the claim is filed, whichever is greater.
25 Coverages for such claims shall be provided on an occurrence
26 basis by the fund independently for each fiscal year, such
27 fiscal year to run from January 1 to December 31. The fund may
28 also provide coverages for portions of each fiscal year. The
29 limits of such coverage afforded by the fund for each health
30 care provider other than a hospital may not exceed the total
31 limits for both entry level and fund coverage of $1 million
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1 per claim with a $3 million annual aggregate, or $2 million
2 per claim with a $4 million annual aggregate, as selected by
3 the health care provider. In the case of coverage for a
4 hospital, the limit of coverage afforded by the fund may not
5 exceed the total limits for both entry level and fund coverage
6 of $2.5 million per claim with no annual aggregate. The health
7 care provider is responsible for the payment of any amount of
8 a claim in excess of the elected limit. The fund is not
9 responsible for the payment of punitive damages awarded for
10 actual or direct negligence of the health care provider
11 member. The health care provider shall have the same
12 responsibility for punitive damages it would have if it were
13 not a member of the fund. A health care provider may have the
14 necessary funds available for payment when due or may provide
15 underlying financial responsibility by one of the following
16 methods:
17 1. A bond purchased from a licensed surety company,
18 which bond is in the applicable amount set forth in paragraph
19 (f) per claim and 3 times the applicable per-claim limit in
20 the aggregate per year, plus an additional amount which is
21 sufficient to meet claims defense and expenses; however, a
22 total bond amount for all years equal to reserved loss and
23 expense amounts for known cases plus 3 times the applicable
24 amount set forth in paragraph (f) plus $45,000 shall be the
25 maximum bond amount required;
26 2. An adequate escrow account in the applicable amount
27 set forth in paragraph (f) per claim and 3 times the per-claim
28 limit in the aggregate per year, plus an additional amount
29 which is sufficient to meet claims defense and expenses;
30 however, a total escrow account for all years equal to
31 reserved loss and expense amounts for known cases plus 3 times
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1 the applicable amount set forth in paragraph (f) plus $45,000
2 shall be the maximum escrow amount required;
3 3. Medical malpractice insurance in the applicable
4 amount set forth in paragraph (f) or more per claim from a
5 private insurer or the Joint Underwriting Association Coverage
6 Account established under s. 627.351(4); or
7 4. Self-insurance as provided in s. 627.357, providing
8 coverage in the applicable amount set forth in paragraph (f)
9 or more per claim and 3 times the applicable per-claim limit
10 in the aggregate per year.
11 (c) Any hospital that can meet one of the following
12 provisions for demonstrating financial responsibility to pay
13 claims and costs ancillary thereto arising out of the
14 rendering of or failure to render medical care or services and
15 for bodily injury or property damage to the person or property
16 of any patient arising out of the activities of the hospital
17 in this state or arising out of the activities of covered
18 individuals listed in paragraph (e) is not required to
19 participate in the fund:
20 1. Post bond in an amount equivalent to $10,000 per
21 claim for each hospital bed in such hospital, not to exceed a
22 $2.5 million annual aggregate.
23 2. Establish an escrow account in an amount equivalent
24 to $10,000 per claim for each hospital bed in such hospital,
25 not to exceed a $2.5 million annual aggregate, to the
26 satisfaction of the Agency for Health Care Administration.
27 3. Obtain professional liability coverage in an amount
28 equivalent to $10,000 or more per claim for each bed in such
29 hospital from a private insurer, from the Joint Underwriting
30 Association Coverage Account established under s. 627.351(4),
31 or through a plan of self-insurance as provided in s. 627.357.
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1 However, no hospital may be required to obtain such coverage
2 in an amount exceeding a $2.5 million annual aggregate.
3 (3) THE FUND.--
4 (a) Purposes.--The There is created a "Florida
5 Patient's Compensation Fund" originally created by this
6 statute shall, as of July 1, 2004, be known as the Florida
7 Patient's Compensation Fund Account, hereinafter referred to
8 as the "fund" or the "fund account," and shall be a discrete
9 and separate account within the medical malpractice risk
10 apportionment plan adopted pursuant to s. 627.351(4). The fund
11 shall continue to serve for the purpose of paying that portion
12 of any claim arising out of the rendering of or failure to
13 render medical care or services, or arising out of activities
14 of committees, for health care providers or any claim for
15 bodily injury or property damage to the person or property of
16 any patient, including all patient injuries and deaths,
17 arising out of the members' activities for those health care
18 providers set forth in subparagraphs (1)(b)1., 5., 6., and 7.
19 which is in excess of the fund entry level selected and less
20 than the limit selected under paragraph (2)(b). The fund
21 shall be responsible only for payment of claims against health
22 care providers who are in compliance with the provisions of
23 paragraph (2)(b), of reasonable and necessary expenses
24 incurred in the payment of claims, and of fund administrative
25 expenses.
26 (b) Fund administration and operation.--Effective July
27 1, 2004, the fund, as a separate and discrete account within
28 the medical malpractice risk apportionment plan adopted
29 pursuant to s. 627.351(4), shall be subject to the supervision
30 and approval of the board of governors of such plan.
31
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1 1. The fund shall operate subject to the supervision
2 and approval of a board of governors consisting of a
3 representative of the insurance industry appointed by the
4 Chief Financial Officer, an attorney appointed by The Florida
5 Bar, a representative of physicians appointed by the Florida
6 Medical Association, a representative of physicians' insurance
7 appointed by the Chief Financial Officer, a representative of
8 physicians' self-insurance appointed by the Chief Financial
9 Officer, two representatives of hospitals appointed by the
10 Florida Hospital Association, a representative of hospital
11 insurance appointed by the Chief Financial Officer, a
12 representative of hospital self-insurance appointed by the
13 Chief Financial Officer, a representative of the osteopathic
14 physicians' or podiatric physicians' insurance or
15 self-insurance appointed by the Chief Financial Officer, and a
16 representative of the general public appointed by the Chief
17 Financial Officer. The board of governors shall, during the
18 first meeting after June 30 of each year, choose one of its
19 members to serve as chair of the board and another member to
20 serve as vice chair of the board. The members of the board
21 shall be appointed to serve terms of 4 years, except that the
22 initial appointments of a representative of the general public
23 by the Chief Financial Officer, an attorney by The Florida
24 Bar, a representative of physicians by the Florida Medical
25 Association, and one of the two representatives of the Florida
26 Hospital Association shall be for terms of 3 years;
27 thereafter, such representatives shall be appointed for terms
28 of 4 years. Subsequent to initial appointments for 4-year
29 terms, the representative of the osteopathic physicians' or
30 podiatric physicians' insurance or self-insurance appointed by
31 the Chief Financial Officer and the representative of hospital
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1 self-insurance appointed by the Chief Financial Officer shall
2 be appointed for 2-year terms; thereafter, such
3 representatives shall be appointed for terms of 4 years. Each
4 appointed member may designate in writing to the chair an
5 alternate to act in the member's absence or incapacity. A
6 member of the board, or the member's alternate, may be
7 reimbursed from the assets of the fund for expenses incurred
8 by him or her as a member, or alternate member, of the board
9 and for committee work, but he or she may not otherwise be
10 compensated by the fund for his or her service as a board
11 member or alternate.
12 2. There shall be no liability on the part of, and no
13 cause of action of any nature shall arise against, the fund or
14 its agents or employees, professional advisers or consultants,
15 members of the board of governors or their alternates, or the
16 Department of Financial Services or the Office of Insurance
17 Regulation of the Financial Services Commission or their
18 representatives for any action taken by them in the
19 performance of their powers and duties pursuant to this
20 section.
21 (c) Powers of the fund.--The fund as a separate and
22 discrete account within the medical malpractice risk
23 apportionment plan established pursuant to s. 627.351(4) has
24 the power through the plan board of governors and staff to:
25 1. Sue and be sued, and appear and defend, in all
26 actions and proceedings in its name to the same extent as a
27 natural person.
28 2. Adopt, change, amend, and repeal a plan of
29 operation for the fund as part of the plan of operation of the
30 medical malpractice risk apportionment plan adopted pursuant
31 to s. 627.351(4), not inconsistent with law, for the
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1 regulation and administration of the affairs of the fund. The
2 plan and any changes thereto shall be filed with the Office of
3 Insurance Regulation of the Financial Services Commission and
4 are all subject to its approval before implementation by the
5 fund. All fund members, board members, and employees shall
6 comply with the plan of operation.
7 3. Have and exercise all powers necessary or
8 convenient to effect any or all of the purposes for which the
9 fund is created.
10 4. Enter into such contracts as are necessary or
11 proper to carry out the provisions and purposes of this
12 section.
13 5. Employ or retain such persons as are necessary to
14 perform the administrative and financial transactions and
15 responsibilities of the fund and to perform other necessary or
16 proper functions unless prohibited by law.
17 6. Take such legal action as may be necessary to avoid
18 payment of improper claims.
19 7. Indemnify any employee, agent, member of the board
20 of governors or his or her alternate, or person acting on
21 behalf of the fund in an official capacity, for expenses,
22 including attorney's fees, judgments, fines, and amounts paid
23 in settlement actually and reasonably incurred by him or her
24 in connection with any action, suit, or proceeding, including
25 any appeal thereof, arising out of his or her capacity in
26 acting on behalf of the fund, if he or she acted in good faith
27 and in a manner he or she reasonably believed to be in, or not
28 opposed to, the best interests of the fund and, with respect
29 to any criminal action or proceeding, he or she had reasonable
30 cause to believe his or her conduct was lawful.
31 (f) Claims procedures.--
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1 1. Any person may file an action against a
2 participating health care provider for damages covered under
3 the fund, except that the person filing the claim may not
4 recover against the fund unless the fund was named as a
5 defendant in the suit. The fund is not required to actively
6 defend a claim until the fund is named therein. If, after the
7 facts upon which the claim is based are reviewed, it appears
8 that the claim will exceed the applicable amount set forth in
9 paragraph (2)(f) or, if greater, the amount of the health care
10 provider's basic coverage, the fund shall appear and actively
11 defend itself when named as a defendant in the suit. In so
12 defending, the fund shall retain counsel and pay out of the
13 account for the appropriate year attorneys' fees and expenses,
14 including court costs incurred in defending the fund. In any
15 claim, the attorney or law firm retained to defend the fund
16 account may not be retained to defend the Joint Underwriting
17 Association authorized by s. 627.351(4) in any situation
18 giving rise to a conflict of interest. The fund is authorized
19 to negotiate with any claimant having a judgment exceeding the
20 applicable amount set forth in paragraph (2)(f) to reach an
21 agreement as to the manner in which that portion of the
22 judgment exceeding such amount is to be paid. Any judgment
23 affecting the fund may be appealed under the Florida Rules of
24 Appellate Procedure, as with any defendant.
25 2. It is the responsibility of the insurer or
26 self-insurer providing insurance or self-insurance for a
27 health care provider who is also covered by the fund to
28 provide an adequate defense on any claim filed which
29 potentially affects the fund, with respect to such insurance
30 contract or self-insurance contract. The insurer or
31 self-insurer shall act in a fiduciary relationship toward the
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1 fund with respect to any claim affecting the fund. No
2 settlement exceeding the applicable amount set forth in
3 paragraph (2)(f), or any other amount which could require
4 payment by the fund, may be agreed to unless approved by the
5 fund.
6 3. A person who has recovered a final judgment against
7 the fund or against a health care provider who is covered by
8 the fund may file a claim with the fund to recover that
9 portion of such judgment which is in excess of the applicable
10 amount set forth in paragraph (2)(f) or the amount of the
11 health care provider's basic coverage, if greater, as set
12 forth in paragraph (2)(b). The amount of liability of the
13 fund under a judgment, including court costs, reasonable
14 attorney's fees, and interest, shall be paid in a lump sum,
15 except that any claims for future special damages, as set
16 forth in s. 768.48(1)(a) and (b), shall be paid periodically
17 as they are incurred by the claimant. If a claimant dies while
18 receiving periodic payments, payment for future medical
19 expenses shall cease, but payment for future wage loss, if
20 any, shall continue at a rate of not more than $100,000 per
21 year. The fund may pay a lump sum reflecting the present
22 value of future wage losses in lieu of continuing the periodic
23 payments.
24 4. Payment of settlements or judgments involving the
25 fund shall be paid in the order received within 60 days after
26 the date of settlement or judgment, unless appealed by the
27 fund. If the account for a given year does not have enough
28 money to pay all of the settlements or judgments, those claims
29 received after the funds are exhausted shall be payable in the
30 order in which they are received. However, no claimant has
31 the right to execute against the fund to the extent that the
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1 judgment is for a claim covered in a membership year for which
2 the fund has insufficient assets to pay the claim, as
3 determined by membership fees for such year, investment income
4 generated by such fees, and assessments collected from members
5 for such year. When the fund has insufficient assets to pay
6 claims for a fund year, the fund will not be required to post
7 a supersedeas bond in order to stay execution of a judgment
8 pending appeal. The fund shall retain a reasonable sum of
9 money for payment of administrative and claims expense, which
10 money will not be subject to execution.
11 5. Except to the extent of the appropriate fund entry
12 level amount selected, if a judgment is entered against the
13 fund for a year in which there are insufficient assets to
14 satisfy the claim, an automatic stay of execution and
15 collection in favor of the fund member shall exist for that
16 portion of the judgment which exceeds the selected entry level
17 amount, and for which fund coverage exists. Such stay shall
18 only be granted to those members who have fully complied with
19 the requirements of fund membership, and such stay shall
20 remain in effect until adequate assessments are collected by
21 the fund to pay the claim. Upon competent proof that the
22 portion of any claim covered by the fund is uncollectible from
23 the fund, the member's stay of execution may be vacated by the
24 court, upon application by the plaintiff and hearing thereon.
25 6. If a health care provider participating in the fund
26 has coverage in excess of the applicable amount set forth in
27 paragraph (2)(f), such health care provider shall be liable
28 for losses up to the amount of his or her coverage, and such
29 health care provider shall receive an appropriate reduction of
30 the fees and assessments for participation in the fund. Such
31 reduction shall be granted only after such health care
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1 provider has proved to the satisfaction of the fund that such
2 health care provider had such coverage during the period of
3 membership of the fiscal year.
4 7. The manager of the fund or his or her assistant is
5 the agent for service of process for the plan.
6 Section 49. Sections 5, 6, 29, 30, 39, 40, and 42
7 shall take effect January 1, 2005; however, any domestic
8 insurer with a certificate of authority in effect on that date
9 shall have 12 months to comply with any rules adopted pursuant
10 to this act.
11 Section 50. Except as otherwise expressly provided in
12 this act, this act shall take effect October 1, 2004.
13
14 *****************************************
15 SENATE SUMMARY
16 Revises and creates a variety of provisions relating,
generally, to insurance. (See bill for details.)
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