Florida Senate - 2014 SB 758
By Senator Lee
24-00866A-14 2014758__
1 A bill to be entitled
2 An act relating to title insurer reserves; amending s.
3 625.041, F.S.; specifying that a title insurer is
4 liable for all of its unpaid losses and claims;
5 amending s. 625.111, F.S.; specifying the reserves
6 certain title insurers must set aside after a certain
7 date; specifying how such reserves will be released;
8 specifying which state law governs the amount of the
9 reserve when a title insurer transfers its domicile to
10 this state; defining “bulk reserve”; amending ss.
11 624.407 and 624.408, F.S.; conforming cross
12 references; providing an effective date.
13
14 Be It Enacted by the Legislature of the State of Florida:
15
16 Section 1. Section 625.041, Florida Statutes, is amended to
17 read:
18 625.041 Liabilities, in general.—In any determination of
19 the financial condition of an insurer, liabilities to be charged
20 against its assets shall include:
21 (1) The amount, estimated in accordance consistent with the
22 provisions of this code, necessary to pay all of its unpaid
23 losses and claims incurred on or prior to the date of statement,
24 whether reported or unreported, together with the expenses of
25 adjustment or settlement thereof.
26 (2) With respect to title insurance, the amount, estimated
27 in accordance with this code, necessary to pay all of its known
28 unpaid losses and claims incurred on or before the date of
29 statement, together with the expenses of adjustment or
30 settlement thereof. This requirement is in addition to the
31 reserves required under s. 625.111.
32 (3)(2) With respect reference to life and health insurance
33 and annuity contracts:
34 (a) The amount of reserves on life insurance policies and
35 annuity contracts in force, valued according to the tables of
36 mortality, rates of interest, and methods adopted pursuant to
37 this code which are applicable thereto.
38 (b) Reserves for disability benefits, for both active and
39 disabled lives.
40 (c) Reserves for accidental death benefits.
41 (d) Any additional reserves that may be required by the
42 office in accordance consistent with practice formulated or
43 approved by the National Association of Insurance Commissioners
44 or its successor organization, on account of such insurance,
45 including contract and premium deficiency reserves.
46 (4)(3) With respect reference to insurance other than that
47 specified in subsections (2) and (3) subsection (2), and other
48 than title insurance, the amount of reserves equal to the
49 unearned portions of the gross premiums charged on policies in
50 force, computed in accordance with this part.
51 (5)(4) Taxes, expenses, and other obligations due or
52 accrued at the date of the statement.
53 (6)(5) An Any insurer in this state that writes workers’
54 compensation insurance shall accrue a liability on its financial
55 statements for all Special Disability Trust Fund assessments
56 that are due within the current calendar year. In addition,
57 Those insurers shall also disclose in the notes to the financial
58 statements required to be filed pursuant to s. 624.424 an
59 estimate of future Special Disability Trust Fund assessments, if
60 the assessments are likely to occur and can be estimated with
61 reasonable certainty.
62 Section 2. Section 625.111, Florida Statutes, is amended to
63 read:
64 625.111 Title insurance reserve.—In addition to an adequate
65 reserve as to outstanding losses relating to known claims, as
66 required under s. 625.041, a title insurer shall establish,
67 segregate, and maintain a guaranty fund or unearned premium
68 reserve as provided in this section. The sums required under
69 this section to be reserved for unearned premiums on title
70 guarantees and policies at all times and for all purposes shall
71 be considered and constitute unearned portions of the original
72 premiums and shall be charged as a reserve liability of the such
73 insurer in determining its financial condition. While Such sums
74 are so reserved funds, they shall be withdrawn from the use of
75 the insurer for its general purposes, impressed with a trust in
76 favor of the holders of title guarantees and policies, and held
77 available for reinsurance of the title guarantees and policies
78 in the event of the insolvency of the insurer. Nothing contained
79 in This section does not shall preclude the such insurer from
80 investing such reserve in investments authorized by law, for
81 such an insurer and the income from such investments invested
82 reserve shall be included in the general income of the insurer
83 and may to be used by such insurer for any lawful purpose.
84 (1) For an unearned premium reserve reserves established on
85 or after July 1, 1999, such unearned premium reserve must be in
86 shall consist of not less than an amount at least equal to the
87 sum of:
88 (a) A reserve with respect to unearned premiums for
89 policies written or title liability assumed in reinsurance
90 before July 1, 1999, equal to the reserve established on June
91 30, 1999, for those unearned premiums with such reserve being
92 subsequently released as provided in subsection (2). For
93 domestic title insurers subject to this section, such amounts
94 shall be calculated in accordance with provisions of law of this
95 state law in effect at the time the associated premiums were
96 written or assumed and as amended before prior to July 1, 1999.
97 (b) A total amount equal to 30 cents for each $1,000 of net
98 retained liability for policies written or title liability
99 assumed in reinsurance on or after July 1, 1999, with such
100 reserve being subsequently released as provided in subsection
101 (2). For the purpose of calculating this reserve, the total of
102 the net retained liability for all simultaneous issue policies
103 covering a single risk shall be equal to the liability for the
104 policy with the highest limit covering that single risk, net of
105 any liability ceded in reinsurance.
106 (c) On or after January 1, 2014, for title insurers holding
107 $50 million or more in surplus as to policyholders as of the
108 previous year-end, a minimum of 6.5 percent of the total of the
109 following:
110 1. Direct premiums written; and
111 2. Premiums for reinsurance assumed, plus other income,
112 less premiums for reinsurance ceded as displayed in Schedule P
113 of the title insurer’s most recent annual statement filed with
114 the office with such reserve being subsequently released as
115 provided in subsection (2). Title insurers with less than $50
116 million in surplus as to policyholders must continue to record
117 unearned premium reserve in accordance with paragraph (b).
118 (d)(c) An additional amount, if deemed necessary by a
119 qualified actuary, to which shall be subsequently released as
120 provided in subsection (2). Using financial results as of
121 December 31 of each year, all domestic title insurers shall
122 obtain a Statement of Actuarial Opinion from a qualified actuary
123 regarding the insurer’s loss and loss adjustment expense
124 reserves, including reserves for known claims, adverse
125 development on known claims, incurred but not reported claims,
126 and unallocated loss adjustment expenses. The actuarial opinion
127 must shall conform to the annual statement instructions for
128 title insurers adopted by the National Association of Insurance
129 Commissioners and shall include the actuary’s professional
130 opinion of the insurer’s reserves as of the date of the annual
131 statement. If the amount of the reserve stated in the opinion
132 and displayed in Schedule P of the annual statement for that
133 reporting date is greater than the sum of the known claim
134 reserve and unearned premium reserve as calculated under this
135 section, as of the same reporting date and including any
136 previous actuarial provisions added at earlier dates, the
137 insurer shall add to the insurer’s unearned premium reserve an
138 actuarial amount equal to the reserve shown in the actuarial
139 opinion, minus the known claim reserve and the unearned premium
140 reserve, as of the current reporting date and calculated in
141 accordance with this section, but not in no event calculated as
142 of any date before prior to December 31, 1999. The comparison
143 shall be made using that line on Schedule P displaying the Total
144 Net Loss and Loss Adjustment Expense which is comprised of the
145 Known Claim Reserve, and any associated Adverse Development
146 Reserve, the reserve for Incurred But Not Reported Losses, and
147 Unallocated Loss Adjustment Expenses.
148 (2)(a) With respect to reserves the reserve established in
149 accordance with:
150 (a) Paragraph (1)(a), the domestic title insurer shall
151 release the reserve over the subsequent a period of 20
152 subsequent years as provided in this paragraph. The insurer
153 shall release 30 percent of the initial aggregate sum during
154 1999, with one quarter of that amount being released on March
155 31, June 30, September 30, and December 31, 1999, with the March
156 31 and June 30 releases to be retroactive and reflected on the
157 September 30 financial statements. Thereafter, the insurer shall
158 release, on the same quarterly basis as specified for reserves
159 released during 1999, a percentage of the initial aggregate sum
160 as follows: 15 percent during calendar year 2000, 10 percent
161 during each of calendar years 2001 and 2002, 5 percent during
162 each of calendar years 2003 and 2004, 3 percent during each of
163 calendar years 2005 and 2006, 2 percent during each of calendar
164 years 2007-2013, and 1 percent during each of calendar years
165 2014-2018.
166 (b) With respect to reserves established in accordance with
167 Paragraph (1)(b), the unearned premium for policies written or
168 title liability assumed during a particular calendar year shall
169 be earned, and released from reserve, over the subsequent a
170 period of 20 subsequent years as provided in this paragraph. The
171 insurer shall release 30 percent of the initial sum during the
172 year following next succeeding the year the premium was written
173 or assumed, with one quarter of that amount being released on
174 March 31, June 30, September 30, and December 31 of such year.
175 Thereafter, the insurer shall release, on the same quarterly
176 basis as specified for reserves released during the year
177 following first succeeding the year the premium was written or
178 assumed, a percentage of the initial sum as follows: 15 percent
179 during the next succeeding year, 10 percent during each of the
180 next succeeding 2 years, 5 percent during each of the next
181 succeeding 2 years, 3 percent during each of the next succeeding
182 2 years, 2 percent during each of the next succeeding 7 years,
183 and 1 percent during each of the next succeeding 5 years.
184 (c) With respect to reserves established in accordance with
185 Paragraph (1)(c), the unearned premium for policies written or
186 title liability assumed during a particular calendar year shall
187 be earned, and released from reserve, over the subsequent 20
188 years at an amortization rate not to exceed the formula in this
189 paragraph. The insurer shall release 35 percent of the initial
190 sum during the year following the year the premium was written
191 or assumed, with one quarter of that amount being released on
192 March 31, June 30, September 30, and December 31 of such year.
193 Thereafter, the insurer shall release, on the same quarterly
194 basis as specified for reserve released during the year
195 following the year the premium was written or assumed, a
196 percentage of the initial sum as follows: 15 percent during each
197 year of the next succeeding 2 years, 10 percent during the next
198 succeeding year, 3 percent during each of the next succeeding 3
199 years, 2 percent during each of the next succeeding 3 years, and
200 1 percent during each of the next succeeding 10 years.
201 (d) Paragraph (1)(d), any additional amount established in
202 any calendar year shall be released in the years subsequent to
203 its establishment as provided in paragraph (c) (b), with the
204 timing and percentage of releases being in all respects
205 identical to those of unearned premium reserves that are
206 calculated as provided in paragraph (c) (b) and established with
207 regard to premiums written or liability assumed in reinsurance
208 in the same year as the year in which any additional amount was
209 originally established.
210 (3) If a title insurer that is organized under the laws of
211 another state transfers its domicile to this state, the
212 statutory or unearned premium reserve shall be the amount
213 required by the laws of the title insurer’s former state of
214 domicile as of the date of transfer of domicile and shall be
215 released from reserve according to the requirements of law in
216 effect in the former state at the time of domicile. On or after
217 January 1, 2014, for new business written after the effective
218 date of the transfer of domicile to this state, the domestic
219 title insurer shall add to and set aside in the statutory or
220 unearned premium reserve such amount as provided in paragraph
221 (1)(c).
222 (4)(3) At any reporting date, the amount of the required
223 releases of existing unearned premium reserves under subsection
224 (2) shall be calculated and deducted from the total unearned
225 premium reserve before any additional amount is established for
226 the current calendar year in accordance with the provisions of
227 paragraph (1)(d) (1)(c).
228 (5) A domestic title insurer is not required to record a
229 separate bulk reserve. However, if a separate bulk reserve is
230 recorded, the statutory premium reserve must be reduced by the
231 amount recorded for such bulk reserve.
232 (6)(4) As used in this section, the term:
233 (a) “Bulk reserve” means provision for subsequent
234 development on known claims.
235 (b)(a) “Net retained liability” means the total liability
236 retained by a title insurer for a single risk, after taking into
237 account the deduction for ceded liability, if any.
238 (c)(b) “Qualified actuary” means a person who is, as
239 detailed in the National Association of Insurance Commissioners’
240 Annual Statement Instructions:
241 1. A member in good standing of the Casualty Actuarial
242 Society;
243 2. A member in good standing of the American Academy of
244 Actuaries who has been approved as qualified for signing
245 casualty loss reserve opinions by the Casualty Practice Council
246 of the American Academy of Actuaries; or
247 3. A person who otherwise has competency in loss reserve
248 evaluation as demonstrated to the satisfaction of the insurance
249 regulatory official of the domiciliary state. In such case, at
250 least 90 days before prior to the filing of its annual
251 statement, the insurer must request approval that the person be
252 deemed qualified and that request must be approved or denied.
253 The request must include the National Association of Insurance
254 Commissioners’ Biographical Form and a list of all loss reserve
255 opinions issued in the last 3 years by this person.
256 (d)(c) “Single risk” means the insured amount of a any
257 title insurance policy, except that where two or more title
258 insurance policies are issued simultaneously covering different
259 estates in the same real property, “single risk” means the sum
260 of the insured amounts of all such title insurance policies. A
261 Any title insurance policy insuring a mortgage interest, a claim
262 payment under which reduces the insured amount of a fee or
263 leasehold title insurance policy, shall be excluded in computing
264 the amount of a single risk to the extent that the insured
265 amount of the mortgage title insurance policy does not exceed
266 the insured amount of the fee or leasehold title insurance
267 policy.
268 Section 3. Subsection (5) of section 624.407, Florida
269 Statutes, is amended to read:
270 624.407 Surplus required; new insurers.—
271 (5) For the purposes of this section, liabilities do not
272 include liabilities required under s. 625.041(5) s. 625.041(4).
273 For purposes of computing minimum surplus as to policyholders
274 pursuant to s. 625.305(1), liabilities include liabilities
275 required under s. 625.041(5) s. 625.041(4).
276 Section 4. Subsection (2) of section 624.408, Florida
277 Statutes, is amended to read:
278 624.408 Surplus required; current insurers.—
279 (2) For purposes of this section, liabilities do not
280 include liabilities required under s. 625.041(5) s. 625.041(4).
281 For purposes of computing minimum surplus as to policyholders
282 pursuant to s. 625.305(1), liabilities include liabilities
283 required under s. 625.041(5) s. 625.041(4).
284 Section 5. This act shall take effect upon becoming a law.