CODING: Words stricken are deletions; words underlined are additions.House Bill 1943e1
HB 1943, First Engrossed
1 A bill to be entitled
2 An act relating to insurance; requiring certain
3 insurers to file reports concerning their risk
4 based capital; requiring the Department of
5 Insurance to request such reports under certain
6 circumstances; providing for hearings;
7 providing definitions and reporting
8 requirements; requiring certain insurers to
9 file reports of material transactions
10 concerning their assets or their ceded
11 reinsurance agreements; providing definitions
12 and reporting requirements; prescribing
13 authority of the Department of Insurance with
14 respect to such reports; amending s. 624.3161,
15 F.S.; deleting a limitation on frequency of
16 certain market conduct examinations; amending
17 s. 626.321, F.S.; authorizing persons who hold
18 a limited license for credit insurance to hold
19 certain additional licenses; amending s.
20 624.424, F.S.; increasing the time limitation
21 on insurers using certain accounting services
22 for certain purposes; creating s. 624.5094,
23 F.S.; providing for offset of dividends or
24 premium refunds in calculating the annual
25 assessment for the Special Disability Trust
26 Fund and expenses of administration; amending
27 s. 625.121, F.S.; providing for the use of
28 additional mortality tables; amending s.
29 627.476, F.S.; providing for the use of
30 additional mortality tables; amending ss.
31 627.4555 and 627.5045, F.S.; revising
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HB 1943, First Engrossed
1 provisions requiring notice to policyowners and
2 secondary addressees of impending lapse of
3 certain insurance policies under certain
4 circumstances; providing procedures; providing
5 application; amending s. 628.801, F.S.;
6 updating a reference to the Insurance Holding
7 Company System Regulatory Act; providing
8 effective dates.
9
10 Be It Enacted by the Legislature of the State of Florida:
11
12 Section 1. Risk based capital requirements for
13 insurers.--
14 (1) As used in this section, the term:
15 (a) "Adjusted risk based capital report" means a risk
16 based capital report that has been adjusted by the department
17 in accordance with this section.
18 (b) "Authorized control level risk based capital"
19 means the number determined under the risk based capital
20 formula in the risk based capital instructions.
21 (c) "Company action level risk based capital" means
22 the product of 2.0 and an insurer's authorized control level
23 risk based capital.
24 (d) "Corrective order" means an order issued by the
25 department specifying corrective actions that the department
26 has determined are required.
27 (e) "Department" means the Department of Insurance.
28 (f) "Domestic insurer" means any insurer domiciled in
29 this state.
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HB 1943, First Engrossed
1 (g) "Foreign insurer" means any insurer that is
2 authorized or eligible to do business in this state but that
3 is not domiciled in this state.
4 (h) "Life and health insurer" means any insurer
5 authorized or eligible under the Florida Insurance Code to
6 underwrite life or health insurance. The term includes a
7 property and casualty insurer that writes accident and health
8 insurance only.
9 (i) "Mandatory control level risk based capital" means
10 the product of 0.70 and the authorized control level risk
11 based capital.
12 (j) "Negative trend" means, with respect to a life and
13 health insurer, a negative trend over a period of time, as
14 determined in accordance with the trend test calculation
15 included in the risk based capital instructions.
16 (k) "Property and casualty insurer" means any insurer
17 licensed under the Florida Insurance Code, but does not
18 include a single-line mortgage guaranty insurer, financial
19 guaranty insurer, or title insurer or a life and health
20 insurer.
21 (l) "Regulatory action level risk based capital" means
22 the product of 1.5 and an insurer's authorized control level
23 risk based capital.
24 (m) "Revised risk based capital plan" means the
25 revision of the risk based capital plan which is prepared by
26 an insurer after the department rejects the original plan.
27 (n) "Risk based capital instructions" means the
28 instructions for preparing a risk based capital report as
29 adopted by the National Association of Insurance
30 Commissioners.
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1 (o) "Risk based capital level" means an insurer's
2 company action level risk based capital, regulatory action
3 level risk based capital, authorized control level risk based
4 capital, or mandatory control level risk based capital.
5 (p) "Risk based capital plan" means a comprehensive
6 financial plan specified in paragraph (4)(b).
7 (q) "Risk based capital report" means the report
8 required in subsection (2).
9 (r) "Total adjusted capital" means the sum of:
10 1. An insurer's statutory capital and surplus; and
11 2. Any other item required by the risk based capital
12 instructions.
13 (2)(a) Each domestic insurer that is subject to this
14 section shall, on or before March 1 of each year, prepare and
15 file with the National Association of Insurance Commissioners
16 a report of its risk based capital levels as of the end of the
17 calendar year just ended, in a form and containing the
18 information required in the risk based capital instructions.
19 In addition, each domestic insurer shall file a printed copy
20 of its risk based capital report:
21 1. With the department on or before March 1 of each
22 year.
23 2. With the insurance department in any other state in
24 which the insurer is authorized to do business, if that
25 department has notified the insurer of its request in writing,
26 in which case the insurer shall file its risk based capital
27 report not later than the later of:
28 a. Fifteen days after the receipt of notice to file
29 its risk based capital report with that state; or
30 b. March 1.
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1 (b) The comparison of an insurer's total adjusted
2 capital to any of its risk based capital levels is a
3 regulatory tool that may indicate the need for possible
4 corrective action with respect to the insurer, and may not be
5 used as a means to rank insurers generally. Therefore, except
6 as otherwise required under this section, the making,
7 publishing, disseminating, circulating, or placing before the
8 public, or causing, directly or indirectly, to be made,
9 published, disseminated, circulated, or placed before the
10 public, in a newspaper, magazine, or other publication, or in
11 the form of a notice, circular, pamphlet, letter, or poster,
12 or over any radio or television station, or in any other way,
13 an advertisement, announcement, or statement containing an
14 assertion, representation, or statement with regard to the
15 risk based capital levels of any insurer, or of any component
16 derived in the calculation, by any insurer, agent, broker, or
17 other person engaged in any manner in the insurance business
18 would be misleading and is therefore prohibited; however, if
19 any materially false statement with respect to the comparison
20 regarding an insurer's total adjusted capital to its risk
21 based capital levels (or any of them) or an inappropriate
22 comparison of any other amount to the insurer's risk based
23 capital levels is published in any written publication and the
24 insurer is able to demonstrate to the commissioner with
25 substantial proof the falsity or inappropriateness of the
26 statement, the insurer may publish in a written publication an
27 announcement the sole purpose of which is to rebut the
28 materially false statement.
29 (c) The department shall use the risk based capital
30 instructions, risk based capital reports, adjusted risk based
31 capital reports, risk based capital plans, and revised risk
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HB 1943, First Engrossed
1 based capital plans solely for monitoring the solvency of
2 insurers and assessing the need for corrective action with
3 respect to insurers. The department may not use that
4 information for ratemaking, as evidence in any rate
5 proceeding, or for calculating or deriving any elements of an
6 appropriate premium level or rate of return for any line of
7 insurance which an insurer or an affiliate of such insurer is
8 authorized to write.
9 (d) A life and health insurer's risk based capital is
10 determined in accordance with the formula set forth in the
11 risk based capital instructions. The formula takes into
12 account and may adjust for the covariance between:
13 1. The risk with respect to the insurer's assets;
14 2. The risk of adverse insurance experience with
15 respect to the insurer's liabilities and obligations;
16 3. The interest rate risk with respect to the
17 insurer's business; and
18 4. Any other business or other relevant risk set out
19 in the risk based capital instructions,
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21 determined in each case by applying the factors in the manner
22 set forth in the risk based capital instructions.
23 (e) A property and casualty insurer's risk based
24 capital is determined in accordance with the formula set forth
25 in the risk based capital instructions. The formula takes into
26 account and may adjust for the covariance between:
27 1. The asset risk;
28 2. The credit risk;
29 3. The underwriting risk; and
30 4. Any other business or other relevant risk set out
31 in the risk based capital instructions,
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HB 1943, First Engrossed
1
2 determined in each case by applying the factors in the manner
3 set forth in the risk based capital instructions.
4 (f) The Legislature finds that an excess of capital
5 over the amount produced by the risk based capital
6 requirements and the formulas, schedules, and instructions
7 specified in this section is a desirable goal with respect to
8 the business of insurance. Accordingly, insurers should seek
9 to maintain capital above the risk based capital levels
10 required by this section. Additional capital is used and
11 useful in the insurance business and helps to secure an
12 insurer against various risks inherent in, or affecting, the
13 business of insurance and not accounted for or only partially
14 measured by the risk based capital requirements contained in
15 this section.
16 (g) If a domestic insurer files a risk based capital
17 report that the department finds is inaccurate, the department
18 shall adjust the risk based capital report to correct the
19 inaccuracy and shall notify the insurer of the adjustment. The
20 notice must state the reason for the adjustment. A risk based
21 capital report that is so adjusted is referred to as the
22 adjusted risk based capital report. The adjusted risk based
23 capital report must also be filed by the insurer with the
24 National Association of Insurance Commissioners.
25 (3)(a) A company action level event includes:
26 1. The filing of a risk based capital report by an
27 insurer which indicates that:
28 a. The insurer's total adjusted capital is greater
29 than or equal to its regulatory action level risk based
30 capital but less than its company action level risk based
31 capital; or
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HB 1943, First Engrossed
1 b. If a life and health insurer, the insurer has total
2 adjusted capital that is greater than or equal to its company
3 action level risk based capital, but is less than the product
4 of its authorized control level risk based capital and 2.5,
5 and has a negative trend;
6 2. The notification by the department to the insurer
7 of an adjusted risk based capital report that indicates an
8 event in subparagraph 1., unless the insurer challenges the
9 adjusted risk based capital report under subsection (7); or
10 3. If, under subsection (7), an insurer challenges an
11 adjusted risk based capital report that indicates an event in
12 subparagraph 1., the notification by the department to the
13 insurer that the department has, after a hearing, rejected the
14 insurer's challenge.
15 (b) If a company action level event occurs, the
16 insurer shall prepare and submit to the department a risk
17 based capital plan, which must:
18 1. Identify the conditions that contribute to the
19 company action level event;
20 2. Contain proposals of corrective actions that the
21 insurer intends to take and that are reasonably expected to
22 result in the elimination of the company action level event;
23 3. Provide projections of the insurer's financial
24 results in the current year and at least the 4 succeeding
25 years, both in the absence of proposed corrective actions and
26 giving effect to the proposed corrective actions, including
27 projections of statutory operating income, net income,
28 capital, and surplus. The projections for both new and renewal
29 business may include separate projections for each major line
30 of business and, if separate projections are provided, must
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HB 1943, First Engrossed
1 separately identify each significant income, expense, and
2 benefit component;
3 4. Identify the key assumptions affecting the
4 insurer's projections and the sensitivity of the projections
5 to the assumptions; and
6 5. Identify the quality of, and problems associated
7 with, the insurer's business, including, but not limited to,
8 its assets, anticipated business growth and associated surplus
9 strain, extraordinary exposure to risk, mix of business, and
10 any use of reinsurance.
11 (c) The risk based capital plan must be submitted:
12 1. Within 45 days after the company action level
13 event; or
14 2. If the insurer challenges an adjusted risk based
15 capital report under subsection (7), within 45 days after
16 notification to the insurer that the department has, after a
17 hearing, rejected the insurer's challenge.
18 (d) Within 60 days after the submission by an insurer
19 of a risk based capital plan to the department, the department
20 shall notify the insurer whether the risk based capital plan
21 must be implemented or is, in the judgment of the department,
22 unsatisfactory. If the department determines that the risk
23 based capital plan is unsatisfactory, the notification to the
24 insurer must set forth the reasons for the determination and
25 may set forth proposed revisions. Upon notification from the
26 department, the insurer shall prepare a revised risk based
27 capital plan, which may incorporate by reference any revisions
28 proposed by the department, and shall submit the revised risk
29 based capital plan to the department:
30 1. Within 45 days after the notification from the
31 department; or
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HB 1943, First Engrossed
1 2. If the insurer challenges the notification from the
2 department under subsection (7), within 45 days after a
3 notification to the insurer that the department has, after a
4 hearing, rejected the insurer's challenge.
5 (e) If the department notifies an insurer that the
6 insurer's risk based capital plan or revised risk based
7 capital plan is unsatisfactory, the department may, at its
8 discretion and subject to the insurer's right to a hearing
9 under subsection (7), specify in the notification that the
10 notification is a regulatory action level event.
11 (f) Each domestic insurer that files a risk based
12 capital plan or a revised risk based capital plan with the
13 department shall file a copy of the risk based capital plan or
14 the revised risk based capital plan with the insurance
15 department in any other state in which the insurer is
16 authorized to do business if:
17 1. That state has a risk based capital law that is
18 substantially similar to paragraph (8)(a); and
19 2. The insurance department of that state has notified
20 the insurer of its request for the filing in writing, in which
21 case the insurer shall file a copy of the risk based capital
22 plan or the revised risk based capital plan in that state no
23 later than the later of:
24 a. Fifteen days after the receipt of notice to file a
25 copy of its risk based capital plan or revised risk based
26 capital plan with the state; or
27 b. The date on which the risk based capital plan or
28 the revised risk based capital plan is filed under paragraph
29 (c) or paragraph (d).
30 (4)(a) A regulatory action level event includes:
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HB 1943, First Engrossed
1 1. The filing of a risk based capital report by the
2 insurer which indicates that the insurer's total adjusted
3 capital is greater than or equal to its authorized control
4 level risk based capital but is less than its regulatory
5 action level risk based capital;
6 2. The notification by the department to the insurer
7 of an adjusted risk based capital report that indicates the
8 event described in subparagraph 1., unless the insurer
9 challenges the adjusted risk based capital report under
10 subsection (7);
11 3. If, under subsection (7), the insurer challenges an
12 adjusted risk based capital report that indicates the event
13 described in subparagraph 1., the notification by the
14 department to the insurer that the department has, after a
15 hearing, rejected the insurer's challenge;
16 4. The failure of the insurer to file a risk based
17 capital report by the filing date, unless the insurer provides
18 an explanation for such failure which is satisfactory to the
19 department and cures the failure within 10 days after the
20 filing date;
21 5. The failure of the insurer to submit a risk based
22 capital plan to the department within the time period set
23 forth in paragraph (3)(c);
24 6. Notification by the department to the insurer that:
25 a. The risk based capital plan or the revised risk
26 based capital plan submitted by the insurer is, in the
27 judgment of the department, unsatisfactory; and
28 b. This notification constitutes a regulatory action
29 level event with respect to the insurer, unless the insurer
30 challenges the determination under subsection (7);
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HB 1943, First Engrossed
1 7. If, under subsection (7), the insurer challenges a
2 determination by the department under subparagraph 6., the
3 notification by the department to the insurer that the
4 department has, after a hearing, rejected the challenge;
5 8. Notification by the department to the insurer that
6 the insurer has failed to adhere to its risk based capital
7 plan or revised risk based capital plan, but only if this
8 failure has a substantial adverse effect on the ability of the
9 insurer to eliminate the company action level event in
10 accordance with its risk based capital plan or revised risk
11 based capital plan and the department has so stated in the
12 notification, unless the insurer challenges the determination
13 under subsection (7); or
14 9. If, under subsection (7), the insurer challenges a
15 determination by the department under subparagraph 8., the
16 notification by the department to the insurer that the
17 department has, after a hearing, rejected the challenge.
18 (b) If a regulatory action level event occurs, the
19 department shall:
20 1. Require the insurer to prepare and submit a risk
21 based capital plan or, if applicable, a revised risk based
22 capital plan;
23 2. Perform an examination pursuant to section 624.316,
24 Florida Statutes, or an analysis, as the department considers
25 necessary, of the assets, liabilities, and operations of the
26 insurer, including a review of the risk based capital plan or
27 the revised risk based capital plan; and
28 3. After the examination or analysis, issue a
29 corrective order specifying such corrective actions as the
30 department determines are required.
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HB 1943, First Engrossed
1 (c) In determining corrective actions, the department
2 shall consider any factor relevant to the insurer based upon
3 the department's examination or analysis of the assets,
4 liabilities, and operations of the insurer, including, but not
5 limited to, the results of any sensitivity tests undertaken as
6 provided in the risk based capital instructions. The risk
7 based capital plan or the revised risk based capital plan must
8 be submitted:
9 1. Within 45 days after the occurrence of the
10 regulatory action level event;
11 2. If the insurer challenges an adjusted risk based
12 capital report under subsection (7), within 45 days after the
13 notification to the insurer that the department has, after a
14 hearing, rejected the insurer's challenge; or
15 3. If the insurer challenges a revised risk based
16 capital plan under subsection (7), within 45 days after the
17 notification to the insurer that the department has, after a
18 hearing, rejected the insurer's challenge.
19 (d) The department may retain actuaries, investment
20 experts, and other consultants to review an insurer's risk
21 based capital plan or revised risk based capital plan, examine
22 or analyze the assets, liabilities, and operations of an
23 insurer, and formulate the corrective order with respect to
24 the insurer. The fees, costs, and expenses relating to
25 consultants must be borne by the affected insurer or by any
26 other party as directed by the department.
27 (5)(a) An authorized control level event includes:
28 1. The filing of a risk based capital report by the
29 insurer which indicates that the insurer's total adjusted
30 capital is greater than or equal to its mandatory control
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HB 1943, First Engrossed
1 level risk based capital but is less than its authorized
2 control level risk based capital;
3 2. The notification by the department to the insurer
4 of an adjusted risk based capital report that indicates the
5 event in subparagraph 1., unless the insurer challenges the
6 adjusted risk based capital report under subsection (7);
7 3. If, under subsection (7), the insurer challenges an
8 adjusted risk based capital report that indicates the event in
9 subparagraph 1., notification by the department to the insurer
10 that the department has, after a hearing, rejected the
11 insurer's challenge;
12 4. The failure of the insurer to respond, in a manner
13 satisfactory to the department, to a corrective order, unless
14 the insurer challenges the corrective order under subsection
15 (7); or
16 5. If the insurer challenges a corrective order under
17 subsection (7) and the department has, after a hearing,
18 rejected the challenge or modified the corrective order, the
19 failure of the insurer to respond, in a manner satisfactory to
20 the department, to the corrective order after rejection or
21 modification by the department.
22 (b) If an authorized control level event occurs, the
23 department shall:
24 1. Take any action required under subsection (4)
25 regarding the insurer with respect to which a regulatory
26 action level event has occurred; or
27 2. If the department considers it to be in the best
28 interests of the policyholders and creditors of the insurer
29 and of the public, take any action as necessary to cause the
30 insurer to be placed under regulatory control under chapter
31 631, Florida Statutes. An authorized control level event is
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HB 1943, First Engrossed
1 sufficient ground for the department to be appointed as
2 receiver as provided in chapter 631, Florida Statutes.
3 (6)(a) A mandatory control level event includes:
4 1. The filing of a risk based capital report that
5 indicates that the insurer's total adjusted capital is less
6 than its mandatory control level risk based capital;
7 2. Notification by the department to the insurer of an
8 adjusted risk based capital report that indicates the event in
9 subparagraph 1., unless the insurer challenges the adjusted
10 risk based capital report under subsection (7); or
11 3. If, under subsection (7), the insurer challenges an
12 adjusted risk based capital report that indicates the event in
13 subparagraph 1., notification by the department to the insurer
14 that the department has, after a hearing, rejected the
15 insurer's challenge.
16 (b) If a mandatory control level event occurs:
17 1. With respect to a life and health insurer, the
18 department shall, after due consideration of s. 624.408,
19 Florida Statutes, take any action necessary to place the
20 insurer under regulatory control, including any remedy
21 available under chapter 631, Florida Statutes. A mandatory
22 control level event is sufficient ground for the department to
23 be appointed as receiver as provided in chapter 631, Florida
24 Statutes. The department may forego taking action for up to
25 90 days after the mandatory control level event if the
26 department finds there is a reasonable expectation that the
27 mandatory control level event may be eliminated within the
28 90-day period.
29 2. With respect to a property and casualty insurer,
30 the department shall, after due consideration of s. 624.408,
31 Florida Statutes, take any action necessary to place the
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HB 1943, First Engrossed
1 insurer under regulatory control, including any remedy
2 available under chapter 631, Florida Statutes, or, in the case
3 of an insurer that is not writing new business, may allow the
4 insurer to continue to operate under the supervision of the
5 department. In either case, the mandatory control level event
6 is sufficient ground for the department to be appointed as
7 receiver as provided in chapter 631, Florida Statutes. The
8 department may forego taking action for up to 90 days after
9 the mandatory control level event if the department finds
10 there is a reasonable expectation that the mandatory control
11 level event will be eliminated within the 90-day period.
12 (7)(a) An insurer has a right to a hearing before the
13 department upon:
14 1. Notification to an insurer by the department of an
15 adjusted risk based capital report;
16 2. Notification to an insurer by the department that
17 the insurer's risk based capital plan or revised risk based
18 capital plan is unsatisfactory, and that the notification
19 constitutes a regulatory action level event with respect to
20 such insurer;
21 3. Notification to any insurer by the department that
22 the insurer has failed to adhere to its risk based capital
23 plan or revised risk based capital plan and that the failure
24 has a substantial adverse effect on the ability of the insurer
25 to eliminate the company action level event in accordance with
26 its risk based capital plan or its revised risk based capital
27 plan; or
28 4. Notification to an insurer by the department of a
29 corrective order with respect to the insurer.
30 (b) At such hearing the insurer may challenge any
31 determination or action by the department. The insurer shall
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1 notify the department of its request for a hearing within 5
2 days after receipt of the notification by the department under
3 this subsection. Upon receipt of the request for a hearing,
4 the department shall set a date for the hearing, which date
5 must be no fewer than 10 nor more than 30 days after the date
6 the department receives the insurer's request. The hearing
7 must be conducted as provided in section 624.324, Florida
8 Statutes, with the right to appellate review under section
9 120.68, Florida Statutes.
10 (8)(a) Any foreign insurer shall, upon the written
11 request of the department, submit to the department a risk
12 based capital report, as of the end of the calendar year just
13 ended, no later than the later of:
14 1. The date a risk based capital report is required to
15 be filed by a domestic insurer under this section; or
16 2. Fifteen days after the request is received by the
17 foreign insurer.
18 (b) Any foreign insurer shall, upon the written
19 request of the department, promptly submit to the department a
20 copy of any risk based capital plan that is filed with the
21 insurance department of another state.
22 (c) The department may require a foreign insurer to
23 file a risk based capital plan if:
24 1. A company action level event, regulatory action
25 level event, or authorized control level event occurs with
26 respect to any foreign insurer as determined under the risk
27 based capital law of the state of domicile of the insurer, or,
28 if there is no risk based capital law in that state, under
29 this section.
30 2. The insurance department of the state of domicile
31 of the foreign insurer fails to require the foreign insurer to
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1 file a risk based capital plan in the manner specified under
2 the risk based capital law of that state, or, if there is no
3 risk based capital law in that state, under subsection (3).
4
5 The failure of the foreign insurer to file a risk based
6 capital plan with the department when required under this
7 paragraph is a ground for the department to take any action
8 under section 624.418, Florida Statutes, which it determines
9 is necessary.
10 (d) If a mandatory control level event occurs with
11 respect to any foreign insurer and a domiciliary receiver has
12 not been appointed with respect to the foreign insurer under
13 the rehabilitation and liquidation law of the state of
14 domicile of the foreign insurer, the department may apply to
15 the Circuit Court of Leon County and such event constitutes
16 grounds for the department to be appointed as receiver as
17 provided in chapter 631, Florida Statutes, with respect to the
18 liquidation of property of foreign insurers found in this
19 state. The occurrence of a mandatory control level event is a
20 ground for such application.
21 (9) There shall be no liability on the part of, and no
22 cause of action shall arise against, the commissioner, the
23 department, or its employees or agents for any action taken by
24 them in the performance of their powers and duties under this
25 section.
26 (10) The department shall transmit any notice that may
27 result in regulatory action by registered mail, certified
28 mail, or any other method of transmission. Notice is
29 effective when the insurer receives it.
30 (11) For the purposes of the risk based capital
31 reports required to be filed by life and health insurers with
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1 respect to their 1997 annual statement data and the risk based
2 capital reports required to be filed by property and casualty
3 insurers with respect to their 1997 annual statement data, the
4 following requirements apply in lieu of the provisions of
5 subsections (3), (4), (5), and (6):
6 (a) If a company action level event occurs with
7 respect to a domestic insurer, the department may not take any
8 regulatory action.
9 (b) If a regulatory action level event occurs under
10 subparagraph 1., subparagraph 2., or subparagraph 3. of
11 paragraph (4)(a), the department shall take the actions
12 required under subsection (3).
13 (c) If a regulatory action level event occurs under
14 subparagraph 4., subparagraph 5., subparagraph 6.,
15 subparagraph 7., subparagraph 8., or subparagraph 9. of
16 paragraph (4)(a), or an authorized control level event occurs,
17 the department shall take the actions required under
18 subsection (4).
19 (d) If a mandatory control level event occurs with
20 respect to an insurer, the department shall take the actions
21 required under subsection (5).
22 (12) This section is supplemental to the other laws of
23 this state and does not preclude or limit any power or duty of
24 the department under those laws or under the rules adopted
25 under those laws.
26 (13) This section does not apply to a domestic
27 property and casualty insurer that meets all of the following
28 conditions:
29 (a) Writes direct business only in this state;
30 (b) Writes direct annual premiums of $2 million or
31 less; and
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1 (c) Assumes no reinsurance in excess of 5 percent of
2 direct premiums written.
3 (14) The department may adopt rules to administer this
4 section, including, but not limited to, those regarding risk
5 based capital reports, adjusted risk based capital reports,
6 risk based capital plans, corrective orders and procedures to
7 be followed in the event of a triggering of a company action
8 level event, a regulatory action level event, an authorized
9 control level event, or a mandatory control level event.
10 Section 2. Assets of insurers; reporting
11 requirements.--
12 (1) As used in this section, the term:
13 (a) "Material acquisition of assets" or "material
14 disposition of assets" means one or more transactions
15 occurring during any 30-day period which are nonrecurring and
16 not in the ordinary course of business and involve more than 5
17 percent of the reporting insurer's total admitted assets as
18 reported in its most recent statutory statement filed with the
19 insurance department of the insurer's state of domicile.
20 (b) "Material nonrenewal, cancellation, or revision of
21 a ceded reinsurance agreement" is one that affects:
22 1. With respect to property and casualty business,
23 including accident and health business written by a property
24 and casualty insurer:
25 a. More than 50 percent of the insurer's total ceded
26 written premium; or
27 b. More than 50 percent of the insurer's total ceded
28 indemnity and loss-adjustment reserves.
29 2. With respect to life, annuity, and accident and
30 health business, more than 50 percent of the total reserve
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1 credit taken for business ceded, on an annualized basis, as
2 indicated in the insurer's most recent annual statement.
3 3. With respect to property and casualty business or
4 life, annuity, and accident and health business, a material
5 revision includes:
6 a. The replacement of an authorized reinsurer
7 representing more than 10 percent of a total cession by one or
8 more unauthorized reinsurers; or
9 b. The reduction or waiver, with respect to one or
10 more unauthorized insurers, of previously established
11 collateral requirements representing more than 10 percent of a
12 total cession.
13 (2) Each domestic insurer shall file a report with the
14 Department of Insurance disclosing a material acquisition of
15 assets, a material disposition of assets, or a material
16 nonrenewal, cancellation, or revision of a ceded reinsurance
17 agreement, unless the material acquisition or disposition of
18 assets or the material nonrenewal, cancellation, or revision
19 of a ceded reinsurance agreement has been submitted to the
20 department for review, approval, or informational purposes
21 under another section of the Florida Insurance Code or a rule
22 adopted thereunder. A copy of the report and each exhibit or
23 other attachment must be filed by the insurer with the
24 National Association of Insurance Commissioners. The report
25 required in this section is due within 15 days after the end
26 of the calendar month in which the transaction occurs.
27 (3) An immaterial acquisition or disposition of assets
28 need not be reported under this section.
29 (4)(a) Acquisitions of assets which are subject to
30 this section include each purchase, lease, exchange, merger,
31 consolidation, succession, or other acquisition of assets.
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1 Asset acquisitions for the construction or development of real
2 property by or for the reporting insurer and the acquisition
3 of construction materials for this purpose are not subject to
4 this section.
5 (b) Dispositions of assets which are subject to this
6 section include each sale, lease, exchange, merger,
7 consolidation, mortgage, hypothecation, assignment for the
8 benefit of a creditor or otherwise, abandonment, destruction,
9 or other disposition of assets.
10 (5)(a) The following information must be disclosed in
11 any report of a material acquisition or disposition of assets:
12 1. The date of the transaction;
13 2. The manner of acquisition or disposition;
14 3. The description of the assets involved;
15 4. The nature and amount of the consideration given or
16 received;
17 5. The purpose of, or reason for, the transaction;
18 6. The manner by which the amount of consideration was
19 determined;
20 7. The gain or loss recognized or realized as a result
21 of the transaction; and
22 8. The name of the person from whom the assets were
23 acquired or to whom they were disposed.
24 (b) Insurers must report material acquisitions or
25 dispositions on a nonconsolidated basis unless the insurer is
26 part of a consolidated group of insurers which uses a pooling
27 arrangement or a 100-percent reinsurance agreement that
28 affects the solvency and integrity of the insurer's reserves
29 and the insurer has ceded substantially all of its direct and
30 assumed business to the pool. An insurer is deemed to have
31 ceded substantially all of its direct and assumed business to
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1 a pool if the insurer has less than $1 million in total direct
2 and assumed written premiums during a calendar year which are
3 not subject to a pooling arrangement and if the net income of
4 the business which is not subject to the pooling arrangement
5 represents less than 5 percent of the insurer's capital and
6 surplus.
7 (6) The nonrenewal, cancellation, or revision of a
8 ceded reinsurance agreement need not be reported if the
9 renewal or the revision is not material or if:
10 (a) With respect to property and casualty business,
11 including accident and health business written by a property
12 and casualty insurer, the insurer's total ceded written
13 premium represents, on an annualized basis, less than 10
14 percent of its total written premium for direct and assumed
15 business; or
16 (b) With respect to life, annuity, and accident and
17 health business, the total reserve credit taken for business
18 ceded represents, on an annualized basis, less than 10 percent
19 of the statutory reserve requirement before the cession.
20 (7)(a) The following information must be disclosed in
21 any report of a material nonrenewal, cancellation, or revision
22 of a ceded reinsurance agreement:
23 1. The effective date of the nonrenewal, cancellation,
24 or revision;
25 2. The description of the transaction and the
26 identification of the initiator of the transaction;
27 3. The purpose of, or reason for, the transaction; and
28 4. If applicable, the identity of each replacement
29 reinsurer.
30 (b) Insurers shall report the material nonrenewal,
31 cancellation, or revision of a ceded reinsurance agreement on
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1 a nonconsolidated basis unless the insurer is part of a
2 consolidated group of insurers which uses a pooling
3 arrangement or a 100-percent reinsurance agreement that
4 affects the solvency and integrity of the insurer's reserves
5 and the insurer has ceded substantially all of its direct and
6 assumed business to the pool. An insurer is deemed to have
7 ceded substantially all of its direct and assumed business to
8 a pool if the insurer has less than $1 million in total direct
9 and assumed written premiums during a calendar year which are
10 not subject to a pooling arrangement and if the net income of
11 the business not subject to the pooling arrangement represents
12 less than 5 percent of the insurer's capital and surplus.
13 Section 3. Subsection (1) of section 624.3161, Florida
14 Statutes, is amended to read:
15 624.3161 Market conduct examinations.--
16 (1) As often as it deems necessary, and not less
17 frequently than each 5 years, the department shall examine
18 each licensed rating organization, each advisory organization,
19 each group, association, or other organization of insurers
20 which engages in joint underwriting or joint reinsurance, and
21 each authorized insurer transacting in this state any class of
22 insurance to which the provisions of part I of chapter 627 are
23 applicable. The examination shall be for the purpose of
24 ascertaining compliance by the person examined with the
25 applicable provisions of chapters 624, 626, 627, and 635.
26 Section 4. Paragraph (d) of subsection (8) of section
27 624.424, Florida Statutes, is amended to read:
28 624.424 Annual statement and other information.--
29 (8)
30 (d) An insurer may not use the same accountant or
31 partner of an accounting firm responsible for preparing the
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1 report required by this subsection for more than 7 5
2 consecutive years. Following this period, the insurer may not
3 use such accountant or partner for a period of 2 years, but
4 may use another accountant or partner of the same firm. An
5 insurer may request the department to waive this prohibition
6 based upon an unusual hardship to the insurer and a
7 determination that the accountant is exercising independent
8 judgment that is not unduly influenced by the insurer
9 considering such factors as the number of partners, expertise
10 of the partners or the number of insurance clients of the
11 accounting firm; the premium volume of the insurer; and the
12 number of jurisdictions in which the insurer transacts
13 business.
14 Section 5. Section 624.5094, Florida Statutes, is
15 created to read:
16 624.5094 Casualty insurance premiums.--Notwithstanding
17 any statutory provision to the contrary, for the purposes of
18 calculating the annual assessments for the Special Disability
19 Trust Fund under s. 440.49 and expenses of administration
20 under s. 440.51, any amount paid or credited as dividends or
21 premium refunds in the same calendar year by the insurer to
22 its policyholders must be deducted from "net premium," "net
23 premiums written," "direct premium," and "net premium
24 collected" for the calendar year. Such offset for dividends or
25 premium refunds paid or credited for the current year must be
26 applied against the current year's net premium for that year's
27 assessment regardless of the policy year for which the
28 dividends or premium refunds are being reimbursed.
29 Section 6. Paragraph (i) is added to subsection (5) of
30 section 625.121, Florida Statutes, 1996 Supplement, to read:
31 625.121 Standard Valuation Law; life insurance.--
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1 (5) MINIMUM STANDARD FOR VALUATION OF POLICIES AND
2 CONTRACTS ISSUED ON OR AFTER OPERATIVE DATE OF STANDARD
3 NONFORFEITURE LAW.--Except as otherwise provided in paragraph
4 (h) and subsections (6), (11), and (14), the minimum standard
5 for the valuation of all such policies and contracts issued on
6 or after the operative date of s. 627.476 (Standard
7 Nonforfeiture Law for Life Insurance) shall be the
8 commissioners' reserve valuation method defined in subsections
9 (7), (11), and (14); 5 percent interest for group annuity and
10 pure endowment contracts and 3.5 percent interest for all
11 other such policies and contracts, or in the case of life
12 insurance policies and contracts, other than annuity and pure
13 endowment contracts, issued on or after July 1, 1973, 4
14 percent interest for such policies issued prior to October 1,
15 1979, and 4.5 percent interest for such policies issued on or
16 after October 1, 1979; and the following tables:
17 (i) In lieu of the mortality tables specified in this
18 subsection, and subject to rules adopted by the department,
19 the insurance company may, at its option:
20 1. Substitute the applicable 1958 CSO or CET Smoker
21 and Nonsmoker Mortality Tables, in lieu of the 1980 CSO or CET
22 mortality table standard, for policies issued on or after the
23 operative date of s. 627.476(9) and before January 1, 1989.
24 2. Substitute the applicable 1980 CSO or CET Smoker
25 and Nonsmoker Mortality Tables in lieu of the 1980 CSO or CET
26 mortality table standard;
27 3. Use the Annuity 2000 Mortality Table for
28 determining the minimum standard of valuation for individual
29 annuity and pure endowment contracts issued on or after the
30 operative date of this section until the department, on a date
31 certain that is on or after January 1, 1998, adopts by rule
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1 that table for determining the minimum standard for valuation
2 purposes.
3 4. Use the 1994 GAR Table for determining the minimum
4 standard of valuation for annuities and pure endowments
5 purchased on or after the operative date of this section under
6 group annuity and pure endowment contracts until the
7 department, on a date certain that is on or after January 1,
8 1998, adopts by rule that table for determining the minimum
9 standard for valuation purposes.
10 Section 7. Paragraph (e) of subsection (1) of section
11 626.321, Florida Statutes, is amended to read:
12 626.321 Limited licenses.--
13 (1) The department shall issue to a qualified
14 individual, or a qualified individual or entity under
15 paragraphs (d) and (e), a license as agent authorized to
16 transact a limited class of business in any of the following
17 categories:
18 (e) Credit life or disability insurance.--License
19 covering only credit life or disability insurance. The
20 license may be issued only to an individual employed by a life
21 or health insurer as an officer or other salaried or
22 commissioned representative, or to an individual employed by
23 or associated with a lending or financing institution or
24 creditor, and may authorize the sale of such insurance only
25 with respect to borrowers or debtors of such lending or
26 financing institution or creditor. However, only the
27 individual or entity whose tax identification number is used
28 in receiving or is credited with receiving the commission from
29 the sale of such insurance shall be the licensed agent of the
30 insurer. No individual while so licensed shall hold a license
31 as an agent or solicitor as to any other or additional kind or
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1 class of life or health insurance coverage. An entity other
2 than a lending or financial institution defined in s. 626.988
3 holding a limited license under this subsection (1)(e) shall
4 also be authorized to sell credit property insurance.
5 Section 8. Paragraph (h) of subsection (9) of section
6 627.476, Florida Statutes, is amended to read:
7 627.476 Standard Nonforfeiture Law for Life
8 Insurance.--
9 (9) CALCULATION OF ADJUSTED PREMIUMS AND PRESENT
10 VALUES FOR POLICIES ISSUED AFTER OPERATIVE DATE OF THIS
11 SUBSECTION.--
12 (h) All adjusted premiums and present values referred
13 to in this section shall for all policies of ordinary
14 insurance be calculated on the basis of the Commissioners'
15 1980 Standard Ordinary Mortality Table or, at the election of
16 the insurer for any one or more specified plans of life
17 insurance, the Commissioners' 1980 Standard Ordinary Mortality
18 Table with Ten-Year Select Mortality Factors; shall for all
19 policies of industrial insurance be calculated on the basis of
20 the Commissioners' 1961 Standard Industrial Mortality Table;
21 and shall for all policies issued in a particular calendar
22 year be calculated on the basis of a rate of interest not
23 exceeding the nonforfeiture interest rate as defined in this
24 subsection for policies issued in that calendar year. However:
25 1. At the option of the insurer, calculations for all
26 policies issued in a particular calendar year may be made on
27 the basis of a rate of interest not exceeding the
28 nonforfeiture interest rate, as defined in this subsection,
29 for policies issued in the immediately preceding calendar
30 year.
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1 2. Under any paid-up nonforfeiture benefit, including
2 any paid-up dividend additions, any cash surrender value
3 available, whether or not required by subsection (2), shall be
4 calculated on the basis of the mortality table and rate of
5 interest used in determining the amount of such paid-up
6 nonforfeiture benefit and paid-up dividend additions, if any.
7 3. An insurer may calculate the amount of any
8 guaranteed paid-up nonforfeiture benefit, including any
9 paid-up additions under the policy, on the basis of an
10 interest rate no lower than that specified in the policy for
11 calculating cash surrender values.
12 4. In calculating the present value of any paid-up
13 term insurance with accompanying pure endowment, if any,
14 offered as a nonforfeiture benefit, the rates of mortality
15 assumed may be not more than those shown in the Commissioners'
16 1980 Extended Term Insurance Table for policies of ordinary
17 insurance and not more than the Commissioners' 1961 Industrial
18 Extended Term Insurance Table for policies of industrial
19 insurance.
20 5. In lieu of the mortality tables specified in this
21 section, at the option of the insurance company and subject to
22 rules adopted by the department, the insurance company may
23 substitute:
24 a. The 1958 CSO or CET Smoker and Nonsmoker Mortality
25 Tables, whichever is applicable, for policies issued on or
26 after the operative date of this subsection and before January
27 1, 1989;
28 b. The 1980 CSO or CET Smoker and Nonsmoker Mortality
29 Tables, whichever is applicable, for policies issued on or
30 after the operative date of this subsection;
31
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1 c. A mortality table that is a blend of the
2 sex-distinct 1980 CSO or CET mortality table standard,
3 whichever is applicable, or a mortality table that is a blend
4 of the sex-distinct 1980 CSO or CET smoker and nonsmoker
5 mortality table standards, whichever is applicable, for
6 policies that are subject to the United States Supreme Court
7 decision in Arizona Governing Committee v. Norris to prevent
8 unfair discrimination in employment situations.
9 6.5. For insurance issued on a substandard basis, the
10 calculation of any such adjusted premiums and present values
11 may be based on appropriate modifications of the
12 aforementioned tables.
13 Section 9. Section 627.4555, Florida Statutes, is
14 amended to read:
15 627.4555 Secondary notice.--Except as provided in this
16 section, a no contract for life insurance issued or issued for
17 delivery in this state on or after October 1, 1997, covering a
18 natural person 64 years of age or older or owned by a natural
19 person 64 years of age or older, which has been in force for
20 at least 1 year, may not shall be lapsed canceled for
21 nonpayment of premium unless, after expiration of the grace
22 period, and at least 21 days before prior to the effective
23 date of any such lapse cancellation, the insurer has mailed a
24 notification of the impending possible lapse in coverage to
25 the policyowner owner of the policy and to a specified
26 secondary addressee if such addressee has been designated in
27 writing by name and address by the policyowner. An insurer
28 issuing a life insurance contract on or after October 1, 1997
29 1995, shall notify the applicant of the right to designate a
30 secondary addressee at the time of application for the policy,
31 on a form provided by the insurer, and at any time the policy
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1 is in force, by submitting a written notice to the insurer
2 containing the name and address of the secondary addressee.
3 For purposes of any life insurance policy that provides a
4 grace period of more than 51 days for nonpayment of premiums,
5 the notice of impending lapse in coverage required by this
6 section must be mailed to the policyowner and the secondary
7 addressee at least 21 days before the expiration of the grace
8 period provided in the policy. This section does not apply to
9 any life insurance contract under which premiums are payable
10 monthly or more frequently and are regularly collected by a
11 licensed agent or are paid by credit card or any preauthorized
12 check processing or automatic debit service of a financial
13 institution. For policies of life insurance issued or renewed
14 on or after October 1, 1995, the insurer shall notify the
15 owner, at least annually, of the right to designate a
16 secondary addressee.
17 Section 10. Section 627.5045, Florida Statutes, is
18 amended to read:
19 627.5045 Secondary notice.--Except as provided in this
20 section, a no contract for an industrial life insurance policy
21 issued or issued for delivery in this state on or after
22 October 1, 1997, for which premiums are paid monthly, covering
23 a natural person 64 years of age or older or owned by a
24 natural person 64 years of age or older, which has been in
25 force for at least 1 year, may not shall be lapsed canceled
26 for nonpayment of premium unless, after expiration of the
27 grace period, and at least 21 days before prior to the
28 effective date of such lapse cancellation, the insurer has
29 mailed a notification of the impending possible lapse in
30 coverage to the policyowner owner of the policy and to a
31 specified secondary addressee if such addressee has been
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1 designated in writing by name and address by the policyowner.
2 An insurer issuing an industrial life insurance contract on or
3 after October 1, 1997 1995, shall notify the applicant of the
4 right to designate a secondary addressee at the time of
5 application for the policy on a form provided by the insurer
6 and at any time the policy is in force by submitting a written
7 notice to the insurer containing the name and address of the
8 secondary addressee. This section does not apply to any life
9 insurance contract under which premiums are payable monthly or
10 more frequently and are regularly collected by a licensed
11 agent. For policies of industrial life insurance issued or
12 renewed on or after October 1, 1995, the insurer shall notify
13 the owner, at least annually, of the right to designate a
14 secondary addressee.
15 Section 11. Section 628.801, Florida Statutes, is
16 amended to read:
17 628.801 Insurance holding companies; registration;
18 regulation.--Every insurer which is authorized to do business
19 in this state and which is a member of an insurance holding
20 company shall register with the department and be subject to
21 regulation with respect to its relationship to such holding
22 company as provided by rule or statute. The department shall
23 adopt rules establishing the information and form required for
24 registration and the manner in which registered insurers and
25 their affiliates shall be regulated. The rules shall apply to
26 domestic insurers, foreign insurers, and commercially
27 domiciled insurers, except a foreign insurer domiciled in
28 states that are accredited by the National Association of
29 Insurance Commissioners by December 31, 1995. Except to the
30 extent of any conflict with this code, the rules must include
31 all requirements and standards of ss. 4 and 5 of the Insurance
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1 Holding Company System Regulatory Act and the Insurance
2 Holding Company System Model Regulation of the National
3 Association of Insurance Commissioners, as the Regulatory Act
4 and the Model Regulation existed on January 1, 1997 1993, and
5 may include a prohibition on oral contracts between affiliated
6 entities. Upon request, the department may waive filing
7 requirements under this section for a domestic insurer that is
8 the subsidiary of an insurer that is in full compliance with
9 the insurance holding company registration laws of its state
10 of domicile, which state is accredited by the National
11 Association of Insurance Commissioners.
12 Section 12. This act shall take effect upon becoming a
13 law, except that sections 9, 10, and 11 shall take effect
14 October 1, 1997.
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