Senate Bill sb0658er

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  1

  2         An act relating to insurance; amending s.

  3         624.610, F.S.; updating a cross-reference;

  4         creating s. 625.011, F.S.; defining the term

  5         "statutory accounting principles"; amending s.

  6         625.012, F.S.; providing for what constitutes

  7         an asset of an insurer; amending s. 625.031,

  8         F.S.; providing for assets not allowed in

  9         determining the financial condition of an

10         insurer; amending s. 625.041, F.S.; revising a

11         provision concerning liability; amending s.

12         625.141, F.S.; providing for the valuation of

13         bonds; amending s. 625.161, F.S.; revising

14         requirements for new appraisals in the

15         valuation of real property; amending s.

16         625.322, F.S.; revising requirements for

17         collateral loans; creating s. 641.183, F.S.;

18         providing a transition selection for statutory

19         accounting principles; amending s. 641.19,

20         F.S.; redefining the terms "reporting period,"

21         "statutory accounting principles," "surplus,"

22         and "surplus notes" for purposes of the Health

23         Maintenance Organization Act; amending s.

24         641.35, F.S.; redefining certain assets or

25         liabilities in the determination of the

26         financial condition of a health maintenance

27         organization; providing applicability; amending

28         ss. 626.916, 626.918, 626.921, 626.923,

29         626.930, 626.931, 626.932, 626.933, 626.935,

30         626.936, 626.9361, 626.938, F.S.; revising

31         certain requirements for surplus lines


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  1         insurance to provide the Florida Surplus Lines

  2         Service Office with the same authority granted

  3         to the Department of Insurance; revising limits

  4         on fees that may be charged with respect to

  5         certain policies certified for export; revising

  6         certain quarterly reporting requirements;

  7         providing for collection of a service fee;

  8         providing a penalty for failure to make certain

  9         reports and pay service fees; providing for an

10         administrative fine for such failure; providing

11         for disposition of surplus lines taxes and

12         service fees; providing a retroactive effective

13         date.

14

15  Be It Enacted by the Legislature of the State of Florida:

16

17         Section 1.  Subsection (4) of section 626.916, Florida

18  Statutes, is amended to read:

19         626.916  Eligibility for export.--

20         (4)  A reasonable per-policy fee, not to exceed $35

21  $25, may be charged by the filing surplus lines agent for each

22  policy certified for export.

23         Section 2.  Subsection (2) of section 626.918, Florida

24  Statutes, is amended to read:

25         626.918  Eligible surplus lines insurers.--

26         (2)  No unauthorized insurer shall be or become an

27  eligible surplus lines insurer unless made eligible by the

28  department in accordance with the following conditions:

29         (a)  Eligibility of the insurer must be requested in

30  writing by the Florida Surplus Lines Service Office a

31  Florida-licensed surplus lines agent;


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  1         (b)  The insurer must be currently an authorized

  2  insurer in the state or country of its domicile as to the kind

  3  or kinds of insurance proposed to be so placed and must have

  4  been such an insurer for not less than the 3 years next

  5  preceding or must be the wholly owned subsidiary of such

  6  authorized insurer or must be the wholly owned subsidiary of

  7  an already eligible surplus lines insurer as to the kind or

  8  kinds of insurance proposed for a period of not less than the

  9  3 years next preceding. However, the department may waive the

10  3-year requirement if the insurer provides a product or

11  service not readily available to the consumers of this state

12  or has operated successfully for a period of at least 1 year

13  next preceding and has capital and surplus of not less than

14  $25 million;

15         (c)  Before granting eligibility, the requesting

16  surplus lines agent or the insurer shall furnish the

17  department with a duly authenticated copy of its current

18  annual financial statement in the English language and with

19  all monetary values therein expressed in United States

20  dollars, at an exchange rate (in the case of statements

21  originally made in the currencies of other countries)

22  then-current and shown in the statement, and with such

23  additional information relative to the insurer as the

24  department may request;

25         (d)1.  The insurer must have and maintain surplus as to

26  policyholders of not less than $15 million; in addition, an

27  alien insurer must also have and maintain in the United States

28  a trust fund for the protection of all its policyholders in

29  the United States under terms deemed by the department to be

30  reasonably adequate, in an amount not less than $5.4 million.

31  Any such surplus as to policyholders or trust fund shall be


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  1  represented by investments consisting of eligible investments

  2  for like funds of like domestic insurers under part II of

  3  chapter 625 provided, however, that in the case of an alien

  4  insurance company, any such surplus as to policyholders may be

  5  represented by investments permitted by the domestic regulator

  6  of such alien insurance company if such investments are

  7  substantially similar in terms of quality, liquidity, and

  8  security to eligible investments for like funds of like

  9  domestic insurers under part II of chapter 625;

10         2.  For those surplus lines insurers that were eligible

11  on January 1, 1994, and that maintained their eligibility

12  thereafter, the required surplus as to policyholders shall be:

13         a.  On December 31, 1994, and until December 30, 1995,

14  $2.5 million.

15         b.  On December 31, 1995, and until December 30, 1996,

16  $3.5 million.

17         c.  On December 31, 1996, and until December 30, 1997,

18  $4.5 million.

19         d.  On December 31, 1997, and until December 30, 1998,

20  $5.5 million.

21         e.  On December 31, 1998, and until December 30, 1999,

22  $6.5 million.

23         f.  On December 31, 1999, and until December 30, 2000,

24  $8 million.

25         g.  On December 31, 2000, and until December 30, 2001,

26  $9.5 million.

27         h.  On December 31, 2001, and until December 30, 2002,

28  $11 million.

29         i.  On December 31, 2002, and until December 30, 2003,

30  $13 million.

31         j.  On December 31, 2003, and thereafter, $15 million.


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  1         3.  The capital and surplus requirements as set forth

  2  in subparagraph 2. do not apply in the case of an insurance

  3  exchange created by the laws of individual states, where the

  4  exchange maintains capital and surplus pursuant to the

  5  requirements of that state, or maintains capital and surplus

  6  in an amount not less than $50 million in the aggregate. For

  7  an insurance exchange which maintains funds in the amount of

  8  at least $12 million for the protection of all insurance

  9  exchange policyholders, each individual syndicate shall

10  maintain minimum capital and surplus in an amount not less

11  than $3 million. If the insurance exchange does not maintain

12  funds in the amount of at least $12 million for the protection

13  of all insurance exchange policyholders, each individual

14  syndicate shall meet the minimum capital and surplus

15  requirements set forth in subparagraph 2.;

16         4.  A surplus lines insurer which is a member of an

17  insurance holding company that includes a member which is a

18  Florida domestic insurer as set forth in its holding company

19  registration statement, as set forth in s. 628.801 and rules

20  adopted thereunder, may elect to maintain surplus as to

21  policyholders in an amount equal to the requirements of s.

22  624.408, subject to the requirement that the surplus lines

23  insurer shall at all times be in compliance with the

24  requirements of chapter 625.

25

26  The election shall be submitted to the department and shall be

27  effective upon the department's being satisfied that the

28  requirements of subparagraph 4. have been met. The initial

29  date of election shall be the date of department approval. The

30  election approval application shall be on a form adopted by

31  department rule. The department may approve an election form


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  1  submitted pursuant to subparagraph 4. only if it was on file

  2  with the department before February 28, 1998;

  3         (e)  The insurer must be of good reputation as to the

  4  providing of service to its policyholders and the payment of

  5  losses and claims;

  6         (f)  The insurer must be eligible, as for authority to

  7  transact insurance in this state, under s. 624.404(3); and

  8         (g)  This subsection does not apply as to unauthorized

  9  insurers made eligible under s. 626.917 as to wet marine and

10  aviation risks.

11         Section 3.  Subsection (2) of section 626.921, Florida

12  Statutes, is amended to read:

13         626.921  Florida Surplus Lines Service Office.--

14         (2)  All surplus lines agents shall, as a condition of

15  holding a license as a surplus lines agent in this state, be

16  deemed to be members of this association and shall report to

17  and file with the service office a copy of or information on

18  each surplus lines insurance policy or document as provided in

19  the plan of operation adopted under subsection (5).  Upon

20  receipt of any claim notice reported under a surplus lines

21  policy which is subject to the filing requirements of this

22  section, the insurer, or an adjuster representing the insurer,

23  must advise the service office of such claim, identifying the

24  policy under which coverage is claimed, and the service office

25  shall determine whether the policy has been filed as required

26  by this section. The service office shall immediately report

27  the particulars of any unfiled policy to the department for

28  enforcement of compliance with the Florida Surplus Lines Law.

29         Section 4.  Section 626.923, Florida Statutes, is

30  amended to read:

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  1         626.923  Filing copy of policy or certificate.--A

  2  surplus lines agent shall, within 30 days after the date of a

  3  request by the department or the Florida Surplus Lines Service

  4  Office, furnish the department an exact copy of any and all

  5  requested policies, including applications, certificates,

  6  cover notes, or other forms of confirmation of insurance

  7  coverage or any substitutions thereof or endorsements thereto.

  8  The department or the Florida Surplus Lines Service Office may

  9  also request and the agent shall furnish, within 30 days after

10  the date of the request, the agent's memorandum as to the

11  substance of any change represented by a substitute

12  certificate, cover note, other form of confirmation of

13  insurance coverage, or endorsement as compared with the

14  coverage as originally placed or issued.

15         Section 5.  Subsection (2) of section 626.930, Florida

16  Statutes, is amended to read:

17         626.930  Records of surplus lines agent.--

18         (2)  The record shall at all times be open to

19  examination by the department or the Florida Surplus Lines

20  Service Office without notice and shall be so kept available

21  and open to the department for 5 years next following

22  expiration or cancellation of the contract.

23         Section 6.  Section 626.931, Florida Statutes, is

24  amended to read:

25         626.931  Agent affidavit and insurer reporting

26  requirements Quarterly report.--

27         (1)  Each surplus lines agent shall on or before the

28  end of the month next following each calendar quarter file

29  with the Florida Surplus Lines Service Office an affidavit, on

30  forms as prescribed and furnished by the Florida Surplus Lines

31  Service Office, stating that a verified report of all surplus


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  1  lines insurance transacted by him or her during such calendar

  2  quarter has been submitted to the Florida Surplus Lines

  3  Service Office as required.

  4         (2)  The reports and supporting information shall be in

  5  a computer-readable format as determined by the department or

  6  shall be submitted on forms prescribed by the department and

  7  shall show:

  8         (a)  Aggregate gross premiums charged;

  9         (b)  Aggregate of returned premiums and taxes paid to

10  insureds;

11         (c)  Aggregate of net premiums;

12         (d)  A listing of all policies, certificates, cover

13  notes, or other forms of confirmation of insurance coverage or

14  any substitutions thereof or endorsements thereto; and

15         (e)  Additional information as required by the

16  department.

17         (2)(3)  The report shall include The affidavit of the

18  surplus lines agent shall include, on forms as prescribed and

19  furnished by the department, as to efforts made to place

20  coverages with authorized insurers and the results thereof.

21         (3)(4)  Each foreign insurer accepting premiums which

22  are subject to taxes and which are described in this section

23  shall, on or before the end of the month following each

24  calendar quarter, file with the Florida Surplus Lines Service

25  Office a verified report of all surplus lines insurance

26  transacted by such insurer for insurance risks located in this

27  state during such calendar quarter.

28         (4)(5)  Each alien insurer accepting premiums which are

29  subject to taxes and which are described in this section

30  shall, on or before June 30 of each year, file with the

31  Florida Surplus Lines Service Office a verified report of all


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  1  surplus lines insurance transacted by such insurer for

  2  insurance risks located in this state during the preceding

  3  calendar year, provided the first such report shall be with

  4  respect to calendar year 1994.

  5         (5)(6)  The Insurance Commissioner shall have the

  6  authority to waive the filing requirements described in

  7  subsections (3) (4) and (4) (5).

  8         (6)(7)  Each insurer's report and supporting

  9  information shall be in a computer-readable format as

10  determined by the Florida Surplus Lines Service Office

11  department or shall be submitted on forms prescribed by the

12  Florida Surplus Lines Service Office department and shall show

13  for each applicable agent:

14         (a)  The aggregate gross Florida premiums charged;

15         (b)  The aggregate of returned Florida premiums;

16         (c)  The aggregate of net Florida premiums;

17         (a)(d)  A listing of all policies, certificates, cover

18  notes, or other forms of confirmation of insurance coverage or

19  any substitutions thereof or endorsements thereto and the

20  identifying number; and

21         (b)(e)  Any additional information required by the

22  department or Florida Surplus Lines Service Office.

23         Section 7.  Paragraph (a) of subsection (2) of section

24  626.932, Florida Statutes, is amended to read:

25         626.932  Surplus lines tax.--

26         (2)(a)  The surplus lines agent shall make payable pay

27  to the Department of Insurance Florida Surplus Lines Service

28  Office the tax related to each calendar quarter's business as

29  reported to the Florida Surplus Lines Service Office, and

30  remit the tax to the Florida Surplus Lines Service Office at

31  the same time as provided for the filing of the quarterly


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  1  affidavit report, under s. 626.931. The Florida Surplus Lines

  2  Service Office shall forward to the department the taxes and

  3  any interest collected pursuant to paragraph (b), within 10

  4  days of receipt, along with a copy of the quarterly reports

  5  received.

  6         Section 8.  Section 626.933, Florida Statutes, is

  7  amended to read:

  8         626.933  Collection of tax and service fee.--If the tax

  9  or service fee payable by a surplus lines agent under this

10  Surplus Lines Law is not so paid within the time prescribed,

11  the same shall be recoverable in a suit brought by the

12  department against the surplus lines agent and the surety or

13  sureties on the bond filed by the surplus lines agent under s.

14  626.928.

15         Section 9.  Paragraphs (d) and (e) of subsection (1) of

16  section 626.935, Florida Statutes, are amended to read:

17         626.935  Suspension, revocation, or refusal of surplus

18  lines agent's license.--

19         (1)  The department shall deny an application for,

20  suspend, revoke, or refuse to renew the appointment of a

21  surplus lines agent and all other licenses and appointments

22  held by the licensee under this code, upon any of the

23  following grounds:

24         (d)  Failure to make and file his or her affidavit or

25  quarterly reports when due as required by s. 626.931.

26         (e)  Failure to pay the tax or service fee on surplus

27  lines premiums, as provided for in this Surplus Lines Law.

28         Section 10.  Section 626.936, Florida Statutes, is

29  amended to read:

30         626.936  Failure to file reports report or pay tax or

31  service fee; administrative penalty.--


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  1         (1)  Any licensed surplus lines agent who neglects to

  2  file a quarterly report or an affidavit in the form and within

  3  the time required or provided for in the Surplus Lines Law may

  4  be fined up to $50 per day for each day the neglect continues,

  5  beginning the day after the quarterly report or affidavit was

  6  due until the date the report or affidavit is received by the

  7  department.  The department shall deposit All sums collected

  8  by it under this section shall be deposited into the Insurance

  9  Commissioner's Regulatory Trust Fund.

10         (2)  Any licensed surplus lines agent who neglects to

11  pay the taxes or service fees as required under the Surplus

12  Lines Law and within the time required may be fined up to $500

13  per day for each day the failure to pay continues, beginning

14  the day after the tax or service fees were was due. The agent

15  shall pay interest on the amount of any delinquent tax due, at

16  the rate of 9 percent per year, compounded annually, beginning

17  the day the amount becomes delinquent.  The department shall

18  deposit all sums collected by it under this section into the

19  Insurance Commissioner's Regulatory Trust Fund.

20         Section 11.  Section 626.9361, Florida Statutes, is

21  amended to read:

22         626.9361  Failure to file report; administrative

23  penalty.--Any eligible surplus lines insurer who fails to file

24  a quarterly report in the form and within the time required or

25  provided for in the Surplus Lines Law may be fined up to $500

26  per day for each day such failure continues, beginning the day

27  after the report was due, until the date the report is

28  received by the department.  Failure to file a quarterly

29  report may also result in withdrawal of eligibility as a

30  surplus lines insurer in this state. All sums collected by the

31


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  1  department under this section shall be deposited into the

  2  Insurance Commissioner's Regulatory Trust Fund.

  3         Section 12.  Subsections (1), (3), (4), and (10) of

  4  section 626.938, Florida Statutes, are amended to read:

  5         626.938  Report and tax of independently procured

  6  coverages.--

  7         (1)  Every insured who in this state procures or causes

  8  to be procured or continues or renews insurance with an

  9  unauthorized foreign or alien insurer, or any self-insurer who

10  in this state so procures or continues excess loss,

11  catastrophe, or other insurance, upon a subject of insurance

12  resident, located, or to be performed within this state, other

13  than insurance procured through a surplus lines agent pursuant

14  to the Surplus Lines Law of this state or exempted from tax

15  under s. 626.932(4), shall, within 30 days after the date such

16  insurance was so procured, continued, or renewed, file a

17  report of the same with the Florida Surplus Lines Service

18  Office department in writing and upon forms designated by the

19  Florida Surplus Lines Service Office department and furnished

20  to such an insured upon request, or in a computer readable

21  format as determined by the Florida Surplus Lines Service

22  Office. The report shall show the name and address of the

23  insured or insureds, the name and address of the insurer, the

24  subject of the insurance, a general description of the

25  coverage, the amount of premium currently charged therefor,

26  and such additional pertinent information as is reasonably

27  requested by the Florida Surplus Lines Service Office

28  department.

29         (3)  For the general support of the government of this

30  state, there is levied upon the obligation, chose in action,

31  or right represented by the premium charged for such insurance


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  1  a tax at the rate of 5 percent of the gross amount of such

  2  premium and a 0.3 percent service fee pursuant to s. 626.9325.

  3  The insured shall withhold the amount of the tax and service

  4  fee from the amount of premium charged by and otherwise

  5  payable to the insurer for such insurance.; and, Within 30

  6  days after the insurance is was so procured, continued, or

  7  renewed, and simultaneously coincidentally with the filing of

  8  the report provided for in subsection (1) with the Florida

  9  Surplus Lines Service Office department of the report provided

10  for in subsection (1), the insured shall make payable to the

11  Department of Insurance pay the amount of the tax and make

12  payable to the Florida Surplus Lines Service Office the amount

13  of the service fee. The insured shall remit the tax and the

14  service fee to the Florida Surplus Lines Service Office

15  department. The Florida Surplus Lines Service Office shall

16  forward to the department the taxes, and any interest

17  collected pursuant to subsection (5), within 10 days after

18  receipt.

19         (4)  If the insured fails to withhold from the premium

20  the amount of tax and the service fee herein levied, the

21  insured shall be liable for the amount thereof and shall pay

22  that amount the same to the Florida Surplus Lines Service

23  Office department within the time stated in subsection (3).

24         (10)  Each report and supporting information shall be

25  in a computer-readable format as determined by the Florida

26  Surplus Lines Service Office department or shall be submitted

27  on forms prescribed by the Florida Surplus Lines Service

28  Office department.

29         Section 13.  Subsection (14) of section 624.610,

30  Florida Statutes, is amended to read:

31         624.610  Reinsurance.--


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  1         (14)  The department may adopt rules implementing the

  2  provisions of this section. Rules are authorized to protect

  3  the interests of insureds, claimants, ceding insurers,

  4  assuming insurers, and the public. These rules shall be in

  5  substantial compliance with:

  6         (a)  The National Association of Insurance

  7  Commissioners model regulations relating to credit for

  8  reinsurance;

  9         (b)  Version 2001 1999 of the National Association of

10  Insurance Commissioners Accounting Practices and Procedures

11  Manual; and

12         (c)  The National Association of Insurance

13  Commissioners model regulation for Credit for Reinsurance and

14  Life and Health Reinsurance Agreements.

15

16  The department may further adopt rules to provide for

17  transition from existing requirements for the approval of

18  reinsurers to the accreditation of reinsurers pursuant to this

19  section.

20         Section 14.  Section 625.011, Florida Statutes, is

21  created to read:

22         625.011  Definitions.--As used in this chapter, the

23  term "statutory accounting principles" means accounting

24  principles as defined in the National Association of Insurance

25  Commissioners Accounting Practices and Procedures Manual

26  effective January 1, 2001.

27         Section 15.  Subsections (1) and (11) of section

28  625.012, Florida Statutes, are amended, present subsection

29  (12) of that section is redesignated as subsection (16), and

30  new subsections (12), (13), (14), and (15) are added to that

31  section to read:


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  1         625.012  "Assets" defined.--In any determination of the

  2  financial condition of an insurer, there shall be allowed as

  3  "assets" only such assets as are owned by the insurer and

  4  which consist of:

  5         (1)  Cash or cash equivalents, in the possession of the

  6  insurer, or in transit under its control, and including the

  7  true balance of any deposit in a solvent bank, savings and

  8  loan association, or trust company. Cash equivalents are

  9  short-term, highly liquid investments, with original

10  maturities of 3 months or less, which are both readily

11  convertible to known amounts of cash and so near their

12  maturity that they present insignificant risk of changes in

13  value because of changes in interest rates.

14         (11)  Electronic and mechanical machines, including

15  computer-operating software equipment and system software

16  constituting a data processing and accounting system, if the

17  cost of which such system is at least $25,000, which cost

18  shall be amortized in full over a period not to exceed 3 7

19  calendar years. The aggregate amount admitted under this

20  subsection shall be limited to 3 percent of the insurer's

21  capital and surplus, adjusted to exclude any electronic data

22  processing equipment and operating software, net deferred tax

23  assets, and net positive goodwill, as reported on the

24  insurer's most recently filed annual statement.

25         (12)  Goodwill arising from acquisitions and mergers

26  occurring after January 1, 2001.

27         (13)  Loans or advances by an insurer to its parent or

28  principal owner if approved by the department.

29         (14)  Current income tax recoverables.

30         (15)  Capitalized interest.

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  1         (16)(12)  Other assets, not inconsistent with the

  2  provisions of this section, deemed by the department to be

  3  available for the payment of losses and claims, at values to

  4  be determined by it.

  5         Section 16.  Section 625.031, Florida Statutes, is

  6  amended to read:

  7         625.031  Assets not allowed.--In addition to assets

  8  impliedly excluded by the provisions of s. 625.012, the

  9  following expressly shall not be allowed as assets in any

10  determination of the financial condition of an insurer:

11         (1)  Good will, Trade names, patents, agreements not to

12  compete, and other like intangible assets.

13         (2)  Advances (other than policy loans) to officers

14  and, directors, and controlling stockholders, whether secured

15  or not, and advances to employees, agents, and other persons

16  on personal security only.

17         (3)  Stock of such insurer, owned by it, or any

18  material equity therein or loans secured thereby, or any

19  material proportionate interest in such stock acquired or held

20  through the ownership by such insurer of an interest in

21  another firm, corporation, or business unit.

22         (4)  Furniture, fixtures, furnishings, safes, vehicles,

23  libraries, stationery, literature, and supplies, other than

24  data processing and accounting systems authorized under s.

25  625.012(11), except in the case of title insurers such

26  materials and plants as the insurer is expressly authorized to

27  invest in under s. 625.330 and except, in the case of any

28  insurer, such personal property as the insurer is permitted to

29  hold pursuant to part II of this chapter, or which is acquired

30  through foreclosure of chattel mortgages acquired pursuant to

31  s. 625.329, or which is reasonably necessary for the


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  1  maintenance and operation of real estate lawfully acquired and

  2  held by the insurer other than real estate used by it for home

  3  office, branch office, and similar purposes.

  4         (5)  The amount, if any, by which the aggregate book

  5  value of investments as carried in the ledger assets of the

  6  insurer exceeds the aggregate value thereof as determined

  7  under this code.

  8         (6)  Bonds, notes, or other evidences of indebtedness

  9  which are secured by mortgages or deeds of trust which are in

10  default.

11         (7)  Prepaid and deferred expenses.

12         (8)  Federal income tax refunds when a refund is not

13  assured.

14         Section 17.  Paragraph (d) of subsection (2) of section

15  625.041, Florida Statutes, is amended to read:

16         625.041  Liabilities, in general.--In any determination

17  of the financial condition of an insurer, liabilities to be

18  charged against its assets shall include:

19         (2)  With reference to life and health insurance and

20  annuity contracts:

21         (d)  Any additional reserves that which may be required

22  by the department consistent with practice formulated or

23  approved by the National Association of Insurance

24  Commissioners or its successor organization, on account of

25  such insurance, including contract and premium deficiency

26  reserves.

27         Section 18.  Subsection (2) of section 625.141, Florida

28  Statutes, is amended to read:

29         625.141  Valuation of bonds.--

30         (2)  The department shall have full discretion in

31  determining the method of calculating values according to the


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  1  rules set forth in this section, but no such method or

  2  valuation shall be inconsistent with the method formulated or

  3  approved by the National Association of Insurance

  4  Commissioners or its successor organization and set forth in

  5  the latest edition of its publication "Valuation of

  6  Securities"; provided that such valuation methodology is

  7  substantially similar to the methodology used by the National

  8  Association of Insurance Commissioners in its 2001 1988

  9  edition of such publication. Amortization of bond premium or

10  discount must be calculated using the scientific (constant

11  yield) interest method taking into consideration specified

12  interest and principal provisions over the life of the bond.

13  Bonds containing call provisions shall be amortized to the

14  call or maturity value or date that produces the lowest asset

15  value.

16         Section 19.  Section 625.161, Florida Statutes, is

17  amended to read:

18         625.161  Valuation of property.--

19         (1)  Real property owned by an insurer which is

20  reported in financial statements filed with the department

21  shall be valued at the lower of depreciated cost or fair

22  market value.

23         (2)(1)  Real property acquired pursuant to a mortgage

24  loan or contract for sale, in the absence of a recent

25  appraisal deemed by the department to be reliable, shall not

26  be valued at an amount greater than the unpaid principal and

27  accrued interest of the defaulted loan or contract at the date

28  of such acquisition, together with any taxes and expenses paid

29  or incurred in connection with such acquisition, and the cost

30  of improvements thereafter made by the insurer and any amounts

31


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  1  thereafter paid by the insurer on assessments levied for

  2  improvements in connection with the property.

  3         (3)(2)  Other real property held by an insurer shall

  4  not be valued at an amount in excess of fair value as

  5  determined by recent appraisal. If the valuation of real

  6  property is based on an appraisal more than 5 3 years old, the

  7  department may, at its discretion, call for and require a new

  8  appraisal in order to determine fair market value.

  9         (4)(3)  Personal property acquired pursuant to chattel

10  mortgages made in accordance with s. 625.329 shall not be

11  valued at an amount greater than the unpaid balance of

12  principal and accrued interest on the defaulted loan at the

13  date of acquisition, together with taxes and expenses incurred

14  in connection with such acquisition, or the fair value of such

15  property, whichever amount is the lesser.

16         (5)(4)  In carrying out its responsibilities under this

17  section, in the event that the department and the insurer do

18  not agree on the value of real or personal property of such

19  insurer, the department may retain the services of a qualified

20  real or personal property appraiser.  In the event it is

21  subsequently determined that the insurer has overvalued

22  assets, the department shall be reimbursed for the costs of

23  the services of any such appraiser incurred with respect to

24  its responsibilities under this section regarding an insurer

25  by said insurer and any reimbursement shall be deposited in

26  the Insurance Commissioner's Regulatory Trust Fund.

27         (6)  Any insurer that reported real estate as of

28  December 31, 2000, with a value in excess of that allowed by

29  subsection (1) shall comply with the requirements of that

30  subsection beginning January 1, 2001.

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  1         Section 20.  Section 625.322, Florida Statutes, is

  2  amended to read:

  3         625.322  Collateral loans.--An insurer may invest in

  4  loans with a maturity not in excess of 12 years from the date

  5  thereof which are secured by the pledge of assets permitted by

  6  part I of this chapter securities eligible for investment

  7  under this chapter or by the pledge or assignment of life

  8  insurance policies issued by other insurers authorized to

  9  transact insurance in this state. On the date made, no such

10  loan shall exceed in amount 80 percent of the market value of

11  the collateral pledged, except that loans upon pledge of

12  United States Government bonds and loans upon the pledge or

13  assignment of life insurance policies shall not exceed 95

14  percent of the market value of the bonds or the cash surrender

15  value of the policies pledged.  Loans made pursuant to this

16  section shall not be admitted as an asset when it is

17  considered probable that any portion of the amounts due under

18  the contractual terms of the loan will not be collected

19  renewable beyond a period of 12 years from the date of the

20  loan. Collateral loans reported in financial statements filed

21  with the department shall not exceed the value of the

22  collateral held by the company.

23         Section 21.  Section 641.183, Florida Statutes, is

24  created to read:

25         641.183  Statutory accounting procedures; transition

26  provisions.--All health maintenance organizations, authorized

27  to do business under this chapter on January 1, 2001, shall

28  elect a transition method for compliance with statutory

29  accounting principles as follows:

30         (1)  Report assets acquired prior to June 30, 2001 in

31  accordance with s. 641.35, Florida Statutes (2000), through


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  1  December 31, 2005. Assets acquired on or after June 30, 2001

  2  shall be accounted for in accordance with the National

  3  Association of Insurance Commissioners Accounting Practices

  4  and Procedures Manual effective January 1, 2001. A health

  5  maintenance organization electing to report assets pursuant to

  6  this subsection shall maintain complete and detailed records

  7  reflecting such accounting treatment; or

  8         (2)  Report all assets in accordance with the NAIC

  9  Accounting Practices and Procedures Manual effective January

10  1, 2001.

11         Section 22.  Subsections (16), (17), and (20) of

12  section 641.19, Florida Statutes, are amended to read:

13         641.19  Definitions.--As used in this part, the term:

14         (16)  "Reporting period" means the annual calendar year

15  accounting period or any part thereof or the fiscal year of

16  the health maintenance organization.

17         (17)  "Statutory accounting principles" means

18  accounting principles as defined in the National Association

19  of Insurance Commissioners Accounting Practices and Procedures

20  Manual effective January 1, 2001 generally accepted accounting

21  principles, except as modified by this part.

22         (20)  "Surplus notes" means debt which has been

23  guaranteed by the United States Government or its agencies, or

24  debt which has been subordinated to all claims of subscribers

25  and general creditors of the organization.

26         Section 23.  Subsections (1), (2), and (3) of section

27  641.35, Florida Statutes, are amended to read:

28         641.35  Assets, liabilities, and investments.--

29         (1)  ASSETS.--In any determination of the financial

30  condition of a health maintenance organization, there shall be

31  allowed as "assets" only those assets that are owned by the


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  1  health maintenance organization and that which assets consist

  2  of:

  3         (a)  Cash or cash equivalents in the possession of the

  4  health maintenance organization, or in transit under its

  5  control, including the true balance of any deposit in a

  6  solvent bank, savings and loan association, or trust company

  7  which is domiciled in the United States. Cash equivalents are

  8  short-term, highly liquid investments, with original

  9  maturities of 3 months or less, which are both readily

10  convertible to known amounts of cash and so near their

11  maturity that they present insignificant risk of changes in

12  value because of changes in interest rates.

13         (b)  Investments, securities, properties, and loans

14  acquired or held in accordance with this part, and in

15  connection therewith the following items:

16         1.  Interest due or accrued on any bond or evidence of

17  indebtedness which is not in default and which is not valued

18  on a basis including accrued interest.

19         2.  Declared and unpaid dividends on stock and shares,

20  unless the amount of the dividends has otherwise been allowed

21  as an asset.

22         3.  Interest due or accrued upon a collateral loan

23  which is not in default in an amount not to exceed 1 year's

24  interest thereon.

25         4.  Interest due or accrued on deposits or certificates

26  of deposit in solvent banks, savings and loan associations,

27  and trust companies domiciled in the United States, and

28  interest due or accrued on other assets, if such interest is

29  in the judgment of the department a collectible asset.

30         5.  Interest due or accrued on current mortgage loans,

31  in an amount not exceeding in any event the amount, if any, of


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  1  the excess of the value of the property less delinquent taxes

  2  thereon over the unpaid principal; but in no event shall

  3  interest accrued for a period in excess of 90 days be allowed

  4  as an asset.

  5         6.  Rent due or accrued on real property if such rent

  6  is not in arrears for more than 3 months.  However, in no

  7  event shall rent accrued for a period in excess of 90 days be

  8  allowed as an asset.

  9         7.  The unaccrued portion of taxes paid prior to the

10  due date on real property.

11         (c)  Premiums in the course of collection, not more

12  than 3 months past due, less commissions payable thereon.  The

13  foregoing limitation shall not apply to premiums payable

14  directly or indirectly by any governmental body in the United

15  States or by any of their instrumentalities.

16         (d)  The full amount of reinsurance recoverable from a

17  solvent reinsurer, which reinsurance is authorized under s.

18  624.610.

19         (e)  Furniture, fixtures, furnishings, vehicles,

20  medical libraries, and equipment, if the original cost of each

21  item is at least $200, which cost shall be amortized in full

22  over a period not to exceed 5 calendar years, unless otherwise

23  approved by the department.

24         (e)(f)  Pharmaceutical and medical supply inventories.

25         (g)  The liquidation value of prepaid expenses.

26         (f)  Goodwill created by acquisitions and mergers

27  occurring on or after January 1, 2001.

28         (g)  Loans or advances by a health maintenance

29  organization to its parent or principal owner if approved by

30  the department.

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  1         (h)  Other assets, not inconsistent with the provisions

  2  of this section, deemed by the department to be available for

  3  the payment of losses and claims, at values to be determined

  4  by it.

  5

  6  The department, upon determining that a health maintenance

  7  organization's asset has not been evaluated according to

  8  applicable law or that it does not qualify as an asset, shall

  9  require the health maintenance organization to properly

10  reevaluate the asset or replace the asset with an asset

11  suitable to the department within 30 days of receipt of

12  written notification by the department of this determination,

13  if the removal of the asset from the organization's assets

14  would impair the organization's solvency.

15         (2)  ASSETS NOT ALLOWED.--In addition to assets

16  impliedly excluded by the provisions of subsection (1), the

17  following assets expressly shall not be allowed as assets in

18  any determination of the financial condition of a health

19  maintenance organization:

20         (a)  Goodwill, Subscriber lists, patents, trade names,

21  agreements not to compete, and other like intangible assets.

22         (b)  Any note or account receivable from or advances to

23  officers, directors, or controlling stockholders, whether

24  secured or not, and advances to employees, agents, or other

25  persons on personal security only, other than those

26  transactions authorized under paragraph (1)(g).

27         (c)  Stock of the health maintenance organization owned

28  by it directly or owned by it through any entity in which the

29  organization owns or controls, directly or indirectly, more

30  than 25 percent of the ownership interest.

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  1         (d)  Leasehold improvements, nonmedical libraries,

  2  stationery, literature, and nonmedical supply inventories,

  3  except that leasehold improvements made prior to October 1,

  4  1985, shall be allowed as an asset and shall be amortized over

  5  the shortest of the following periods:

  6         1.  The life of the lease.

  7         2.  The useful life of the improvements.

  8         3.  The 3-year period following October 1, 1985.

  9         (e)  Furniture, fixtures, furnishings, vehicles,

10  medical libraries, and equipment, other than those items

11  authorized under paragraph (1)(e).

12         (f)  Notes or other evidences of indebtedness which are

13  secured by mortgages or deeds of trust which are in default

14  and beyond the express period specified in the instrument for

15  curing the default.

16         (g)  Bonds in default for more than 60 days.

17         (h)  Deferred costs other than the liquidation value of

18  Prepaid and deferred expenses.

19         (i)  Any note, account receivable, advance, or other

20  evidence of indebtedness, or investment in:

21         1.  The parent of the health maintenance organization;

22         2.  Any entity directly or indirectly controlled by the

23  health maintenance organization parent; or

24         3.  An affiliate of the parent or the health

25  maintenance organization,

26

27  except as allowed in subsections (1), (11), and (12).  The

28  department may, however, allow all or a portion of such asset,

29  at values to be determined by the department, if deemed by the

30  department to be available for the payment of losses and

31  claims.


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  1         (3)  LIABILITIES.--In any determination of the

  2  financial condition of a health maintenance organization,

  3  liabilities to be charged against its assets shall include:

  4         (a)  The amount, estimated consistently with the

  5  provisions of this part, necessary to pay all of its unpaid

  6  losses and claims incurred for or on behalf of a subscriber,

  7  on or prior to the end of the reporting period, whether

  8  reported or unreported, including contract and premium

  9  deficiency reserves.

10         (b)  The amount equal to the unearned portions of the

11  gross premiums charged on health maintenance contracts in

12  force.

13         (c)  Taxes, expenses, and other obligations due or

14  accrued at the date of the statement.

15

16  The department, upon determining that a health maintenance

17  organization has failed to report liabilities that should have

18  been reported, shall require a corrected report which reflects

19  the proper liabilities to be submitted by the organization to

20  the department within 10 working days of receipt of written

21  notification.

22         Section 24.  Any quarterly or annual statement that is

23  required to be filed after the effective date of this act

24  shall be prepared in accordance with the provisions of this

25  act.

26         Section 25.  This act shall take effect upon becoming a

27  law and section 24 of this act shall apply retroactively to

28  January 1, 2001.

29

30

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