Florida Senate - 2016                             CS for SB 1422
       
       
        
       By the Committee on Banking and Insurance; and Senator Simmons
       
       597-02617-16                                          20161422c1
    1                        A bill to be entitled                      
    2         An act relating to insurer regulatory reporting;
    3         creating s. 628.8015, F.S.; defining terms; requiring
    4         an insurer to maintain a risk management framework;
    5         requiring certain insurers and insurance groups to
    6         conduct an own-risk and solvency assessment; providing
    7         requirements for the preparation and submission of an
    8         own-risk and solvency assessment summary report;
    9         providing exemptions and waivers; requiring certain
   10         insurers and members of an insurance group to prepare
   11         and submit a corporate governance annual disclosure;
   12         providing disclosure and preparation requirements;
   13         specifying privilege requirements and prohibitions for
   14         certain filings and related documents; authorizing the
   15         Office of Insurance Regulation to retain third-party
   16         consultants for certain purposes; authorizing the
   17         Financial Services Commission to adopt rules; amending
   18         s. 628.803, F.S.; revising provisions relating to
   19         penalties to conform to the act; providing a
   20         contingent effective date.
   21          
   22  Be It Enacted by the Legislature of the State of Florida:
   23  
   24         Section 1. Section 628.8015, Florida Statutes, is created
   25  to read:
   26         628.8015Own-risk and solvency assessment; corporate
   27  governance annual disclosure.—
   28         (1)DEFINITIONS.—As used in this section, the term:
   29         (a) “Corporate governance annual disclosure” means a report
   30  filed by an insurer or insurance group in accordance with this
   31  section.
   32         (b) “Insurance group” means insurers and affiliates
   33  included within an insurance holding company system.
   34         (c) “Insurer” has the same meaning as in s. 624.03.
   35  However, the term does not include agencies, authorities,
   36  instrumentalities, possessions, or territories of the United
   37  States, the Commonwealth of Puerto Rico, or the District of
   38  Columbia; or agencies, authorities, instrumentalities, or
   39  political subdivisions of a state.
   40         (d) “Own-risk and solvency assessment” or “ORSA” means an
   41  internal assessment, appropriate to the nature, scale, and
   42  complexity of an insurer or insurance group, conducted by that
   43  insurer or insurance group, of the material and relevant risks
   44  associated with the business plan of an insurer or insurance
   45  group and the sufficiency of capital resources to support those
   46  risks.
   47         (e)“ORSA guidance manual” means the own-risk and solvency
   48  assessment guidance manual developed and adopted by the National
   49  Association of Insurance Commissioners.
   50         (f) “ORSA summary report” means a high-level ORSA summary
   51  of an insurer or insurance group, consisting of a single report
   52  or combination of reports.
   53         (g) “Senior management” means any corporate officer
   54  responsible for reporting information to the board of directors
   55  at regular intervals or providing information to shareholders or
   56  regulators and includes, but is not limited to, the chief
   57  executive officer, chief financial officer, chief operations
   58  officer, chief risk officer, chief procurement officer, chief
   59  legal officer, chief information officer, chief technology
   60  officer, chief revenue officer, chief visionary officer, or any
   61  other executive performing one or more of these functions.
   62         (2) OWN-RISK AND SOLVENCY ASSESSMENT.—
   63         (a) Risk management framework.—An insurer shall maintain a
   64  risk management framework to assist in identifying, assessing,
   65  monitoring, managing, and reporting its material and relevant
   66  risks. An insurer may satisfy this requirement by being a member
   67  of an insurance group with a risk management framework
   68  applicable to the operations of the insurer.
   69         (b) ORSA requirement.—Subject to paragraph (c), an insurer,
   70  or the insurance group of which the insurer is a member, shall
   71  regularly conduct an ORSA consistent with and comparable to the
   72  process in the ORSA guidance manual. The ORSA must be conducted
   73  at least annually and whenever there have been significant
   74  changes to the risk profile of the insurer or the insurance
   75  group of which the insurer is a member.
   76         (c) ORSA summary report.
   77         1.a.A domestic insurer or insurer member of an insurance
   78  group of which the office is the lead state, as determined by
   79  the procedures in the most recent National Association of
   80  Insurance Commissioners Financial Analysis Handbook, shall:
   81         (I) Submit an ORSA summary report to the office once every
   82  calendar year.
   83         (II) Notify the office of its proposed annual submission
   84  date by December 1, 2016. The initial ORSA summary report must
   85  be submitted by December 31, 2017.
   86         b. An insurer not required to submit an ORSA summary report
   87  pursuant to sub-subparagraph a. shall:
   88         (I) Submit an ORSA summary report at the request of the
   89  office, but not more than once per calendar year.
   90         (II) Notify the office of the proposed submission date
   91  within 30 days after the request of the office.
   92         2. An insurer may comply with sub-subparagraph 1.a. or sub
   93  subparagraph 1.b. by providing the most recent and substantially
   94  similar ORSA summary report submitted by the insurer, or another
   95  member of an insurance group of which the insurer is a member,
   96  to the chief insurance regulatory official of another state or
   97  the supervisor or regulator of a foreign jurisdiction. For
   98  purposes of this subparagraph, a “substantially similar” ORSA
   99  summary report is one that contains information comparable to
  100  the information described in the ORSA guidance manual as
  101  determined by the commissioner of the office. If the report is
  102  in a language other than English, it must be accompanied by an
  103  English translation.
  104         3. The chief risk officer or chief executive officer of the
  105  insurer or insurance group responsible for overseeing the
  106  enterprise risk management process must sign the ORSA summary
  107  report attesting that, to the best of his or her knowledge and
  108  belief, the insurer or insurance group applied the enterprise
  109  risk management process described in the ORSA summary report and
  110  provided a copy of the report to the board of directors or the
  111  appropriate board committee.
  112         4. The ORSA summary report must be prepared in accordance
  113  with the ORSA guidance manual. Documentation and supporting
  114  information must be maintained by the insurer and made available
  115  upon examination pursuant to s. 624.316 or upon the request of
  116  the office.
  117         5. The ORSA summary report must include a brief description
  118  of material changes and updates since the prior year report.
  119         6. The office’s review of the ORSA summary report must be
  120  conducted, and any additional requests for information must be
  121  made, using procedures similar to those used in the analysis and
  122  examination of multistate or global insurers and insurance
  123  groups.
  124         (d) Exemption.
  125         1. An insurer is exempt from the requirements of this
  126  subsection if:
  127         a. The insurer has annual direct written and unaffiliated
  128  assumed premium, including international direct and assumed
  129  premium, but excluding premiums reinsured with the Federal Crop
  130  Insurance Corporation and the National Flood Insurance Program,
  131  of less than $500 million; or
  132         b. The insurer is a member of an insurance group and the
  133  insurance group has annual direct written and unaffiliated
  134  assumed premium, including international direct and assumed
  135  premium, but excluding premiums reinsured with the Federal Crop
  136  Insurance Corporation and the National Flood Insurance Program,
  137  of less than $1 billion.
  138         2. If an insurer is:
  139         a. Exempt under sub-subparagraph 1.a., but the insurance
  140  group of which the insurer is a member is not exempt under sub
  141  subparagraph 1.b., the ORSA summary report must include every
  142  insurer within the insurance group. The insurer may satisfy this
  143  requirement by submitting more than one ORSA summary report for
  144  any combination of insurers if any combination of reports
  145  includes every insurer within the insurance group.
  146         b. Not exempt under sub-subparagraph 1.a., but the
  147  insurance group of which it is a member is exempt under sub
  148  subparagraph 1.b., the insurer must submit to the office the
  149  ORSA summary report applicable only to that insurer.
  150         3. The office may require an exempt insurer to maintain a
  151  risk management framework, conduct an ORSA, and file an ORSA
  152  summary report:
  153         a. Based on unique circumstances, including, but not
  154  limited to, the type and volume of business written, ownership
  155  and organizational structure, federal agency requests, and
  156  international supervisor requests;
  157         b. If the insurer has risk-based capital for a company
  158  action level event pursuant to s. 624.4085(3), meets one or more
  159  of the standards of an insurer deemed to be in hazardous
  160  financial condition as defined in rules adopted by the
  161  commission pursuant to s. 624.81(11), or exhibits qualities of
  162  an insurer in hazardous financial condition as determined by the
  163  office; or
  164         c. If the office determines it is in the best interest of
  165  the state.
  166         4. If an exempt insurer becomes disqualified for an
  167  exemption because of changes in premium as reported on the most
  168  recent annual statement of the insurer or annual statements of
  169  the insurers within the insurance group of which the insurer is
  170  a member, the insurer must comply with the requirements of this
  171  section effective 1 year after the year in which the insurer
  172  exceeded the premium thresholds.
  173         (e) Waiver.—An insurer that does not qualify for an
  174  exemption under paragraph (d) may request a waiver from the
  175  office based upon unique circumstances. If the insurer is part
  176  of an insurance group with insurers domiciled in more than one
  177  state, the office must coordinate with the lead state and with
  178  the other domiciliary regulators in deciding whether to grant a
  179  waiver. In deciding whether to grant a waiver, the office may
  180  consider:
  181         1. The type and volume of business written by the insurer.
  182         2. The ownership and organizational structure of the
  183  insurer.
  184         3. Any other factor the office considers relevant to the
  185  insurer or insurance group of which the insurer is a member.
  186  
  187  A waiver granted pursuant to this paragraph is valid until
  188  withdrawn by the office.
  189         (3) CORPORATE GOVERNANCE ANNUAL DISCLOSURE.—
  190         (a) Scope.This section does not prescribe or impose
  191  corporate governance standards and internal procedures beyond
  192  those required under applicable state corporate law or limit the
  193  authority of the office, or the rights or obligations of third
  194  parties, under s. 624.316.
  195         (b) Disclosure requirement.
  196         1.a. An insurer, or insurer member of an insurance group,
  197  of which the office is the lead state regulator, as determined
  198  by the procedures in the most recent National Association of
  199  Insurance Commissioners Financial Analysis Handbook, shall
  200  submit a corporate governance annual disclosure to the office by
  201  June 1 of each calendar year. The initial corporate governance
  202  annual disclosure must be submitted by December 31, 2017.
  203         b. An insurer or insurance group not required to submit a
  204  corporate governance annual disclosure under sub-subparagraph
  205  1.a. shall do so at the request of the office, but not more than
  206  once per calendar year. The insurer shall notify the office of
  207  the proposed submission date within 30 days after the request of
  208  the office.
  209         2. The chief executive officer or corporate secretary of
  210  the insurer or the insurance group must sign the corporate
  211  governance annual disclosure attesting that, to the best of his
  212  or her knowledge and belief, the insurer has implemented the
  213  corporate governance practices and provided a copy of the
  214  disclosure to the board of directors or the appropriate board
  215  committee.
  216         3.a. Depending on the structure of its system of corporate
  217  governance, the insurer or insurance group may provide corporate
  218  governance information at one of the following levels:
  219         (I) The ultimate controlling parent level;
  220         (II) An intermediate holding company level; or
  221         (III) The individual legal entity level.
  222         b. The insurer or insurance group may make the corporate
  223  governance annual disclosure at:
  224         (I) The level used to determine the risk appetite of the
  225  insurer or insurance group;
  226         (II) The level at which the earnings, capital, liquidity,
  227  operations, and reputation of the insurer are collectively
  228  overseen and the supervision of those factors is coordinated and
  229  exercised; or
  230         (III) The level at which legal liability for failure of
  231  general corporate governance duties would be placed.
  232  
  233  An insurer or insurance group must indicate the level of
  234  reporting used and explain any subsequent changes in the
  235  reporting level.
  236         4. The review of the corporate governance annual disclosure
  237  and any additional requests for information shall be made
  238  through the lead state as determined by the procedures in the
  239  most recent National Association of Insurance Commissioners
  240  Financial Analysis Handbook.
  241         5. An insurer or insurance group may comply with this
  242  paragraph by cross-referencing other existing relevant and
  243  applicable documents, including, but not limited to, the ORSA
  244  summary report, Holding Company Form B or F filings, Securities
  245  and Exchange Commission proxy statements, or foreign regulatory
  246  reporting requirements, if the documents contain information
  247  substantially similar to the information described in paragraph
  248  (c). The insurer or insurance group shall clearly identify and
  249  reference the specific location of the relevant and applicable
  250  information within the corporate governance annual disclosure
  251  and attach the referenced document if it has not already been
  252  filed with, or made available to, the office.
  253         6. Each year following the initial filing of the corporate
  254  governance annual disclosure, the insurer or insurance group
  255  shall file an amended version of the previously filed corporate
  256  governance annual disclosure indicating changes that have been
  257  made. If changes have not been made in the previously filed
  258  disclosure, the insurer or insurance group should so indicate.
  259         (c) Preparation of the corporate governance annual
  260  disclosure.
  261         1. The corporate governance annual disclosure must be
  262  prepared in a manner consistent with this subsection.
  263  Documentation and supporting information must be maintained and
  264  made available upon examination pursuant to s. 624.316 or upon
  265  the request of the office.
  266         2. The corporate governance annual disclosure must be as
  267  descriptive as possible and include any attachments or example
  268  documents used in the governance process.
  269         3. The insurer or insurance group has discretion in
  270  determining the appropriate format of the corporate governance
  271  annual disclosure in communicating the required information and
  272  responding to inquiries, provided that the corporate governance
  273  annual disclosure includes material and relevant information
  274  sufficient to enable the office to understand the corporate
  275  governance structure, policies, and practices used by the
  276  insurer or insurance group.
  277         4. The corporate governance annual disclosure must describe
  278  the:
  279         a. Corporate governance framework and structure of the
  280  insurer or insurance group.
  281         b. Policies and practices of the most senior governing
  282  entity and significant committees.
  283         c. Policies and practices for directing senior management.
  284         d. Processes by which the board, its committees, and senior
  285  management ensure an appropriate amount of oversight to the
  286  critical risk areas that have an impact on the insurer’s
  287  business activities.
  288         (4)CONFIDENTIALITY.—The filings and related documents
  289  submitted pursuant to subsections (2) and (3) are privileged and
  290  not subject to subpoena or discovery directly from the office.
  291  However, the department or office may use these filings and
  292  related documents in the furtherance of any regulatory or legal
  293  action brought against an insurer as part of the official duties
  294  of the department or office. A waiver of any applicable claim of
  295  privilege in these filings and related documents may not occur
  296  because of a disclosure to the office under this section,
  297  because of any other provision of the Insurance Code, or because
  298  of sharing under s. 624.4212. The office or a person receiving
  299  these filings and related documents, while acting under the
  300  authority of the office, or with whom such filings and related
  301  documents are shared pursuant to s. 624.4212, is not permitted
  302  or required to testify in any private civil action concerning
  303  any such filings or related documents.
  304         (5) USE OF THIRD-PARTY CONSULTANTS.—The office may retain
  305  third-party consultants at the expense of the insurer or
  306  insurance group for the purpose of assisting it in the
  307  performance of its regulatory responsibilities under this
  308  section, including, but not limited to, the risk management
  309  framework, the ORSA, the ORSA summary report, and the corporate
  310  governance annual disclosure. A third-party consultant must
  311  agree, in writing, to:
  312         (a) Adhere to confidentiality standards and requirements
  313  applicable to the office governing the sharing and use of such
  314  filings and related documents.
  315         (b) Verify to the office, with notice to the insurer, that
  316  the consultant is free of any conflict of interest.
  317         (c) Monitor compliance with applicable confidentiality and
  318  conflict of interest standards pursuant to a system of internal
  319  procedures.
  320         (6) RULE ADOPTION.—The commission may adopt rules to
  321  administer this section.
  322         Section 2. Subsections (1) and (4) of section 628.803,
  323  Florida Statutes, are amended to read:
  324         628.803 Sanctions.—
  325         (1) Any company failing, without just cause, to file any
  326  registration statement or certificate of exemption required to
  327  be filed pursuant to commission rules relating to this part or
  328  to submit an ORSA summary report or a corporate governance
  329  annual disclosure required pursuant to s. 628.8015 shall, in
  330  addition to other penalties prescribed under the Florida
  331  Insurance Code, be subject to pay a penalty of $100 for each
  332  day’s delay, not to exceed a total of $10,000.
  333         (4) If the office determines that any person violated s.
  334  628.461, or s. 628.801, or s. 628.8015, the violation may serve
  335  as an independent basis for disapproving dividends or
  336  distributions and for placing the insurer under an order of
  337  supervision in accordance with part VI of chapter 624.
  338         Section 3. This act shall take effect October 1, 2016, if
  339  SB 1416 or similar legislation is adopted in the same
  340  legislative session or an extension thereof and becomes a law.