Florida Senate - 2011                                    SB 1836
       
       
       
       By Senator Diaz de la Portilla
       
       
       
       
       36-00500-11                                           20111836__
    1                        A bill to be entitled                      
    2         An act relating to captive insurance; amending s.
    3         628.901, F.S.; providing definitions; amending s.
    4         628.905, F.S.; expanding the kinds of insurance for
    5         which a captive insurer may seek licensure; limiting
    6         the risks that certain captive insurers may insure;
    7         specifying requirements and conditions relating to a
    8         captive insurer’s authority to conduct business;
    9         requiring that before licensure certain captive
   10         insurers must file or submit to the Commissioner of
   11         Insurance Regulation specified information, documents,
   12         and statements; requiring a captive insurance company
   13         to file specific evidence with the commissioner
   14         relating to the financial condition and quality of
   15         management and operations of the company; requiring an
   16         applicant-sponsored captive insurer to file with the
   17         commissioner a business plan, certain statements,
   18         sample contracts, and certain evidence relating to
   19         expenses; requiring a captive insurance company to pay
   20         certain fees and costs relating to an application for
   21         licensure and renewal; authorizing initial licensure
   22         until a date certain and requiring annual renewal
   23         thereafter on such date; authorizing a foreign or
   24         alien captive insurance company to become a domestic
   25         captive insurance company by complying with specified
   26         requirements; authorizing the commissioner to waive
   27         any requirements for public hearings relating to the
   28         redomestication of an alien captive insurance company;
   29         amending s. 628.907, F.S.; revising capitalization and
   30         security requirements for specified captive insurance
   31         companies; requiring capital of specified captive
   32         insurance companies to be held in certain forms;
   33         requiring contributions to captive insurance companies
   34         that are nonprofit corporations to be in a certain
   35         form; authorizing the commission to issue a captive
   36         insurance company license conditioned upon certain
   37         evidence relating to possession of specified capital;
   38         authorizing revocation of a conditional license under
   39         certain circumstances; authorizing the commissioner to
   40         prescribe certain additional capital and net asset
   41         requirements; requiring such additional requirements
   42         relating to capital and net assets to be held in
   43         specified forms; requiring certain security of a
   44         branch captive insurance company to be trust funded by
   45         specified types of assets made payable to certain
   46         policyholders and insurers; providing limitations on
   47         the payment of dividends by a captive insurance
   48         company; prohibiting distributions by a captive
   49         insurance company that is a nonprofit corporation
   50         without commissioner approval; requiring certain
   51         irrevocable letters of credit to meet certain
   52         standards; creating s. 628.908, F.S.; prohibiting the
   53         issuance of a license to specified captive insurance
   54         companies unless such companies possess and maintain
   55         certain levels of unimpaired surplus; requiring
   56         unimpaired surplus to be in specified forms;
   57         authorizing a sponsored captive insurance company that
   58         does not assume risk to maintain unimpaired surplus in
   59         certain securities approved by the commissioner;
   60         requiring a captive insurance company that is
   61         organized as a reciprocal insurer to maintain a
   62         specified amount of unimpaired surplus; authorizing
   63         the commissioner to condition issuance of a captive
   64         insurance company license upon the provision of
   65         certain evidence relating to the possession of a
   66         minimum amount of unimpaired surplus; authorizing
   67         revocation of a conditional license under certain
   68         circumstances; authorizing the commissioner to require
   69         additional surplus in specified forms; requiring
   70         dividends or distributions of capital or surplus to
   71         meet certain conditions and be approved by the
   72         commissioner; requiring certain letters of credit to
   73         meet certain standards; amending s. 628.909, F.S.;
   74         providing for applicability of certain statutory
   75         provisions to specified captive insurers; creating s.
   76         628.910, F.S.; providing requirements, options, and
   77         conditions relating to how a pure captive insurance
   78         company or a sponsored captive insurance company may
   79         be incorporated or organized as a business; amending
   80         s. 628.911, F.S.; providing reporting requirements for
   81         specified captive insurance companies and captive
   82         reinsurance companies; creating s. 628.912, F.S.;
   83         authorizing a sponsored captive insurance company and
   84         a captive reinsurance company to discount specified
   85         losses subject to certain conditions; amending s.
   86         628.913, F.S.; authorizing a captive reinsurance
   87         company to apply to the commission for licensure to
   88         write reinsurance covering property and casualty
   89         insurance or reinsurance contracts; authorizing the
   90         commissioner to allow a captive reinsurance company to
   91         write reinsurance contracts covering risks in any
   92         state; specifying that a captive reinsurance company
   93         is subject to specified requirements and must meet
   94         specified conditions to conduct business in this
   95         state; creating s. 628.914, F.S.; specifying
   96         requirements and conditions relating to the
   97         capitalization or maintenance of reserves by a captive
   98         reinsurance company; creating s. 628.9141, F.S.;
   99         specifying requirements and conditions relating to the
  100         incorporation of a captive reinsurance company;
  101         creating s. 628.9142, F.S.; providing for the effect
  102         on reserves of certain actions taken by a captive
  103         insurance company relating to providing reinsurance
  104         for specified risks; creating s. 628.9143, F.S.;
  105         requiring a captive reinsurance company to annually
  106         pay a specified tax amount; prohibiting any other
  107         taxation of a captive reinsurance company other than
  108         an occupation tax and certain ad valorem taxes;
  109         subjecting a captive reinsurance company to sanctions
  110         for failures relating to the payment of taxes;
  111         creating s. 628.918, F.S.; requiring a specified
  112         percentage of a captive reinsurance company’s assets
  113         to be managed by an asset manager domiciled in this
  114         state; creating s. 628.919, F.S.; authorizing the
  115         Financial Services Commission to adopt rules
  116         establishing certain standards for control of an
  117         unaffiliated business by a parent or affiliated
  118         company relating to coverage by a pure captive
  119         insurance company; creating s. 628.920, F.S.;
  120         providing for the conversion of certain stock, mutual
  121         corporations, or limited liability companies into
  122         reciprocal insurers; requiring a specified plan for
  123         such conversions or mergers; specifying requirements
  124         and conditions for the approval of a conversion or
  125         merger plan by the commissioner; creating s. 628.921,
  126         F.S.; providing requirements and conditions relating
  127         to the formation of a sponsored captive insurance
  128         company and the establishment of protected cells;
  129         creating s. 628.922, F.S.; providing requirements and
  130         conditions applicable to a sponsor of a sponsored
  131         captive insurance company; creating s. 628.923, F.S.;
  132         authorizing specified entities to be participants in
  133         sponsored captive insurance companies under certain
  134         circumstances; creating s. 628.924, F.S.; requiring
  135         that a licensed captive insurance company must be
  136         considered for issuance of a certificate of authority
  137         as an insurer under certain circumstances; providing
  138         an effective date.
  139  
  140  Be It Enacted by the Legislature of the State of Florida:
  141  
  142         Section 1. Section 628.901, Florida Statutes, is amended to
  143  read:
  144         628.901 Definitions “Captive insurer” defined.—As used in
  145  For the purposes of this part, unless the context requires
  146  otherwise: except as provided in s. 628.903, a “captive insurer”
  147  is a domestic insurer established under part I to insure the
  148  risks of a specific corporation or group of corporations under
  149  common ownership owned by the corporation or corporations from
  150  which it accepts risk under a contract of insurance.
  151         (1) “Affiliated company” means a company in the same
  152  corporate system as a parent, an industrial insured, or a member
  153  organization by virtue of common ownership, control, operation,
  154  or management.
  155         (2) “Alien captive insurance company” means an insurance
  156  company formed to write insurance business for its parents and
  157  affiliates and licensed under the laws of an alien jurisdiction
  158  which imposes statutory or regulatory standards in a form
  159  acceptable to the commissioner on companies transacting the
  160  business of insurance in the alien jurisdiction.
  161         (3) “Association” means a legal association of individuals,
  162  corporations, limited liability companies, partnerships,
  163  political subdivisions, or associations that has been in
  164  continuous existence for at least 1 year:
  165         (a) The member organizations of which collectively, or
  166  which does itself:
  167         1. Own, control, or hold with power to vote all of the
  168  outstanding voting securities of an association captive
  169  insurance company incorporated as a stock insurer or organized
  170  as a limited liability company; or
  171         2. Have complete voting control over an association captive
  172  insurance company organized as a mutual insurer; or
  173         (b) The member organizations of which collectively
  174  constitute all of the subscribers of an association captive
  175  insurance company formed as a reciprocal insurer.
  176         (4) “Association captive insurance company” means a company
  177  that insures risks of the member organizations of the
  178  association and their affiliated companies.
  179         (5) “Branch business” means any insurance business
  180  transacted by a branch captive insurance company in this state.
  181         (6) “Branch captive insurance company” means an alien
  182  captive insurance company licensed by the commissioner to
  183  transact the business of insurance in this state through a
  184  business unit with a principal place of business in this state.
  185         (7) “Branch operations” means any business operations of a
  186  branch captive insurance company in this state.
  187         (8) “Captive insurance company” means a pure captive
  188  insurance company, association captive insurance company,
  189  captive reinsurance company, sponsored captive insurance
  190  company, special purpose captive insurance company, or
  191  industrial insured captive insurance company formed or licensed
  192  under this chapter. For purposes of this chapter, a branch
  193  captive insurance company must be a pure captive insurance
  194  company with respect to operations in this state, unless
  195  otherwise permitted by the commissioner.
  196         (9) “Captive reinsurance company” means a reinsurance
  197  company that is formed or licensed under this chapter and is
  198  wholly owned by a qualifying reinsurance parent company. A
  199  captive reinsurance company is a stock corporation.
  200         (10) “Commissioner” means the Commissioner of the Office of
  201  Insurance Regulation or the commissioner’s designee.
  202         (11) “Consolidated debt to total capital ratio” means the
  203  ratio of the sum of all debts and hybrid capital instruments as
  204  described in paragraph (a) to total capital as described in
  205  paragraph (b).
  206         (a) Debts and hybrid capital instruments include, but are
  207  not limited to, all borrowings from banks, all senior debt, all
  208  subordinated debts, all trust preferred shares, and all other
  209  hybrid capital instruments that are not included in the
  210  determination of consolidated GAAP net worth issued and
  211  outstanding.
  212         (b) Total capital consists of all debts and hybrid capital
  213  instruments as described in paragraph (a) plus owners’ equity
  214  determined in accordance with GAAP for reporting to the United
  215  States Securities and Exchange Commission.
  216         (12) “Consolidated GAAP net worth” means the consolidated
  217  owners’ equity determined in accordance with generally accepted
  218  accounting principles for reporting to the United States
  219  Securities and Exchange Commission.
  220         (13) “Controlled unaffiliated business” means a company:
  221         (a) That is not in the corporate system of a parent and
  222  affiliated companies;
  223         (b) That has an existing contractual relationship with a
  224  parent or affiliated company; and
  225         (c) Whose risks are managed by a captive insurance company
  226  in accordance with s. 628.919.
  227         (14) “GAAP” means generally accepted accounting principles.
  228         (15) “Industrial insured” means an insured as defined in s.
  229  628.903(1).
  230         (16) “Industrial insured captive insurance company” means a
  231  company that insures risks of the industrial insureds that
  232  comprise the industrial insured group and their affiliated
  233  companies.
  234         (17) “Industrial insured group” means a group that meets
  235  either of the following criteria:
  236         (a) A group of industrial insureds that collectively:
  237         1. Own, control, or hold with power to vote all of the
  238  outstanding voting securities of an industrial insured captive
  239  insurance company incorporated as a stock insurer or limited
  240  liability company; or
  241         2. Have complete voting control over an industrial insured
  242  captive insurance company incorporated as a mutual insurer; or
  243         (b) A group which is created under the Liability Risk
  244  Retention Act of 1986, 15 U.S.C. s. 3901, et seq., as amended,
  245  and a corporation or other limited liability association taxable
  246  as a stock insurance company or a mutual insurer under the
  247  insurance code.
  248         (18) “Member organization” means any individual,
  249  corporation, limited liability company, partnership, or
  250  association that belongs to an association.
  251         (19) “Office” means the Office of Insurance Regulation.
  252         (20) “Parent” means any corporation, limited liability
  253  company, partnership, or individual that directly or indirectly
  254  owns, controls, or holds with power to vote more than 50 percent
  255  of the outstanding voting interests of a captive insurance
  256  company.
  257         (21) “Participant” means an entity as defined in s.
  258  628.923, and any affiliates of that entity, that are insured by
  259  a sponsored captive insurance company, where the losses of the
  260  participant are limited through a participant contract to the
  261  assets of a protected cell.
  262         (22) “Participant contract” means a contract by which a
  263  sponsored captive insurance company insures the risks of a
  264  participant and limits the losses of the participant to the
  265  assets of a protected cell.
  266         (23) “Protected cell” means a separate account established
  267  and maintained by a sponsored captive insurance company for one
  268  participant.
  269         (24) “Pure captive insurance company” means a company that
  270  insures risks of its parent, affiliated companies, controlled
  271  unaffiliated business, or a combination thereof.
  272         (25) “Qualifying reinsurer parent company” means a
  273  reinsurer authorized to write reinsurance by this state and that
  274  has a consolidated GAAP net worth of not less than $500 million
  275  and a consolidated debt to total capital ratio of not greater
  276  than 0.50.
  277         (26) “Special purpose captive insurance company” means a
  278  captive insurance company that is formed or licensed under this
  279  chapter that does not meet the definition of any other type of
  280  captive insurance company defined in this section.
  281         (27) “Sponsor” means an entity that meets the requirements
  282  of s. 628.922, and is approved by the commissioner to provide
  283  all or part of the capital and surplus required by applicable
  284  law and to organize and operate a sponsored captive insurance
  285  company.
  286         (28) “Sponsored captive insurance company” means a captive
  287  insurance company:
  288         (a) In which the minimum capital and surplus required by
  289  applicable law is provided by one or more sponsors;
  290         (b) That is formed or licensed under this chapter;
  291         (c) That insures the risks of separate participants through
  292  the contract; and
  293         (d) That segregates each participant’s liability through
  294  one or more protected cells.
  295         (29) “Treasury rates” means the United States Treasury
  296  strips asked yield as published in the Wall Street Journal as of
  297  a balance sheet date.
  298         Section 2. Section 628.905, Florida Statutes, is amended to
  299  read:
  300         628.905 Licensing; authority.—
  301         (1) Any captive insurer, when permitted by its charter or
  302  articles of incorporation, may apply to the commissioner office
  303  for a license to do any and all insurance authorized under the
  304  insurance code, provide commercial property, commercial
  305  casualty, and commercial marine insurance coverage other than
  306  workers’ compensation and employer’s liability insurance, except
  307  that: coverage, except that an industrial insured captive
  308  insurer may apply for a license to provide workers’ compensation
  309  and employer’s liability insurance as set forth in subsection
  310  (6).
  311         (a) A pure captive insurance company may not insure any
  312  risks other than those of its parent, affiliated companies,
  313  controlled unaffiliated businesses, or a combination thereof.
  314         (b) An association captive insurance company may not insure
  315  any risks other than those of the member organizations of its
  316  association and their affiliated companies.
  317         (c) An industrial insured captive insurance company may not
  318  insure any risks other than those of the industrial insureds
  319  that comprise the industrial insured group and their affiliated
  320  companies.
  321         (d) In general, a special purpose captive insurance company
  322  may only insure the risks of its parent. Notwithstanding any
  323  other provisions of this chapter, a special purpose captive
  324  insurance company may provide insurance or reinsurance, or both,
  325  for risks as approved by the commissioner.
  326         (e) A captive insurance company may not provide personal
  327  motor vehicle or homeowners’ insurance coverage or any component
  328  of such coverages.
  329         (f) A captive insurance company may not accept or cede
  330  reinsurance except as provided in this part.
  331         (2) To conduct insurance business in this state, a No
  332  captive insurer, other than an industrial insured captive
  333  insurer, shall: insure or accept reinsurance on any risks other
  334  than those of its parent and affiliated companies.
  335         (a) Obtain from the commissioner a license authorizing it
  336  to conduct insurance business in this state;
  337         (b) Hold at least one board of directors’ meeting or, in
  338  the case of a reciprocal insurer, a subscriber’s advisory
  339  committee meeting or, in the case of a limited liability
  340  company, a meeting of the managing board each year in this
  341  state;
  342         (c) Maintain its principal place of business in this state
  343  or, in the case of a branch captive insurance company, maintain
  344  the principal place of business for its branch operations in
  345  this state; and
  346         (d) Appoint a resident registered agent to accept service
  347  of process and to otherwise act on its behalf in this state. In
  348  the case of a captive insurance company:
  349         1. Formed as a corporation, a nonprofit corporation, or a
  350  limited liability company, whenever the registered agent cannot
  351  with reasonable diligence be found at the registered office of
  352  the captive insurance company, the Chief Financial Officer of
  353  this state must be an agent of the captive insurance company
  354  upon whom any process, notice, or demand may be served.
  355         2. Formed as a reciprocal insurer, whenever the registered
  356  agent cannot with reasonable diligence be found at the
  357  registered office of the captive insurance company, the Chief
  358  Financial Officer of this state must be an agent of the captive
  359  insurance company upon whom any process, notice, or demand may
  360  be served.
  361         (3)(a) Before receiving a license, a captive insurance
  362  company:
  363         1. Formed as a corporation or a nonprofit corporation must
  364  file with the commissioner a certified copy of its articles of
  365  incorporation and bylaws, a statement under oath of its
  366  president and secretary showing its financial condition, and any
  367  other statements or documents required by the commissioner.
  368         2. Formed as a limited liability company must file with the
  369  commissioner a certified copy of its articles of organization
  370  and operating agreement, a statement under oath by its managers
  371  showing its financial condition, and any other statements or
  372  documents required by the commissioner.
  373         3. Formed as a reciprocal must:
  374         a. File with the commissioner a certified copy of the power
  375  of attorney of its attorney-in-fact, a certified copy of its
  376  subscribers’ agreement, a statement under oath of its attorney
  377  in-fact showing its financial condition, and any other
  378  statements or documents required by the commissioner; and
  379         b. Submit to the commissioner for approval a description of
  380  the coverages, deductibles, coverage limits, and rates and any
  381  other information the commissioner may reasonably require. If
  382  there is a subsequent material change in an item in the
  383  description, the reciprocal captive insurance company must
  384  submit to the commissioner for approval an appropriate revision
  385  and may not offer any additional kinds of insurance until a
  386  revision of the description is approved by the commissioner. The
  387  reciprocal captive insurance company must inform the
  388  commissioner of any material change in rates within 30 days
  389  after the adoption of the change.
  390         (b) In addition to the information required by paragraph
  391  (a), an applicant captive insurance company must file with the
  392  commissioner evidence of:
  393         1. The amount and liquidity of the proposed captive
  394  insurance company’s assets relative to the risks to be assumed;
  395         2. The adequacy of the expertise, experience, and character
  396  of the person or persons who will manage the company;
  397         3. The overall soundness of the company’s plan of
  398  operation;
  399         4. The adequacy of the loss prevention programs of the
  400  company’s parent, member organizations, or industrial insureds,
  401  as applicable; and
  402         5. Any other factors considered relevant by the
  403  commissioner in ascertaining whether the company will be able to
  404  meet its policy obligations.
  405         (c) In addition to the information required by paragraphs
  406  (a) and (b), an applicant-sponsored captive insurance company
  407  must file with the commissioner:
  408         1. A business plan demonstrating how the applicant will
  409  account for the loss and expense experience of each protected
  410  cell at a level of detail found to be sufficient by the
  411  commissioner and how the applicant will report the experience to
  412  the commissioner;
  413         2. A statement acknowledging that all financial records of
  414  the sponsored captive insurance company, including records
  415  pertaining to any protected cells, must be made available for
  416  inspection or examination by the commissioner;
  417         3. All contracts or sample contracts between the sponsored
  418  captive insurance company and any participants; and
  419         4. Evidence that expenses will be allocated to each
  420  protected cell in an equitable manner In addition to information
  421  otherwise required by this code, each applicant captive insurer
  422  shall file with the office evidence of the adequacy of the loss
  423  prevention program of its insureds.
  424         (4)(a) A captive insurance company must pay to the office a
  425  nonrefundable fee of $200 for processing its application for
  426  license. In addition, the commissioner may retain legal,
  427  financial, and examination services from outside the office to
  428  examine and investigate the application, the reasonable cost of
  429  which may be charged against the applicant, or the commissioner
  430  may use internal resources to examine and investigate the
  431  application for a fee of $2,400.
  432         (b) In addition, a captive insurance company must pay a
  433  license fee of $300 for 1 year of registration and an annual
  434  renewal fee of $500.
  435         (c) The office may charge a fee of $15 for any document
  436  requiring certification of authenticity or the signature of the
  437  commissioner or his or her designee An industrial insured
  438  captive insurer need not be incorporated in this state if it has
  439  been validly incorporated under the laws of another
  440  jurisdiction.
  441         (5) If the commissioner is satisfied that the documents and
  442  statements filed by the captive insurance company comply with
  443  the provisions of this chapter, the commissioner may grant a
  444  license authorizing the company to conduct insurance business in
  445  this state until the next succeeding March 1, at which time the
  446  license may be renewed An industrial insured captive insurer is
  447  subject to all provisions of this part except as otherwise
  448  indicated.
  449         (6) Upon approval of the commissioner or his or her
  450  designee, a foreign or alien captive insurance company may
  451  become a domestic captive insurance company by complying with
  452  all of the requirements of law relative to the organization and
  453  licensing of a domestic captive insurance company of the same or
  454  equivalent type in this state and by filing with the Secretary
  455  of State its articles of association, charter, or other
  456  organizational documents, together with any appropriate
  457  amendments that have been adopted in accordance with the laws of
  458  this state to bring those articles of association, charter, or
  459  other organizational documents into compliance with the laws of
  460  this state, along with a certificate of good standing issued by
  461  the commissioner. After this is accomplished, the captive
  462  insurance company is entitled to the necessary or appropriate
  463  certificates and licenses to continue transacting business in
  464  this state and is subject to the authority and jurisdiction of
  465  this state. In connection with this redomestication, the
  466  commissioner may waive any requirements for public hearings. It
  467  is not necessary for a company redomesticating into this state
  468  to merge, consolidate, transfer assets, or otherwise engage in
  469  any other reorganization, other than as specified in this
  470  section An industrial insured captive insurer may not provide
  471  workers’ compensation and employer’s liability insurance except
  472  in excess of at least $25 million in the annual aggregate.
  473         Section 3. Section 628.907, Florida Statutes, is amended to
  474  read:
  475         628.907 Capitalization requirements; security requirements
  476  for branch captive insurance companies; restriction on payment
  477  of dividends Minimum capital and surplus.—
  478         (1)A No captive insurer may not shall be issued a license
  479  unless it possesses and thereafter maintains unimpaired paid-in
  480  capital of:
  481         (a)(1)In the case of a pure captive insurance company, not
  482  less than $100,000. Unimpaired paid-in capital of at least
  483  $500,000; and
  484         (b)(2)In the case of an association captive insurance
  485  company incorporated as a stock insurer or organized as a
  486  limited liability company, not less than $400,000. Unimpaired
  487  surplus of at least $250,000.
  488         (c) In the case of an industrial insured captive insurance
  489  company incorporated as a stock insurer or organized as a
  490  limited liability company, not less than $200,000.
  491         (d) In the case of a sponsored captive insurance company,
  492  not less than $500,000. However, if the sponsored captive
  493  insurance company does not assume any risk, the risks insured by
  494  the protected cells are homogeneous, and there are no more than
  495  10 cells, the commissioner may reduce this amount to an amount
  496  not less than $150,000.
  497         (e) In the case of a special purpose captive insurance
  498  company, an amount determined by the commissioner after giving
  499  due consideration to the company’s business plan, feasibility
  500  study, and pro forma financial statements and projections,
  501  including the nature of the risks to be insured.
  502         (2)(a) Except for a sponsored captive insurance company
  503  that does not assume any risk, the capital must be in the form
  504  of cash, cash equivalent, or an irrevocable letter of credit
  505  issued by a bank chartered by this state or a member bank of the
  506  Federal Reserve System with a branch office in this state, or as
  507  approved by the commissioner.
  508         (b) For a sponsored captive insurance company that does not
  509  assume any risk, the capital may also be in the form of other
  510  high-quality securities as approved by the commissioner.
  511         (3) The commissioner may not issue a license to a captive
  512  insurance company incorporated as a nonprofit corporation unless
  513  the company possesses and maintains unrestricted net assets of:
  514         (a) In the case of a pure captive insurance company, not
  515  less than $250,000.
  516         (b) In the case of a special purpose captive insurance
  517  company, an amount determined by the commissioner after giving
  518  due consideration to the company’s business plan, feasibility
  519  study, and pro forma financial statements and projections,
  520  including the nature of the risks to be insured.
  521         (4) Contributions to a captive insurance company
  522  incorporated as a nonprofit corporation must be in the form of
  523  cash, cash equivalent, or an irrevocable letter of credit issued
  524  by a bank chartered by this state or a member bank of the
  525  Federal Reserve System with a branch office in this state, or as
  526  approved by the commissioner.
  527         (5) For purposes of this section, the commissioner may
  528  issue a license expressly conditioned upon the captive insurance
  529  company providing to the commissioner satisfactory evidence of
  530  possession of the minimum required unimpaired paid-in capital.
  531  Until this evidence is provided, the captive insurance company
  532  may not issue any policy, assume any liability, or otherwise
  533  provide coverage. The commissioner may revoke the conditional
  534  license without legal recourse by the company if satisfactory
  535  evidence of the required capital is not provided within a
  536  maximum period of time, not to exceed 1 year, to be established
  537  by the commissioner at the time the conditional license is
  538  issued.
  539         (6) The commissioner may prescribe additional capital or
  540  net assets based upon the type, volume, and nature of insurance
  541  business transacted. Contributions in connection with these
  542  prescribed additional net assets or capital must be in the form
  543  of:
  544         (a) Cash;
  545         (b) Cash equivalent;
  546         (c) An irrevocable letter of credit issued by a bank
  547  chartered by this state or a member bank of the Federal Reserve
  548  System with a branch office in this state, or as approved by the
  549  commissioner; or
  550         (d) Securities invested as provided in part II of chapter
  551  625.
  552         (7) In the case of a branch captive insurance company, as
  553  security for the payment of liabilities attributable to branch
  554  operations, the commissioner must require that a trust fund,
  555  funded by an irrevocable letter of credit or other acceptable
  556  asset, be established and maintained in the United States for
  557  the benefit of United States policyholders and United States
  558  ceding insurers under insurance policies issued or reinsurance
  559  contracts issued or assumed, by the branch captive insurance
  560  company through its branch operations. The amount of the
  561  security may be no less than the capital and surplus required by
  562  this chapter and the reserves on these insurance policies or
  563  reinsurance contracts, including reserves for losses, allocated
  564  loss adjustment expenses, incurred but not reported losses, and
  565  unearned premiums with regard to business written through branch
  566  operations. However, the commissioner may permit a branch
  567  captive insurance company that is required to post security for
  568  loss reserves on branch business by its reinsurer to reduce the
  569  funds in the trust account required by this section by the same
  570  amount as long as the security remains posted with the
  571  reinsurer. If the form of security selected is a letter of
  572  credit, the letter of credit must be established by, or issued
  573  or confirmed by, a bank chartered in this state or a member bank
  574  of the Federal Reserve System.
  575         (8)(a) A captive insurance company may not pay a dividend
  576  out of, or other distribution with respect to, capital or
  577  surplus in excess of the limitations set forth in this chapter
  578  without the prior approval of the commissioner. Approval of an
  579  ongoing plan for the payment of dividends or other distributions
  580  must be conditioned upon the retention, at the time of each
  581  payment, of capital or surplus in excess of amounts specified
  582  by, or determined in accordance with formulas approved by, the
  583  commissioner.
  584         (b) A captive insurance company incorporated as a nonprofit
  585  corporation may not make any distributions without the prior
  586  approval of the commissioner.
  587         (9) An irrevocable letter of credit, which is issued by a
  588  financial institution other than a bank chartered by this state
  589  or a member bank of the Federal Reserve System, must meet the
  590  same standards as an irrevocable letter of credit which has been
  591  issued by a bank chartered by this state or a member bank of the
  592  Federal Reserve System.
  593         Section 4. Section 628.908, Florida Statutes, is created to
  594  read:
  595         628.908 Surplus requirements; restriction on payment of
  596  dividends.—
  597         (1) The commissioner may not issue a license to a captive
  598  insurance company unless the company possesses and maintains
  599  unimpaired surplus of:
  600         (a) In the case of a pure captive insurance company, not
  601  less than $150,000.
  602         (b) In the case of an association captive insurance company
  603  incorporated as a stock insurer or organized as a limited
  604  liability company, not less than $350,000.
  605         (c) In the case of an industrial insured captive insurance
  606  company incorporated as a stock insurer or organized as a
  607  limited liability company, not less than $300,000.
  608         (d) In the case of an association captive insurance company
  609  incorporated as a mutual insurer, not less than $750,000.
  610         (e) In the case of an industrial insured captive insurance
  611  company incorporated as a mutual insurer, not less than
  612  $500,000.
  613         (f) In the case of a sponsored captive insurance company,
  614  not less than $500,000. However, if the sponsored captive
  615  insurance company does not assume any risk, the risks insured by
  616  the protected cells are homogeneous, and there are no more than
  617  10 cells, the commissioner may reduce this amount to an amount
  618  not less than $150,000.
  619         (g) In the case of a special purpose captive insurance
  620  company, an amount determined by the commissioner after giving
  621  due consideration to the company’s business plan, feasibility
  622  study, and pro forma financial statements and projections,
  623  including the nature of the risks to be insured.
  624         (2)(a) Except for a sponsored captive insurance company
  625  that does not assume any risk, the surplus must be in the form
  626  of cash, cash equivalent, or an irrevocable letter of credit
  627  issued by a bank chartered by this state or a member bank of the
  628  Federal Reserve System with the branch office in this state and
  629  approved by the commissioner.
  630         (b) For a sponsored captive insurance company that does not
  631  assume any risk, the surplus may also be in the form of other
  632  high-quality securities, as approved by the commissioner.
  633         (3) Notwithstanding the requirements of this section, a
  634  captive insurance company organized as a reciprocal insurer
  635  under this chapter may not be issued a license unless it
  636  possesses and thereafter maintains unimpaired surplus of $1
  637  million.
  638         (4) For purposes of subsections (1) and (2), the
  639  commissioner may issue a license expressly conditioned upon the
  640  captive insurance company providing to the commissioner
  641  satisfactory evidence of possession of the minimum required
  642  unimpaired surplus. Until this evidence is provided, the captive
  643  insurance company may not issue any policy, assume any
  644  liability, or otherwise provide coverage. The commissioner may
  645  revoke the conditional license without legal recourse by the
  646  company if satisfactory evidence of the required capital is not
  647  provided within a maximum period of time, not to exceed 1 year,
  648  to be established by the commissioner at the time the
  649  conditional license is issued.
  650         (5) A captive insurance company may not pay a dividend out
  651  of, or other distribution with respect to, capital or surplus in
  652  excess of the limitations set forth in this chapter without the
  653  prior approval of the commissioner. Approval of an ongoing plan
  654  for the payment of dividends or other distribution must be
  655  conditioned upon the retention, at the time of each payment, of
  656  capital or surplus in excess of amounts specified by, or
  657  determined in accordance with formulas approved by, the
  658  commissioner.
  659         (6) An irrevocable letter of credit, which is issued by a
  660  financial institution other than a bank chartered by this state
  661  or a member bank of the Federal Reserve System, must meet the
  662  same standards as an irrevocable letter of credit which has been
  663  issued by a bank chartered by this state or a member bank of the
  664  Federal Reserve System.
  665         Section 5. Section 628.909, Florida Statutes, is amended to
  666  read:
  667         628.909 Applicability of other laws.—
  668         (1) The Florida Insurance Code shall not apply to captive
  669  insurers or industrial insured captive insurers except as
  670  provided in this part and subsections (2) and (3).
  671         (2) The following provisions of the Florida Insurance Code
  672  shall apply to captive insurers who are not industrial insured
  673  captive insurers to the extent that such provisions are not
  674  inconsistent with this part:
  675         (a) Chapter 624, except for ss. 624.407, 624.408, 624.4085,
  676  624.40851, 624.4095, 624.425, and 624.426.
  677         (b) Chapter 625, part II.
  678         (c) Chapter 626, part IX.
  679         (d) Sections 627.730-627.7405, when no-fault coverage is
  680  provided.
  681         (e) Chapter 628.
  682         (3) The following provisions of the Florida Insurance Code
  683  shall apply to industrial insured captive insurers to the extent
  684  that such provisions are not inconsistent with this part:
  685         (a) Chapter 624, except for ss. 624.407, 624.408, 624.4085,
  686  624.40851, 624.4095, 624.425, 624.426, and 624.609(1).
  687         (b) Chapter 625, part II, if the industrial insured captive
  688  insurer is incorporated in this state.
  689         (c) Chapter 626, part IX.
  690         (d) Sections 627.730-627.7405 when no-fault coverage is
  691  provided.
  692         (e) Chapter 628, except for ss. 628.341, 628.351, and
  693  628.6018.
  694         Section 6. Section 628.910, Florida Statutes, is created to
  695  read:
  696         628.910 Incorporation options and requirements.—
  697         (1) A pure captive insurance company or a sponsored captive
  698  insurance company may be:
  699         (a) Incorporated as a stock insurer with its capital
  700  divided into shares and held by the stockholders;
  701         (b) Incorporated as a public benefit, mutual benefit, or
  702  religious nonprofit corporation with members in accordance with
  703  the Florida Not For Profit Corporation Act; or
  704         (c) Organized as a limited liability company with its
  705  capital divided into capital accounts and held by its members.
  706         (2) An association captive insurance company or an
  707  industrial insured captive insurance company may be:
  708         (a) Incorporated as a stock insurer with its capital
  709  divided into shares and held by the stockholders;
  710         (b) Organized as a limited liability company with its
  711  capital divided into capital accounts and held by its members;
  712         (c) Incorporated as a mutual insurer without capital stock,
  713  the governing body of which is elected by the member
  714  organizations of its association; or
  715         (d) Organized as a reciprocal insurer in accordance with
  716  chapter 629.
  717         (3) A captive insurance company may not have fewer than
  718  three incorporators or organizers of whom not fewer than two
  719  must be residents of this state.
  720         (4) In the case of a captive insurance company formed as a
  721  corporation, a nonprofit corporation, or a limited liability
  722  company, before the articles of incorporation or articles of
  723  organization are transmitted to the Secretary of State, the
  724  incorporators or organizers shall petition the commissioner to
  725  issue a certificate setting forth a finding that the
  726  establishment and maintenance of the proposed entity will
  727  promote the general good of the state. In arriving at this
  728  finding, the commissioner must consider:
  729         (a) The character, reputation, financial standing, and
  730  purposes of the incorporators or organizers;
  731         (b) The character, reputation, financial responsibility,
  732  insurance experience, and business qualifications of the
  733  officers and directors or managers; and
  734         (c) Other aspects as the commissioner considers advisable.
  735         (5) The articles of incorporation or articles of
  736  organization, the certificate issued pursuant to this section,
  737  and the organization fees required by the Florida Business
  738  Corporation Act or the Florida Not For Profit Corporation Act,
  739  as applicable, must be transmitted to the Secretary of State,
  740  who must record both the articles of incorporation or articles
  741  of organization and the certificate.
  742         (6) In the case of a captive insurance company formed as a
  743  reciprocal insurer, the organizers must petition the
  744  commissioner to issue a certificate setting forth the
  745  commissioner’s finding that the establishment and maintenance of
  746  the proposed association will promote the general good of the
  747  state. In arriving at this finding, the commissioner must
  748  consider:
  749         (a) The character, reputation, financial standing, and
  750  purposes of the incorporators or organizers;
  751         (b) The character, reputation, financial responsibility,
  752  insurance experience, and business qualifications of the
  753  officers and directors or managers; and
  754         (c) Other aspects the commissioner considers advisable.
  755         (7) In the case of a captive insurance company licensed as
  756  a branch captive insurance company, the alien captive insurance
  757  company must petition the commissioner to issue a certificate
  758  setting forth the commissioner’s finding that, after considering
  759  the character, reputation, financial responsibility, insurance
  760  experience, and business qualifications of the officers and
  761  directors or managers of the alien captive insurance company,
  762  the licensing and maintenance of the branch operations will
  763  promote the general good of the state. The alien captive
  764  insurance company may register to do business in this state
  765  after the commissioner’s certificate has been issued.
  766         (8) The capital stock or membership interests of a captive
  767  insurance company incorporated as a stock insurer or limited
  768  liability company must be issued at not less than par value.
  769         (9) In the case of a captive insurance company formed as a
  770  corporation or a nonprofit corporation, at least one of the
  771  members of the board of directors of a captive insurance company
  772  incorporated in this state must be a resident of this state.
  773         (10) In the case of a captive insurance company formed as a
  774  limited liability company, at least one of the managers of the
  775  captive insurance company must be a resident of this state.
  776         (11) In the case of a captive insurance company formed as a
  777  reciprocal insurer, at least one of the members of the
  778  subscribers’ advisory committee must be a resident of this
  779  state.
  780         (12) A captive insurance company formed as a corporation, a
  781  nonprofit corporation, or a limited liability company, pursuant
  782  to the provisions of this chapter, has the privileges and is
  783  subject to the provisions of the general corporation law,
  784  including the Florida Not For Profit Corporation Act for
  785  nonprofit corporations and the Florida Limited Liability Company
  786  Act for limited liability companies, as applicable, as well as
  787  the applicable provisions contained in this chapter. If a
  788  conflict occurs between a provision of the general corporation
  789  law, including the Florida Not For Profit Corporation Act for
  790  nonprofit corporations and the Florida Limited Liability Company
  791  Act for limited liability companies, as applicable, and a
  792  provision of this chapter, the latter controls. The provisions
  793  of this title pertaining to mergers, consolidations,
  794  conversions, mutualizations, and redomestications apply in
  795  determining the procedures to be followed by a captive insurance
  796  company in carrying out any of the transactions described in
  797  such provisions, except the commissioner may waive or modify the
  798  requirements for public notice and hearing in accordance with
  799  regulations which the commissioner may adopt addressing
  800  categories of transactions. If a notice of public hearing is
  801  required, but no one requests a hearing, the commissioner may
  802  cancel the hearing.
  803         (13) A captive insurance company formed as a reciprocal
  804  insurer pursuant to the provisions of this chapter has the
  805  privileges and is subject to chapter 629 in addition to the
  806  applicable provisions of this part. If a conflict occurs between
  807  the provisions of chapter 629 and the provisions of this part,
  808  the latter controls. To the extent a reciprocal insurer is made
  809  subject to other provisions of this title pursuant to chapter
  810  629, the provisions are not applicable to a reciprocal insurer
  811  formed pursuant to the provisions of this chapter unless the
  812  provisions are expressly made applicable to a captive insurance
  813  company pursuant to the provisions of this chapter.
  814         (14) The articles of incorporation or bylaws of a captive
  815  insurance company may authorize a quorum of a board of directors
  816  to consist of no fewer than one-third of the fixed or prescribed
  817  number of directors as provided for by the Florida Business
  818  Corporation Act or the Florida Not For Profit Corporation Act.
  819  In the case of a limited liability company, the articles of
  820  organization or operating agreement of a captive insurance
  821  company may authorize a quorum to consist of no fewer than one
  822  third of the managers required by the articles of organization
  823  or the operating agreement.
  824         Section 7. Section 628.911, Florida Statutes, is amended to
  825  read:
  826         628.911 Reports and statements.—
  827         (1) A captive insurance company may insurer shall not be
  828  required to make any annual report except as provided in this
  829  part section.
  830         (2) Annually before March 1, a captive insurance company or
  831  a captive reinsurance company insurer shall, within 60 days
  832  after the end of its fiscal year and as often as the office may
  833  deem necessary, submit to the commissioner office a report of
  834  its financial condition verified by oath of two of its executive
  835  officers. Except as provided in this part, a captive insurance
  836  company or a captive reinsurance company must report using
  837  generally accepted accounting principles, unless the
  838  commissioner approves the use of statutory accounting
  839  principles, with useful or necessary modifications or
  840  adaptations required or approved or accepted by the commissioner
  841  for the type of insurance and kinds of insurers to be reported
  842  upon, and as supplemented by additional information required by
  843  the commissioner. The Financial Services Commission may adopt by
  844  rule the form in which captive insurance companies insurers
  845  shall report.
  846         (3)(a) A pure captive insurance company may make written
  847  application for filing the required report on a fiscal year-end
  848  that is consistent with the parent company’s fiscal year. If an
  849  alternative reporting date is granted, the annual report is due
  850  60 days after the fiscal year-end.
  851         (b) In order to provide sufficient detail to support the
  852  premium tax return, the pure captive insurance company must file
  853  before March 1 of each year for each calendar year-end pages 1-7
  854  of the NAIC Annual Statement, verified by oath of two of its
  855  executive officers.
  856         (4) Sixty days after the fiscal year end, a branch captive
  857  insurance company must file with the commissioner a copy of all
  858  reports and statements required to be filed under the laws of
  859  the jurisdiction in which the alien captive insurance company is
  860  formed, verified by oath by two of its executive officers. If
  861  the commissioner is satisfied that the annual report filed by
  862  the alien captive insurance company in its domiciliary
  863  jurisdiction provides adequate information concerning the
  864  financial condition of the alien captive insurance company, the
  865  commissioner may waive the requirement for completion of the
  866  captive annual statement for business written in the alien
  867  jurisdiction. Such waiver must be in writing and subject to
  868  public inspection.
  869         Section 8. Section 628.912, Florida Statutes, is created to
  870  read:
  871         628.912 Discounting of loss and loss adjustment expense
  872  reserves.—
  873         (1) A sponsored captive insurance company and a captive
  874  reinsurance company may discount its loss and loss adjustment
  875  expense reserves at treasury rates applied to the applicable
  876  payments projected through the use of the expected payment
  877  pattern associated with the reserves.
  878         (2) A sponsored captive insurance company and a captive
  879  reinsurance company must file annually an actuarial opinion on
  880  loss and loss adjustment expense reserves provided by an
  881  independent actuary. The actuary may not be an employee of the
  882  captive company or its affiliates.
  883         (3) The commissioner may disallow the discounting of
  884  reserves if a sponsored captive insurance company or a captive
  885  reinsurance company violates a provision of this part.
  886         Section 9. Section 628.913, Florida Statutes, is amended to
  887  read:
  888         (Substantial rewording of section. See
  889         s. 628.913, F.S., for present text.)
  890         628.913 Captive reinsurance companies.—
  891         (1) A captive reinsurance company, if permitted by its
  892  articles of incorporation or charter, may apply to the
  893  commissioner for a license to write reinsurance covering
  894  property and casualty insurance or reinsurance contracts. A
  895  captive reinsurance company authorized by the commissioner may
  896  write reinsurance contracts covering risks in any state.
  897         (2) To conduct business in this state, a captive
  898  reinsurance company must:
  899         (a) Obtain from the commissioner a license authorizing it
  900  to conduct business as a captive reinsurance company in this
  901  state;
  902         (b) Hold at least one board of directors’ meeting each year
  903  in this state;
  904         (c) Maintain its principal place of business in this state;
  905  and
  906         (d) Appoint a registered agent to accept service of process
  907  and act otherwise on its behalf in this state.
  908         (3) Before receiving a license, a captive reinsurance
  909  company must file with the commissioner:
  910         (a) A certified copy of its charter and bylaws;
  911         (b) A statement under oath of its president and secretary
  912  showing its financial condition; and
  913         (c) Other documents required by the commissioner.
  914         (4) In addition to the information required by this
  915  section, the captive reinsurance company must file with the
  916  commissioner evidence of:
  917         (a) The amount and liquidity of the captive reinsurance
  918  company’s assets relative to the risks to be assumed;
  919         (b) The adequacy of the expertise, experience, and
  920  character of the person who manages the company;
  921         (c) The overall soundness of the company’s plan of
  922  operation; and
  923         (d) Other overall factors considered relevant by the
  924  commissioner in ascertaining if the company would be able to
  925  meet its policy obligations.
  926         Section 10. Section 628.914, Florida Statutes, is created
  927  to read:
  928         628.914 Minimum capitalization or reserves for captive
  929  reinsurance companies.—
  930         (1) The commissioner may not issue a license to a captive
  931  reinsurance company unless the company possesses and maintains
  932  capital or unimpaired surplus of not less than the greater of
  933  $300 million or 10 percent of reserves. The surplus may be in
  934  the form of cash or securities.
  935         (2) The commissioner may prescribe additional capital or
  936  surplus based upon the type, volume, and nature of the insurance
  937  business transacted.
  938         (3) A captive reinsurance company may not pay a dividend
  939  out of, or other distribution with respect to, capital or
  940  surplus in excess of the limitations without the prior approval
  941  of the commissioner. Approval of an ongoing plan for the payment
  942  of dividends or other distributions must be conditioned upon the
  943  retention, at the time of each payment, of capital or surplus in
  944  excess of amounts specified by, or determined in accordance with
  945  formulas approved by, the commissioner.
  946         Section 11. Section 628.9141, Florida Statutes, is created
  947  to read:
  948         628.9141 Incorporation of a captive reinsurance company.—
  949         (1) A captive reinsurance company must be incorporated as a
  950  stock insurer with its capital divided into shares and held by
  951  its shareholders.
  952         (2) A captive reinsurance company may not have fewer than
  953  three incorporators of whom at least two must be residents of
  954  this state.
  955         (3) Before the articles of incorporation are transmitted to
  956  the Secretary of State, the incorporators shall petition the
  957  commissioner to issue a certificate finding that the
  958  establishment and maintenance of the proposed corporation
  959  promotes the general good of this state. In arriving at this
  960  finding, the commissioner must consider:
  961         (a) The character, reputation, financial standing, and
  962  purposes of the incorporators;
  963         (b) The character, reputation, financial responsibility,
  964  insurance experience, and business qualifications of the
  965  officers and directors; and
  966         (c) Other factors the commissioner considers advisable.
  967         (4) The capital stock of a captive reinsurance company must
  968  be issued at par value or greater.
  969         (5) At least one of the members of the board of directors
  970  of a captive reinsurance company incorporated in this state must
  971  be a resident of this state.
  972         Section 12. Section 628.9142, Florida Statutes, is created
  973  to read:
  974         628.9142 Reinsurance; effect on reserves.—
  975         (1) A captive insurance company may provide reinsurance, as
  976  authorized in this part, on risks ceded by any other insurer.
  977         (2) A captive insurance company may take credit for
  978  reserves on risks or portions of risks ceded to authorized
  979  insurers or reinsurers and unauthorized insurers or reinsurers
  980  complying with the provisions of s. 624.610. A captive insurer
  981  may not take credit for reserves on risks or portions of risks
  982  ceded to an unauthorized insurer or reinsurer if the insurer or
  983  reinsurer is not in compliance with s. 624.610.
  984         Section 13. Section 628.9143, Florida Statutes, is created
  985  to read:
  986         628.9143 Annual captive reinsurance tax.—
  987         (1) A captive reinsurance company must pay to the office by
  988  March 1 of each year a captive reinsurance tax of $5,000.
  989         (2) The tax provided in this section is the only tax
  990  collectible under the laws of this state from a captive
  991  reinsurance company, and no tax on reinsurance premiums, other
  992  than occupation tax, nor any other taxes, except ad valorem
  993  taxes on real and personal property used in the production of
  994  income, may be levied or collected from a captive reinsurance
  995  company by the state or a county, city, or municipality within
  996  this state.
  997         (3) A captive reinsurance company failing to make returns
  998  or to pay all taxes required by this section is subject to
  999  sanctions provided in this part.
 1000         Section 14. Section 628.918, Florida Statutes, is created
 1001  to read:
 1002         628.918 Management of assets of captive reinsurance
 1003  company.—At least 35 percent of the assets of a captive
 1004  reinsurance company must be managed by an asset manager
 1005  domiciled in this state.
 1006         Section 15. Section 628.919, Florida Statutes, is created
 1007  to read:
 1008         628.919 Regulations establishing standards to ensure risk
 1009  management control by parent company.—The Financial Services
 1010  Commission shall adopt rules establishing standards to ensure
 1011  that a parent or affiliated company is able to exercise control
 1012  of the risk management function of any controlled unaffiliated
 1013  business to be insured by the pure captive insurance company.
 1014         Section 16. Section 628.920, Florida Statutes, is created
 1015  to read:
 1016         628.920 Conversion of certain stock, mutual corporations,
 1017  or limited liability companies into reciprocal insurers; plan
 1018  for conversion.—
 1019         (1) An association captive insurance company or industrial
 1020  insured group formed as a stock or mutual corporation or a
 1021  limited liability company may be converted to or merged with and
 1022  into a reciprocal insurer in accordance with a plan and the
 1023  provisions of this section.
 1024         (2) A plan for this conversion or merger:
 1025         (a) Must be fair and equitable to the:
 1026         1. Shareholders, in the case of a stock insurer;
 1027         2. Members, in the case of a limited liability company; or
 1028         3. Policyholders, in the case of a mutual insurer; and
 1029         (b) Must provide for the purchase of the shares of any
 1030  nonconsenting shareholder of a stock insurer, of the member
 1031  interest of any nonconsenting member of a limited liability
 1032  company, of the policyholder interest of any nonconsenting
 1033  policyholder of a mutual insurer in substantially the same
 1034  manner and subject to the same rights and conditions as are
 1035  accorded a dissenting shareholder, dissenting member, or a
 1036  dissenting policyholder pursuant to the provisions of this
 1037  chapter, provided the merger of a limited liability company
 1038  requires the consent of all members unless waived in an
 1039  operating agreement signed by all of the members of the limited
 1040  liability company.
 1041         (3) In the case of a conversion authorized under this
 1042  section:
 1043         (a) The conversion must be accomplished under a reasonable
 1044  plan and procedure as may be approved by the commissioner.
 1045  However, the commissioner may not approve the plan of conversion
 1046  unless the plan:
 1047         1. Satisfies the provisions of this section;
 1048         2. Provides for a hearing, of which notice has been given
 1049  to the insurer, its directors, officers, and stockholders, in
 1050  the case of a stock insurer; members and managers, in the case
 1051  of a limited liability company; or policyholders, in the case of
 1052  a mutual insurer, all of whom have the right to appear at the
 1053  hearing, except that the director may waive or modify the
 1054  requirements for the hearing. However, if a notice of hearing is
 1055  required, but no hearing is requested, the commissioner may
 1056  cancel the hearing;
 1057         3. Provides for the conversion of existing stockholder,
 1058  member, or policyholder interests into subscriber interests in
 1059  the resulting reciprocal insurer, proportionate to stockholder,
 1060  member, or policyholder interests in the stock or mutual insurer
 1061  or limited liability company; and
 1062         4. Is approved:
 1063         a. In the case of a stock insurer or limited liability
 1064  company, by a majority of the shares or interests entitled to
 1065  vote represented in person or by proxy at a duly called regular
 1066  or special meeting at which a quorum is present;
 1067         b. In the case of a mutual insurer, by a majority of the
 1068  voting interests of policyholders represented in person or by
 1069  proxy at a duly called regular or special meeting at which a
 1070  quorum is present;
 1071         (b) The commissioner shall approve the plan of conversion
 1072  if the commissioner finds that the conversion will promote the
 1073  general good of the state in conformity with those standards
 1074  provided in this part;
 1075         (c) If the commissioner approves the plan, the commissioner
 1076  must amend the converting insurer’s certificate of authority to
 1077  reflect conversion to a reciprocal insurer and issue the amended
 1078  certificate of authority to the company’s attorney-in-fact;
 1079         (d) Upon issuance of an amended certificate of authority of
 1080  a reciprocal insurer by the commissioner, the conversion is
 1081  effective; and
 1082         (e) Upon the effectiveness of the conversion, the corporate
 1083  existence of the converting insurer must cease and the resulting
 1084  reciprocal insurer must notify the Secretary of State of the
 1085  conversion.
 1086         (4) A merger authorized pursuant to the provisions of this
 1087  section must be accomplished substantially in accordance with
 1088  the procedures provided in this part, except that, only for
 1089  purposes of the merger:
 1090         (a) The plan or merger must satisfy the requirements of
 1091  subsection (2);
 1092         (b) The subscribers’ advisory committee of a reciprocal
 1093  insurer must be equivalent to the board of directors of a stock
 1094  or mutual insurance company or the managers of a limited
 1095  liability company;
 1096         (c) The subscribers of a reciprocal insurer must be the
 1097  equivalent of the policyholders of a mutual insurance company;
 1098         (d) If a subscribers’ advisory committee does not have a
 1099  president or secretary, the officers of the committee having
 1100  substantially equivalent duties are considered the president and
 1101  secretary of the committee;
 1102         (e) The commissioner must approve the articles of merger if
 1103  the commissioner finds that the merger will promote the general
 1104  good of the state in conformity with those standards provided in
 1105  this part. If the commissioner approves the articles of merger,
 1106  the commissioner must endorse his or her approval on the
 1107  articles and the surviving insurer must present the endorsement
 1108  of the commissioner to the Secretary of State at the Secretary
 1109  of State’s office;
 1110         (f) Notwithstanding the provisions of this part, the
 1111  commissioner may permit the formation, without surplus, of a
 1112  captive insurance company organized as a reciprocal insurer,
 1113  into which an existing captive insurance company may be merged
 1114  for the purpose of facilitating a transaction provided for in
 1115  this section. However, there may be no more than one authorized
 1116  insurance company surviving the merger; and
 1117         (g) An alien insurer may be a party to a merger authorized
 1118  pursuant to the provisions of subsection (1) if the requirements
 1119  for the merger between a domestic and a foreign insurer pursuant
 1120  to the provisions of this chapter apply to a merger between a
 1121  domestic and an alien insurer provided by this subsection. The
 1122  alien insurer must be treated as a foreign insurer pursuant to
 1123  the provisions of this chapter and other jurisdictions must be
 1124  the equivalent of a state.
 1125         Section 17. Section 628.921, Florida Statutes, is created
 1126  to read:
 1127         628.921 Formation of sponsored captive insurance company;
 1128  establishing protected cells.—
 1129         (1) One or more sponsors may form a sponsored captive
 1130  insurance company under this part.
 1131         (2) A sponsored captive insurance company formed or
 1132  licensed under this part may establish and maintain one or more
 1133  protected cells to insure risks of one or more participants,
 1134  subject to the following conditions:
 1135         (a) The shareholders of a sponsored captive insurance
 1136  company must be limited to its participants and sponsors;
 1137         (b) Each protected cell must be accounted for separately on
 1138  the books and records of the sponsored captive insurance company
 1139  to reflect the financial condition and results of operations of
 1140  the protected cell, net income or loss, dividends or other
 1141  distributions to participants, and other factors that may be
 1142  provided in the participant contract or required by the
 1143  commissioner;
 1144         (c) The assets of a protected cell must not be chargeable
 1145  with liabilities arising out of any other insurance business the
 1146  sponsored captive insurance company may conduct;
 1147         (d) Sale, exchange, or other transfer of assets may not be
 1148  made by the sponsored captive insurance company between or among
 1149  any of its protected cells without the consent of the protected
 1150  cells;
 1151         (e) Sale, exchange, transfer of assets, dividend, or
 1152  distribution may not be made from a protected cell to a sponsor
 1153  or participant without the commissioner’s approval, nor may the
 1154  approval be given if the sale, exchange, transfer, dividend, or
 1155  distribution would result in insolvency or impairment with
 1156  respect to a protected cell;
 1157         (f) A sponsored captive insurance company must annually
 1158  file with the commissioner financial reports the commissioner
 1159  requires, which must include, but are not limited to, accounting
 1160  statements detailing the financial experience of each protected
 1161  cell;
 1162  (g) A sponsored captive insurance company must notify the
 1163  commissioner in writing within 10 business days after a
 1164  protected cell becomes insolvent or otherwise unable to meet its
 1165  claim or expense obligations; and
 1166         (h) A participant contract may not take effect without the
 1167  commissioner’s prior written approval, and the addition of each
 1168  new protected cell and withdrawal of any participant of any
 1169  existing protected cell constitutes a change in the business
 1170  plan, which requires the commissioner’s prior written approval.
 1171         Section 18. Section 628.922, Florida Statutes, is created
 1172  to read:
 1173         628.922 Requirements applicable to sponsors.—A sponsor of a
 1174  sponsored captive insurance company must be an insurer licensed
 1175  pursuant to the laws of a state, an insurance holding company
 1176  that controls an insurer licensed under the laws of any state
 1177  and subject to registration under the insurance holding company
 1178  system laws of the state of domicile of the insurer, a reinsurer
 1179  authorized or approved under the laws of a state, or a captive
 1180  insurance company formed or licensed under this chapter. A risk
 1181  retention group may not be either a sponsor or a participant of
 1182  a sponsored captive insurance company. The business written by a
 1183  sponsored captive insurance company with respect to each
 1184  protected cell must be:
 1185         (1) Fronted by an insurance company licensed under the laws
 1186  of:
 1187         (a) Any state; or
 1188         (b) Any jurisdiction if the insurance company is a wholly
 1189  owned subsidiary of an insurance company licensed under the laws
 1190  of any state;
 1191         (2) Reinsured by a reinsurer authorized or approved by this
 1192  state; or
 1193         (3) Secured by a trust fund in the United States for the
 1194  benefit of policyholders and claimants funded by an irrevocable
 1195  letter of credit or other asset acceptable to the commissioner.
 1196  The amount of security provided by the trust fund may not be
 1197  less than the reserves associated with those liabilities,
 1198  including reserves for losses, allocated loss adjustment
 1199  expenses, incurred but unreported losses, and unearned premiums
 1200  for business written through the participant’s protected cell.
 1201  The commissioner may require the sponsored captive to increase
 1202  the funding of a trust established under this subsection. If the
 1203  form of security in the trust is a letter of credit, the letter
 1204  of credit must be established, issued, or confirmed by a bank
 1205  chartered in this state, a member of the Federal Reserve System,
 1206  or a bank chartered by another state if that state-chartered
 1207  bank is acceptable to the commissioner. A trust and trust
 1208  instrument maintained under this subsection must be in a form
 1209  and upon terms approved by the commissioner.
 1210         Section 19. Section 628.923, Florida Statutes, is created
 1211  to read:
 1212         628.923 Participants in sponsored captive insurance
 1213  companies.—
 1214         (1) An association, a corporation, a limited liability
 1215  company, a partnership, a trust, or another business entity may
 1216  be a participant in a sponsored captive insurance company formed
 1217  or licensed under this part.
 1218         (2) A sponsor may be a participant in a sponsored captive
 1219  insurance company.
 1220         (3) A participant need not be a shareholder of the
 1221  sponsored captive insurance company or an affiliate of the
 1222  company.
 1223         (4) A participant may insure only its own risks through a
 1224  sponsored captive insurance company, unless otherwise approved
 1225  by the commissioner.
 1226         Section 20. Section 628.924, Florida Statutes, is created
 1227  to read:
 1228         628.924 Eligibility of licensed captive insurance company
 1229  for certificate of authority to act as insurer.—A licensed
 1230  captive insurance company that meets the necessary requirements
 1231  of this part imposed upon an insurer must be considered for
 1232  issuance of a certificate of authority to act as an insurer in
 1233  this state.
 1234         Section 21. This act shall take effect July 1, 2011.