HB 0831 2003
1	A bill to be entitled
2	An act relating to insurance; amending s. 624.310, F.S.;
3	revising definitions; conforming provisions to a revised
4	definition; conforming provisions to certain governmental
5	reorganization; prohibiting affiliated parties from
6	certain activities constituting a conflict of interest;
7	providing exceptions; authorizing the Office of Insurance
8	Regulation to require certain disclosures of personal
9	interest; specifying certain restrictions governing
10	affiliated party conduct; amending s. 624.4095, F.S.;
11	conforming provisions to certain governmental
12	reorganization; providing for calculating certain surplus
13	for certain insurers; amending s. 624.610, F.S.;
14	conforming provisions to certain governmental
15	reorganization; revising requirements for securities of a
16	trust fund for a single assuming insurer; amending ss.
17	628.461 and 628.4615, F.S.; specifying additional
18	nonapplication of acquisition of controlling stock
19	provisions to changes of ownership of a domestic insurer
20	or specialty insurer, respectively, under certain
21	circumstances; creating ss. 634.042, 627.8401, 634.3076,
22	634.4062, and 651.029, F.S.; prohibiting certain
23	investments by motor vehicle service agreement companies,
24	premium finance companies, home warranty associations,
25	service warranty associations, and continuing care
26	providers, respectively; creating s. 641.263, F.S.;
27	providing definitions; providing for risk-based capital
28	for health maintenance organizations; requiring risk-based
29	capital reports; providing reporting requirements;
30	providing requirements for determining risk-based capital;
31	providing legislative findings; providing for adjusting
32	risk-based capital reports under certain circumstances;
33	providing requirements for health maintenance
34	organizations upon the occurrence of certain events;
35	providing notice requirements; requiring a risk-based
36	capital plan for such events; providing plan requirements;
37	providing duties and responsibilities of the Office of
38	Insurance Regulation; providing for office hearings of
39	challenges by health maintenance organizations; providing
40	notice requirements; providing construction; authorizing
41	the office to adopt rules; authorizing the office to
42	exempt certain health maintenance organizations;
43	specifying absence of liability of the office or the
44	Financial Services Commission for certain actions;
45	providing for effect of certain notices; providing
46	alternative requirements for risk-based capital reports
47	for certain time periods; providing legislative intent for
48	the use of risk-based capital reports and other related
49	documents; amending s. 440.20, F.S.; correcting a cross
50	reference; providing an effective date.
51
52	Be It Enacted by the Legislature of the State of Florida:
53
54	Section 1. Section 624.310, Florida Statutes, is amended
55	to read:
56	624.310 Enforcement; cease and desist orders; removal of
57	certain persons; fines.--
58	(1) DEFINITIONS.--For the purposes of this section, the
59	term:
60	(a) "Affiliated party of a licensee" means any person who
61	directs or participates in the conduct of the affairs of a
62	licensee and who is:
63	1. A director, officer, employee, trustee, committee
64	member, or controlling stockholder of a licensee or a subsidiary
65	or service corporation of the licensee, other than a controlling
66	stockholder which is a holding company,or an agent of a
67	licensee or a subsidiary or service corporation of the licensee;
68	2. A person who has filed or is required to file a
69	statement or any other information required to be filed under s.
70	628.461 or s. 628.4615;
71	3. A stockholder, other than a stockholder that is a
72	holding company of the licensee,who participates in the conduct
73	of the affairs of the licensee; or
74	4. An independent contractor who:
75	a. Renders a written opinion required by the laws of this
76	state under her or his professional credentials on behalf of the
77	licensee, which opinion is reasonably relied on by the office
78	departmentin the performance of its duties; or
79	b. Affirmatively and knowingly conceals facts, through a
80	written misrepresentation to the officedepartment, with
81	knowledge that such misrepresentation:
82	(I) Constitutes a violation of the insurance code or a
83	lawful rule or order of the officedepartment; and
84	(II) Directly and materially endangers the ability of the
85	licensee to meet its obligations to policyholders.
86
87	For the purposes of this subparagraph, any representation of
88	fact made by an independent contractor on behalf of a licensee,
89	affirmatively communicated as a representation of the licensee
90	to the independent contractor, shall not be considered a
91	misrepresentation by the independent contractor to the office
92	department.
93	(b) "Licensee" means a person issued a license or
94	certificate of authority or approval under this code or a person
95	registered under a provision of this code.
96	(2) ENFORCEMENT GENERALLY.--The officedepartmentmay
97	institute such suits or other legal proceedings as may be
98	required to enforce any provision of this code. If it appears
99	that any person has violated any provision of this code for
100	which criminal prosecution is provided, the officedepartment
101	shall provide the appropriate state attorney or other
102	prosecuting agency having jurisdiction with respect to such
103	prosecution with the relevant information in its possession.
104	(3) CEASE AND DESIST ORDERS.--
105	(a) The officedepartmentmay issue and serve a complaint
106	stating charges upon any licensee or upon any affiliated party
107	of a licensee, whenever the officedepartmenthas reasonable
108	cause to believe that the person or individual named therein is
109	engaging in or has engaged in conduct that is:
110	1. An act that demonstrates a lack of fitness or
111	trustworthiness to engage in the business of insurance, is
112	hazardous to the insurance buying public, or constitutes
113	business operations that are a detriment to policyholders,
114	stockholders, investors, creditors, or the public;
115	2. A violation of any provision of the Florida Insurance
116	Code;
117	3. A violation of any rule of the officedepartment;
118	4. A violation of any order of the officedepartment; or
119	5. A breach of any written agreement with the office
120	department.
121	(b) The complaint shall contain a statement of facts and
122	notice of opportunity for a hearing pursuant to ss. 120.569 and
123	120.57.
124	(c) If no hearing is requested within the time allowed by
125	ss. 120.569 and 120.57, or if a hearing is held and the office
126	department finds that any of the charges are proven, the office
127	departmentmay enter an order directing the licensee or the
128	affiliated party of a licenseenamed in the complaint to cease
129	and desist from engaging in the conduct complained of and take
130	corrective action to remedy the effects of past improper conduct
131	and assure future compliance.
132	(d) If the licensee or affiliated party of a licensee
133	named in the order fails to respond to the complaint within the
134	time allotted by ss. 120.569 and 120.57, the failure constitutes
135	a default and justifies the entry of a cease and desist order.
136	(e) A contested or default cease and desist order is
137	effective when reduced to writing and served upon the licensee
138	or affiliated party of a licenseenamed therein. An uncontested
139	cease and desist order is effective as agreed.
140	(f) Whenever the officedepartmentfinds that conduct
141	described in paragraph (a) is likely to cause insolvency,
142	substantial dissipation or misvaluation of assets or earnings of
143	the licensee, substantial inability to pay claims on a timely
144	basis, or substantial prejudice to prospective or existing
145	insureds, policyholders, subscribers, or the public, it may
146	issue an emergency cease and desist order requiring the licensee
147	or any affiliated party of a licenseeto immediately cease and
148	desist from engaging in the conduct complained of and to take
149	corrective and remedial action. The emergency order is effective
150	immediately upon service of a copy of the order upon the
151	licensee or affiliated party of a licenseenamed therein and
152	remains effective for 90 days. If the officedepartmentbegins
153	nonemergency cease and desist proceedings under this subsection,
154	the emergency order remains effective until the conclusion of
155	the proceedings under ss. 120.569 and 120.57. Any emergency
156	order entered under this subsection is exempt from s. 119.07(1)
157	and is confidential until it is made permanent unless the office
158	departmentfinds that the confidentiality will result in
159	substantial risk of financial loss to the public. All emergency
160	cease and desist orders that are not made permanent are
161	available for public inspection 1 year from the date the
162	emergency cease and desist order expires; however, portions of
163	an emergency cease and desist order remain confidential and
164	exempt from the provisions of s. 119.07(1) if disclosure would:
165	1. Jeopardize the integrity of another active
166	investigation;
167	2. Impair the safety and financial soundness of the
168	licensee or affiliated party of a licensee;
169	3. Reveal personal financial information;
170	4. Reveal the identity of a confidential source;
171	5. Defame or cause unwarranted damage to the good name or
172	reputation of an individual or jeopardize the safety of an
173	individual; or
174	6. Reveal investigative techniques or procedures.
175	(4) REMOVAL OF AFFILIATED PARTIES OF A LICENSEE BY THE
176	OFFICEDEPARTMENT.--
177	(a) The officedepartmentmay issue and serve a complaint
178	stating charges upon any affiliated party of a licenseeand upon
179	the licensee involved, whenever the officedepartmenthas reason
180	to believe that an affiliated party of a licenseeis engaging in
181	or has engaged in conduct that constitutes:
182	1. An act that demonstrates a lack of fitness or
183	trustworthiness to engage in the business of insurance through
184	engaging in illegal activity or mismanagement of business
185	activities;
186	2. A willful violation of any law relating to the business
187	of insurance; however, if the violation constitutes a
188	misdemeanor, no complaint shall be served as provided in this
189	section until the affiliated party of a licenseeis notified in
190	writing of the matter of the violation and has been afforded a
191	reasonable period of time, as set forth in the notice, to
192	correct the violation and has failed to do so;
193	3. A violation of any other law involving fraud or moral
194	turpitude that constitutes a felony;
195	4. A willful violation of any rule of the office
196	department;
197	5. A willful violation of any order of the office
198	department;
199	6. A material misrepresentation of fact, made knowingly
200	and willfully or made with reckless disregard for the truth of
201	the matter; or
202	7. An act of commission or omission or a practice which is
203	a breach of trust or a breach of fiduciary duty.
204	(b) The complaint shall contain a statement of facts and
205	notice of opportunity for a hearing pursuant to ss. 120.569 and
206	120.57.
207	(c) If no hearing is requested within the time allotted by
208	ss. 120.569 and 120.57, or if a hearing is held and the office
209	departmentfinds that any of the charges in the complaint are
210	proven true and that:
211	1. The licensee has suffered or will likely suffer loss or
212	other damage;
213	2. The interests of the policyholders, creditors, or
214	public are, or could be, seriously prejudiced by reason of the
215	violation or act or breach of fiduciary duty;
216	3. The affiliated party of a licenseehas received
217	financial gain by reason of the violation, act, or breach of
218	fiduciary duty; or
219	4. The violation, act, or breach of fiduciary duty is one
220	involving personal dishonesty on the part of the affiliated
221	party of a licenseeor the conduct jeopardizes or could
222	reasonably be anticipated to jeopardize the financial soundness
223	of the licensee,
224
225	The officedepartmentmay enter an order removing the affiliated
226	party of a licenseeor restricting or prohibiting participation
227	by the person in the affairs of that particular licensee or of
228	any other licensee.
229	(d) If the affiliated party of a licenseefails to respond
230	to the complaint within the time allotted by ss. 120.569 and
231	120.57, the failure constitutes a default and justifies the
232	entry of an order of removal, suspension, or restriction.
233	(e) A contested or default order of removal, restriction,
234	or prohibition is effective when reduced to writing and served
235	on the licensee and the affiliated party of a licensee. An
236	uncontested order of removal, restriction, or prohibition is
237	effective as agreed.
238	(f)1. The chief executive officer, or the person holding
239	the equivalent office, of a licensee shall promptly notify the
240	officedepartmentif she or he has actual knowledge that any
241	affiliated party of a licenseeis charged with a felony in a
242	state or federal court.
243	2. Whenever any affiliated party of a licenseeis charged
244	with a felony in a state or federal court or with the equivalent
245	of a felony in the courts of any foreign country with which the
246	United States maintains diplomatic relations, and the charge
247	alleges violation of any law involving fraud, theft, or moral
248	turpitude, the officedepartmentmay enter an emergency order
249	suspending the affiliated party of a licenseeor restricting or
250	prohibiting participation by the affiliated party of a licensee
251	in the affairs of the particular licensee or of any other
252	licensee upon service of the order upon the licensee and the
253	affiliated party of a licenseecharged. The order shall contain
254	notice of opportunity for a hearing pursuant to ss. 120.569 and
255	120.57, where the affiliated party of a licenseemay request a
256	postsuspension hearing to show that continued service to or
257	participation in the affairs of the licensee does not pose a
258	threat to the interests of the licensee's policyholders or
259	creditors and does not threaten to impair public confidence in
260	the licensee. In accordance with applicable officedepartmental
261	rules, the officedepartment shall notify the affiliated party
262	of a licenseewhether the order suspending or prohibiting the
263	person from participation in the affairs of a licensee will be
264	rescinded or otherwise modified. The emergency order remains in
265	effect, unless otherwise modified by the officedepartment,
266	until the criminal charge is disposed of. The acquittal of the
267	person charged, or the final, unappealed dismissal of all
268	charges against the person, dissolves the emergency order, but
269	does not prohibit the officedepartmentfrom instituting
270	proceedings under paragraph (a). If the person charged is
271	convicted or pleads guilty or nolo contendere, whether or not an
272	adjudication of guilt is entered by the court, the emergency
273	order shall become final.
274	(g) Any affiliated party of a licenseeremoved from office
275	pursuant to this section is not eligible for reelection or
276	appointment to the position or to any other official position in
277	any licensee in this state except upon the written consent of
278	the officedepartment. Any affiliated party of a licenseewho is
279	removed, restricted, or prohibited from participation in the
280	affairs of a licensee pursuant to this section may petition the
281	officedepartmentfor modification or termination of the
282	removal, restriction, or prohibition.
283	(h) Resignation or termination of an affiliated party of a
284	licensee does not affect the office’sdepartment'sjurisdiction
285	to proceed under this subsection.
286	(5)(a) CONFLICT OF INTEREST.--An affiliated party of a
287	licensee may not engage or participate, directly or indirectly,
288	in any business or transaction conducted on behalf of or
289	involving the licensee, subsidiary, or service corporation that
290	would result in a conflict of the party's own personal interests
291	with those of the licensee, subsidiary, or service corporation
292	with which he or she is affiliated, unless:
293	1. Such business or transactions are conducted in good
294	faith and are honest, fair, and reasonable to the licensee,
295	subsidiary, or service corporation and are on terms no more
296	favorable than would be offered to a disinterested third party.
297	2. A full disclosure of such business or transaction, and
298	the nature of the interest of the affiliated party of the
299	licensee, is made to the board of directors.
300	3. Such business or transactions are approved in good
301	faith by the board of directors and any interested director
302	abstaining and such approval is recorded in the minutes.
303	4. Any profits inuring to the affiliated party of a
304	licensee are not at the expense of the licensee, subsidiary, or
305	service corporation and do not prejudice the best interests of
306	the licensee, subsidiary, or service corporation in any way.
307	5. Such business or transactions do not represent a breach
308	of the fiduciary duty of an affiliated party of a licensee and
309	are not fraudulent, illegal, or ultra vires.
310	(b) Without limitation by any of the specific provisions
311	of this section, the office may require the disclosure by
312	affiliated parties of a licensee of their personal interests,
313	directly or indirectly, in any business or transactions on
314	behalf of or involving the licensee, subsidiary, or service
315	corporation and of their control of or active participation in
316	enterprises having activities related to the business of the
317	licensee, subsidiary, or service corporation.
318	(c) The following restrictions governing the conduct of
319	affiliated parties of a licensee are expressly specified, but
320	such specification is not to be construed in any manner as
321	excusing such parties from the observance of any other aspect of
322	the general fiduciary duty owed by such parties to the licensee
323	which they serve:
324	1. A director of a licensee may not accept director fees
325	unless the director fees have been previously approved by the
326	board of directors and such fees represent reasonable
327	compensation for service as a director or member of a committee.
328	This subparagraph does not limit or preclude reasonable
329	compensation as otherwise authorized by paragraph (a) for a
330	director who also provides goods or services to the licensee.
331	2. An affiliated party of a licensee may not purchase or
332	otherwise obtain ownership of any asset of the licensee or
333	subsidiary at less than fair market value of such asset.
334	3. An affiliated party of a licensee may not have any
335	interest, direct or indirect, of any evidence of indebtedness of
336	the licensee or subsidiary.
337	4. An affiliated party of a licensee acting as proxy for a
338	stockholder of a licensee, subsidiary, or service corporation
339	may not, directly or indirectly, exercise, transfer, or delegate
340	such vote or votes in any consideration of a private benefit or
341	advantage. The voting rights of stockholders and directors may
342	not be the subject of sale, barter, exchange, or similar
343	transaction, directly or indirectly. Any affiliated party of a
344	licensee who violates the provisions of this subparagraph is
345	accountable to the licensee, subsidiary, or service corporation
346	for any increment.
347	(6)(5)ADMINISTRATIVE FINES; ENFORCEMENT.--
348	(a) The officedepartmentmay, in a proceeding initiated
349	pursuant to chapter 120, impose an administrative fine against
350	any person found in the proceeding to have violated any
351	provision of this code, a cease and desist order of the office
352	department, or any written agreement with the officedepartment.
353	No proceeding shall be initiated and no fine shall accrue until
354	after the person has been notified in writing of the nature of
355	the violation and has been afforded a reasonable period of time,
356	as set forth in the notice, to correct the violation and has
357	failed to do so.
358	(b) A fine imposed under this subsection may not exceed
359	the amounts specified in s. 624.4211, per violation.
360	(c) The officedepartmentmay, in addition to the
361	imposition of an administrative fine under this subsection, also
362	suspend or revoke the license or certificate of authority of the
363	licensee fined under this subsection.
364	(d) Any administrative fine levied by the office
365	department under this subsection may be enforced by the office
366	departmentby appropriate proceedings in the circuit court of
367	the county in which the person resides or in which the principal
368	office of a licensee is located, or, in the case of a foreign
369	insurer or person not residing in this state, in Leon County. In
370	any administrative or judicial proceeding arising under this
371	section, a party may elect to correct the violation asserted by
372	the officedepartment, and, upon doing so, any fine shall cease
373	to accrue; however, the election to correct the violation does
374	not render any administrative or judicial proceeding moot. All
375	fines collected under this section shall be paid to the
376	Insurance Commissioner's Regulatory Trust Fund.
377	(e) In imposing any administrative penalty or remedy
378	provided for under this section, the officedepartmentshall
379	take into account the appropriateness of the penalty with
380	respect to the size of the financial resources and the good
381	faith of the person charged, the gravity of the violation, the
382	history of previous violations, and other matters as justice may
383	require.
384	(f) The imposition of an administrative fine under this
385	subsection may be in addition to any other penalty or
386	administrative fine authorized under this code.
387	(7)(6)ADMINISTRATIVE PROCEDURES.--All administrative
388	proceedings brought under this sectionsubsections (3), (4), and
389	(5)shall be conducted in accordance with chapter 120. Any
390	service required or authorized to be made by the office
391	departmentunder this code shall be made by certified mail,
392	return receipt requested, delivered to the addressee only; by
393	personal delivery; or in accordance with chapter 48. The service
394	provided for herein shall be effective from the date of
395	delivery.
396	(8)(7)OTHER LAWS NOT SUPERSEDED.--The provisions of this
397	section are in addition to other provisions of this code, and
398	shall not be construed to curtail, impede, replace, or delete
399	any other similar provision or power of the officedepartment
400	under the insurance code as defined in s. 624.01 or any power of
401	the officedepartmentwhich may exist under the common law of
402	this state. The procedures set forth in s. 626.9581 do not apply
403	to regulatory action taken pursuant to the provisions of this
404	section.
405	Section 2. Section 624.4095, Florida Statutes, is amended
406	to read:
407	624.4095 Premiums written; restrictions.--
408	(1) Whenever an insurer's ratio of actual or projected
409	annual written premiums as adjusted in accordance with
410	subsection (5)(4)to current or projected surplus as to
411	policyholders as adjusted in accordance with subsection (6)(5)
412	exceeds 10 to 1 for gross written premiums or exceeds 4 to 1 for
413	net written premiums, the officedepartmentshall suspend the
414	insurer's certificate of authority or establish by order maximum
415	gross or net annual premiums to be written by the insurer
416	consistent with maintaining the ratios specified herein unless
417	the insurer demonstrates to the office’sdepartment's
418	satisfaction that exceeding the ratios of this section does not
419	endanger the financial condition of the insurer or endanger the
420	interests of the insurer's policyholders.
421	(2) Projected annual net or gross premiums shall be based
422	on the actual writings to date for the insurer's current
423	calendar year or the insurer's writings for the previous
424	calendar year or both. Ratios shall be computed on an annualized
425	basis.
426	(3) For the purposes of this section, gross premiums
427	written means direct premiums written and reinsurance assumed.
428	(4) For the purposes of this section, surplus as to
429	policyholders for property and casualty insurers shall be
430	calculated as follows: (actual surplus as to policyholders)
431	minus (surplus as to policyholders of all subsidiary insurers as
432	allowed pursuant to s. 625.325).
433	(5)(4)For the purposes of this section, for the calendar
434	year ending December 31, 1990, and each subsequent year,
435	premiums shall be calculated as the product of the actual or
436	projected premiums and the following:
437	(a) For property insurance, 0.90.
438	(b) For casualty insurance, 1.25.
439	(c) For health insurance, 0.80.
440	(d) For all other kinds of insurance, 1.00.
441	(6)(5)This section shall not apply to:
442	(a) Life insurance written by life or life and health
443	insurers; or
444	(b) Life and health insurers which have a surplus as to
445	policyholders greater than $40 million and which have written
446	health insurance during each of the immediately preceding five
447	calendar years.
448	(7)(6)For the purposes of this section, surplus as to
449	policyholders for life and health insurers shall be calculated
450	as follows: (actual or projected surplus as to policyholders)
451	minus (surplus as to policyholders required to be maintained
452	under s. 624.408 for liabilities relating to life insurance) and
453	minus (surplus as to policyholders of all subsidiary insurers as
454	allowed pursuant to s. 625.325).
455	Note.--Subsection (7)(6)relates to calculation of surplus
456	as to policyholders.
457	Section 3. Paragraph (c) of subsection (3) of section
458	624.610, Florida Statutes, is amended to read:
459	624.610 Reinsurance.--
460	(3)
461	(c)1. Credit must be allowed when the reinsurance is ceded
462	to an assuming insurer that maintains a trust fund in a
463	qualified United States financial institution, as defined in
464	paragraph (5)(b), for the payment of the valid claims of its
465	United States ceding insurers and their assigns and successors
466	in interest. To enable the officedepartmentto determine the
467	sufficiency of the trust fund, the assuming insurer shall report
468	annually to the officedepartmentinformation substantially the
469	same as that required to be reported on the NAIC Annual
470	Statement form by authorized insurers. The assuming insurer
471	shall submit to examination of its books and records by the
472	officedepartmentand bear the expense of examination.
473	2.a. Credit for reinsurance must not be granted under this
474	subsection unless the form of the trust and any amendments to
475	the trust have been approved by:
476	(I) The commissioner of the state in which the trust is
477	domiciled; or
478	(II) The commissioner of another state who, pursuant to
479	the terms of the trust instrument, has accepted principal
480	regulatory oversight of the trust.
481	b. The form of the trust and any trust amendments must be
482	filed with the commissioner of every state in which the ceding
483	insurer beneficiaries of the trust are domiciled. The trust
484	instrument must provide that contested claims are valid and
485	enforceable upon the final order of any court of competent
486	jurisdiction in the United States. The trust must vest legal
487	title to its assets in its trustees for the benefit of the
488	assuming insurer's United States ceding insurers and their
489	assigns and successors in interest. The trust and the assuming
490	insurer are subject to examination as determined by the
491	commissioner.
492	c. The trust remains in effect for as long as the assuming
493	insurer has outstanding obligations due under the reinsurance
494	agreements subject to the trust. No later than February 28 of
495	each year, the trustee of the trust shall report to the
496	commissioner in writing the balance of the trust and list the
497	trust's investments at the preceding year end, and shall certify
498	that the trust will not expire prior to the following December
499	31.
500	3. The following requirements apply to the following
501	categories of assuming insurer:
502	a. The trust fund for a single assuming insurer consists
503	of funds in trust in an amount not less than the assuming
504	insurer's liabilities attributable to reinsurance ceded by
505	United States ceding insurers, and, in addition, the assuming
506	insurer shall maintain a trusteed surplus of not less than $20
507	million. Not less than 50 percent of the funds in the trust
508	covering the assuming insurer’s liabilities attributable to
509	reinsurance ceded by United States ceding insurersand trusteed
510	surplus shallconsist of assets of a quality substantially
511	similar to that required in part II of chapter 625. Clean,
512	irrevocable, unconditional, and evergreen letters of credit,
513	issued or confirmed by a qualified United States financial
514	institution, as defined in paragraph (5)(a), effective no later
515	than December 31 of the year for which the filing is made, and
516	in the possession of the trust on or before the filing date of
517	its annual statement, may be used to fund the remainder of the
518	trust fund and trusteed surplus.
519	b.(I) In the case of a group including incorporated and
520	individual unincorporated underwriters:
521	(A) For reinsurance ceded under reinsurance agreements
522	with an inception, amendment, or renewal date on or after August
523	1, 1995, the trust consists of a trusteed account in an amount
524	not less than the group's several liabilities attributable to
525	business ceded by United States domiciled ceding insurers to any
526	member of the group;
527	(B) For reinsurance ceded under reinsurance agreements
528	with an inception date on or before July 31, 1995, and not
529	amended or renewed after that date, notwithstanding the other
530	provisions of this section, the trust consists of a trusteed
531	account in an amount not less than the group's several insurance
532	and reinsurance liabilities attributable to business written in
533	the United States; and
534	(C) In addition to these trusts, the group shall maintain
535	in trust a trusteed surplus of which $100 million must be held
536	jointly for the benefit of the United States domiciled ceding
537	insurers of any member of the group for all years of account.
538	(II) The incorporated members of the group must not be
539	engaged in any business other than underwriting of a member of
540	the group, and are subject to the same level of regulation and
541	solvency control by the group's domiciliary regulator as the
542	unincorporated members.
543	(III) Within 90 days after its financial statements are
544	due to be filed with the group's domiciliary regulator, the
545	group shall provide to the commissioner an annual certification
546	by the group's domiciliary regulator of the solvency of each
547	underwriter member or, if a certification is unavailable,
548	financial statements, prepared by independent public
549	accountants, of each underwriter member of the group.
550	Section 4. Section 627.8401, Florida Statutes, is created
551	to read:
552	627.8401 Prohibited investments and loans.--A premium
553	finance company shall not directly or indirectly invest in or
554	lend its funds upon the security of any note or other evidence
555	of indebtedness of any director, officer, or controlling
556	stockholder of the premium finance company.
557	Section 5. Subsection (2) of section 628.461, Florida
558	Statutes, is amended to read:
559	628.461 Acquisition of controlling stock.--
560	(2) This section does not apply to any acquisition of
561	voting securities of a domestic stock insurer or of a
562	controlling company by any person who, on July 1, 1976, is the
563	owner of a majority of such voting securities or who, on or
564	after July 1, 1976, becomes the owner of a majority of such
565	voting securities with the approval of the department pursuant
566	to this section. Further, the provisions of this section shall
567	not apply to a change of ownership of a domestic insurer
568	resulting from changes within an insurance holding company of
569	which the insurer is a member, provided the insurer establishes
570	that no new person or entity will have the ability to influence
571	or control the activities of the insurer and that the
572	reorganization will not result in any changes in the officers,
573	directors, or business plan of the domestic insurer.
574	Section 6. Subsection (3) of section 628.4615, Florida
575	Statutes, is amended to read:
576	628.4615 Specialty insurers; acquisition of controlling
577	stock, ownership interest, assets, or control; merger or
578	consolidation.--
579	(3) This section does not apply to any acquisition of
580	voting securities or ownership interest of a specialty insurer
581	or of a controlling company by any person who, on July 9, 1986,
582	is the owner of a majority of such voting securities or
583	ownership interest or who, on or after July 9, 1986, becomes the
584	owner of a majority of such voting securities or ownership
585	interest with the approval of the department pursuant to this
586	section. Further, the provisions of this section shall not apply
587	to a change of ownership of a specialty insurer resulting from
588	changes within a holding company of which the specialty insurer
589	is a member, provided the specialty insurer establishes that no
590	new person or entity will have the ability to influence or
591	control the activities of the specialty insurer and that the
592	reorganization will not result in any changes in the officers,
593	directors, or business plan of the specialty insurer.
594	Section 7. Section 634.042, Florida Statutes, is created
595	to read:
596	634.042 Prohibited investments and loans.--A motor vehicle
597	service agreement company shall not directly or indirectly
598	invest in or lend its funds upon the security of any note or
599	other evidence of indebtedness of any director, officer, or
600	controlling stockholder of the motor vehicle service agreement
601	company.Section 8. Section 634.3076, Florida Statutes, is
602	created to read:
603	634.3076 Prohibited investments and loans.--A home
604	warranty association shall not directly or indirectly invest in
605	or lend its funds upon the security of any note or other
606	evidence of indebtedness of any director, officer, or
607	controlling stockholder of the home warranty association.
608	Section 9. Section 634.4062, Florida Statutes, is created
609	to read:
610	634.4062 Prohibited investments and loans.--A service
611	warranty association shall not directly or indirectly invest in
612	or lend its funds upon the security of any note or other
613	evidence of indebtedness of any director, officer, or
614	controlling stockholder of the service warranty association.
615	Section 10. Section 641.263, Florida Statutes, is created
616	to read:
617	641.263 Risk-based capital.--
618	(1) For purposes of this section:
619	(a) "Adjusted risk-based capital report" means a risk-
620	based capital report which has been adjusted by the office in
621	accordance with paragraph (2)(b).
622	(b) "Association" means the National Association of
623	Insurance Commissioners.
624	(c) "Corrective order" means an order issued by the office
625	specifying corrective actions which the office has determined
626	are required.
627	(d) "Risk-based capital instructions" means the risk-based
628	capital report including risk-based capital instructions adopted
629	by the association, as these risk-based capital instructions may
630	be amended by the association from time to time in accordance
631	with the procedures adopted by the association.
632	(e) "Risk-based capital level" means a health maintenance
633	organization's company action level risk-based capital,
634	regulatory action level risk-based capital, authorized control
635	level risk-based capital, or mandatory control level risk-based
636	capital. For purposes of this paragraph:
637	1. "Company action level risk-based capital" means the
638	product of 2.0 and the health maintenance organization's
639	authorized control level risk-based capital.
640	2. "Regulatory action level risk-based capital" means the
641	product of 1.5 and the health maintenance organization's
642	authorized control level risk-based capital.
643	3. "Authorized control level risk-based capital" means the
644	number determined under the risk-based capital formula in
645	accordance with the risk-based capital instructions.
646	4. "Mandatory control level risk-based capital" means the
647	product of .70 and the authorized control level risk-based
648	capital.
649	(f) "Risk-based capital plan" means a comprehensive
650	financial plan containing the elements specified in paragraph
651	(3)(b). If the office rejects the risk-based capital plan and
652	the plan is revised by the health maintenance organization, with
653	or without the office's recommendation, the plan shall be called
654	the "revised risk-based capital plan."
655	(g) "Risk-based capital report" means the report required
656	in subsection (2).
657	(h) "Total adjusted capital" means the sum of:
658	1. A health maintenance organization's net worth,
659	consisting of its statutory capital and surplus, as determined
660	in accordance with the statutory accounting applicable to the
661	annual financial statements required to be filed under s.
662	641.26.
663	2. Such other items, if any, as the risk-based capital
664	instructions may provide.
665	(2)(a) A health maintenance organization shall, on or
666	prior to April 1 of each year, prepare and submit to the office
667	a report of its risk-based capital levels as of the end of the
668	calendar year, in a form and containing such information as is
669	required by the risk-based capital instructions. In addition, a
670	health maintenance organization shall file its risk-based
671	capital report:
672	1. With the association in accordance with the risk-based
673	capital instructions.
674	2. With the chief insurance regulatory official in any
675	state in which the health maintenance organization is authorized
676	to do business. If such official has notified the health
677	maintenance organization of his or her request in writing, the
678	health maintenance organization shall file its risk-based
679	capital report no later than the later of 15 days after the
680	receipt of notice to file its risk-based capital report with
681	that state or April 1.
682	(b) A health maintenance organization's risk-based capital
683	shall be determined in accordance with the formula set forth in
684	the risk-based capital instructions. The formula shall take into
685	account and may adjust for the covariance between:
686	1. Asset risks.
687	2. Credit risks.
688	3. Underwriting risks.
689	4. All other business risks and such other relevant risks
690	as are set forth in the risk-based capital instructions,
691	determined in each case by applying the factors in the manner
692	set forth in the risk-based capital instructions.
693	(c) The Legislature finds that an excess of capital over
694	the amount produced by the risk-based capital requirements
695	contained in this section and the formulas, schedules, and
696	instructions referenced in this section is desirable in the
697	health maintenance organization business. Accordingly, health
698	maintenance organizations should seek to maintain capital above
699	the risk-based capital levels required by this section. Further,
700	the Legislature finds that additional capital is used and useful
701	in the health maintenance organization business and helps to
702	secure a health maintenance organization against various risks
703	inherent in, or affecting, such business and not accounted for
704	or only partially measured by the risk-based capital
705	requirements contained in this section.
706	(d) If a health maintenance organization files a risk-
707	based capital report that in the judgment of the office is
708	inaccurate, the office shall adjust the risk-based capital
709	report to correct the inaccuracy and shall notify the health
710	maintenance organization of the adjustment. The notice shall
711	contain a statement of the reason for the adjustment. A risk-
712	based capital report as so adjusted is referred to as an
713	"adjusted risk-based capital report."
714	(3)(a) A company action level event includes:
715	1. The filing of a risk-based capital report by a health
716	maintenance organization that indicates that the health
717	maintenance organization's total adjusted capital is greater
718	than or equal to its regulatory action level risk-based capital
719	but less than its company action level risk-based capital;
720	2. Notification by the office to the health maintenance
721	organization of an adjusted risk-based capital report that
722	indicates the event described in subparagraph 1., provided the
723	health maintenance organization does not challenge the adjusted
724	risk-based capital report under subsection (7); or
725	3. If, pursuant to the provisions of subsection (7), a
726	health maintenance organization challenges an adjusted risk-
727	based capital report that indicates the event described in
728	subparagraph 1., the notification by the office to the health
729	maintenance organization that the office has, after a hearing,
730	rejected the health maintenance organization's challenge.
731	(b) If a company action level event occurs, the health
732	maintenance organization shall prepare and submit to the office
733	a risk-based capital plan that shall:
734	1. Identify the conditions that contribute to the company
735	action level event.
736	2. Contain proposals of corrective actions that the health
737	maintenance organization intends to take and that would be
738	expected to result in the elimination of the company action
739	level event.
740	3. Provide projections of the health maintenance
741	organization's financial results in the current year and at
742	least the 2 succeeding years, both in the absence of proposed
743	corrective actions and giving effect to the proposed corrective
744	actions, including projections of statutory balance sheets,
745	operating income, net income, capital and surplus, and risk-
746	based capital levels. The projections for both new and renewal
747	businesses might include separate projections for each major
748	line of business and might separately identify each significant
749	income, expense, and benefit component.
750	4. Identify the key assumptions impacting the health
751	maintenance organization's projections and the sensitivity of
752	the projections to the assumptions.
753	5. Identify the quality of, and problems associated with,
754	the health maintenance organization's business, including, but
755	not limited to, its assets, anticipated business growth and
756	associated surplus strain, extraordinary exposure to risk, mix
757	of business, and use of reinsurance, if any, in each case.
758	(c) The risk-based capital plan shall be submitted:
759	1. Within 45 days after a company action level event; or
760	2. If the health maintenance organization challenges an
761	adjusted risk-based capital report pursuant to the provisions of
762	subsection (7), within 45 days after notification to the health
763	maintenance organization that the office has, after a hearing,
764	rejected the health maintenance organization's challenge.
765	(d) Within 60 days after the submission by a health
766	maintenance organization of a risk-based capital plan to the
767	office, the office shall notify the health maintenance
768	organization whether the risk-based capital plan shall be
769	implemented or is, in the judgment of the office,
770	unsatisfactory. If the office determines the risk-based capital
771	plan is unsatisfactory, the notification to the health
772	maintenance organization shall set forth the reasons for the
773	determination and may set forth proposed revisions which will
774	render the risk-based capital plan satisfactory in the judgment
775	of the office. Upon notification from the office, the health
776	maintenance organization shall prepare a revised risk-based
777	capital plan, which may incorporate by reference any revisions
778	proposed by the office, and shall submit the revised risk-based
779	capital plan to the office:
780	1. Within 45 days after the notification from the office;
781	or
782	2. If the health maintenance organization challenges the
783	notification from the office under the provisions of subsection
784	(7), within 45 days after a notification to the health
785	maintenance organization that the office has, after a hearing,
786	rejected the health maintenance organization's challenge.
787	(e) If the office notifies a health maintenance
788	organization that the health maintenance organization's risk-
789	based capital plan or revised risk-based capital plan is
790	unsatisfactory, the office may, at its discretion, subject to
791	the health maintenance organization's right to a hearing under
792	the provisions of subsection (7), specify in the notification
793	that the notification constitutes a regulatory action level
794	event.
795	(f) Each domestic health maintenance organization that
796	files a risk-based capital plan or revised risk-based capital
797	plan with the office shall file a copy of the risk-based capital
798	plan or revised risk-based capital plan with the insurance
799	office in any state in which the health maintenance organization
800	is authorized to do business if:
801	1. The state has a risk-based capital provision
802	substantially similar to the provisions of s. 641.264.
803	2. The insurance office of that state has notified the
804	health maintenance organization of its request for the filing in
805	writing, in which case the health maintenance organization shall
806	file a copy of the risk-based capital plan or revised risk-based
807	capital plan in that state no later than the later of:
808	a. Fifteen days after the receipt of notice to file a copy
809	of its risk-based capital plan or revised risk-based capital
810	plan with the state; or
811	b. The date on which the risk-based capital plan or
812	revised risk-based capital plan is filed under paragraph (c) or
813	paragraph (d).
814	(4)(a) A regulatory action level event includes, with
815	respect to a health maintenance organization:
816	1. The filing of a risk-based capital report by the health
817	maintenance organization that indicates that the health
818	maintenance organization's total adjusted capital is greater
819	than or equal to its authorized control level risk-based capital
820	but less than its regulatory action level risk-based capital;
821	2. Notification by the office to a health maintenance
822	organization of an adjusted risk-based capital report that
823	indicates the event described in subparagraph 1., provided the
824	health maintenance organization does not challenge the adjusted
825	risk-based capital report under the provisions of subsection
826	(7);
827	3. If, pursuant to the provisions of subsection (7), the
828	health maintenance organization challenges an adjusted risk-
829	based capital report that indicates the event described in
830	subparagraph 1., the notification by the office to the health
831	maintenance organization that the office has, after a hearing,
832	rejected the health maintenance organization's challenge;
833	4. The failure of the health maintenance organization to
834	file a risk-based capital report by April 1, unless the health
835	maintenance organization has provided an explanation for the
836	failure that is satisfactory to the office and has cured the
837	failure within 10 days after April 1;
838	5. The failure of the health maintenance organization to
839	submit a risk-based capital plan to the office within the time
840	period set forth in paragraph (3)(c);
841	6. Notification by the office to the health maintenance
842	organization that:
843	a. The risk-based capital plan or revised risk-based
844	capital plan submitted by the health maintenance organization
845	is, in the judgment of the office, unsatisfactory; and
846	b. Notification constitutes a regulatory action level
847	event with respect to the health maintenance organization,
848	provided the health maintenance organization has not challenged
849	the determination under subsection (7);
850	7. If, pursuant to subsection (7), the health maintenance
851	organization challenges a determination by the office under
852	subparagraph 6., the notification by the office to the health
853	maintenance organization that the office has, after a hearing,
854	rejected the health maintenance organization's challenge;
855	8. Notification by the office to the health maintenance
856	organization that the health maintenance organization has failed
857	to adhere to its risk-based capital plan or revised risk-based
858	capital plan, but only if the failure has a substantial adverse
859	effect on the ability of the health maintenance organization to
860	eliminate the company action level event in accordance with its
861	risk-based capital plan or revised risk-based capital plan and
862	the office has so stated in the notification, provided the
863	health maintenance organization has not challenged the
864	determination under subsection (7); or
865	9. If, pursuant to subsection (7), the health maintenance
866	organization challenges a determination by the office under
867	subparagraph 8., the notification by the office to the health
868	maintenance organization that the office has, after a hearing,
869	rejected the health maintenance organization's challenge.
870	(b) If a regulatory action level event occurs, the office
871	shall:
872	1. Require the health maintenance organization to prepare
873	and submit a risk-based capital plan or, if applicable, a
874	revised risk-based capital plan.
875	2. Perform such examination or analysis as the office
876	deems necessary of the assets, liabilities, and operations of
877	the health maintenance organization, including a review of its
878	risk-based capital plan or revised risk-based capital plan.
879	3. Subsequent to the examination or analysis, issue a
880	corrective order specifying such corrective actions as the
881	office shall determine are required.
882	(c) In determining corrective actions, the office may take
883	into account factors the office deems relevant with respect to
884	the health maintenance organization based upon the office's
885	examination or analysis of the assets, liabilities, and
886	operations of the health maintenance organization, including,
887	but not limited to, the results of any sensitivity tests
888	undertaken pursuant to the risk-based capital instructions. The
889	risk-based capital plan or revised risk-based capital plan shall
890	be submitted:
891	1. Within 45 days after the occurrence of the regulatory
892	action level event;
893	2. If the health maintenance organization challenges an
894	adjusted risk-based capital report pursuant to subsection (7)
895	and the challenge is not frivolous in the judgment of the
896	office, within 45 days after the notification to the health
897	maintenance organization that the office has, after a hearing,
898	rejected the health maintenance organization's challenge; or
899	3. If the health maintenance organization challenges a
900	revised risk-based capital plan pursuant to subsection (7) and
901	the challenge is not frivolous in the judgment of the office,
902	within 45 days after the notification to the health maintenance
903	organization that the office has, after a hearing, rejected the
904	health maintenance organization's challenge.
905	(d) The office may retain actuaries, investment experts,
906	and other consultants as may be necessary in the judgment of the
907	office to review the health maintenance organization's risk-
908	based capital plan or revised risk-based capital plan; examine
909	or analyze the assets, liabilities, and operations, including
910	contractual relationships, of the health maintenance
911	organization; and formulate the corrective order with respect to
912	the health maintenance organization. The fees, costs, and
913	expenses relating to consultants shall be borne by the affected
914	health maintenance organization or such other party as directed
915	by the office.
916	(5)(a) An authorized control level event includes:
917	1. The filing of a risk-based capital report by the health
918	maintenance organization that indicates that the health
919	maintenance organization's total adjusted capital is greater
920	than or equal to its mandatory control level risk-based capital
921	but less than its authorized control level risk-based capital;
922	2. Notification by the office to the health maintenance
923	organization of an adjusted risk-based capital report that
924	indicates the event described in subparagraph 1., provided the
925	health maintenance organization does not challenge the adjusted
926	risk-based capital report under subsection (7);
927	3. If, pursuant to subsection (7), the health maintenance
928	organization challenges an adjusted risk-based capital report
929	that indicates the event described in subparagraph 1.,
930	notification by the office to the health maintenance
931	organization that the office has, after a hearing, rejected the
932	health maintenance organization's challenge;
933	4. The failure of the health maintenance organization to
934	respond, in a manner satisfactory to the office, to a corrective
935	order, provided the health maintenance organization has not
936	challenged the corrective order under subsection (7); or
937	5. If the health maintenance organization has challenged a
938	corrective order under subsection (7) and the office has, after
939	a hearing, rejected the challenge or modified the corrective
940	order, the failure of the health maintenance organization to
941	respond, in a manner satisfactory to the office, to the
942	corrective order subsequent to rejection or modification by the
943	office.
944	(b) If an authorized control level event occurs, with
945	respect to a health maintenance organization, the office shall:
946	1. Take such actions as are required under paragraph
947	(4)(b) regarding a health maintenance organization with respect
948	to which regulatory action level event has occurred; or
949	2. If the office deems it to be in the best interests of
950	the subscribers and creditors of the health maintenance
951	organization and of the public, take such actions as are
952	necessary to cause the health maintenance organization to be
953	placed under regulatory control under chapter 631. If the office
954	takes such actions, the authorized control level event shall be
955	deemed sufficient grounds for the office to take action under
956	chapter 631 and the office shall have the rights, powers, and
957	duties with respect to the health maintenance organization as
958	are set forth in such chapter. If the office takes actions under
959	thissubparagraph pursuant to an adjusted risk-based capital
960	report, the health maintenance organization shall be entitled to
961	such protections as are afforded to health maintenance
962	organizations under the summary proceedings provisions of s.
963	120.574.
964	(6)(a) A mandatory control level event includes:
965	1. The filing of a risk-based capital report by the health
966	maintenance organization that indicates that the health
967	maintenance organization's total adjusted capital is less than
968	its mandatory control level risk-based capital;
969	2. Notification by the office to the health maintenance
970	organization of an adjusted risk-based capital report that
971	indicates the event described in subparagraph 1., provided the
972	health maintenance organization does not challenge the adjusted
973	risk-based capital report under subsection (7); or
974	3. If, pursuant to subsection (7), the health maintenance
975	organization challenges an adjusted risk-based capital report
976	that indicates the event described in subparagraph 1.,
977	notification by the office to the health maintenance
978	organization that the office has, after a hearing, rejected the
979	health maintenance organization's challenge.
980	(b) If a mandatory control level event occurs, the office
981	shall take such actions as are necessary to place the health
982	maintenance organization under regulatory control under chapter
983	631. If the office takes such actions, the mandatory control
984	level event shall be deemed sufficient grounds for the office to
985	take action under chapter 631 and the office shall have the
986	rights, powers, and duties with respect to the health
987	maintenance organization as are set forth in such chapter. If
988	the office takes actions under this paragraph pursuant to an
989	adjusted risk-based capital report, the health maintenance
990	organization shall be entitled to the summary proceedings
991	protections of s. 120.574. However, the office may forego action
992	for up to 90 days after themandatory control level event if the
993	office finds there is a reasonable expectation that the
994	mandatory control level event may be eliminated within the 90-
995	day period.
996	(7) Upon the occurrence of any of the following events,
997	the health maintenance organization shall have the right to a
998	confidential official hearing, on record, at which the health
999	maintenance organization may challenge any determination or
1000	action by the office. The health maintenance organization shall
1001	notify the office of its request for a hearing within 5 days
1002	after the notification by the office under this subsection. Upon
1003	receipt of the health maintenance organization's request for a
1004	hearing, the office shall set a date for the hearing, which
1005	shall be no less than 10 nor more than 30 days after the date of
1006	thehealth maintenance organization's request. Such events are:
1007	(a) Notification to a health maintenance organization by
1008	the office of an adjusted risk-based capital report.
1009	(b) Notification to a health maintenance organization by
1010	the office that:
1011	1. The health maintenance organization's risk-based
1012	capital plan or revised risk-based capital plan is
1013	unsatisfactory.
1014	2. Notification constitutes a regulatory action level
1015	event with respect to the health maintenance organization.
1016	(c) Notification to a health maintenance organization by
1017	the office that the health maintenance organization has failed
1018	to adhere to its risk-based capital plan or revised risk-based
1019	capital plan and that the failure has a substantial adverse
1020	effect on the ability of the health maintenance organization to
1021	eliminate the company action level event with respect to the
1022	health maintenance organization in accordance with its risk-
1023	based capital plan or revised risk-based capital plan.
1024	(d) Notification to a health maintenance organization by
1025	the office of a corrective order with respect to the health
1026	maintenance organization.
1027	(8)(a) This section is supplemental to any other
1028	provisions of this part and shall not preclude or limit any
1029	other powers or duties of the office as provided in the
1030	insurance code.
1031	(b) The office may adopt reasonable rules necessary to
1032	implement this section.
1033	(c) The office may exempt from the application of this
1034	section a health maintenance organization that:
1035	1. Writes direct business only in this state;
1036	2. Assumes no reinsurance in excess of 5 percent of direct
1037	premium written, and writes direct annual premiums for
1038	comprehensive medical business of $2 million or less; or
1039	3. Is a limited health service organization that covers
1040	less than 2,000 lives.
1041	(9) There shall be no liability on the part of, and no
1042	cause of action shall arise against, the commissioner or the
1043	office or its employees or agents for any action taken by them
1044	in the performance of their powers and duties under this
1045	section.
1046	(10) All notices by the office to a health maintenance
1047	organization that may result in regulatory action under this
1048	section shall be effective upon dispatch if transmitted by
1049	registered or certified mail or, in the case of any other
1050	transmission, shall be effective upon the health maintenance
1051	organization's receipt of notice.
1052	(11) For risk-based capital reports required to be filed
1053	in 2004, 2005, and 2006 by health maintenance organizations with
1054	respect to their 2003, 2004, and 2005 annual statement data, the
1055	following requirements shall apply in lieu of the provisions of
1056	subsections (3), (4), (5), and (6):
1057	(a) If a company action level event occurs with respect to
1058	a health maintenance organization, the office shall take no
1059	regulatory action under this section.
1060	(b) If a regulatory action level event as provided in
1061	subparagraphs (4)(a)1., 2., or 3. occurs, the office shall take
1062	the actions required under subsection (3).
1063	(c) If a regulatory action level event as provided in
1064	subparagraphs (4)(a)4., 5., 6., 7., 8., or 9. occurs or an
1065	authorized control level event occurs, the office shall take the
1066	actions required under subsection (4) with respect to the health
1067	maintenance organization.
1068	(d) If a mandatory control level event occurs with respect
1069	to a health maintenance organization, the office shall take the
1070	actions required under subsection (5) with respect to the health
1071	maintenance organization.
1072
1073	Nothing in this subsection restricts or otherwise limits the
1074	office's authority under other provisions of the insurance code.
1075	(12) It is the intent of the Legislature that the risk-
1076	based capital instructions, risk-based capital reports, adjusted
1077	risk-based capital reports, risk-based capital plans, revised
1078	risk-based capital plans, and related documents, materials, or
1079	information are intended solely for use by the office in
1080	monitoring the solvency of health maintenance organizations and
1081	the need for possible corrective action with respect to health
1082	maintenance organizations and shall not be used by the office
1083	for ratemaking, considered or introduced as evidence in any rate
1084	proceeding, or used by the office to calculate or derive any
1085	elements of an appropriate premium level or rate of return for
1086	any line of insurance that a health maintenance organization or
1087	any affiliate is authorized to write.
1088	Section 11. Section 651.029, Florida Statutes, is created
1089	to read:
1090	651.029 Prohibited investments and loans.--A provider
1091	shall not directly or indirectly invest in or lend its funds
1092	upon the security of any note or other evidence of indebtedness
1093	of any director, officer, or controlling stockholder of the
1094	provider.
1095	Section 12. Paragraph (a) of subsection (15) of section
1096	440.20, Florida Statutes, is amended to read:
1097	440.20 Time for payment of compensation; penalties for
1098	late payment.--
1099	(15)(a) The department shall examine on an ongoing basis
1100	claims files in accordance with s. 624.3161 and may impose fines
1101	pursuant to s. 624.310(6)(5)and this chapter in order to
1102	identify questionable claims-handling techniques, questionable
1103	patterns or practices of claims, or a pattern of repeated
1104	unreasonably controverted claims by carriers, as defined in s.
1105	440.02, providing services to employees pursuant to this
1106	chapter. If the department finds such questionable techniques,
1107	patterns, or repeated unreasonably controverted claims as
1108	constitute a general business practice of a carrier, as defined
1109	in s. 440.02, the department shall take appropriate action so as
1110	to bring such general business practices to a halt pursuant to
1111	s. 440.38(3) or may impose penalties pursuant to s. 624.4211.
1112	The department may initiate investigations of questionable
1113	techniques, patterns, practices, or repeated unreasonably
1114	controverted claims. The department may by rule establish forms
1115	and procedures for corrective action plans and for auditing
1116	carriers.
1117	Section 13. This act shall take effect October 1, 2003.