HB 0831 2003
1	CHAMBER ACTION
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6	The Committee on Insurance recommends the following:
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8	Committee Substitute
9	Remove the entire bill and insert:
10	A bill to be entitled
11	An act relating to insurance; amending s. 624.310, F.S.;
12	revising definitions; conforming provisions to a revised
13	definition; conforming provisions to certain governmental
14	reorganization; prohibiting affiliated parties from
15	certain activities constituting a conflict of interest;
16	providing exceptions; authorizing the Office of Insurance
17	Regulation to require certain disclosures of personal
18	interest; specifying certain restrictions governing
19	conduct of an affiliated party of a licensee; amending
20	624.316, F.S.; deleting provisions providing for an
21	examination of an insurer pursuant to an agreement between
22	the Department of Financial Services and the insurer;
23	requiring such examinations according to rules of the
24	commission; amending s. 624.4095, F.S.; conforming
25	provisions to certain governmental reorganization;
26	providing for calculating certain surplus for certain
27	insurers; amending s. 624.610, F.S.; conforming provisions
28	to certain governmental reorganization; revising
29	requirements for securities of a trust fund for a single
30	assuming insurer; amending ss. 628.461 and 628.4615, F.S.;
31	specifying additional nonapplication of acquisition of
32	controlling stock provisions to changes of ownership of a
33	domestic insurer or specialty insurer, respectively, under
34	certain circumstances; creating ss. 634.042, 627.8401,
35	634.3076, 634.4062, and 651.029, F.S.; prohibiting certain
36	investments by motor vehicle service agreement companies,
37	premium finance companies, home warranty associations,
38	service warranty associations, and continuing care
39	providers, respectively; amending s. 440.20, F.S.;
40	correcting a cross reference; providing an effective date.
41
42	Be It Enacted by the Legislature of the State of Florida:
43
44	Section 1. Section 624.310, Florida Statutes, is amended
45	to read:
46	624.310 Enforcement; cease and desist orders; removal of
47	certain persons; fines.--
48	(1) DEFINITIONS.--For the purposes of this section, the
49	term:
50	(a) "Affiliated party of a licensee" means any person who
51	directs or participates in the conduct of the affairs of a
52	licensee and who is:
53	1. A director, officer, employee, trustee, committee
54	member, or controlling stockholder of a licensee or a subsidiary
55	or service corporation of the licensee, other than a controlling
56	stockholder which is a holding company,or an agent of a
57	licensee or a subsidiary or service corporation of the licensee;
58	2. A person who has filed or is required to file a
59	statement or any other information required to be filed under s.
60	628.461 or s. 628.4615;
61	3. A stockholder, other than a stockholder that is a
62	holding company of the licensee,who participates in the conduct
63	of the affairs of the licensee; or
64	4. An independent contractor who:
65	a. Renders a written opinion required by the laws of this
66	state under her or his professional credentials on behalf of the
67	licensee, which opinion is reasonably relied on by the office
68	departmentin the performance of its duties; or
69	b. Affirmatively and knowingly conceals facts, through a
70	written misrepresentation to the officedepartment, with
71	knowledge that such misrepresentation:
72	(I) Constitutes a violation of the insurance code or a
73	lawful rule or order of the officedepartment; and
74	(II) Directly and materially endangers the ability of the
75	licensee to meet its obligations to policyholders.
76
77	For the purposes of this subparagraph, any representation of
78	fact made by an independent contractor on behalf of a licensee,
79	affirmatively communicated as a representation of the licensee
80	to the independent contractor, shall not be considered a
81	misrepresentation by the independent contractor to the
82	department or office.
83	(b) "Licensee" means a person issued a license or
84	certificate of authority or approval under this code or a person
85	registered under a provision of this code.
86	(2) ENFORCEMENT GENERALLY.--The department or officemay
87	institute such suits or other legal proceedings as may be
88	required to enforce any provision of this code. If it appears
89	that any person has violated any provision of this code for
90	which criminal prosecution is provided, the department or office
91	shall provide the appropriate state attorney or other
92	prosecuting agency having jurisdiction with respect to such
93	prosecution with the relevant information in its possession.
94	(3) CEASE AND DESIST ORDERS.--
95	(a) The department or officemay issue and serve a
96	complaint stating charges upon any licensee or upon any
97	affiliated party of a licensee, whenever the department or
98	officehas reasonable cause to believe that the person or
99	individual named therein is engaging in or has engaged in
100	conduct that is:
101	1. An act that demonstrates a lack of fitness or
102	trustworthiness to engage in the business of insurance, is
103	hazardous to the insurance buying public, or constitutes
104	business operations that are a detriment to policyholders,
105	stockholders, investors, creditors, or the public;
106	2. A violation of any provision of the Florida Insurance
107	Code;
108	3. A violation of any rule of the department or office;
109	4. A violation of any order of the department or office;
110	or
111	5. A breach of any written agreement with the department
112	or office.
113	(b) The complaint shall contain a statement of facts and
114	notice of opportunity for a hearing pursuant to ss. 120.569 and
115	120.57.
116	(c) If no hearing is requested within the time allowed by
117	ss. 120.569 and 120.57, or if a hearing is held and the
118	department or officefinds that any of the charges are proven,
119	the department or officemay enter an order directing the
120	licensee or the affiliated party of a licenseenamed in the
121	complaint to cease and desist from engaging in the conduct
122	complained of and take corrective action to remedy the effects
123	of past improper conduct and assure future compliance.
124	(d) If the licensee or affiliated party of a licensee
125	named in the order fails to respond to the complaint within the
126	time allotted by ss. 120.569 and 120.57, the failure constitutes
127	a default and justifies the entry of a cease and desist order.
128	(e) A contested or default cease and desist order is
129	effective when reduced to writing and served upon the licensee
130	or affiliated party of a licenseenamed therein. An uncontested
131	cease and desist order is effective as agreed.
132	(f) Whenever the department or officefinds that conduct
133	described in paragraph (a) is likely to cause insolvency,
134	substantial dissipation or misvaluation of assets or earnings of
135	the licensee, substantial inability to pay claims on a timely
136	basis, or substantial prejudice to prospective or existing
137	insureds, policyholders, subscribers, or the public, it may
138	issue an emergency cease and desist order requiring the licensee
139	or any affiliated party of a licenseeto immediately cease and
140	desist from engaging in the conduct complained of and to take
141	corrective and remedial action. The emergency order is effective
142	immediately upon service of a copy of the order upon the
143	licensee or affiliated party of a licenseenamed therein and
144	remains effective for 90 days. If the department or office
145	begins nonemergency cease and desist proceedings under this
146	subsection, the emergency order remains effective until the
147	conclusion of the proceedings under ss. 120.569 and 120.57. Any
148	emergency order entered under this subsection is exempt from s.
149	119.07(1) and is confidential until it is made permanent unless
150	the department or officefinds that the confidentiality will
151	result in substantial risk of financial loss to the public. All
152	emergency cease and desist orders that are not made permanent
153	are available for public inspection 1 year from the date the
154	emergency cease and desist order expires; however, portions of
155	an emergency cease and desist order remain confidential and
156	exempt from the provisions of s. 119.07(1) if disclosure would:
157	1. Jeopardize the integrity of another active
158	investigation;
159	2. Impair the safety and financial soundness of the
160	licensee or affiliated party of a licensee;
161	3. Reveal personal financial information;
162	4. Reveal the identity of a confidential source;
163	5. Defame or cause unwarranted damage to the good name or
164	reputation of an individual or jeopardize the safety of an
165	individual; or
166	6. Reveal investigative techniques or procedures.
167	(4) REMOVAL OF AFFILIATED PARTIES OF A LICENSEEBY THE
168	DEPARTMENT OR OFFICE.--
169	(a) The department or officemay issue and serve a
170	complaint stating charges upon any affiliated party of a
171	licensee and upon the licensee involved, whenever the department
172	or office has reason to believe that an affiliated party of a
173	licenseeis engaging in or has engaged in conduct that
174	constitutes:
175	1. An act that demonstrates a lack of fitness or
176	trustworthiness to engage in the business of insurance through
177	engaging in illegal activity or mismanagement of business
178	activities;
179	2. A willful violation of any law relating to the business
180	of insurance; however, if the violation constitutes a
181	misdemeanor, no complaint shall be served as provided in this
182	section until the affiliated party of a licenseeis notified in
183	writing of the matter of the violation and has been afforded a
184	reasonable period of time, as set forth in the notice, to
185	correct the violation and has failed to do so;
186	3. A violation of any other law involving fraud or moral
187	turpitude that constitutes a felony;
188	4. A willful violation of any rule of the department or
189	office;
190	5. A willful violation of any order of the department or
191	office;
192	6. A material misrepresentation of fact, made knowingly
193	and willfully or made with reckless disregard for the truth of
194	the matter; or
195	7. An act of commission or omission or a practice which is
196	a breach of trust or a breach of fiduciary duty.
197	(b) The complaint shall contain a statement of facts and
198	notice of opportunity for a hearing pursuant to ss. 120.569 and
199	120.57.
200	(c) If no hearing is requested within the time allotted by
201	ss. 120.569 and 120.57, or if a hearing is held and the
202	department or officefinds that any of the charges in the
203	complaint are proven true and that:
204	1. The licensee has suffered or will likely suffer loss or
205	other damage;
206	2. The interests of the policyholders, creditors, or
207	public are, or could be, seriously prejudiced by reason of the
208	violation or act or breach of fiduciary duty;
209	3. The affiliated party of a licenseehas received
210	financial gain by reason of the violation, act, or breach of
211	fiduciary duty; or
212	4. The violation, act, or breach of fiduciary duty is one
213	involving personal dishonesty on the part of the affiliated
214	party of a licenseeor the conduct jeopardizes or could
215	reasonably be anticipated to jeopardize the financial soundness
216	of the licensee,
217
218	The department or officemay enter an order removing the
219	affiliated party of a licenseeor restricting or prohibiting
220	participation by the person in the affairs of that particular
221	licensee or of any other licensee.
222	(d) If the affiliated party of a licenseefails to respond
223	to the complaint within the time allotted by ss. 120.569 and
224	120.57, the failure constitutes a default and justifies the
225	entry of an order of removal, suspension, or restriction.
226	(e) A contested or default order of removal, restriction,
227	or prohibition is effective when reduced to writing and served
228	on the licensee and the affiliated party of a licensee. An
229	uncontested order of removal, restriction, or prohibition is
230	effective as agreed.
231	(f)1. The chief executive officer, or the person holding
232	the equivalent office, of a licensee shall promptly notify the
233	department or officeif she or he has actual knowledge that any
234	affiliated party of a licenseeis charged with a felony in a
235	state or federal court.
236	2. Whenever any affiliated party of a licenseeis charged
237	with a felony in a state or federal court or with the equivalent
238	of a felony in the courts of any foreign country with which the
239	United States maintains diplomatic relations, and the charge
240	alleges violation of any law involving fraud, theft, or moral
241	turpitude, the department or officemay enter an emergency order
242	suspending the affiliated party of a licenseeor restricting or
243	prohibiting participation by the affiliated party of a licensee
244	in the affairs of the particular licensee or of any other
245	licensee upon service of the order upon the licensee and the
246	affiliated party of a licenseecharged. The order shall contain
247	notice of opportunity for a hearing pursuant to ss. 120.569 and
248	120.57, where the affiliated party of a licenseemay request a
249	postsuspension hearing to show that continued service to or
250	participation in the affairs of the licensee does not pose a
251	threat to the interests of the licensee's policyholders or
252	creditors and does not threaten to impair public confidence in
253	the licensee. In accordance with applicable departmental or
254	office rules, the department or officeshall notify the
255	affiliated party of a licenseewhether the order suspending or
256	prohibiting the person from participation in the affairs of a
257	licensee will be rescinded or otherwise modified. The emergency
258	order remains in effect, unless otherwise modified by the
259	department or office, until the criminal charge is disposed of.
260	The acquittal of the person charged, or the final, unappealed
261	dismissal of all charges against the person, dissolves the
262	emergency order, but does not prohibit the department or office
263	from instituting proceedings under paragraph (a). If the person
264	charged is convicted or pleads guilty or nolo contendere,
265	whether or not an adjudication of guilt is entered by the court,
266	the emergency order shall become final.
267	(g) Any affiliated party of a licenseeremoved from office
268	pursuant to this section is not eligible for reelection or
269	appointment to the position or to any other official position in
270	any licensee in this state except upon the written consent of
271	the department or office. Any affiliated party of a licenseewho
272	is removed, restricted, or prohibited from participation in the
273	affairs of a licensee pursuant to this section may petition the
274	department or officefor modification or termination of the
275	removal, restriction, or prohibition.
276	(h) Resignation or termination of an affiliated party of a
277	licensee does not affect the department's or office’s
278	jurisdiction to proceed under this subsection.
279	(5)(a) CONFLICT OF INTEREST.--An affiliated party of a
280	licensee may not engage or participate, directly or indirectly,
281	in any business or transaction conducted on behalf of or
282	involving the licensee, subsidiary, or service corporation that
283	would result in a conflict of the party's own personal interests
284	with those of the licensee, subsidiary, or service corporation
285	with which he or she is affiliated, unless:
286	1. Such business or transactions are conducted in good
287	faith and are honest, fair, and reasonable to the licensee,
288	subsidiary, or service corporation and are on terms no more
289	favorable than would be offered to a disinterested third party.
290	2. A full disclosure of such business or transaction, and
291	the nature of the interest of the affiliated party of the
292	licensee, is made to the board of directors.
293	3. Such business or transactions are approved in good
294	faith by the board of directors and any interested director
295	abstaining and such approval is recorded in the minutes.
296	4. Any profits inuring to the affiliated party of a
297	licensee are not at the expense of the licensee, subsidiary, or
298	service corporation and do not prejudice the best interests of
299	the licensee, subsidiary, or service corporation in any way.
300	5. Such business or transactions do not represent a breach
301	of the fiduciary duty of an affiliated party of a licensee and
302	are not fraudulent, illegal, or ultra vires.
303	(b) Without limitation by any of the specific provisions
304	of this section, the office may require the disclosure by
305	affiliated parties of a licensee of their personal interests,
306	directly or indirectly, in any business or transactions on
307	behalf of or involving the licensee, subsidiary, or service
308	corporation and of their control of or active participation in
309	enterprises having activities related to the business of the
310	licensee, subsidiary, or service corporation.
311	(c) The following restrictions governing the conduct of
312	affiliated parties of a licensee are expressly specified, but
313	such specification is not to be construed in any manner as
314	excusing such parties from the observance of any other aspect of
315	the general fiduciary duty owed by such parties to the licensee
316	which they serve:
317	1. A director of a licensee may not accept director fees
318	unless the director fees have been previously approved by the
319	board of directors and such fees represent reasonable
320	compensation for service as a director or member of a committee.
321	This subparagraph does not limit or preclude reasonable
322	compensation as otherwise authorized by paragraph (a) for a
323	director who also provides goods or services to the licensee.
324	2. An affiliated party of a licensee may not purchase or
325	otherwise obtain ownership of any asset of the licensee or
326	subsidiary at less than fair market value of such asset.
327	3. An affiliated party of a licensee may not have any
328	interest, direct or indirect, of any evidence of indebtedness of
329	the licensee or subsidiary.
330	4. An affiliated party of a licensee acting as proxy for a
331	stockholder of a licensee, subsidiary, or service corporation
332	may not, directly or indirectly, exercise, transfer, or delegate
333	such vote or votes in any consideration of a private benefit or
334	advantage. The voting rights of stockholders and directors may
335	not be the subject of sale, barter, exchange, or similar
336	transaction, directly or indirectly. Any affiliated party of a
337	licensee who violates the provisions of this subparagraph is
338	accountable to the licensee, subsidiary, or service corporation
339	for any increment.
340	(d) This subsection shall not apply to foreign or alien
341	insurers.
342	(e) This subsection shall not apply to a transaction with
343	an affiliated party of a licensee if the transaction is reported
344	to the office pursuant to the requirements of s. 628.801.
345	(6)(5)ADMINISTRATIVE FINES; ENFORCEMENT.--
346	(a) The department or officemay, in a proceeding
347	initiated pursuant to chapter 120, impose an administrative fine
348	against any person found in the proceeding to have violated any
349	provision of this code, a cease and desist order of the
350	department or office, or any written agreement with the
351	department or office. No proceeding shall be initiated and no
352	fine shall accrue until after the person has been notified in
353	writing of the nature of the violation and has been afforded a
354	reasonable period of time, as set forth in the notice, to
355	correct the violation and has failed to do so.
356	(b) A fine imposed under this subsection may not exceed
357	the amounts specified in s. 624.4211, per violation.
358	(c) The department or officemay, in addition to the
359	imposition of an administrative fine under this subsection, also
360	suspend or revoke the license or certificate of authority of the
361	licensee fined under this subsection.
362	(d) Any administrative fine levied by the department or
363	office under this subsection may be enforced by the department
364	or officeby appropriate proceedings in the circuit court of the
365	county in which the person resides or in which the principal
366	office of a licensee is located, or, in the case of a foreign
367	insurer or person not residing in this state, in Leon County. In
368	any administrative or judicial proceeding arising under this
369	section, a party may elect to correct the violation asserted by
370	the department or office, and, upon doing so, any fine shall
371	cease to accrue; however, the election to correct the violation
372	does not render any administrative or judicial proceeding moot.
373	All fines collected under this section shall be paid to the
374	Insurance Commissioner's Regulatory Trust Fund.
375	(e) In imposing any administrative penalty or remedy
376	provided for under this section, the department or officeshall
377	take into account the appropriateness of the penalty with
378	respect to the size of the financial resources and the good
379	faith of the person charged, the gravity of the violation, the
380	history of previous violations, and other matters as justice may
381	require.
382	(f) The imposition of an administrative fine under this
383	subsection may be in addition to any other penalty or
384	administrative fine authorized under this code.
385	(7)(6)ADMINISTRATIVE PROCEDURES.--All administrative
386	proceedings brought under this sectionsubsections (3), (4), and
387	(5)shall be conducted in accordance with chapter 120. Any
388	service required or authorized to be made by the department or
389	officeunder this code shall be made by certified mail, return
390	receipt requested, delivered to the addressee only; by personal
391	delivery; or in accordance with chapter 48. The service provided
392	for herein shall be effective from the date of delivery.
393	(8)(7)OTHER LAWS NOT SUPERSEDED.--The provisions of this
394	section are in addition to other provisions of this code, and
395	shall not be construed to curtail, impede, replace, or delete
396	any other similar provision or power of the department or office
397	under the insurance code as defined in s. 624.01 or any power of
398	the department or officewhich may exist under the common law of
399	this state. The procedures set forth in s. 626.9581 do not apply
400	to regulatory action taken pursuant to the provisions of this
401	section.
402	Section 2. Paragraph (e) of subsection (2) of section
403	624.316, Florida Statutes, is amended to read:
404	624.316 Examination of insurers.--
405	(2)
406	(e) The commissiondepartmentshall adopt rules providing
407	that, upon agreement between the department and the insurer,an
408	examination under this section may be conducted by independent
409	certified public accountants, actuaries, investment specialists,
410	information technology specialistsmeeting criteria specified by
411	rule, and reinsurance specialists meeting criteria specified by
412	rule. The rules shall provide:
413	1. That the agreement of the insurer is not required if
414	the department reasonably suspects criminal misconduct on the
415	part of the insurer.
416	2. That the department shall provide the insurer with a
417	list of three firms acceptable to the department, and that the
418	insurer shall select the firm to conduct the examination from
419	the list provided by the department.
420	1.3.That the insurer being examined must make payment for
421	the examination directly to the firm performing the examination
422	in accordance with the rates and terms establishedagreed toby
423	the officedepartment, the insurer,and the firm performing the
424	examination.
425	2. That the rates charged to the insurer being examined
426	are consistent with rates charged by other firms in a similar
427	profession.
428	3. That the firm selected by the office to perform the
429	examination has no conflicts of interest that might affect its
430	ability to independently perform its responsibilities on the
431	examination.
432	4. That if the examination is conducted without the
433	consent of the insurer, the insurer must pay all reasonable
434	charges of the examining firm if the examination finds
435	impairment, insolvency, or criminal misconduct on the part of
436	the insurer.
437	Section 3. Section 624.4095, Florida Statutes, is amended
438	to read:
439	624.4095 Premiums written; restrictions.--
440	(1) Whenever an insurer's ratio of actual or projected
441	annual written premiums as adjusted in accordance with
442	subsection (5)(4)to current or projected surplus as to
443	policyholders as adjusted in accordance with subsection (6)(5)
444	exceeds 10 to 1 for gross written premiums or exceeds 4 to 1 for
445	net written premiums, the officedepartmentshall suspend the
446	insurer's certificate of authority or establish by order maximum
447	gross or net annual premiums to be written by the insurer
448	consistent with maintaining the ratios specified herein unless
449	the insurer demonstrates to the office’sdepartment's
450	satisfaction that exceeding the ratios of this section does not
451	endanger the financial condition of the insurer or endanger the
452	interests of the insurer's policyholders.
453	(2) Projected annual net or gross premiums shall be based
454	on the actual writings to date for the insurer's current
455	calendar year or the insurer's writings for the previous
456	calendar year or both. Ratios shall be computed on an annualized
457	basis.
458	(3) For the purposes of this section, gross premiums
459	written means direct premiums written and reinsurance assumed.
460	(4) For the purposes of this section, surplus as to
461	policyholders for property and casualty insurers shall be
462	calculated as follows: (actual surplus as to policyholders)
463	minus (surplus as to policyholders of all subsidiary insurers as
464	allowed pursuant to s. 625.325).
465	(5)(4)For the purposes of this section, for the calendar
466	year ending December 31, 1990, and each subsequent year,
467	premiums shall be calculated as the product of the actual or
468	projected premiums and the following:
469	(a) For property insurance, 0.90.
470	(b) For casualty insurance, 1.25.
471	(c) For health insurance, 0.80.
472	(d) For all other kinds of insurance, 1.00.
473	(6)(5)This section shall not apply to:
474	(a) Life insurance written by life or life and health
475	insurers; or
476	(b) Life and health insurers which have a surplus as to
477	policyholders greater than $40 million and which have written
478	health insurance during each of the immediately preceding five
479	calendar years.
480	(7)(6)For the purposes of this section, surplus as to
481	policyholders for life and health insurers shall be calculated
482	as follows:(actual or projected surplus as to policyholders)
483	minus(surplus as to policyholders required to be maintained
484	under s. 624.408 for liabilities relating to life insurance) and
485	minus (surplus as to policyholders of all subsidiary insurers as
486	allowed pursuant to s. 625.325).
487	Note.--Subsection (7)(6)relates to calculation of surplus
488	as to policyholders.
489	Section 4. Paragraph (c) of subsection (3) of section
490	624.610, Florida Statutes, is amended to read:
491	624.610 Reinsurance.--
492	(3)
493	(c)1. Credit must be allowed when the reinsurance is ceded
494	to an assuming insurer that maintains a trust fund in a
495	qualified United States financial institution, as defined in
496	paragraph (5)(b), for the payment of the valid claims of its
497	United States ceding insurers and their assigns and successors
498	in interest. To enable the officedepartmentto determine the
499	sufficiency of the trust fund, the assuming insurer shall report
500	annually to the officedepartmentinformation substantially the
501	same as that required to be reported on the NAIC Annual
502	Statement form by authorized insurers. The assuming insurer
503	shall submit to examination of its books and records by the
504	officedepartmentand bear the expense of examination.
505	2.a. Credit for reinsurance must not be granted under this
506	subsection unless the form of the trust and any amendments to
507	the trust have been approved by:
508	(I) The commissioner of the state in which the trust is
509	domiciled; or
510	(II) The commissioner of another state who, pursuant to
511	the terms of the trust instrument, has accepted principal
512	regulatory oversight of the trust.
513	b. The form of the trust and any trust amendments must be
514	filed with the commissioner of every state in which the ceding
515	insurer beneficiaries of the trust are domiciled. The trust
516	instrument must provide that contested claims are valid and
517	enforceable upon the final order of any court of competent
518	jurisdiction in the United States. The trust must vest legal
519	title to its assets in its trustees for the benefit of the
520	assuming insurer's United States ceding insurers and their
521	assigns and successors in interest. The trust and the assuming
522	insurer are subject to examination as determined by the
523	commissioner.
524	c. The trust remains in effect for as long as the assuming
525	insurer has outstanding obligations due under the reinsurance
526	agreements subject to the trust. No later than February 28 of
527	each year, the trustee of the trust shall report to the
528	commissioner in writing the balance of the trust and list the
529	trust's investments at the preceding year end, and shall certify
530	that the trust will not expire prior to the following December
531	31.
532	3. The following requirements apply to the following
533	categories of assuming insurer:
534	a. The trust fund for a single assuming insurer consists
535	of funds in trust in an amount not less than the assuming
536	insurer's liabilities attributable to reinsurance ceded by
537	United States ceding insurers, and, in addition, the assuming
538	insurer shall maintain a trusteed surplus of not less than $20
539	million. Not less than 50 percent of the funds in the trust
540	covering the assuming insurer’s liabilities attributable to
541	reinsurance ceded by United States ceding insurersand trusteed
542	surplus shallconsist of assets of a quality substantially
543	similar to that required in part II of chapter 625. Clean,
544	irrevocable, unconditional, and evergreen letters of credit,
545	issued or confirmed by a qualified United States financial
546	institution, as defined in paragraph (5)(a), effective no later
547	than December 31 of the year for which the filing is made, and
548	in the possession of the trust on or before the filing date of
549	its annual statement, may be used to fund the remainder of the
550	trust fund and trusteed surplus.
551	b.(I) In the case of a group including incorporated and
552	individual unincorporated underwriters:
553	(A) For reinsurance ceded under reinsurance agreements
554	with an inception, amendment, or renewal date on or after August
555	1, 1995, the trust consists of a trusteed account in an amount
556	not less than the group's several liabilities attributable to
557	business ceded by United States domiciled ceding insurers to any
558	member of the group;
559	(B) For reinsurance ceded under reinsurance agreements
560	with an inception date on or before July 31, 1995, and not
561	amended or renewed after that date, notwithstanding the other
562	provisions of this section, the trust consists of a trusteed
563	account in an amount not less than the group's several insurance
564	and reinsurance liabilities attributable to business written in
565	the United States; and
566	(C) In addition to these trusts, the group shall maintain
567	in trust a trusteed surplus of which $100 million must be held
568	jointly for the benefit of the United States domiciled ceding
569	insurers of any member of the group for all years of account.
570	(II) The incorporated members of the group must not be
571	engaged in any business other than underwriting of a member of
572	the group, and are subject to the same level of regulation and
573	solvency control by the group's domiciliary regulator as the
574	unincorporated members.
575	(III) Within 90 days after its financial statements are
576	due to be filed with the group's domiciliary regulator, the
577	group shall provide to the commissioner an annual certification
578	by the group's domiciliary regulator of the solvency of each
579	underwriter member or, if a certification is unavailable,
580	financial statements, prepared by independent public
581	accountants, of each underwriter member of the group.
582	Section 5. Section 627.8401, Florida Statutes, is created
583	to read:
584	627.8401 Prohibited investments and loans.--A premium
585	finance company shall not directly or indirectly invest in or
586	lend its funds upon the security of any note or other evidence
587	of indebtedness of any director, officer, or controlling
588	stockholder of the premium finance company.
589	Section 6. Subsection (2) of section 628.461, Florida
590	Statutes, is amended to read:
591	628.461 Acquisition of controlling stock.--
592	(2) This section does not apply to any acquisition of
593	voting securities of a domestic stock insurer or of a
594	controlling company by any person who, on July 1, 1976, is the
595	owner of a majority of such voting securities or who, on or
596	after July 1, 1976, becomes the owner of a majority of such
597	voting securities with the approval of the department pursuant
598	to this section. Further, the provisions of this section shall
599	not apply to a change of ownership of a domestic insurer
600	resulting from changes within an insurance holding company of
601	which the insurer is a member, provided the insurer establishes
602	that no new person or entity will have the ability to influence
603	or control the activities of the insurer and that the
604	reorganization will not result in any changes in the officers,
605	directors, or business plan of the domestic insurer.
606	Section 7. Subsection (3) of section 628.4615, Florida
607	Statutes, is amended to read:
608	628.4615 Specialty insurers; acquisition of controlling
609	stock, ownership interest, assets, or control; merger or
610	consolidation.--
611	(3) This section does not apply to any acquisition of
612	voting securities or ownership interest of a specialty insurer
613	or of a controlling company by any person who, on July 9, 1986,
614	is the owner of a majority of such voting securities or
615	ownership interest or who, on or after July 9, 1986, becomes the
616	owner of a majority of such voting securities or ownership
617	interest with the approval of the department pursuant to this
618	section. Further, the provisions of this section shall not apply
619	to a change of ownership of a specialty insurer resulting from
620	changes within a holding company of which the specialty insurer
621	is a member, provided the specialty insurer establishes that no
622	new person or entity will have the ability to influence or
623	control the activities of the specialty insurer and that the
624	reorganization will not result in any changes in the officers,
625	directors, or business plan of the specialty insurer.
626	Section 8. Section 634.042, Florida Statutes, is created
627	to read:
628	634.042 Prohibited investments and loans.--A motor vehicle
629	service agreement company shall not directly or indirectly
630	invest in or lend its funds upon the security of any note or
631	other evidence of indebtedness of any director, officer, or
632	controlling stockholder of the motor vehicle service agreement
633	company.
634	Section 9. Section 634.3076, Florida Statutes, is created
635	to read:
636	634.3076 Prohibited investments and loans.--A home
637	warranty association shall not directly or indirectly invest in
638	or lend its funds upon the security of any note or other
639	evidence of indebtedness of any director, officer, or
640	controlling stockholder of the home warranty association.
641	Section 10. Section 634.4062, Florida Statutes, is created
642	to read:
643	634.4062 Prohibited investments and loans.--A service
644	warranty association shall not directly or indirectly invest in
645	or lend its funds upon the security of any note or other
646	evidence of indebtedness of any director, officer, or
647	controlling stockholder of the service warranty association.
648	Section 11. Section 651.029, Florida Statutes, is created
649	to read:
650	651.029 Prohibited investments and loans.--A provider
651	shall not directly or indirectly invest in or lend its funds
652	upon the security of any note or other evidence of indebtedness
653	of any director, officer, or controlling stockholder of the
654	provider.
655	Section 12. Paragraph (a) of subsection (15) of section
656	440.20, Florida Statutes, is amended to read:
657	440.20 Time for payment of compensation; penalties for
658	late payment.--
659	(15)(a) The department shall examine on an ongoing basis
660	claims files in accordance with s. 624.3161 and may impose fines
661	pursuant to s. 624.310(6)(5)and this chapter in order to
662	identify questionable claims-handling techniques, questionable
663	patterns or practices of claims, or a pattern of repeated
664	unreasonably controverted claims by carriers, as defined in s.
665	440.02, providing services to employees pursuant to this
666	chapter. If the department finds such questionable techniques,
667	patterns, or repeated unreasonably controverted claims as
668	constitute a general business practice of a carrier, as defined
669	in s. 440.02, the department shall take appropriate action so as
670	to bring such general business practices to a halt pursuant to
671	s. 440.38(3) or may impose penalties pursuant to s. 624.4211.
672	The department may initiate investigations of questionable
673	techniques, patterns, practices, or repeated unreasonably
674	controverted claims. The department may by rule establish forms
675	and procedures for corrective action plans and for auditing
676	carriers.
677	Section 13. This act shall take effect October 1, 2003.