HB 1265

1	A bill to be entitled
2	An act relating to insurance regulation; amending s.
3	624.316, F.S.; increasing a time period for required
4	insurer examinations by the Department of Financial
5	Services; deleting provisions authorizing the department
6	to accept certain accountant audit reports in lieu of
7	examinations; expanding the group of entities authorized
8	to conduct insurer examinations; revising commission
9	examination rules criteria; amending s. 624.319, F.S.;
10	requiring insurers to provide copies of certain documents;
11	creating s. 624.4045, F.S.; authorizing the office to
12	examine certain insurers for compliance with certain
13	federal laws; authorizing the office to report to and
14	cooperate with certain federal authorities; amending s.
15	624.4095, F.S.; requiring certain parent companies to
16	maintain certain premium to surplus ratios; amending s.
17	624.413, F.S.; requiring certain insurers to provide the
18	Office of Insurance Regulation with certain additional
19	documents when applying for a certificate of authority;
20	amending s. 624.418, F.S.; providing an additional
21	criterion requiring the office to suspend or revoke an
22	insurer's certificate of authority; amending s. 624.424,
23	F.S.; authorizing the office to require insurers to submit
24	certain actuarial certifications in annual statements;
25	amending s. 624.4622, F.S.; specifying organization and
26	operation requirements for certain local government self-
27	insurance funds; creating s. 624.4685, F.S.; authorizing
28	the department to establish and order certain financial
29	requirements for commercial self-insurance funds;
30	providing limitations; specifying certain reinsurance
31	financial requirements for such funds; amending s.
32	624.610, F.S.; specifying certain asset requirements for
33	funds in certain trusts; authorizing certain letters of
34	credit to be used to fund certain trust financial
35	requirements; amending s. 625.121, F.S.; providing
36	additional standards for valuation of certain insurance
37	policies and contracts; amending s. 625.131, F.S.;
38	requiring insurers to establish and maintain certain
39	reserves as to certain life insurance policies; amending
40	s. 625.304, F.S.; requiring an insurers' board of
41	directors or governing body to adopt certain investment
42	plans; providing criteria; specifying duties and
43	responsibilities of such boards of directors relating to
44	investments and such plan; amending s. 625.326, F.S.;
45	specifying additional limitations on certain foreign
46	bonds, notes, or stocks an insurer is authorized to invest
47	in; amending s. 626.88, F.S.; revising definitions;
48	amending s. 626.8805, F.S.; specifying additional
49	documents required to be filed with the office by an
50	administrator applying for a certificate of authority;
51	specifying document requirements; amending s. 626.8817,
52	F.S.; specifying duties and responsibilities for insurers
53	using administrator services; amending s. 626.89, F.S.;
54	specifying certain annual report financial statement
55	requirements; authorizing the commission to require by
56	rule electronic filing of reports or filings; amending s.
57	626.901, F.S.; limiting application of certain prohibited
58	practices provisions to certain independently procured out
59	of state coverages; amending s. 626.902, F.S.; limiting
60	application of certain penalties for representing
61	unauthorized insurers to certain matters authorized by the
62	office; amending s. 626.9913, F.S.; authorizing the
63	commission to require by rule electronic filing of reports
64	or filings; creating s. 627.0646, F.S.; authorizing the
65	office to develop and recommend commission adoption of
66	certain uniform rate adjustment factors; providing
67	limitations on and requirements for certain rate
68	adjustment filings using such factors; authorizing the
69	commission to adopt implementing rules; preserving
70	application; providing for flex rate filings; providing
71	for application to certain types of insurance; providing
72	exemptions; providing limitations on and requirements for
73	flex rate filings; providing responsibilities of the
74	office; providing for effects of flex rate filings;
75	authorizing the commission to adopt certain procedural
76	rules; prohibiting excessive, inadequate, or unfairly
77	discriminatory flex rate filings; authorizing the
78	commission to adopt rules; amending s. 627.351, F.S.;
79	requiring the Joint Underwriting Association to include a
80	Florida Patient's Compensation Fund Account under a joint
81	underwriting plan for certain purposes; requiring certain
82	insurers to be members of a separate Coverage Account
83	within the association; providing for transfer of certain
84	property of the association to the Coverage Account;
85	prohibiting use of assets or revenues of either account
86	for certain purposes; requiring both accounts to be
87	subject to the board of directors of the association;
88	specifying plan coverage requirements for the Coverage
89	Account; amending s. 627.476, F.S.; providing an
90	additional table option for calculating certain insurance
91	policy premiums and values; amending s. 627.836, F.S.;
92	authorizing the commission to require by rule electronic
93	filing of reports or filings; creating s. 627.8401, F.S.;
94	prohibiting certain investments by premium finance
95	companies; amending s. 627.915, F.S.; revising a market
96	share percentage calculation methodology for certain
97	insurer premiums; amending s. 627.943, F.S.; specifying
98	certain feasibility study preparation requirements;
99	requiring periodic update of the study under certain
100	circumstances; providing for exempting certain insurer
101	certificate of authority applications from certain capital
102	funds and surplus requirements; authorizing the office to
103	contract for independent expert review of the study;
104	amending s. 628.071, F.S.; providing an additional
105	criterion for office examination and investigation of
106	certain permit applications; creating s. 628.072, F.S.;
107	requiring certain insurers to establish and maintain
108	certain governance practices for certificate of authority
109	purposes; providing requirements; authorizing the
110	commission to adopt rules for certain governance
111	practices; providing rule requirements; amending s.
112	628.371, F.S.; providing limitations on certain
113	extraordinary dividends or distributions by domestic
114	insurers; providing a definition; providing criteria;
115	providing an exception; deleting certain dividend or
116	distribution limitations; providing additional factors for
117	office review of certain distributions or dividends;
118	amending ss. 628.461 and 628.4615, F.S.; specifying
119	additional nonapplication of certain acquisition of
120	controlling stock provisions to changes in ownership of
121	certain insurers under certain circumstances; amending s.
122	628.709, F.S.; deleting a provision excluding certain
123	mutual insurers from authorization to undergo certain
124	reorganization; creating s. 634.042, F.S.; prohibiting
125	certain investments or loans by motor vehicle service
126	agreement companies; creating s. 634.3076, F.S.;
127	prohibiting certain investments or loans by home warranty
128	associations; creating s. 634.4062, F.S.; prohibiting
129	certain investments or loans by service warranty
130	associations; amending s. 636.043, F.S.; revising certain
131	financial condition reporting requirements for prepaid
132	limited health service organizations; authorizing the
133	office to require certain certification updates under
134	certain circumstances; requiring such organizations to
135	periodically file certain financial statements; providing
136	fines for failure to file certain reports; providing for
137	deposit of such fines into the Insurance Regulatory Trust
138	Fund; limiting the total amount of such fines; requiring
139	such organizations to retain certain accountants for
140	certain purposes; specifying duties and responsibilities
141	of such accountants; authorizing the commission to adopt
142	certain financial statement forms by rule; authorizing the
143	commission to require filing certain information
144	electronically; requiring such organizations to file
145	certain information with the office; requiring such
146	organizations to file certain statements electronically;
147	requiring such organizations to pay certain document
148	filing and analysis fees; amending s. 641.22, F.S.;
149	providing an additional criterion for office issuance of a
150	certificate of authority to certain health maintenance
151	organizations; amending s. 641.23, F.S.; providing an
152	additional criterion for office suspension or revocation
153	of certain health maintenance organization authority or
154	certificate; amending s. 641.27, F.S.; increasing a time
155	period for required health maintenance organization
156	examinations by the office; deleting provisions
157	authorizing the office to accept certain accountant audit
158	reports in lieu of examinations; deleting an expense
159	limitation on certain examinations; amending s. 641.30,
160	F.S.; requiring health maintenance organizations to comply
161	with certain governance requirements; amending s. 641.409,
162	F.S.; authorizing prepaid health clinics to make certain
163	deposits with the office in lieu of certain surety bond
164	requirements; increasing a required cash deposit by such
165	clinics for certain purposes; amending ss. 651.026 and
166	651.0261, F.S.; authorizing the commission to require by
167	rule electronic submission of certain reports or filings;
168	creating s. 651.0265, F.S.; prohibiting certain
169	investments or loans by certain providers; amending s.
170	651.033, F.S.; clarifying certain escrow account
171	requirements; amending s. 766.105, F.S.; specifying that
172	the Florida Patient's Compensation Fund is the Florida
173	Patient's Compensation Fund Account within a medical
174	malpractice risk apportionment plan; requiring such
175	account to be subject to supervision and approval by the
176	plan's board of governors; deleting provisions specifying
177	membership of the board of governors; revising and
178	clarifying provisions relating to the fund as relating to
179	the fund account; granting certain domestic insurers on
180	year to comply with certain rules; providing effective
181	dates.
182
183	Be It Enacted by the Legislature of the State of Florida:
184
185	Section 1.  Paragraphs (a), (e), and (f) of subsection (2)
186	of section 624.316, Florida Statutes, are amended to read:
187	624.316  Examination of insurers.--
188	(2)(a)  Except as provided in paragraph (f), the office may
189	examine each insurer as often as may be warranted for the
190	protection of the policyholders and in the public interest, and
191	shall examine each domestic insurer not less frequently than
192	once every 5 3 years. The examination shall cover the preceding
193	5 3 fiscal years of the insurer and shall be commenced within 12
194	months after the end of the most recent fiscal year being
195	covered by the examination. The examination may cover any period
196	of the insurer's operations since the last previous examination.
197	The examination may include examination of events subsequent to
198	the end of the most recent fiscal year and the events of any
199	prior period that affect the present financial condition of the
200	insurer. In lieu of making its own examination, the office may
201	accept an independent certified public accountant's audit report
202	prepared on a statutory basis consistent with the Florida
203	Insurance Code on that specific company. The office may not
204	accept the report in lieu of the requirement imposed by
205	paragraph (1)(b). When an examination is conducted by the office
206	for the sole purpose of examining the 3 preceding fiscal years
207	of the insurer within 12 months after the opinion date of an
208	independent certified public accountant's audit report prepared
209	on a statutory basis on that specific company consistent with
210	the Florida Insurance Code, the cost of the examination as
211	charged to the insurer pursuant to s. 624.320 shall be reduced
212	by the cost to the insurer of the independent certified public
213	accountant's audit reports. Requests for the reduction in cost
214	of examination must be submitted to the office in writing no
215	later than 90 days after the conclusion of the examination and
216	shall include sufficient documentation to support the charges
217	incurred for the statutory audit performed by the independent
218	certified public accountant.
219	(e)  The commission shall adopt rules providing that, upon
220	agreement between the office and the insurer, an examination
221	under this section may be conducted by independent certified
222	public accountants, actuaries, investment specialists,
223	information technology specialists meeting criteria specified by
224	rule, and reinsurance specialists meeting criteria specified by
225	rule. The rules shall provide:
226	1.  That the agreement of the insurer is not required if
227	the office reasonably suspects criminal misconduct on the part
228	of the insurer.
229	2.  That the office shall provide the insurer with a list
230	of three firms acceptable to the office, and that the insurer
231	shall select the firm to conduct the examination from the list
232	provided by the office.
233	1.3.  That the insurer being examined must make payment for
234	the examination directly to the firm performing the examination
235	in accordance with the rates and terms established agreed to by
236	the office, the insurer, and the firm performing the
237	examination.
238	2.  That the rates charged to the insurer being examined
239	are consistent with rates charged by other firms in a similar
240	profession.
241	3.  That the firm selected by the office to perform the
242	examination has no conflicts of interest that might affect its
243	ability to independently perform its responsibilities on the
244	examination.
245	4.  That if the examination is conducted without the
246	consent of the insurer, the insurer must pay all reasonable
247	charges of the examining firm if the examination finds
248	impairment, insolvency, or criminal misconduct on the part of
249	the insurer.
250	(f)1.a.  An examination under this section must be
251	conducted at least once every year with respect to a domestic
252	insurer that has continuously held a certificate of authority
253	for less than 3 years. The examination must cover the preceding
254	fiscal year or the period since the last examination of the
255	insurer. The office may limit the scope of the examination.
256	b.  The office may not accept an independent certified
257	public accountant's audit report in lieu of an examination
258	required by this subparagraph.
259	c.  An insurer may not be required to pay more than $25,000
260	to cover the costs of any one examination under this
261	subparagraph.
262	2.  An examination under this section must be conducted not
263	less frequently than once every 5 years with respect to an
264	insurer that has continuously held a certificate of authority,
265	without a change in ownership subject to s. 624.4245 or s.
266	628.461, for more than 15 years. The examination must cover the
267	preceding 5 fiscal years of the insurer or the period since the
268	last examination of the insurer. This subparagraph does not
269	limit the ability of the office to conduct more frequent
270	examinations.
271	Section 2.  Subsection (1) of section 624.319, Florida
272	Statutes, is amended to read:
273	624.319  Examination and investigation reports.?
274	(1)  The department or office or its examiner shall make a
275	full and true written report of each examination. The
276	examination report shall contain only information obtained from
277	examination of the records, accounts, files, and documents of or
278	relative to the insurer examined or from testimony of
279	individuals under oath, together with relevant conclusions and
280	recommendations of the examiner based thereon. The insurer shall
281	provide copies of documents upon request by the examiner. The
282	department or office shall furnish a copy of the examination
283	report to the insurer examined not less than 30 days prior to
284	filing the examination report in its office. If such insurer so
285	requests in writing within such 30-day period, the department or
286	office shall grant a hearing with respect to the examination
287	report and shall not so file the examination report until after
288	the hearing and after such modifications have been made therein
289	as the department or office deems proper.
290	Section 3.  Section 624.4045, Florida Statutes, is created
291	to read:
292	624.4045  Compliance with federal laws.--Any entity issued
293	a certificate of authority by the office, or otherwise regulated
294	by the office under the Insurance Code or any part thereof, when
295	such entity is subject to compliance with Pub. L. No. 107-56,
296	commonly referred to as the "Uniting and Strengthening America
297	by Providing Appropriate Tools Required to Intercept and
298	Obstruct Terrorism (USA PATRIOT Act) Act of 2001," may be
299	examined or investigated by the office to determine compliance
300	with such law. The office may report and provide evidence to the
301	appropriate federal authorities of any possible violations of
302	such law which are discovered and may cooperate with any
303	subsequent federal investigation.
304	Section 4.  Subsection (7) is added to section 624.4095,
305	Florida Statutes, to read:
306	624.4095  Premiums written; restrictions.--
307	(7)  If the parent company and its subsidiary are both
308	insurers, in addition to individual insurer compliance pursuant
309	to subsection (1), the parent company must also comply with this
310	section using consolidated direct and net premium compared to
311	the parent company's surplus.
312	Section 5.  Effective January 1, 2005, paragraph (k) is
313	added to subsection (1) of section 624.413, Florida Statutes, to
314	read:
315	624.413  Application for certificate of authority.--
316	(1)  To apply for a certificate of authority, an insurer
317	shall file its application therefor with the office, upon a form
318	adopted by the commission and furnished by the office, showing
319	its name; location of its home office and, if an alien insurer,
320	its principal office in the United States; kinds of insurance to
321	be transacted; state or country of domicile; and such additional
322	information as the commission reasonably requires, together with
323	the following documents:
324	(k)  If a domestic stock or mutual insurer, documents that
325	demonstrate the ability to comply with s. 628.072 and rules
326	adopted under such section.
327	Section 6.  Effective January 1, 2005, paragraph (h) is
328	added to subsection (1) of section 624.418, Florida Statutes, to
329	read:
330	624.418  Suspension, revocation of certificate of authority
331	for violations and special grounds.--
332	(1)  The office shall suspend or revoke an insurer's
333	certificate of authority if it finds that the insurer:
334	(h)  If a domestic stock or mutual insurer, failed to
335	maintain and demonstrate compliance with s. 628.072 and rules
336	adopted under such section.
337	Section 7.  Paragraph (b) of subsection (1) of section
338	624.424, Florida Statutes, is amended to read:
339	624.424  Annual statement and other information.--
340	(1)
341	(b)  Each insurer's annual statement must contain a
342	statement of opinion on loss and loss adjustment expense
343	reserves made by a member of the American Academy of Actuaries
344	or by a qualified loss reserve specialist, under criteria
345	established by rule of the commission. In adopting the rule, the
346	commission must consider any criteria established by the
347	National Association of Insurance Commissioners. The office may
348	require an insurer to submit an actuarial certification prepared
349	by an independent actuary and semiannual updates of the annual
350	statement of opinion as to a particular insurer if the office
351	has reasonable cause to believe that such reserves are
352	understated to the extent of materially misstating the financial
353	position of the insurer. Workpapers in support of the statement
354	of opinion must be provided to the office upon request. This
355	paragraph does not apply to life insurance or title insurance.
356	Section 8.  Subsections (3), (4), and (5) are added to
357	section 624.4622, Florida Statutes, to read:
358	624.4622  Local government self-insurance funds.--
359	(3)  Notwithstanding the provisions of subsection (2), a
360	local government self-insurance fund created under this section
361	after October 1, 2004, shall initially be organized as a
362	commercial self-insurance fund under s. 624.462 or a group self-
363	insurance fund under s. 624.4621 and, for the first 5 years of
364	its existence, shall be subject to all the requirements applied
365	to commercial self-insurance funds or to group self-insurance
366	funds, respectively.
367	(4)(a)  A local government self-insurance fund formed after
368	January 1, 2005, shall, for its first 5 fiscal years, file with
369	the office full and true statements of its financial condition,
370	transactions, and affairs. An annual statement covering the
371	preceding fiscal year shall be filed within 60 days after the end
372	of the fund's fiscal year and quarterly statements shall be filed
373	within 45 days after each such date. The office may, for good
374	cause, grant an extension of time for filing an annual or
375	quarterly statement. The statements shall contain information
376	generally included in insurers' financial statements prepared in
377	accordance with generally accepted insurance accounting
378	principles and practices and in a form generally used by insurers
379	for financial statements, sworn to by at least two executive
380	officers of the self-insurance fund. The form for financial
381	statements shall be the form currently approved by the National
382	Association of Insurance Commissioners for use by property and
383	casualty insurers.
384	(b)  Each annual statement shall contain a statement of
385	opinion on loss and loss adjustment expense reserves made by a
386	member of the American Academy of Actuaries. Workpapers in
387	support of the statement of opinion must be provided to the
388	office upon request.
389	(5)  A local government self-insurance fund shall maintain
390	surplus to policyholders in a positive amount.
391	Section 9.  Section 624.4685, Florida Statutes, is created
392	to read:
393	624.4685  Premiums written; restrictions.--
394	(1)  If, during the first 6 full calendar years of its
395	operation, a commercial self-insurance fund's actual or projected
396	annual earned premiums exceed four times the sum of 10 percent of
397	the fund's statutory unearned premium as reported in its most
398	recent report made pursuant to s. 624.470(2)(a) plus the
399	aggregate excess of loss reinsurance limits available for the
400	year reported, established in accordance with subsection (2), the
401	department may establish by order maximum net annual premiums to
402	be written by the fund consistent with maintaining such ratio
403	between actual or projected earned premiums and unearned premiums
404	and aggregate excess of loss reinsurance, unless the fund
405	demonstrates to the department's satisfaction that exceeding such
406	limitations does not endanger the financial condition of the fund
407	or endanger the interest of the fund's members or that the fund's
408	operation is and will be actuarially sound without obtaining
409	excess reinsurance. Such orders shall be in effect no longer than
410	the end of the current calendar year. The fund's self-funded
411	reinsurance, if any, shall be included as aggregate excess of
412	loss reinsurance at an amount that will be sufficient to cover
413	unpaid losses as actuarially determined.
414	(2)  With respect to subsection (1), the aggregate excess of
415	loss reinsurance shall attach at a point, not greater than the
416	loss ratio, above which an assessment would be indicated pursuant
417	to rules of the department adopted under the authority of this
418	chapter. At a minimum, the aggregate excess of loss reinsurance
419	shall also provide coverage for 100 percent of the losses between
420	the attachment point required by this subsection and a loss ratio
421	of 100 percent.
422	(3)  After the 6th full calendar year of operation, a
423	commercial self-insurance fund may, instead of limiting actual or
424	projected premium to the ratio specified in subsection (1),
425	maintain aggregate excess of loss reinsurance limits, subject to
426	minimum limits enumerated in subsection (4), equal to the
427	difference between the loss ratio at which an assessment would be
428	indicated pursuant to rules adopted by the department and a loss
429	ratio 10 percentage points higher than the highest loss ratio
430	from the most recent 6 calendar years as indicated on the
431	property and casualty annual statement report, after including
432	excess statutory reserves over statement reserves, for auto
433	liability, other liability, medical malpractice, workers'
434	compensation, and credit insurance. For commercial lines of
435	business other than auto liability, other liability, medical
436	malpractice, workers' compensation, and credit, the amount
437	required by Schedule P shall be calculated in the same manner as
438	auto liability and shall be calculated for each line of business
439	individually. However, if a fund fails or chooses not to maintain
440	the aggregate excess reinsurance as specified in this subsection,
441	the fund shall be subject to the provisions of subsection (1).
442	(4)  A commercial self-insurance fund maintaining aggregate
443	excess of loss reinsurance pursuant to subsection (3) must, at a
444	minimum, maintain dollar limits of aggregate excess of loss
445	reinsurance as follows:
446	(a)  For funds with actual or projected earned premiums of
447	$5,000,000 or less, the minimum shall be equal to 25 percent of
448	actual or projected earned premiums or $500,000, whichever is
449	greater.
450	(b)  For funds with actual or projected earned premiums
451	greater than $5,000,000, the minimum shall be:
452
453	Actual or Projected                         Percent of Earned
454	Earned Premiums                         Premium
455	$5,000,000.01-$10,000,000               22 percent
456	$10,000,000.01-$25,000,000               19 percent
457	$25,000,000.01-$50,000,000               16 percent
458	$50,000,000.01-$100,000,000               13 percent
459	$100,000,000.01-$250,000,000               10 percent
460	$250,000,000.01 and greater               7 percent
461
462	(5)  Notwithstanding other provisions of this section, the
463	department may, by order, establish maximum gross or net annual
464	premiums to be written if the department, for good cause shown,
465	finds that the actual or projected premium volume of the fund
466	endangers the interests of the fund's policyholders or the
467	financial condition of the fund.
468	Section 10.  Paragraph (c) of subsection (3) of section
469	624.610, Florida Statutes, is amended to read:
470	624.610  Reinsurance.--
471	(3)
472	(c)1.  Credit must be allowed when the reinsurance is ceded
473	to an assuming insurer that maintains a trust fund in a
474	qualified United States financial institution, as defined in
475	paragraph (5)(b), for the payment of the valid claims of its
476	United States ceding insurers and their assigns and successors
477	in interest. To enable the office to determine the sufficiency
478	of the trust fund, the assuming insurer shall report annually to
479	the office information substantially the same as that required
480	to be reported on the NAIC Annual Statement form by authorized
481	insurers. The assuming insurer shall submit to examination of
482	its books and records by the office and bear the expense of
483	examination.
484	2.a.  Credit for reinsurance must not be granted under this
485	subsection unless the form of the trust and any amendments to
486	the trust have been approved by:
487	(I)  The insurance regulator of the state in which the
488	trust is domiciled; or
489	(II)  The insurance regulator of another state who,
490	pursuant to the terms of the trust instrument, has accepted
491	principal regulatory oversight of the trust.
492	b.  The form of the trust and any trust amendments must be
493	filed with the insurance regulator of every state in which the
494	ceding insurer beneficiaries of the trust are domiciled. The
495	trust instrument must provide that contested claims are valid
496	and enforceable upon the final order of any court of competent
497	jurisdiction in the United States. The trust must vest legal
498	title to its assets in its trustees for the benefit of the
499	assuming insurer's United States ceding insurers and their
500	assigns and successors in interest. The trust and the assuming
501	insurer are subject to examination as determined by the
502	insurance regulator.
503	c.  The trust remains in effect for as long as the assuming
504	insurer has outstanding obligations due under the reinsurance
505	agreements subject to the trust. No later than February 28 of
506	each year, the trustee of the trust shall report to the
507	insurance regulator in writing the balance of the trust and list
508	the trust's investments at the preceding year end, and shall
509	certify that the trust will not expire prior to the following
510	December 31.
511	3.  The following requirements apply to the following
512	categories of assuming insurer:
513	a.  The trust fund for a single assuming insurer consists
514	of funds in trust in an amount not less than the assuming
515	insurer's liabilities attributable to reinsurance ceded by
516	United States ceding insurers, and, in addition, the assuming
517	insurer shall maintain a trusteed surplus of not less than $20
518	million. Not less than 50 percent of the funds in the trust
519	covering the assuming insurer's liabilities attributable to
520	reinsurance ceded by United States ceding insurers and trusteed
521	surplus shall consist of assets of a quality substantially
522	similar to that required in part II of chapter 625. Clean,
523	irrevocable, unconditional, and evergreen letters of credit,
524	issued or confirmed by a qualified United States financial
525	institution, as defined in paragraph (5)(a), effective no later
526	than December 31 of the year for which the filing is made, and
527	in the possession of the trust on or before the filing date of
528	its annual statement, may be used to fund the remainder of the
529	trust and trusteed surplus.
530	b.(I)  In the case of a group including incorporated and
531	individual unincorporated underwriters:
532	(A)  For reinsurance ceded under reinsurance agreements
533	with an inception, amendment, or renewal date on or after August
534	1, 1995, the trust consists of a trusteed account in an amount
535	not less than the group's several liabilities attributable to
536	business ceded by United States domiciled ceding insurers to any
537	member of the group;
538	(B)  For reinsurance ceded under reinsurance agreements
539	with an inception date on or before July 31, 1995, and not
540	amended or renewed after that date, notwithstanding the other
541	provisions of this section, the trust consists of a trusteed
542	account in an amount not less than the group's several insurance
543	and reinsurance liabilities attributable to business written in
544	the United States; and
545	(C)  In addition to these trusts, the group shall maintain
546	in trust a trusteed surplus of which $100 million must be held
547	jointly for the benefit of the United States domiciled ceding
548	insurers of any member of the group for all years of account.
549	(II)  The incorporated members of the group must not be
550	engaged in any business other than underwriting of a member of
551	the group, and are subject to the same level of regulation and
552	solvency control by the group's domiciliary regulator as the
553	unincorporated members.
554	(III)  Within 90 days after its financial statements are
555	due to be filed with the group's domiciliary regulator, the
556	group shall provide to the insurance regulator an annual
557	certification by the group's domiciliary regulator of the
558	solvency of each underwriter member or, if a certification is
559	unavailable, financial statements, prepared by independent
560	public accountants, of each underwriter member of the group.
561	Section 11.  Effective July 1, 2004, paragraphs (a), (e),
562	and (f) of subsection (5) of section 625.121, Florida Statutes,
563	are amended, and paragraphs (k) and (l) are added to said
564	subsection, to read:
565	625.121  Standard Valuation Law; life insurance.--
566	(5)  MINIMUM STANDARD FOR VALUATION OF POLICIES AND
567	CONTRACTS ISSUED ON OR AFTER OPERATIVE DATE OF STANDARD
568	NONFORFEITURE LAW.--Except as otherwise provided in paragraph
569	(h) and subsections (6), (11), and (14), the minimum standard
570	for the valuation of all such policies and contracts issued on
571	or after the operative date of s. 627.476 (Standard
572	Nonforfeiture Law for Life Insurance) shall be the
573	commissioners' reserve valuation method defined in subsections
574	(7), (11), and (14); 5 percent interest for group annuity and
575	pure endowment contracts and 3.5 percent interest for all other
576	such policies and contracts, or in the case of life insurance
577	policies and contracts, other than annuity and pure endowment
578	contracts, issued on or after July 1, 1973, 4 percent interest
579	for such policies issued prior to October 1, 1979, and 4.5
580	percent interest for such policies issued on or after October 1,
581	1979; and the following tables:
582	(a)  For all ordinary policies of life insurance issued on
583	the standard basis, excluding any disability and accidental
584	death benefits in such policies:
585	1.  For policies issued prior to the operative date of s.
586	627.476(9), the commissioners' 1958 Standard Ordinary Mortality
587	Table; except that, for any category of such policies issued on
588	female risks, modified net premiums and present values, referred
589	to in subsection (7), may be calculated according to an age not
590	more than 6 years younger than the actual age of the insured.;
591	and
592	2.  For policies issued on or after the operative date of
593	s. 627.476(9), the commissioners' 1980 Standard Ordinary
594	Mortality Table or, at the election of the insurer for any one
595	or more specified plans of life insurance, the commissioners'
596	1980 Standard Ordinary Mortality Table with Ten-Year Select
597	Mortality Factors.
598	3.  For policies issued on or after July 1, 2004, ordinary
599	mortality tables, adopted after 1980 by the National Association
600	of Insurance Commissioners, adopted by rule by the commission
601	for use in determining the minimum standard of valuation for
602	such policies.
603	(e)  For total and permanent disability benefits in or
604	supplementary to ordinary policies or contracts:
605	1.  For policies or contracts issued on or after January 1,
606	1966, the tables of period 2 disablement rates and the 1930 to
607	1950 termination rates of the 1952 disability study of the
608	Society of Actuaries, with due regard to the type of benefit.;
609	2.  For policies or contracts issued on or after January 1,
610	1961, and prior to January 1, 1966, either those tables or, at
611	the option of the insurer, the class three disability table
612	(1926).; and
613	3.  For policies issued prior to January 1, 1961, the class
614	three disability table (1926); and
615	4.  For policies or contracts issued on or after July 1,
616	2004, tables of disablement rates and termination rates adopted
617	after 1980 by the National Association of Insurance
618	Commissioners, adopted by rule by the commission for use in
619	determining the minimum standard of valuation for those policies
620	or contracts.
621
622	Any such table for active lives shall be combined with a
623	mortality table permitted for calculating the reserves for life
624	insurance policies.
625	(f)  For accidental death benefits in or supplementary to
626	policies:
627	1.  For policies issued on or after January 1, 1966, the
628	1959 Accidental Death Benefits Table.;
629	2.  For policies issued on or after January 1, 1961, and
630	prior to January 1, 1966, either that table or, at the option of
631	the insurer, the Intercompany Double Indemnity Mortality Table.;
632	and
633	3.  For policies issued prior to January 1, 1961, the
634	Intercompany Double Indemnity Mortality Table; and
635	4.  For policies issued on or after July 1, 2004, tables of
636	accidental death benefits adopted after 1980 by the National
637	Association of Insurance Commissioners, adopted by rule by the
638	commission for use in determining the minimum standard of
639	valuation for those policies.
640
641	Either table shall be combined with a mortality table permitted
642	for calculating the reserves for life insurance policies.
643	(k)  For individual annuity and pure endowment contracts
644	issued on or after July 1, 2004, excluding any disability and
645	accidental death benefits purchased under those contracts,
646	individual annuity mortality tables adopted after 1980 by the
647	National Association of Insurance Commissioners, adopted by rule
648	by the commission for use in determining the minimum standard of
649	valuation for those contracts.
650	(l)  For all annuities and pure endowments purchased on or
651	after July 1, 2004, under group annuity and pure endowment
652	contracts, excluding any disability and accidental death
653	benefits purchased under those contracts, group annuity
654	mortality tables adopted after 1980 by the National Association
655	of Insurance Commissioners, adopted by rule by the commission
656	for use in determining the minimum standard of valuation for
657	those contracts.
658	Section 12.  Effective July 1, 2004, section 625.131,
659	Florida Statutes, is amended to read:
660	625.131  Credit life and disability policies, special
661	reserve bases.--
662	(1)  The minimum reserve for single-premium credit
663	disability insurance, monthly premium credit life insurance and
664	monthly premium credit disability insurance shall be the
665	unearned gross premium.
666	(2)  As to single-premium credit life insurance policies,
667	the insurer shall establish and maintain reserves which are not
668	less than the value, at the valuation date, of the risk for the
669	unexpired portion of the period for which the premium has been
670	paid as computed on the basis of the National Association of
671	Insurance Commissioners' 1980 Standard Ordinary Mortality Table
672	and 3.5 percent interest. At the discretion of the office, the
673	insurer may make a reasonable assumption as to the ages at which
674	net premiums are to be determined. In lieu of the foregoing
675	basis, reserves based upon unearned gross premiums may be used
676	at the option of the insurer.
677	(3)  As to single-premium credit life insurance policies,
678	issued on or after July 1, 2004, the insurer shall establish and
679	maintain reserves which are not less than the value, at the
680	valuation date, of the risk for the unexpired portion of the
681	period for which the premium has been paid as computed on the
682	basis of ordinary mortality tables adopted after 1980 by the
683	National Association of Insurance Commissioners, that are
684	adopted by rule by the commission, and 3.5 percent interest. At
685	the discretion of the office, the insurer may make a reasonable
686	assumption as to the ages at which net premiums are to be
687	determined. In lieu of such requirement, reserves based upon
688	unearned gross premiums may be used at the option of the
689	insurer.
690	Section 13.  Section 625.304, Florida Statutes, is amended
691	to read:
692	625.304  Authorization of investment.--
693	(1)  An insurer shall not make any investment or loan,
694	other than a policy loan or annuity contract loan of a life
695	insurer, unless the same is authorized or approved by the
696	insurer's board of directors or by a committee authorized by
697	such board and charged with the supervision or making of such
698	investment or loan. The minutes of any such committee shall be
699	recorded and regular reports of such committee shall be
700	submitted to the board of directors.
701	(2)  An insurer's board of directors shall adopt a written
702	plan for acquiring and holding investments and for engaging in
703	investment practices that specifies guidelines as to the
704	quality, maturity, and diversification of investments and other
705	specifications, including, but not limited to, investment
706	strategies intended to ensure that the investments and
707	investment practices are appropriate for the business conducted
708	by the insurer, its liquidity needs, and its capital and
709	surplus. The board shall review and assess the insurer's
710	technical investment and administrative capabilities and
711	expertise before adopting a written plan concerning an
712	investment strategy or investment practice.
713	(3)  Investments acquired and held under this section shall
714	be acquired and held under the supervision and direction of the
715	board of directors of the insurer. The board of directors shall
716	evidence by formal resolution, at least annually, that the board
717	has determined whether all investments have been made in
718	accordance with delegations, standards, limitations, and
719	investment objectives prescribed by the board or a committee of
720	the board charged with the responsibility to direct its
721	investments.
722	(4)  On no less than a quarterly basis, and more often if
723	deemed appropriate, an insurer's board of directors or committee
724	of the board of directors shall:
725	(a)  Receive and review a summary report on the insurer's
726	investment portfolio, its investment activities, and its
727	investment practices engaged in under delegated authority, in
728	order to determine whether the investment activity of the
729	insurer is consistent with its written plan.
730	(b)  Review and revise, as appropriate, the written plan.
731	(5)  In discharging its duties under this section, the
732	board of directors shall require that records of any
733	authorizations or approvals, or other documentation as the board
734	may require, and reports of any action taken under authority
735	delegated under the plan referred to in subsection (2), shall be
736	made available on a regular basis to the board of directors.
737	(6)  In discharging their duties under this section, the
738	directors of an insurer shall perform their duties in good faith
739	and with that degree of care that ordinarily prudent individuals
740	in like positions would use under similar circumstances.
741	(7)  If an insurer does not have a board of directors, all
742	references to the board of directors in this section shall be
743	deemed to be references to the governing body of the insurer
744	having authority equivalent to that of a board of directors.
745	Section 14.  Subsection (2) of section 625.326, Florida
746	Statutes, is amended to read:
747	625.326  Foreign investments.--An insurer authorized to
748	transact insurance in a foreign country may have funds invested
749	in such securities as may be required for such authority and for
750	the transaction of such business. Canadian securities eligible
751	for investment under other provisions of this part are not
752	subject to this section. Subject to the approval of the office:
753	(2)  In addition to Canadian securities eligible for
754	investment and to investments in countries in which an insurer
755	transacts insurance, an insurer may invest in bonds, notes, or
756	stocks of any foreign country or corporation if such securities
757	meet security meets the general requirements of s. 625.303 and
758	in the aggregate do not exceed 10 does not exceed, in total, 5
759	percent of admitted assets, subject to the following
760	limitations:
761	(a)  No more than 3 percent of the insurer's assets shall
762	be invested in any security not rated by the Security Valuation
763	Office of the National Association of Insurance Commissioners as
764	1 or 2, except that securities rated as 5 or 6 by the Security
765	Valuation Office of the National Association of Insurance
766	Commissioners shall not exceed 1.5 percent of assets in total
767	with no more than 0.5 percent of assets in securities that have
768	been given a rating of 6.
769	(b)  No more than 3 percent of the insurer's assets shall
770	be invested in the common stock of any one corporation.
771	(c)  In determining the financial condition of an insurer,
772	any amounts that exceed the limitations in paragraphs (a) and
773	(b) in valuation shall be considered as non-admitted assets
774	unless the investments otherwise qualify under the provision of
775	s. 625.331(1).
776	Section 15.  Section 626.88, Florida Statutes, is amended
777	to read:
778	626.88  Definitions of "administrator" and "insurer".--
779	(1)  For the purposes of this part, an "administrator" is
780	any person who directly or indirectly solicits or effects
781	coverage of, collects charges or premiums from, or adjusts or
782	settles claims on residents of this state in connection with
783	authorized commercial self-insurance funds or with insured or
784	self-insured programs which provide life or health insurance
785	coverage or coverage of any other expenses described in s.
786	624.33(1) or any person who, through a health care risk contract
787	as defined in s. 641.234 with an insurer or health maintenance
788	organization, provides billing and collection services to health
789	insurers and health maintenance organizations on behalf of
790	health care providers, other than any of the following persons:
791	(a)  An employer or wholly owned direct or indirect
792	subsidiary of an employer, on behalf of such employer's
793	employees or the employees of one or more subsidiary or
794	affiliated corporations of such employer.
795	(b)  A union on behalf of its members.
796	(c)  An insurance company which is either authorized to
797	transact insurance in this state or is acting as an insurer with
798	respect to a policy lawfully issued and delivered by such
799	company in and pursuant to the laws of a state in which the
800	insurer was authorized to transact an insurance business.
801	(d)  A health care services plan, health maintenance
802	organization, professional service plan corporation, or person
803	in the business of providing continuing care, possessing a valid
804	certificate of authority issued by the office, and the sales
805	representatives thereof, if the activities of such entity are
806	limited to the activities permitted under the certificate of
807	authority.
808	(e)  An administrator who is affiliated with an insurer and
809	who only performs the contractual duties, between the
810	administrator and the insurer, of an administrator for the
811	direct and assumed insurance business of the affiliated insurer.
812	The insurer is responsible for the acts of the administrator and
813	is responsible for providing all of the administrator's books
814	and records to the insurance commissioner, upon a request from
815	the insurance commissioner. For purposes of this paragraph,
816	"insurer" means a licensed insurance company, prepaid hospital
817	or medical care plan, or a health maintenance organization.
818	(f)  A nonresident administrator licensed in its state of
819	domicile if the administrator's duties in this state are limited
820	to the administration of a group policy or plan of insurance and
821	no more than a total of 100 lives for all plans reside in this
822	state.
823	(g)(e)  An insurance agent licensed in this state whose
824	activities are limited exclusively to the sale of insurance.
825	(h)  A person licensed as a managing general agent in this
826	state, whose activities are limited exclusively to the scope of
827	activities conveyed under such license.
828	(i)(f)  An adjuster licensed in this state whose activities
829	are limited to the adjustment of claims.
830	(j)(g)  A creditor on behalf of such creditor's debtors
831	with respect to insurance covering a debt between the creditor
832	and its debtors.
833	(k)(h)  A trust and its trustees, agents, and employees
834	acting pursuant to such trust established in conformity with 29
835	U.S.C. s. 186.
836	(l)(i)  A trust exempt from taxation under s. 501(a) of the
837	Internal Revenue Code, a trust satisfying the requirements of
838	ss. 624.438 and 624.439, or any governmental trust as defined in
839	s. 624.33(3), and the trustees and employees acting pursuant to
840	such trust, or a custodian and its agents and employees,
841	including individuals representing the trustees in overseeing
842	the activities of a service company or administrator, acting
843	pursuant to a custodial account which meets the requirements of
844	s. 401(f) of the Internal Revenue Code.
845	(m)(j)  A financial institution which is subject to
846	supervision or examination by federal or state authorities or a
847	mortgage lender licensed under chapter 494 who collects and
848	remits premiums to licensed insurance agents or authorized
849	insurers concurrently or in connection with mortgage loan
850	payments.
851	(n)(k)  A credit card issuing company which advances for
852	and collects premiums or charges from its credit card holders
853	who have authorized such collection if such company does not
854	adjust or settle claims.
855	(o)(l)  A person who adjusts or settles claims in the
856	normal course of such person's practice or employment as an
857	attorney at law and who does not collect charges or premiums in
858	connection with life or health insurance coverage.
859	(p)(m)  A person approved by the department who administers
860	only self-insured workers' compensation plans.
861	(q)(n)  A service company or service agent and its
862	employees, authorized in accordance with ss. 626.895-626.899,
863	serving only a single employer plan, multiple-employer welfare
864	arrangements, or a combination thereof.
865	(r)(o)  Any provider or group practice, as defined in s.
866	456.053, providing services under the scope of the license of
867	the provider or the member of the group practice.
868	(s)(p)  Any hospital providing billing, claims, and
869	collection services solely on its own and its physicians' behalf
870	and providing services under the scope of its license.
871
872	A person who provides billing and collection services to health
873	insurers and health maintenance organizations on behalf of
874	health care providers shall comply with the provisions of ss.
875	627.6131, 641.3155, and 641.51(4).
876	(2)  For the purposes of this part, the term:
877	(a)  an "Insurer" includes an authorized commercial self-
878	insurance fund and includes any person undertaking to provide
879	life or health insurance coverage or coverage of any of the
880	other expenses described in s. 624.33(1).
881	(b)  "Affiliate," including the term "affiliated," means an
882	entity or person who directly or indirectly through one or more
883	intermediaries, controls or is controlled by, or is under common
884	control with, a specified entity or person.
885	(c)  "Control," including the terms "controlling,"
886	"controlled by," and "under common control with," means the
887	possession, direct or indirect, of the power to direct or cause
888	the direction of the management and policies of a person,
889	whether through the ownership of voting securities, by contract
890	other than a commercial contract for goods or nonmanagement
891	services, or otherwise, unless the power is the result of an
892	official position with or corporate office held by the person.
893	Control is presumed to exist if any person, directly or
894	indirectly, owns, controls, holds with the power to vote, or
895	holds proxies representing 10 percent or more of the voting
896	securities of any other person.
897	Section 16.  Subsection (2) of section 626.8805, Florida
898	Statutes, is amended to read:
899	626.8805  Certificate of authority to act as
900	administrator.--
901	(2)  The administrator shall file with the office an
902	application for a certificate of authority upon a form to be
903	adopted by the commission and furnished by the office, which
904	application shall include or have attached the following
905	information and documents:
906	(a)  All basic organizational documents of the
907	administrator, such as the articles of incorporation, articles
908	of association, partnership agreement, trade name certificate,
909	trust agreement, shareholder agreement, and other applicable
910	documents, and all amendments to those documents.
911	(b)  The bylaws, rules, and regulations or similar
912	documents regulating the conduct or the internal affairs of the
913	administrator.
914	(c)  The names, addresses, official positions, and
915	professional qualifications of the individuals who are
916	responsible for the conduct of the affairs of the administrator,
917	including all members of the board of directors, board of
918	trustees, executive committee, or other governing board or
919	committee, the principal officers in the case of a corporation,
920	the partners or members in the case of a partnership or
921	association, and any other person who exercises control or
922	influence over the affairs of the administrator.
923	(d)  Audited annual financial statements for the 2 most
924	recent fiscal years that prove that the applicant has a positive
925	net worth. If the applicant has been in existence for less than
926	2 fiscal years, the application shall include financial
927	statements or reports, certified by an officer of the applicant
928	and prepared in accordance with generally accepted accounting
929	principles consistently applied in the United States, for any
930	completed fiscal years, and for any month during the current
931	fiscal year for which such financial statements or reports have
932	been completed. An audited financial statement or report
933	prepared on a consolidated basis shall include a columnar
934	consolidating or combining worksheet that shall be filed with
935	the report and shall comply with the following:
936	1.  Amounts shown on the consolidated audited financial
937	report shall be included on the worksheet.
938	2.  Amounts for each entity shall be stated separately.
939	3.  Explanations of consolidating and eliminating entries
940	shall be included.
941
942	The applicant shall also include such other information as the
943	office may require in order to review the current financial
944	condition of the applicant Annual statements or reports for the
945	3 most recent years, or such other information as the office may
946	require in order to review the current financial condition of
947	the applicant.
948	(e)  A statement describing the business plan including
949	information on staffing levels and activities proposed in this
950	state and nationwide. The plan shall provide details setting
951	forth the applicant's capability for providing a sufficient
952	number of experienced and qualified personnel in the areas of
953	claims processing, record keeping, and underwriting.
954	(f)(e)  If the applicant is not currently acting as an
955	administrator, a statement of the amounts and sources of the
956	funds available for organization expenses and the proposed
957	arrangements for reimbursement and compensation of incorporators
958	or other principals.
959	Section 17.  Section 626.8817, Florida Statutes, is amended
960	to read:
961	626.8817  Responsibilities of insurance company with
962	respect to administration of coverage insured.--
963	(1)  If an insurer uses the services of an administrator,
964	the insurer shall be responsible for determining the benefits,
965	premium rates, underwriting criteria, and claims payment
966	procedures applicable to the coverage and for securing
967	reinsurance, if any. The rules pertaining to these matters shall
968	be provided, in writing, by the insurer to the administrator.
969	The responsibilities of the administrator as to any of these
970	matters shall be set forth in the written agreement between the
971	administrator and the insurer.
972	(2)  It is the sole responsibility of the insurer to
973	provide for competent administration of its programs.
974	(3)  In cases in which an administrator administers
975	benefits for more than 100 certificateholders on behalf of an
976	insurer, the insurer shall, at least semiannually, conduct a
977	review of the operations of the administrator. At least one such
978	review shall be an on-site audit of the operations of the
979	administrator.
980	(4)  For purposes of this section, "insurer" means a
981	licensed insurance company, health maintenance organization,
982	prepaid limited health service organization, or prepaid health
983	clinic As to the administration of coverage insured by an
984	insurance company, the insurance company, and not the
985	administrator, shall be responsible for determining the
986	benefits, rates, underwriting criteria, and claims payment
987	procedures applicable to such coverage and for securing
988	reinsurance, if any.
989	Section 18.  Section 626.89, Florida Statutes, is amended
990	to read:
991	626.89  Annual financial statement and filing fee; notice
992	of change of ownership.--
993	(1)  Each authorized administrator shall file with the
994	office a full and true statement of its financial condition,
995	transactions, and affairs. The statement shall be filed annually
996	on or before March 1 or within such extension of time therefor
997	as the office for good cause may have granted and shall be for
998	the preceding calendar year. The statement shall be in such form
999	and contain such matters as the commission prescribes and shall
1000	be verified by at least two officers of such administrator.
1001	(2)  The annual report shall include an audited financial
1002	statement performed by an independent certified public
1003	accountant. An audited financial report or annual report
1004	prepared on a consolidated basis shall include a columnar
1005	consolidating or combining worksheet that shall be filed with
1006	the report and shall comply with the following:
1007	(a)  Amounts shown on the consolidated audited financial
1008	report shall be shown on the worksheet.
1009	(b)  Amounts for each entity shall be stated separately.
1010	(c)  Explanations of consolidating and eliminating entries
1011	shall be included.
1012	(3)(2)  At the time of filing its annual statement, the
1013	administrator shall pay a filing fee in the amount specified in
1014	s. 624.501 for the filing of an annual statement by an insurer.
1015	(4)(3)  In addition, the administrator shall immediately
1016	notify the office of any material change in its ownership.
1017	(5)  The commission may by rule require all or part of the
1018	reports or filings required under this section to be submitted
1019	by electronic means in a computer-readable form compatible with
1020	an electronic data format specified by the commission.
1021	Section 19.  Paragraph (d) of subsection (4) of section
1022	626.901, Florida Statutes, is amended to read:
1023	626.901  Representing or aiding unauthorized insurer
1024	prohibited.--
1025	(4)  This section does not apply to:
1026	(d)  Independently procured coverage written pursuant to s.
1027	626.938, which is not solicited, marketed, negotiated, or sold
1028	in this state.
1029	Section 20.  Subsection (3) is added to section 626.902,
1030	Florida Statutes, to read:
1031	626.902  Penalty for representing unauthorized insurer.?
1032	(3)  This section does not apply to matters authorized to
1033	be done by the office under ss. 626.904-626.912, the
1034	Unauthorized Insurers Process Law.
1035	Section 21.  Subsection (2) of section 626.9913, Florida
1036	Statutes, is amended to read:
1037	626.9913  Viatical settlement provider license continuance;
1038	annual report; fees; deposit.--
1039	(2)  Annually, on or before March 1, the viatical
1040	settlement provider licensee shall file a statement containing
1041	information the commission requires and shall pay to the office
1042	a license fee in the amount of $500. A viatical settlement
1043	provider shall include in all statements filed with the office
1044	all information requested by the office regarding a related
1045	provider trust established by the viatical settlement provider.
1046	The office may require more frequent reporting. Failure to
1047	timely file the annual statement or to timely pay the license
1048	fee is grounds for immediate suspension of the license. The
1049	commission may by rule require all or part of the reports or
1050	filings required under this section to be submitted by
1051	electronic means in a computer-readable form compatible with an
1052	electronic data format specified by the commission.
1053	Section 22.  Section 627.0646, Florida Statutes, is created
1054	to read:
1055	627.0646  Uniform rate adjustment factors.--
1056	(1)(a)  The office may examine trends in premiums and in
1057	average cost and frequency of claims and develop and recommend
1058	for adoption by the commission uniform rate adjustment factors
1059	that are reflective of such trends for personal lines homeowners
1060	insurance and private passenger motor vehicle insurance. The
1061	purpose of the uniform rate adjustment factors is to allow
1062	insurers to submit rate filings adjusting their rates by
1063	incremental measures for changes in the cost and frequency of
1064	claims, if any, without having to provide supporting data for
1065	the proposed rates.
1066	(b)1.  The submission of a rate filing seeking to adjust
1067	rates by the application of the uniform rate adjustment factors
1068	shall not include any other changes. The office shall approve or
1069	disapprove the filing within 30 days after receiving the filing.
1070	2.  Submission of a rate filing seeking to adjust rates by
1071	the application of the uniform rate adjustment factors precludes
1072	the insurer from submitting any subsequent rate filing the
1073	effective dates of which are sooner than 6 months following
1074	filing effective dates of the uniform rate adjustment factors.
1075	This limitation does not apply to recoupment filings submitted
1076	pursuant to s. 627.062, s. 627.3512, or s. 631.64.
1077	3.  The submission of a rate filing seeking to adjust rates
1078	by the application of the uniform rate adjustment factors shall
1079	be accompanied by a certification by an actuary that the filing
1080	seeks to implement a rate that is actuarially sound and not
1081	inadequate, which certification satisfies the rate filing
1082	requirement pursuant to s. 627.0645.
1083	4.  In order to develop uniform rate adjustment factors,
1084	the office may annually solicit from insurers information on
1085	trends that the insurers are experiencing. Insurers from whom
1086	data is solicited must provide the solicited information to the
1087	office within 30 days after the date of the request. The office
1088	shall determine the type of data necessary and the format of
1089	this data for its examination and, if rulemaking is required,
1090	submit its recommendation to the commission for consideration
1091	and rule adoption.
1092	5.  The uniform rate adjustment factors shall be applied
1093	uniformly to all subject policies in force on each policy's
1094	effective date at renewal and all new business written on or
1095	after the effective date of the uniform rate adjustment factors
1096	by any insurer that has submitted such a filing, provided notice
1097	required by law is provided.
1098	6.  The first filing of uniform rate adjustment factors
1099	permitted for an insurer by this section may be submitted at any
1100	time after the publication of the initial uniform rate
1101	adjustment factors. A rate determined by a subsequent filing of
1102	uniform rate adjustment factors by an insurer shall not be
1103	effective any sooner than 12 months after the effective date of
1104	the previous filing of uniform rate adjustment factors.
1105
1106	Neither the calculation nor the publication of the factors by
1107	the office constitutes an order or a rule that is subject to
1108	chapter 120. Nothing in this section precludes the office from
1109	requesting necessary information on a case by case basis from an
1110	insurer submitting a filing pursuant to this section.
1111	(c)  The commission may adopt rules and forms necessary to
1112	implement this section.
1113	(d)  Nothing in this subsection affects the application of
1114	s. 627.066.
1115	(2)(a)  This subsection applies to commercial property,
1116	casualty, and surety insurance on subjects of insurance
1117	resident, located, or to be performed in this state. Medical
1118	malpractice insurance, title insurance, workers' compensation
1119	and employer's liability insurance, commercial property and
1120	casualty insurance issued to condominium associations, and such
1121	commercial insurance exempted from the scope of this chapter
1122	under s. 627.021(2) are exempt from this section.
1123	(b)  The purpose of this subsection is to enhance
1124	competition and reduce the frictional costs associated with rate
1125	filings for insurance subject to this subsection through the use
1126	of flex rate filings, which do not require submission of
1127	supporting data for the proposed rates. Submission of a flex
1128	rate filing precludes the insurer from submitting any subsequent
1129	rate filing the effective date of which is earlier than 6 months
1130	following the flex rate filing effective date. This limitation
1131	does not apply to recoupment filings submitted pursuant to s.
1132	627.062, s. 627.3512, or s. 631.64.
1133	(c)  The submission of a rate filing seeking to adjust
1134	rates by the application of the flex rate filing shall not
1135	include any other changes. A flex rate filing shall be effective
1136	on or after the date of filing as specified by the filer and is
1137	exempt from any otherwise applicable provision of this part
1138	requiring office approval of the filing prior to its
1139	implementation.
1140	(d)  The submission of a flex rate filing satisfies the
1141	annual rate filing requirement pursuant to s. 627.0645, if
1142	applicable.
1143	(e)  In order to evaluate the impact of flex rate filings
1144	on compliance with s. 627.062, the office may annually solicit
1145	from insurers information concerning compliance by insurers.
1146	Insurers from whom data is solicited must provide the solicited
1147	information to the office within 30 days after the date of the
1148	request. The office shall determine the type of data necessary
1149	and the format of this data for its examination.
1150	(f)  The rate change set forth in the flex rate filing
1151	shall be applied by the insurer uniformly to all policies within
1152	the class of insurance to which it applies that are in force on
1153	the filing's effective date at renewal and all new business
1154	written on or after the filing's effective date by any insurer
1155	that has submitted such a filing, provided the insurer provides
1156	the policyholder with notice of the renewal premium as required
1157	by s. 627.4133 or any other applicable provision of the Florida
1158	Insurance Code or rules of the Office.
1159	(g)  The commission may establish by rule the procedures
1160	the office will use to evaluate the market place with respect to
1161	the effect flex rates are having on whether the resultant rates
1162	are excessive, inadequate, or unfairly discriminatory. The rules
1163	may specify data collection requirements for insurers to provide
1164	to the office and related forms.
1165	(h)1.  An insurer may submit a maximum of three consecutive
1166	flex rate filings before it must submit a complete rate revision
1167	as specified by s. 627.062 and the rules of the office.
1168	2.  For rate filings involving reference to approved loss
1169	costs filed by a licensed advisory organization or licensed
1170	rating organization, the commission shall develop by rule a
1171	procedure which establishes an average loss cost multiplier
1172	based on average insurer expenses and a reasonable margin for
1173	profit and contingencies for each type of loss cost. The office
1174	shall publish annually by a method set forth by rule adopted by
1175	the commission a list of average loss cost multipliers for each
1176	type of loss cost. If an insurer files to adopt a loss cost
1177	multiplier for a particular type of loss cost which is within 15
1178	percent of the most recent average loss cost multiplier
1179	published by the office for that particular type of loss cost,
1180	the proposed loss cost multiplier shall be approved or
1181	disapproved within 30 days after its receipt. The first rate
1182	filing filed pursuant to this subsection may be submitted at any
1183	time after the publication of the initial average loss cost
1184	multipliers.
1185	3.  For all other rate filings made pursuant to this
1186	subsection, a flex rate filing may not provide a rate change
1187	greater than 7 percent from the rate in effect at the time of
1188	the flex rate filing. The first flex rate filing permitted by
1189	this subsection may be submitted at any time after the effective
1190	date of this act.
1191	4.  Subsequent flex rate filings shall not be effective any
1192	sooner than 12 months after the effective dates of the previous
1193	flex rate filing.
1194	(i)  A flex rate filing may not provide a rate that is
1195	excessive, inadequate, or unfairly discriminatory.
1196	(j)  The commission may adopt rules or forms necessary to
1197	implement this subsection.
1198	Section 23.  Effective July 1, 2004, subsection (4) of
1199	section 627.351, Florida Statutes, is amended to read:
1200	627.351  Insurance risk apportionment plans.--
1201	(4)  MEDICAL MALPRACTICE RISK APPORTIONMENT.--
1202	(a)  The office shall, after consultation with insurers as
1203	set forth in paragraph (b), adopt a joint underwriting plan as
1204	set forth in paragraph (d). Additionally, effective July 1,
1205	2004, the Joint Underwriting Association established pursuant to
1206	this subsection shall include a separate and discrete account,
1207	known as the Florida Patient's Compensation Fund Account, for
1208	the assets, liabilities, rights, and obligations and members of
1209	the fund account created pursuant to s. 766.105.
1210	(b)  Entities licensed to issue casualty insurance as
1211	defined in s. 624.605(1)(b), (k), and (q) and self-insurers
1212	authorized to issue medical malpractice insurance under s.
1213	627.357 shall participate in the plan as set forth in paragraph
1214	(d) and shall be members of a separate and discrete account
1215	within the Joint Underwriting Association to be known as the
1216	Coverage Account. The policies, assets, liabilities, rights, and
1217	obligations of the Joint Underwriting Association as of June 30,
1218	2004, are transferred to the Coverage Account, effective July 1,
1219	2004. In no instance shall the assets or revenues of the
1220	Coverage Account be used to satisfy or secure any debt,
1221	obligation, or expense of the Florida Patient's Compensation
1222	Fund Account nor shall the assets or revenues of the Florida
1223	Patient's Compensation Fund Account be used to satisfy or secure
1224	any debt, obligation, or expense of the Coverage Account.
1225	(c)  The Coverage Account and Florida Patient's
1226	Compensation Fund Account of the Joint Underwriting Association
1227	shall operate subject to the supervision and approval of a board
1228	of governors consisting of representatives of five of the
1229	insurers participating in the Coverage Account of the Joint
1230	Underwriting Association, an attorney to be named by The Florida
1231	Bar, a physician to be named by the Florida Medical Association,
1232	a dentist to be named by the Florida Dental Association, and a
1233	hospital representative to be named by the Florida Hospital
1234	Association. The Chief Financial Officer shall select the
1235	representatives of the five insurers. One insurer representative
1236	shall be selected from recommendations of the American Insurance
1237	Association. One insurer representative shall be selected from
1238	recommendations of the Alliance of American Insurers. One
1239	insurer representative shall be selected from recommendations of
1240	the National Association of Independent Insurers. Two insurer
1241	representatives shall be selected to represent insurers that are
1242	not affiliated with these associations. The board of governors
1243	shall choose, during the first meeting of the board after June
1244	30 of each year, one of its members to serve as chair of the
1245	board and another member to serve as vice chair of the board.
1246	There shall be no liability on the part of, and no cause of
1247	action of any nature shall arise against, any member insurer,
1248	self-insurer, or its agents or employees, the Joint Underwriting
1249	Association or its agents or employees, members of the board of
1250	governors, or the office or its representatives for any action
1251	taken by them in the performance of their powers and duties
1252	under this subsection.
1253	(d)  The plan shall provide coverage through the Coverage
1254	Account for claims arising out of the rendering of, or failure
1255	to render, medical care or services and, in the case of health
1256	care facilities, coverage for bodily injury or property damage
1257	to the person or property of any patient arising out of the
1258	insured's activities, in appropriate policy forms for all health
1259	care providers as defined in paragraph (h). The Coverage Account
1260	provisions of the plan shall include, but shall not be limited
1261	to:
1262	1.  Classifications of risks and rates for the Coverage
1263	Account which reflect past and prospective loss and expense
1264	experience in different areas of practice and in different
1265	geographical areas. To assure that plan rates for the Coverage
1266	Account are adequate to pay claims and expenses, the Joint
1267	Underwriting Association shall develop a means of obtaining loss
1268	and expense experience; and the plan shall file such experience,
1269	when available, with the office in sufficient detail to make a
1270	determination of rate adequacy. Within 60 days after a rate
1271	filing, the office shall approve such rates or rate revisions as
1272	are fully supported by the filing. In addition to provisions for
1273	claims and expenses, the ratemaking formula may include a factor
1274	for projected claims trending and a margin for contingencies.
1275	The use of trend factors shall not be found to be inappropriate.
1276	2.  A Coverage Account rating plan which reasonably
1277	recognizes the prior claims experience of insureds.
1278	3.  Provisions as to Coverage Account rates for:
1279	a.  Insureds who are retired or semiretired.
1280	b.  The estates of deceased insureds.
1281	c.  Part-time professionals.
1282	4.  Coverage Account protection in an amount not to exceed
1283	$250,000 per claim, $750,000 annual aggregate for health care
1284	providers other than hospitals and in an amount not to exceed
1285	$1.5 million per claim, $5 million annual aggregate for
1286	hospitals. Such coverage for health care providers other than
1287	hospitals shall be available as primary coverage and as excess
1288	coverage for the layer of coverage between the primary coverage
1289	and the total limits of $250,000 per claim, $750,000 annual
1290	aggregate. The plan shall also provide tail coverage in these
1291	amounts to insureds whose claims-made coverage with another
1292	insurer or trust has or will be terminated. Such tail coverage
1293	shall provide coverage for incidents that occurred during the
1294	claims-made policy period for which a claim is made after the
1295	policy period.
1296	5.  A risk management program for insureds of the
1297	association Coverage Account. This program shall include, but
1298	not be limited to: investigation and analysis of frequency,
1299	severity, and causes of adverse or untoward medical injuries;
1300	development of measures to control these injuries; systematic
1301	reporting of medical incidents; investigation and analysis of
1302	patient complaints; and auditing of association members to
1303	assure implementation of this program. The plan may refuse to
1304	insure any insured who refuses or fails to comply with the risk
1305	management program implemented by the association. Prior to
1306	cancellation or refusal to renew an insured, the association
1307	shall provide the insured 60 days' notice of intent to cancel or
1308	nonrenew and shall further notify the insured of any action
1309	which must be taken to be in compliance with the risk management
1310	program.
1311	(e)  In the event an underwriting deficit exists in the
1312	Coverage Account for any policy year the plan is in effect, any
1313	surplus which has accrued from previous years and is not
1314	projected within reasonable actuarial certainty to be needed for
1315	payment of claims in the year the surplus arose shall be used to
1316	offset the deficit to the extent available.
1317	1.  As to remaining deficit, except those relating to
1318	deficit assessment coverage, each Coverage Account policyholder
1319	shall pay to the association a premium contingency assessment
1320	not to exceed one-third of the premium payment paid by such
1321	policyholder to the association for that policy year. The
1322	association shall pay no further claims on any policy for the
1323	policyholder who fails to pay the premium contingency
1324	assessment.
1325	2.  If there is any remaining deficit under the plan for
1326	the Coverage Account after maximum collection of the premium
1327	contingency assessment, such deficit shall be recovered from the
1328	companies participating in the plan Coverage Account in the
1329	proportion that the net direct premiums of each such member
1330	written during the calendar year immediately preceding the end
1331	of the policy year for which there is a deficit assessment bear
1332	to the aggregate net direct premiums written in this state by
1333	all members of the association. The term "premiums" as used
1334	herein means premiums for the lines of insurance defined in s.
1335	624.605(1)(b), (k), and (q), including premiums for such
1336	coverage issued under package policies.
1337	(f)  The plan, for Coverage Account claims, shall provide
1338	for one or more insurers able and willing to provide policy
1339	service through licensed resident agents and claims service on
1340	behalf of all other insurers participating in the plan. The plan
1341	shall also provide for Florida Patients' Compensation Fund
1342	Account claims to be serviced by the Joint Underwriting
1343	Association or through contracts with claims handling entities.
1344	In the event no insurer is able and willing to provide such
1345	services, the Joint Underwriting Association is authorized to
1346	perform any and all such services.
1347	(g)  All books, records, documents, or audits relating to
1348	the Joint Underwriting Association or its operation shall be
1349	open to public inspection, except that a claim file in the
1350	possession of the Joint Underwriting Association is confidential
1351	and exempt from the provisions of s. 119.07(1) during the
1352	processing of that claim. Any information contained in these
1353	files that identifies an injured person is confidential and
1354	exempt from the provisions of s. 119.07(1).
1355	(h)  For purposes of the Coverage Account As used in this
1356	subsection:
1357	1.  "Health care provider" means hospitals licensed under
1358	chapter 395; physicians licensed under chapter 458; osteopathic
1359	physicians licensed under chapter 459; podiatric physicians
1360	licensed under chapter 461; dentists licensed under chapter 466;
1361	chiropractic physicians licensed under chapter 460; naturopaths
1362	licensed under chapter 462; nurses licensed under part I of
1363	chapter 464; midwives licensed under chapter 467; clinical
1364	laboratories registered under chapter 483; physician assistants
1365	licensed under chapter 458 or chapter 459; physical therapists
1366	and physical therapist assistants licensed under chapter 486;
1367	health maintenance organizations certificated under part I of
1368	chapter 641; ambulatory surgical centers licensed under chapter
1369	395; other medical facilities as defined in subparagraph 2.;
1370	blood banks, plasma centers, industrial clinics, and renal
1371	dialysis facilities; or professional associations, partnerships,
1372	corporations, joint ventures, or other associations for
1373	professional activity by health care providers.
1374	2.  "Other medical facility" means a facility the primary
1375	purpose of which is to provide human medical diagnostic services
1376	or a facility providing nonsurgical human medical treatment, to
1377	which facility the patient is admitted and from which facility
1378	the patient is discharged within the same working day, and which
1379	facility is not part of a hospital. However, a facility existing
1380	for the primary purpose of performing terminations of pregnancy
1381	or an office maintained by a physician or dentist for the
1382	practice of medicine shall not be construed to be an "other
1383	medical facility."
1384	3.  "Health care facility" means any hospital licensed
1385	under chapter 395, health maintenance organization certificated
1386	under part I of chapter 641, ambulatory surgical center licensed
1387	under chapter 395, or other medical facility as defined in
1388	subparagraph 2.
1389	(i)  The manager of the plan or the manager's assistant is
1390	the agent for service of process for the plan.
1391	Section 24.  Paragraph (h) of subsection (9) of section
1392	627.476, Florida Statutes, is amended to read:
1393	627.476  Standard Nonforfeiture Law for Life Insurance.--
1394	(9)  CALCULATION OF ADJUSTED PREMIUMS AND PRESENT VALUES
1395	FOR POLICIES ISSUED AFTER OPERATIVE DATE OF THIS SUBSECTION.--
1396	(h)  All adjusted premiums and present values referred to
1397	in this section shall for all policies of ordinary insurance be
1398	calculated on the basis of the Commissioners' 1980 Standard
1399	Ordinary Mortality Table or, at the election of the insurer for
1400	any one or more specified plans of life insurance, the
1401	Commissioners' 1980 Standard Ordinary Mortality Table with Ten-
1402	Year Select Mortality Factors; shall for all policies of
1403	industrial insurance be calculated on the basis of the
1404	Commissioners' 1961 Standard Industrial Mortality Table; and
1405	shall for all policies issued in a particular calendar year be
1406	calculated on the basis of a rate of interest not exceeding the
1407	nonforfeiture interest rate as defined in this subsection for
1408	policies issued in that calendar year. However:
1409	1.  At the option of the insurer, calculations for all
1410	policies issued in a particular calendar year may be made on the
1411	basis of a rate of interest not exceeding the nonforfeiture
1412	interest rate, as defined in this subsection, for policies
1413	issued in the immediately preceding calendar year.
1414	2.  Under any paid-up nonforfeiture benefit, including any
1415	paid-up dividend additions, any cash surrender value available,
1416	whether or not required by subsection (2), shall be calculated
1417	on the basis of the mortality table and rate of interest used in
1418	determining the amount of such paid-up nonforfeiture benefit and
1419	paid-up dividend additions, if any.
1420	3.  An insurer may calculate the amount of any guaranteed
1421	paid-up nonforfeiture benefit, including any paid-up additions
1422	under the policy, on the basis of an interest rate no lower than
1423	that specified in the policy for calculating cash surrender
1424	values.
1425	4.  In calculating the present value of any paid-up term
1426	insurance with accompanying pure endowment, if any, offered as a
1427	nonforfeiture benefit, the rates of mortality assumed may be not
1428	more than those shown in the Commissioners' 1980 Extended Term
1429	Insurance Table for policies of ordinary insurance and not more
1430	than the Commissioners' 1961 Industrial Extended Term Insurance
1431	Table for policies of industrial insurance.
1432	5.  In lieu of the mortality tables specified in this
1433	section, at the option of the insurance company and subject to
1434	rules adopted by the commission, the insurance company may
1435	substitute:
1436	a.  The 1958 CSO or CET Smoker and Nonsmoker Mortality
1437	Tables, whichever is applicable, for policies issued on or after
1438	the operative date of this subsection and before January 1,
1439	1989;
1440	b.  The 1980 CSO or CET Smoker and Nonsmoker Mortality
1441	Tables, whichever is applicable, for policies issued on or after
1442	the operative date of this subsection;
1443	c.  A mortality table that is a blend of the sex-distinct
1444	1980 CSO or CET mortality table standard, whichever is
1445	applicable, or a mortality table that is a blend of the sex-
1446	distinct 1980 CSO or CET smoker and nonsmoker mortality table
1447	standards, whichever is applicable, for policies that are
1448	subject to the United States Supreme Court decision in Arizona
1449	Governing Committee v. Norris to prevent unfair discrimination
1450	in employment situations.
1451	6.  Ordinary mortality tables, adopted after 1980 by the
1452	National Association of Insurance Commissioners, adopted by rule
1453	by the commission for use in determining the minimum
1454	nonforfeiture standard may be substituted for the Commissioners'
1455	1980 Standard Ordinary Mortality Table with or without Ten-Year
1456	Select Mortality Factors or for the Commissioners' 1980 Extended
1457	Term Insurance Table.
1458	7.6.  For insurance issued on a substandard basis, the
1459	calculation of any such adjusted premiums and present values may
1460	be based on appropriate modifications of the aforementioned
1461	tables.
1462	Section 25.  Subsection (2) of section 627.836, Florida
1463	Statutes, is amended to read:
1464	627.836  Licensee's books and records; reports.--
1465	(2)  Each licensee shall annually, on or before March 1,
1466	file a report with the office giving such information as the
1467	office may require. The report shall be made under oath and in
1468	the form prescribed by the commission and shall be accompanied
1469	by the annual report filing fee specified in s. 627.849. The
1470	office may make and publish annually an analysis and
1471	recapitulation of such reports. In addition, the office may
1472	require such additional regular or special reports as it may
1473	deem necessary. The commission may by rule require all or part
1474	of the reports or filings required under this section to be
1475	submitted by electronic means in a computer-readable form
1476	compatible with an electronic data format specified by the
1477	commission.
1478	Section 26.  Section 627.8401, Florida Statutes, is created
1479	to read:
1480	627.8401  Prohibited investments and loans.--A premium
1481	finance company shall not directly or indirectly invest in or
1482	lend its funds upon the security of any note or other evidence
1483	of indebtedness of any director, officer, or controlling
1484	stockholder of the premium finance company.
1485	Section 27.  Subsection (5) of section 627.915, Florida
1486	Statutes, is amended to read:
1487	627.915  Insurer experience reporting.--
1488	(5)  Any insurer or insurer group which does not write at
1489	least 0.5 percent of the Florida market based on premiums
1490	written shall not have to file any report required by subsection
1491	(2) other than a report indicating its percentage of the market
1492	share. That percentage shall be calculated by dividing the
1493	insurer's preceding year's current premiums written by the
1494	preceding year's total premiums written in the state for that
1495	line of insurance.
1496	Section 28.  Subsection (2) of section 627.943, Florida
1497	Statutes, is amended, and subsections (6) and (7) are added to
1498	said section, to read:
1499	627.943  Risk retention groups certified in Florida.--
1500	(2)  Before it may offer insurance in any state, each risk
1501	retention group shall also submit for approval to the office a
1502	plan of operation or a feasibility study. The feasibility study
1503	shall be prepared by an independent qualified actuary or an
1504	independent certified public accountant and address market
1505	potential, market penetration, market competition, operating
1506	expenses, gross revenues, minimum capital and surplus required,
1507	net income, total assets and liabilities, cash flow, and such
1508	other items as the office may require. The study shall continue
1509	for the greater of 3 years or until the arrangement has been
1510	projected to be profitable for 12 consecutive months. The study
1511	must demonstrate the financial ability of the fund to meet its
1512	claims and obligations and reflect and support all premium,
1513	reserve, and other financial requirements with which the risk
1514	retention group must comply. Before additional lines of
1515	liability insurance are offered in this or any other state
1516	approval shall be obtained from the office.
1517	(6)  Domestic risk retention groups shall periodically
1518	update the feasibility study required pursuant to s. 627.943(2),
1519	if requested by the office.
1520	(7)  An application for a domestic risk retention group
1521	certificate of authority may be exempted from the requirements
1522	of ss. 624.407 and 624.408 upon the determination by the office
1523	that the feasibility study required pursuant to subsection (2)
1524	adequately addresses minimum capital and surplus. Prior to such
1525	an exemption, the office may contract with an independent expert
1526	to the review the feasibility study. In making the
1527	determination, the office shall consider:
1528	(a)  The applicant's line of business.
1529	(b)  The applicant's business plan, including premium
1530	volume.
1531	(c)  The applicant's scope of coverage and coverage limits.
1532	(d)  Other relevant factors.
1533	Section 29.  Effective January 1, 2005, subsection (1) of
1534	section 628.071, Florida Statutes, is amended to read:
1535	628.071  Granting, denial of permit.--
1536	(1)  The office shall expeditiously examine and investigate
1537	the application for a permit as referred to in s. 628.051. If
1538	the office finds that:
1539	(a)  The application is complete;
1540	(b)  The documents therewith filed are in compliance with
1541	law;
1542	(c)  None of the stockholders, organizers, incorporators,
1543	subscribers, and other persons who directly or indirectly
1544	exercise or have the ability to exercise effective control of
1545	the proposed insurer or who will be involved in its management
1546	have been found guilty of, or have pleaded guilty or nolo
1547	contendere to, a felony or a crime punishable by imprisonment of
1548	1 year or more under the law of the United States or any state
1549	thereof, or under the law of any other country, which involves
1550	moral turpitude, without regard to whether a judgment of
1551	conviction has been entered by the court having jurisdiction of
1552	such cases;
1553	(d)  The proposed financial structure is adequate; and
1554	(e)  All stockholders, organizers, incorporators,
1555	subscribers, and other persons who directly or indirectly
1556	exercise or have the ability to exercise effective control of
1557	the proposed insurer or who will be involved in management of
1558	the proposed insurer possess the financial standing and business
1559	experience to form an insurer; and
1560	(f)  The applicant, if a domestic stock or mutual insurer,
1561	has demonstrated the ability to comply with s. 628.072 and rules
1562	adopted under such section,
1563
1564	the office it shall issue to the applicant a permit to form the
1565	proposed insurer.
1566	Section 30.  Effective January 1, 2005, section 628.072,
1567	Florida Statutes, is created to read:
1568	628.072  Domestic insurers, corporate good governance.-?
1569	(1)  Each domestic stock or domestic mutual insurer shall
1570	establish and maintain corporate good governance practices as a
1571	condition to obtain or retain a certificate of authority.
1572	(2)  Each domestic stock or domestic mutual insurer shall
1573	annually demonstrate to the office adherence to the requirements
1574	of this section. The method of demonstration shall be on a form
1575	or in accordance with rules adopted by the commission.
1576	(3)  A publicly traded domestic stock insurer, in lieu of
1577	complying with subsection (4), may satisfy the requirements of
1578	this section by demonstrating compliance with the applicable
1579	provisions of 15 U.S.C. s. 7201.
1580	(4)  The commission shall adopt rules providing for
1581	corporate good governance practices to be met by all domestic
1582	insurers. In adopting the rules, the commission shall consider:
1583	(a)  Practices which avoid fraud.
1584	(b)  Corporate accountability and transparency with respect
1585	to the fiduciary responsibilities of officers and board of
1586	directors.
1587	(c)  Controls with respect to insurer operations and other
1588	management practices to avoid waste or misuse of the insurer's
1589	assets.
1590	(d)  With respect to corporate directors:
1591	1.  Requiring board meetings at least quarterly or more
1592	frequently as prudent.
1593	2.  Requiring the insurer to have at least one independent
1594	director.
1595	3.  Requiring the board of directors to review and approve
1596	minutes of any audit committee, with the board's review and
1597	approval being reflected in board's minutes.
1598	(e)  With respect to management:
1599	1.  Requiring a written code of ethics and conduct
1600	addressing director and officer conflicts of interest and
1601	corporate, director, and officer compliance with laws and rules.
1602	2.  Requiring approval by the corporate chief executive
1603	officer and chief financial officer of all annual and quarterly
1604	financial reports, attesting that he or she reviewed the report,
1605	that to the best of his or her knowledge the report fairly
1606	represents the financial condition of the insurer, and that the
1607	financial statements do not, to the officer's best knowledge,
1608	contain a misstatement of material fact or omission of material
1609	fact.
1610	(f)  With respect to the corporate audit committee:
1611	1.  Requiring that the audit committee chair have
1612	accounting or financial management experience.
1613	2.  Requiring that the audit committee members be
1614	financially literate.
1615	3.  Requiring that the audit committee meet at least
1616	quarterly, and more frequently as prudent.
1617	4.  Prohibiting payments by the insurer to any audit
1618	committee member except for services on the board and audit
1619	committee.
1620	5.  Requiring an audit committee charter and specifying
1621	requirements therefore.
1622	6.  Requiring, with respect to the audit committee, that
1623	the committee must:
1624	a.  Approve all related party transactions.
1625	b.  Meet in executive session regularly and as often as
1626	prudent.
1627	c.  Oversee the internal audit functions, including
1628	reporting and personnel matters.
1629	d.  Oversee performance evaluations and compensation of the
1630	internal audit director.
1631	e.  Oversee the outside auditor, including recommending the
1632	firm, evaluating the auditor's performance; and the rotation of
1633	the senior audit personnel.
1634	f.  Oversee the financial reporting process.
1635	g.  Certify in correspondence to the office and signed by
1636	all the audit committee members that they have reviewed the
1637	financials and, to the best of their knowledge, quarterly and
1638	annual financial statements submitted to the office contain no
1639	material omissions or inaccuracies and reflect no questionable
1640	accounting practices, the frequency of such certification to be
1641	governed by rule of the commission.
1642	(g)  With respect to an outside auditor, requiring:
1643	1.  That the outside auditor report directly to the audit
1644	committee or to the full board if there is no audit committee,
1645	in which case, the board shall act as the audit committee and
1646	meet all requirements of the audit committee as set forth by
1647	rule of the commission.
1648	2.  That outside firms provide a concurring or second
1649	partner review of audit reports.
1650	3.  That outside auditors should limit their non-audit
1651	services to a client to avoid conflicts.
1652	(h)  With respect to audit reports, requiring that the
1653	outside audit report describe the extent of testing of internal
1654	controls.
1655	(i)  Requiring the insurer to establish an internal audit
1656	function either in house or outside that is independent from the
1657	regular outside auditor.
1658	(j)  Requiring the insurer to establish internal policies
1659	and procedures that encourage employees to come forward with
1660	allegations of misconduct without fear of retribution.
1661	(k)  Requiring other procedures that provide substantially
1662	equivalent safeguards as those specified within this subsection
1663	standards where appropriate to operate in lieu thereof.
1664
1665	In adopting the rules, the commission shall consider the
1666	corporate good governance practices set forth in 15 U.S.C. s.
1667	7201 to the degree such practices may be applied to mutual
1668	domestic insurers or publicly traded or closely held stock
1669	domestic insurers; provided, a rule which is applicable to a
1670	publicly traded domestic stock insurer may not conflict with the
1671	provisions of 15 U.S.C. s. 7201. The commission may adopt forms
1672	necessary to implement this section.
1673	Section 31.  Subsections (2), (3), and (4) of section
1674	628.371, Florida Statutes, are amended to read:
1675	628.371  Dividends to stockholders.--
1676	(2)(a)  No domestic insurer shall pay any extraordinary
1677	dividend or make any other extraordinary distribution to its
1678	shareholders until 30 days after the office has received notice
1679	of the declaration of such dividend or distribution and has not
1680	within that period disapproved the payment, or until the office
1681	has approved the payment within the 30 day period.
1682	(b)  For purposes of this section, an extraordinary
1683	dividend or distribution includes any dividend or distribution
1684	of cash or other property whose fair market value, together with
1685	that of other dividends or distributions made within the
1686	preceding 12 months, exceeds the lesser of:
1687	1.  Ten percent of the insurer's surplus as regards
1688	policyholders as of the date of the most recent quarterly
1689	statement filed with the office; or
1690	2.  The net gain from operations of the insurer, if the
1691	insurer is a life insurer, or the net income of the insurer, if
1692	the insurer is not a life insurer, not including realized
1693	capital gains, for the 12 month period ending the 31st day of
1694	December next preceding, but shall not include pro rata
1695	distributions of any class of the insurer's own securities.
1696	(c)  In determining whether a dividend or distribution is
1697	extraordinary, an insurer other than a life insurer may carry
1698	forward net income from the previous 2 calendar years that has
1699	not already been paid out as dividends. This carryforward shall
1700	be computed by taking the net income from the second and third
1701	preceding calendar years, not including realized capital gains,
1702	less dividends paid in the second and immediately preceding
1703	calendar years.
1704	(d)  Notwithstanding any other provision of law, an insurer
1705	may declare an extraordinary dividend or distribution which is
1706	conditional upon the approval of the office, and the declaration
1707	shall confer no rights upon shareholders until:
1708	1.  The office has approved the payment of the dividend or
1709	distribution; or
1710	2.  The office has not disapproved payment within the 30-
1711	day period pursuant to paragraph (a). Dividend payments or
1712	distributions to stockholders, without prior written approval of
1713	the office, shall not exceed the larger of:
1714	(a)  The lesser of 10 percent of surplus or net gain from
1715	operations (life and health companies) or net income (property
1716	and casualty companies), not including realized capital gains,
1717	plus a 2-year carryforward for property and casualty companies;
1718	(b)  Ten percent of surplus, with dividends payable
1719	constrained to unassigned funds minus 25 percent of unrealized
1720	capital gains;
1721	(c)  The lesser of 10 percent of surplus or net investment
1722	income (net gain before capital gains for life and health
1723	companies) plus a 3-year carryforward (2-year carryforward for
1724	life and health companies) with dividends payable constrained to
1725	unassigned funds minus 25 percent of unrealized capital gains.
1726	(3)  In lieu of the provisions in subsection (2), an
1727	insurer may pay a dividend or make a distribution without the
1728	prior written approval of the office when:
1729	(a)  The dividend is equal to or less than the greater of:
1730	1.  Ten percent of the insurer's surplus as to
1731	policyholders derived from realized net operating profits on its
1732	business and net realized capital gains; or
1733	2.  The insurer's entire net operating profits and realized
1734	net capital gains derived during the immediately preceding
1735	calendar year; and
1736	(b)  The insurer will have surplus as to policyholders
1737	equal to or exceeding 115 percent of the minimum required
1738	statutory surplus as to policyholders after the dividend or
1739	distribution is made; and
1740	(c)  The insurer has filed notice with the office at least
1741	10 business days prior to the dividend payment or distribution,
1742	or such shorter period of time as approved by the office on a
1743	case-by-case basis. Such notice shall not create a right in the
1744	office to approve or disapprove a dividend otherwise properly
1745	payable hereunder; and
1746	(d)  The notice includes a certification by an officer of
1747	the insurer attesting that after payment of the dividend or
1748	distribution the insurer will have at least 115 percent of
1749	required statutory surplus as to policyholders.
1750	(3)(4)  The office shall not approve a dividend or
1751	distribution in excess of the maximum amount allowed in
1752	subsection (1) unless the office, considering the following
1753	factors, it determines that the distribution or dividend would
1754	not jeopardize the financial condition of the insurer, based
1755	upon a review of the following factors:
1756	(a)  The liquidity, quality, and diversification of the
1757	insurer's assets and the effect on its ability to meet its
1758	obligations.
1759	(b)  Reduction of investment portfolio and investment
1760	income.
1761	(c)  Effects on the written premium to surplus ratios as
1762	required by the Florida Insurance Code.
1763	(d)  Industrywide financial conditions.
1764	(e)  Prior dividend distributions of the insurer.
1765	(f)  Whether the dividend is only a "pass-through" dividend
1766	from a subsidiary of the insurer.
1767	(g)  Risk-based capital of the insurer.
1768	(h)  Any other relevant factor.
1769	Section 32.  Subsection (2) of section 628.461, Florida
1770	Statutes, is amended to read:
1771	628.461  Acquisition of controlling stock.--
1772	(2)  This section does not apply to any acquisition of
1773	voting securities of a domestic stock insurer or of a
1774	controlling company by any person who, on July 1, 1976, is the
1775	owner of a majority of such voting securities or who, on or
1776	after July 1, 1976, becomes the owner of a majority of such
1777	voting securities with the approval of the office pursuant to
1778	this section. Further, the provisions of this section shall not
1779	apply to a change of ownership of a domestic insurer resulting
1780	from changes within an insurance holding company of which the
1781	insurer is a member, provided the insurer establishes that no
1782	new person or entity will have the ability to influence or
1783	control the activities of the insurer and that the
1784	reorganization will not result in any changes in the officers,
1785	directors, or business plan of the domestic insurer.
1786	Section 33.  Subsection (3) of section 628.4615, Florida
1787	Statutes, is amended to read:
1788	628.4615  Specialty insurers; acquisition of controlling
1789	stock, ownership interest, assets, or control; merger or
1790	consolidation.--
1791	(3)  This section does not apply to any acquisition of
1792	voting securities or ownership interest of a specialty insurer
1793	or of a controlling company by any person who, on July 9, 1986,
1794	is the owner of a majority of such voting securities or
1795	ownership interest or who, on or after July 9, 1986, becomes the
1796	owner of a majority of such voting securities or ownership
1797	interest with the approval of the office pursuant to this
1798	section. Further, the provisions of this section shall not apply
1799	to a change of ownership of a specialty insurer resulting from
1800	changes within a holding company of which the specialty insurer
1801	is a member, provided the specialty insurer establishes that no
1802	new person or entity will have the ability to influence or
1803	control the activities of the specialty insurer and that the
1804	reorganization will not result in any changes in the officers,
1805	directors, or business plan of the specialty insurer.
1806	Section 34.  Subsection (1) of section 628.709, Florida
1807	Statutes, is amended to read:
1808	628.709  Formation of a mutual insurance holding company.--
1809	(1)  A domestic mutual insurance company, other than a
1810	mutual insurer that issued assessable policies as a mutual
1811	insurer and which held a certificate of authority in this state
1812	on July 1, 1997, may, pursuant to a plan of reorganization,
1813	reorganize as a mutual insurance holding company system that
1814	must consist of a mutual insurance holding company and one or
1815	more controlled subsidiaries and which may consist of one or
1816	more intermediate stock holding companies and other
1817	subsidiaries. The reorganization may be effected by the
1818	organization of one or more companies, amendment or restatement
1819	of the articles of incorporation and bylaws of one or more
1820	companies, transfer of assets and liabilities among two or more
1821	companies, issuance, acquisition or transfer of capital stock of
1822	one or more companies, or merger or consolidation of two or more
1823	companies. On and after the effective date of a plan of
1824	reorganization, the mutual insurance holding company shall at
1825	all times have the power, directly or indirectly, to cast at
1826	least a majority of the votes for the election of the board of
1827	directors of each controlled subsidiary and any intermediate
1828	stock holding company.
1829	Section 35.  Section 634.042, Florida Statutes, is created
1830	to read:
1831	634.042  Prohibited investments and loans.--A motor vehicle
1832	service agreement company shall not directly or indirectly
1833	invest in or lend its funds upon the security of any note or
1834	other evidence of indebtedness of any director, officer, or
1835	controlling stockholder of the motor vehicle service agreement
1836	company.
1837	Section 36.  Section 634.3076, Florida Statutes, is created
1838	to read:
1839	634.3076  Prohibited investments and loans.--A home
1840	warranty association shall not directly or indirectly invest in
1841	or lend its funds upon the security of any note or other
1842	evidence of indebtedness of any director.
1843	Section 37.  Section 634.4062, Florida Statutes, is created
1844	to read:
1845	634.4062  Prohibited investments and loans.--A service
1846	warranty association shall not directly or indirectly invest in
1847	or lend its funds upon the security of any note or other
1848	evidence of indebtedness of any director, officer, or
1849	controlling stockholder of the service warranty association.
1850	Section 38.  Section 636.043, Florida Statutes, is amended
1851	to read:
1852	(Substantial rewording of section. See s.
1853	636.043, Florida Statutes, for present text.)
1854	636.043  Annual, quarterly, and miscellaneous reports.--
1855	(1)  Every prepaid limited health service organization
1856	shall, annually within 3 months after the end of the calendar
1857	year, or within an extension of time therefore as the office,
1858	for good cause, may grant, in a form prescribed by the
1859	commission, file a report with the office, verified by the oath
1860	of two officers of the corporation, or if not a corporation, of
1861	two persons who are principal managing directors of the
1862	organization, or if not a corporation, of two persons who are
1863	principal managing directors of the affairs of the organization,
1864	properly notarized, showing its condition on the last day of the
1865	immediately preceding reporting period. Such report shall
1866	include:
1867	(a)  A financial statement of the prepaid limited health
1868	service, organization filed by electronic means in a computer-
1869	readable form using a format acceptable to the office.
1870	(b)  A financial statement of the prepaid limited health
1871	service organization filed on forms acceptable to the office.
1872	(c)  An audited financial statement of the prepaid limited
1873	health service organization, including its balance sheet and a
1874	statement of operations for the preceding year certified by an
1875	independent certified public accountant, prepared in accordance
1876	with statutory accounting principles.
1877	(d)  The number of prepaid limited health service contracts
1878	issued and outstanding and the number of prepaid limited health
1879	service organization contracts terminated.
1880	(e)  The number and amount of damage claims for medical
1881	injury initiated against the prepaid limited health service
1882	organization and any of the providers engaged by the
1883	organization during the reporting year, broken down into claims
1884	with and without formal legal process, and the disposition, if
1885	any, of each such claim.
1886	(f)  An actuarial certification that:
1887	1.  The prepaid limited health service organization is
1888	actuarially sound, which certification shall consider the rates,
1889	benefits, and expenses of, and any other funds available for the
1890	payment of obligations of, the organization.
1891	2.  The rates being charged or to be charged are
1892	actuarially adequate to the end of the period for which rates
1893	have been guaranteed.
1894	3.  Incurred but not reported claims and claims reported
1895	but not fully paid have been adequately provided for.
1896	4.  The prepaid limited health service organization has
1897	adequately provided for all obligations required by s.
1898	641.35(3)(a).
1899	(g)  A report prepared by the certified public accountant
1900	and filed with the office describing any material weaknesses in
1901	the prepaid limited health service organization's internal
1902	control structure as noted by the certified public accountant
1903	during the audit. The report must be filed with the annual
1904	audited financial report as required in paragraph (c). The
1905	prepaid limited health service organization shall provide a
1906	description of remedial actions taken or proposed to correct
1907	material weaknesses, if the actions are not described in the
1908	independent certified public accountant's report.
1909	(h)  Such other information relating to the performance of
1910	prepaid limited health service organizations as is required by
1911	the commission or office.
1912	(2)  The office may require updates of the actuarial
1913	certification as to a particular prepaid limited health service
1914	organization if the office has reasonable cause to believe that
1915	such reserves are understated to the extent of materially
1916	misstating the financial position of the prepaid limited health
1917	service organization. Workpapers in support of the statement of
1918	the updated actuarial certification must be provided to the
1919	office upon request.
1920	(3)  Every prepaid limited health service organization
1921	shall file quarterly, for the first three calendar quarters of
1922	each year, an unaudited financial statement of the organization
1923	as described in paragraphs (1)(a) and (b). The statement for the
1924	quarter ending March 31 shall be filed on or before May 15, the
1925	statement for the quarter ending June 30 shall be filed on or
1926	before August 15, and the statement for the quarter ending
1927	September 30 shall be filed on or before November 15. The
1928	quarterly report shall be verified by the oath of two officers
1929	of the organization, properly notarized.
1930	(4)  Any prepaid limited health service organization that
1931	neglects to file an annual report or quarterly report in the
1932	form and within the time required by this section shall forfeit
1933	up to $1,000 for each day for the first 10 days during which the
1934	neglect continues and shall forfeit up to $2,000 for each day
1935	after the first 10 days during which the neglect continues and,
1936	upon notice by the office to that effect, the organization's
1937	authority to enroll new subscribers or to do business in this
1938	state shall cease while such default continues. The office shall
1939	deposit all sums collected by it under this section to the
1940	credit of the Insurance Regulatory Trust Fund. The office shall
1941	not collect more than $100,000 for each report.
1942	(5)  Each authorized prepaid limited health service
1943	organization shall retain an independent certified public
1944	accountant, referred to in this subsection as "accountant," who
1945	agrees by written contract with the prepaid limited health
1946	service organization to comply with the provisions of this part.
1947	(a)  The accountant shall provide to the prepaid limited
1948	health service organization audited financial statements
1949	consistent with this part.
1950	(b)  Any determination by the accountant that the prepaid
1951	limited health service organization does not meet minimum
1952	surplus requirements as set forth in this part shall be stated
1953	by the accountant, in writing, in the audited financial
1954	statement.
1955	(c)  The completed work papers and any written
1956	communications between the accountant firm and the prepaid
1957	limited health service organization relating to the audit of the
1958	prepaid limited health service organization shall be made
1959	available for review on a visual-inspection-only basis by the
1960	office at the offices of the prepaid limited health service
1961	organization, at the office, or at any other reasonable place as
1962	mutually agreed between the office and the prepaid limited
1963	health service organization. The accountant must retain for
1964	review the work papers and written communications for a period
1965	of not less than 6 years.
1966	(d)  The accountant shall provide to the office a written
1967	report describing material weaknesses in the prepaid limited
1968	health service organization's internal control structure as
1969	noted during the audit.
1970	(6)  To facilitate uniformity in financial statements and
1971	analysis by the office, the commission may by rule adopt the
1972	form for financial statements of a prepaid limited health
1973	service organization, including supplements, as approved by the
1974	National Association of Insurance Commissioners in 2004 and may
1975	adopt subsequent amendments to such form if the methodology
1976	remains substantially consistent. The commission may by rule
1977	require each prepaid limited health service organization to
1978	submit to the office all or part of the information contained in
1979	the annual statement in a computer-readable form compatible with
1980	the electronic data processing system specified by the office.
1981	(7)  In addition to information required and furnished in
1982	connection with its annual or quarterly statements, the prepaid
1983	limited health service organization shall furnish to the office
1984	as soon as reasonably possible such information as to its
1985	material transactions which, in the office's opinion, may have a
1986	material adverse effect on the prepaid limited health service
1987	organization's financial condition, as the office requests in
1988	writing. All such information furnished pursuant to the office's
1989	request must be verified by the oath of two executive officers
1990	of the prepaid limited health service organization.
1991	(8)  Each prepaid limited health service organization shall
1992	file one copy of its annual statement convention blank in
1993	electronic form, along with such additional filings as
1994	prescribed by the commission for the preceding calendar year or
1995	quarter, with the National Association of Insurance
1996	Commissioners. Each prepaid limited health service organization
1997	shall pay fees assessed by the National Association of Insurance
1998	Commissioners to cover costs associated with the filing and
1999	analysis of the documents by the National Association of
2000	Insurance Commissioners.
2001	(9)  The office may require monthly reports if the
2002	financial condition of the prepaid limited health service
2003	organization has deteriorated from previous periods or if the
2004	financial condition of the organization is such that it may be
2005	hazardous to subscribers if not monitored more frequently.
2006	Section 39.  Effective January 1, 2005, subsection (10) is
2007	added to section 641.22, Florida Statutes, to read:
2008	641.22  Issuance of certificate of authority.--The office
2009	shall issue a certificate of authority to any entity filing a
2010	completed application in conformity with s. 641.21, upon payment
2011	of the prescribed fees and upon the office's being satisfied
2012	that:
2013	(10)  The health maintenance organization has demonstrated
2014	that it will meet the applicable requirements of ss. 641.30(6)
2015	and 628.072.
2016	Section 40.  Effective January 1, 2005, paragraph (f) is
2017	added to subsection (2) of section 641.23, Florida Statutes, to
2018	read:
2019	641.23  Revocation or cancellation of certificate of
2020	authority; suspension of enrollment of new subscribers; terms of
2021	suspension.--
2022	(2)  The office may suspend the authority of a health
2023	maintenance organization to enroll new subscribers or revoke any
2024	certificate issued to a health maintenance organization, or
2025	order compliance within 30 days, if it finds that any of the
2026	following conditions exists:
2027	(f)  That the organization has failed to meet and maintain
2028	the applicable requirements of ss. 641.30(6) and 628.072.
2029	Section 41.  Subsection (1) of section 641.27, Florida
2030	Statutes, is amended to read:
2031	641.27  Examination by the office department.--
2032	(1)  The office shall examine the affairs, transactions,
2033	accounts, business records, and assets of any health maintenance
2034	organization as often as it deems it expedient for the
2035	protection of the people of this state, but not less frequently
2036	than once every 5 3 years. In lieu of making its own financial
2037	examination, the office may accept an independent certified
2038	public accountant's audit report prepared on a statutory
2039	accounting basis consistent with this part. However, except when
2040	the medical records are requested and copies furnished pursuant
2041	to s. 456.057, medical records of individuals and records of
2042	physicians providing service under contract to the health
2043	maintenance organization shall not be subject to audit, although
2044	they may be subject to subpoena by court order upon a showing of
2045	good cause. For the purpose of examinations, the office may
2046	administer oaths to and examine the officers and agents of a
2047	health maintenance organization concerning its business and
2048	affairs. The examination of each health maintenance organization
2049	by the office shall be subject to the same terms and conditions
2050	as apply to insurers under chapter 624. In no event shall
2051	expenses of all examinations exceed a maximum of $20,000 for any
2052	1-year period. Any rehabilitation, liquidation, conservation, or
2053	dissolution of a health maintenance organization shall be
2054	conducted under the supervision of the department, which shall
2055	have all power with respect thereto granted to it under the laws
2056	governing the rehabilitation, liquidation, reorganization,
2057	conservation, or dissolution of life insurance companies.
2058	Section 42.  Effective January 1, 2005, subsection (6) is
2059	added to section 641.30, Florida Statutes, to read:
2060	641.30  Construction and relationship to other laws.--
2061	(6)  Each health maintenance organization shall comply with
2062	the applicable provisions of s. 628.072 and rules adopted under
2063	such section. Applicability shall be based on the organizational
2064	structure of the health maintenance organization.
2065	Section 43.  Subsection (3) of section 641.409, Florida
2066	Statutes, is renumbered as subsection (4) and amended, and a new
2067	subsection (3) is added to said section, to read:
2068	641.409  Insolvency protection.--
2069	(3)  In lieu of the surety bond required under paragraph
2070	(1)(b), the prepaid health clinic may deposit with the office
2071	the amount determined in subsection (2). The deposit shall not
2072	be considered as an admitted asset in determining the statutory
2073	financial condition of the prepaid health clinic. The deposit
2074	shall be released to the prepaid health clinic if replaced by a
2075	surety bond that meets the requirements of subsection (2).
2076	(4)(3)  Every prepaid health clinic shall deposit with the
2077	department a cash deposit in the amount of $50,000 $30,000 to
2078	guarantee that the obligations to the subscribers will be
2079	performed.
2080	Section 44.  Subsection (9) is added to section 651.026,
2081	Florida Statutes, to read:
2082	651.026  Annual reports.--
2083	(9)  The commission may by rule require all or part of the
2084	reports or filings required under this section to be submitted
2085	by an a computer-readable form compatible with an electronic
2086	data format specified by the commission.
2087	Section 45.  Section 651.0261, Florida Statutes, is amended
2088	to read:
2089	651.0261  Quarterly statements.--If the office finds,
2090	pursuant to rules of the commission, that such information is
2091	needed to properly monitor the financial condition of a provider
2092	or facility or is otherwise needed to protect the public
2093	interest, the office may require the provider to file, within 45
2094	days after the end of each fiscal quarter, a quarterly unaudited
2095	financial statement of the provider or of the facility in the
2096	form prescribed by the commission by rule. The commission may by
2097	rule require all or part of the reports or filings required
2098	under this section to be submitted by an a computer-readable
2099	form compatible with an electronic data format specified by the
2100	commission.
2101	Section 46.  Section 651.0265, Florida Statutes, is created
2102	to read:
2103	651.0265  Prohibited investments and loans.--A provider
2104	shall not directly or indirectly invest in or lend its funds
2105	upon the security of any note or other evidence of indebtedness
2106	of any director, officer, or controlling stockholder of the
2107	provider.
2108	Section 47.  Paragraph (a) of subsection (1) of section
2109	651.033, Florida Statutes, is amended to read:
2110	651.033  Escrow accounts.--
2111	(1)  When funds are required to be deposited in an escrow
2112	account pursuant to s. 651.022, s. 651.023, s. 651.035, or s.
2113	651.055:
2114	(a)  The escrow account shall be established in a federal
2115	or state chartered Florida bank, Florida savings and loan
2116	association, or Florida trust company having a physical presence
2117	and doing business in this state and otherwise acceptable to the
2118	office or on deposit with the department; and the funds
2119	deposited therein shall be kept and maintained in an account
2120	separate and apart from the provider's business accounts.
2121	Section 48.  Effective July 1, 2004, paragraph (a) of
2122	subsection (1), paragraphs (b) and (c) of subsection (2), and
2123	subsection (3) of section 766.105, Florida Statutes, are amended
2124	to read:
2125	766.105  Florida Patient's Compensation Fund.--
2126	(1)  DEFINITIONS.--The following definitions apply in the
2127	interpretation and enforcement of this section:
2128	(a)  The term "fund" means the Florida Patient's
2129	Compensation Fund Account within the medical malpractice risk
2130	apportionment plan adopted pursuant to s. 627.351(4). The fund
2131	account is not a state agency, board, or commission. However,
2132	for the purposes of s. 199.183(1) only, the fund account shall
2133	be considered a political subdivision of this state.
2134	(2)  COVERAGE.--
2135	(b)  Whenever a claim covered under subsection (3) results
2136	in a settlement or judgment against a health care provider, the
2137	fund shall pay to the extent of its coverage if the health care
2138	provider has paid the fees and any assessments required pursuant
2139	to subsection (3) for the year in which the incident occurred
2140	for which the claim is filed, provides an adequate defense for
2141	the fund, and pays the initial amount of the claim up to the
2142	applicable amount set forth in paragraph (f) or the maximum
2143	limit of the underlying coverage maintained by the health care
2144	provider on the date when the incident occurred for which the
2145	claim is filed, whichever is greater. Coverages for such claims
2146	shall be provided on an occurrence basis by the fund
2147	independently for each fiscal year, such fiscal year to run from
2148	January 1 to December 31. The fund may also provide coverages
2149	for portions of each fiscal year. The limits of such coverage
2150	afforded by the fund for each health care provider other than a
2151	hospital may not exceed the total limits for both entry level
2152	and fund coverage of $1 million per claim with a $3 million
2153	annual aggregate, or $2 million per claim with a $4 million
2154	annual aggregate, as selected by the health care provider. In
2155	the case of coverage for a hospital, the limit of coverage
2156	afforded by the fund may not exceed the total limits for both
2157	entry level and fund coverage of $2.5 million per claim with no
2158	annual aggregate. The health care provider is responsible for
2159	the payment of any amount of a claim in excess of the elected
2160	limit. The fund is not responsible for the payment of punitive
2161	damages awarded for actual or direct negligence of the health
2162	care provider member. The health care provider shall have the
2163	same responsibility for punitive damages it would have if it
2164	were not a member of the fund. A health care provider may have
2165	the necessary funds available for payment when due or may
2166	provide underlying financial responsibility by one of the
2167	following methods:
2168	1.  A bond purchased from a licensed surety company, which
2169	bond is in the applicable amount set forth in paragraph (f) per
2170	claim and 3 times the applicable per-claim limit in the
2171	aggregate per year, plus an additional amount which is
2172	sufficient to meet claims defense and expenses; however, a total
2173	bond amount for all years equal to reserved loss and expense
2174	amounts for known cases plus 3 times the applicable amount set
2175	forth in paragraph (f) plus $45,000 shall be the maximum bond
2176	amount required;
2177	2.  An adequate escrow account in the applicable amount set
2178	forth in paragraph (f) per claim and 3 times the per-claim limit
2179	in the aggregate per year, plus an additional amount which is
2180	sufficient to meet claims defense and expenses; however, a total
2181	escrow account for all years equal to reserved loss and expense
2182	amounts for known cases plus 3 times the applicable amount set
2183	forth in paragraph (f) plus $45,000 shall be the maximum escrow
2184	amount required;
2185	3.  Medical malpractice insurance in the applicable amount
2186	set forth in paragraph (f) or more per claim from a private
2187	insurer or the Coverage Account of the Joint Underwriting
2188	Association established under s. 627.351(4); or
2189	4.  Self-insurance as provided in s. 627.357, providing
2190	coverage in the applicable amount set forth in paragraph (f) or
2191	more per claim and 3 times the applicable per-claim limit in the
2192	aggregate per year.
2193	(c)  Any hospital that can meet one of the following
2194	provisions for demonstrating financial responsibility to pay
2195	claims and costs ancillary thereto arising out of the rendering
2196	of or failure to render medical care or services and for bodily
2197	injury or property damage to the person or property of any
2198	patient arising out of the activities of the hospital in this
2199	state or arising out of the activities of covered individuals
2200	listed in paragraph (e) is not required to participate in the
2201	fund:
2202	1.  Post bond in an amount equivalent to $10,000 per claim
2203	for each hospital bed in such hospital, not to exceed a $2.5
2204	million annual aggregate.
2205	2.  Establish an escrow account in an amount equivalent to
2206	$10,000 per claim for each hospital bed in such hospital, not to
2207	exceed a $2.5 million annual aggregate, to the satisfaction of
2208	the Agency for Health Care Administration.
2209	3.  Obtain professional liability coverage in an amount
2210	equivalent to $10,000 or more per claim for each bed in such
2211	hospital from a private insurer, from the Coverage Account of
2212	the Joint Underwriting Association established under s.
2213	627.351(4), or through a plan of self-insurance as provided in
2214	s. 627.357. However, no hospital may be required to obtain such
2215	coverage in an amount exceeding a $2.5 million annual aggregate.
2216	(3)  THE FUND ACCOUNT.--
2217	(a)  Purposes.--The There is created a "Florida Patient's
2218	Compensation Fund," originally created by this section, shall,
2219	as of July 1, 2004, be known as the Florida Patient's
2220	Compensation Fund Account, hereinafter referred to as the "fund
2221	account", and shall be a discrete and separate account within
2222	the medical malpractice risk apportionment plan adopted pursuant
2223	to s. 627.351(4). The fund account shall continue to serve for
2224	the purpose of paying that portion of any claim arising out of
2225	the rendering of or failure to render medical care or services,
2226	or arising out of activities of committees, for health care
2227	providers or any claim for bodily injury or property damage to
2228	the person or property of any patient, including all patient
2229	injuries and deaths, arising out of the members' activities for
2230	those health care providers set forth in subparagraphs (1)(b)1.,
2231	5., 6., and 7. which is in excess of the fund account entry
2232	level selected and less than the limit selected under paragraph
2233	(2)(b). The fund account shall be responsible only for payment
2234	of claims against health care providers who are in compliance
2235	with the provisions of paragraph (2)(b), of reasonable and
2236	necessary expenses incurred in the payment of claims, and of
2237	fund account administrative expenses.
2238	(b)  Fund account administration and operation.--
2239	1.  The fund account, as a separate and discrete account
2240	within the medical malpractice risk apportionment plan adopted
2241	pursuant to s. 627.351(4), shall be subject to the supervision
2242	and approval of the board of governors of such plan shall
2243	operate subject to the supervision and approval of a board of
2244	governors consisting of a representative of the insurance
2245	industry appointed by the Chief Financial Officer, an attorney
2246	appointed by The Florida Bar, a representative of physicians
2247	appointed by the Florida Medical Association, a representative
2248	of physicians' insurance appointed by the Chief Financial
2249	Officer, a representative of physicians' self-insurance
2250	appointed by the Chief Financial Officer, two representatives of
2251	hospitals appointed by the Florida Hospital Association, a
2252	representative of hospital insurance appointed by the Chief
2253	Financial Officer, a representative of hospital self-insurance
2254	appointed by the Chief Financial Officer, a representative of
2255	the osteopathic physicians' or podiatric physicians' insurance
2256	or self-insurance appointed by the Chief Financial Officer, and
2257	a representative of the general public appointed by the Chief
2258	Financial Officer. The board of governors shall, during the
2259	first meeting after June 30 of each year, choose one of its
2260	members to serve as chair of the board and another member to
2261	serve as vice chair of the board. The members of the board shall
2262	be appointed to serve terms of 4 years, except that the initial
2263	appointments of a representative of the general public by the
2264	Chief Financial Officer, an attorney by The Florida Bar, a
2265	representative of physicians by the Florida Medical Association,
2266	and one of the two representatives of the Florida Hospital
2267	Association shall be for terms of 3 years; thereafter, such
2268	representatives shall be appointed for terms of 4 years.
2269	Subsequent to initial appointments for 4-year terms, the
2270	representative of the osteopathic physicians' or podiatric
2271	physicians' insurance or self-insurance appointed by the Chief
2272	Financial Officer and the representative of hospital self-
2273	insurance appointed by the Chief Financial Officer shall be
2274	appointed for 2-year terms; thereafter, such representatives
2275	shall be appointed for terms of 4 years. Each appointed member
2276	may designate in writing to the chair an alternate to act in the
2277	member's absence or incapacity. A member of the board, or the
2278	member's alternate, may be reimbursed from the assets of the
2279	fund for expenses incurred by him or her as a member, or
2280	alternate member, of the board and for committee work, but he or
2281	she may not otherwise be compensated by the fund for his or her
2282	service as a board member or alternate.
2283	2.  There shall be no liability on the part of, and no
2284	cause of action of any nature shall arise against, the fund or
2285	its agents or employees, professional advisers or consultants,
2286	members of the board of governors or their alternates, or the
2287	Department of Financial Services or the Office of Insurance
2288	Regulation of the Financial Services Commission or their
2289	representatives for any action taken by them in the performance
2290	of their powers and duties pursuant to this section.
2291	(c)  Powers of the fund account.--The fund account, as a
2292	separate and discrete account within the medical malpractice
2293	risk apportionment plan established pursuant to s. 627.351(4),
2294	has the power through the plan board of governors and staff to:
2295	1.  Sue and be sued, and appear and defend, in all actions
2296	and proceedings in its name to the same extent as a natural
2297	person.
2298	2.  Adopt, change, amend, and repeal a plan of operation
2299	for the fund account as part of the plan of operation of the
2300	medical malpractice risk apportionment plan adopted pursuant to
2301	s. 627.351(4), not inconsistent with law, for the regulation and
2302	administration of the affairs of the fund account. The plan and
2303	any changes thereto shall be filed with the Office of Insurance
2304	Regulation of the Financial Services Commission and are all
2305	subject to its approval before implementation by the fund
2306	account. All fund members, board members, and employees shall
2307	comply with the plan of operation.
2308	3.  Have and exercise all powers necessary or convenient to
2309	effect any or all of the purposes for which the fund account is
2310	created.
2311	4.  Enter into such contracts as are necessary or proper to
2312	carry out the provisions and purposes of this section.
2313	5.  Employ or retain such persons as are necessary to
2314	perform the administrative and financial transactions and
2315	responsibilities of the fund account and to perform other
2316	necessary or proper functions unless prohibited by law.
2317	6.  Take such legal action as may be necessary to avoid
2318	payment of improper claims.
2319	7.  Indemnify any employee, agent, member of the board of
2320	governors or his or her alternate, or person acting on behalf of
2321	the fund account in an official capacity, for expenses,
2322	including attorney's fees, judgments, fines, and amounts paid in
2323	settlement actually and reasonably incurred by him or her in
2324	connection with any action, suit, or proceeding, including any
2325	appeal thereof, arising out of his or her capacity in acting on
2326	behalf of the fund account, if he or she acted in good faith and
2327	in a manner he or she reasonably believed to be in, or not
2328	opposed to, the best interests of the fund account and, with
2329	respect to any criminal action or proceeding, he or she had
2330	reasonable cause to believe his or her conduct was lawful.
2331	(d)  Fees and assessments.--Each health care provider, as
2332	set forth in subsection (2), electing to comply with paragraph
2333	(2)(b) for a given fiscal year shall pay the fees and any
2334	assessments established under this section relative to such
2335	fiscal year, for deposit into the fund account. Those entering
2336	the fund account after the fiscal year has begun shall pay a
2337	prorated share of the yearly fees for a prorated membership.
2338	Actuarially sound membership fees payable annually,
2339	semiannually, or quarterly with appropriate service charges
2340	shall be established by the fund account before January 1 of
2341	each fiscal year, based on the following considerations:
2342	1.  Past and prospective loss and expense experience in
2343	different types of practice and in different geographical areas
2344	within the state;
2345	2.  The prior claims experience of the members covered
2346	under the fund account; and
2347	3.  Risk factors for persons who are retired, semiretired,
2348	or part-time professionals.
2349
2350	Such fees shall be based on not more than three geographical
2351	areas, not necessarily contiguous, with five categories of
2352	practice and with categories which contemplate separate risk
2353	ratings for hospitals, for health maintenance organizations, for
2354	ambulatory surgical facilities, and for other medical
2355	facilities. The fund account is authorized to adjust the fees of
2356	an individual member to reflect the claims experience of such
2357	member. Each fiscal year of the fund account shall operate
2358	independently of preceding fiscal years. Participants shall only
2359	be liable for assessments for claims from years during which
2360	they were members of the fund account; in cases in which a
2361	participant is a member of the fund account for less than the
2362	total fiscal year, a member shall be subject to assessments for
2363	that year on a pro rata basis determined by the percentage of
2364	participation for the year. The fund account shall submit to the
2365	Office of Insurance Regulation the classifications and
2366	membership fees to be charged, and the Office of Insurance
2367	Regulation shall review such fees and shall approve them if they
2368	comply with all the requirements of this section and fairly
2369	reflect the considerations provided for in this section. If the
2370	classifications or membership fees do not comply with this
2371	section, the Office of Insurance Regulation shall set
2372	classifications or membership fees which do comply and which
2373	give due recognition to all considerations provided for in this
2374	section. Nothing contained herein shall be construed as imposing
2375	liability for payment of any part of a fund account deficit on
2376	the Joint Underwriting Association authorized by s. 627.351(4)
2377	or its member insurers. If the fund account determines that the
2378	amount of money in an account for a given fiscal year is in
2379	excess of or not sufficient to satisfy the claims made against
2380	the account, the fund account shall certify the amount of the
2381	projected excess or insufficiency to the Office of Insurance
2382	Regulation and request the office to levy an assessment against
2383	or refund to all participants in the fund account for that
2384	fiscal year, prorated, based on the number of days of
2385	participation during the year in question. The Office of
2386	Insurance Regulation shall approve the request of the fund
2387	account to refund to, or levy any assessment against, the
2388	participants, provided the refund or assessment fairly reflects
2389	the same considerations and classifications upon which the
2390	membership fees were based. The assessment shall be in an amount
2391	sufficient to satisfy reserve requirements for known claims,
2392	including expenses to satisfy the claims, made against the
2393	account for a given fiscal year. In any proceeding to challenge
2394	the amount of the refund or assessment, it is to be presumed
2395	that the amount of refund or assessment requested by the fund
2396	account is correct, if the fund demonstrates that it has used
2397	reasonable claims handling and reserving procedures. Additional
2398	assessments may be certified and levied in accordance with this
2399	paragraph as necessary for any fiscal year. If a fund account
2400	member objects to his or her assessment, he or she shall, as a
2401	condition precedent to bringing legal action contesting the
2402	assessment, pay the assessment, under protest, to the fund
2403	account. The fund account may borrow money needed for current
2404	operations, if necessary to pay claims and related expenses,
2405	fees, and costs timely for a given fiscal year, from an account
2406	for another fiscal year until such time as sufficient funds have
2407	been obtained through the assessment process. Any such money,
2408	together with interest at the mean interest rate earned on the
2409	investment portfolio of the fund account, shall be repaid from
2410	the next assessment for the given fiscal year. If any
2411	assessments are levied in accordance with this subsection as a
2412	result of claims in excess of $500,000 per occurrence, and such
2413	assessments are a result of the liability of certain individuals
2414	and entities specified in paragraph (2)(e), only hospitals shall
2415	be subject to such assessments. Before approving the request of
2416	the fund account to charge membership fees, issue refunds, or
2417	levy assessments, the Office of Insurance Regulation shall
2418	publish notice of the request in the Florida Administrative
2419	Weekly. Pursuant to chapter 120, any party substantially
2420	affected may request an appropriate proceeding. Any petition for
2421	such a proceeding shall be filed with the Office of Insurance
2422	Regulation within 21 days after the date of publication of the
2423	notice in the Florida Administrative Weekly.
2424	(e)  Fund account accounting and audit.--
2425	1.  Money shall be withdrawn from the fund account only
2426	upon a voucher as authorized by the board of governors.
2427	2.  All books, records, and audits of the fund account
2428	shall be open for reasonable inspection to the general public,
2429	except that a claim file in possession of the fund account, fund
2430	account members, and their insurers is confidential and exempt
2431	from the provisions of s. 119.07(1) and s. 24(a), Art. I of the
2432	State Constitution until termination of litigation or settlement
2433	of the claim, although medical records and other portions of the
2434	claim file may remain confidential and exempt as otherwise
2435	provided by law. Any book, record, document, audit, or asset
2436	acquired by, prepared for, or paid for by the fund account is
2437	subject to the authority of the board of governors, which shall
2438	be responsible therefor.
2439	3.  Persons authorized to receive deposits, issue vouchers,
2440	or withdraw or otherwise disburse any fund account moneys shall
2441	post a blanket fidelity bond in an amount reasonably sufficient
2442	to protect fund account assets. The cost of such bond shall be
2443	paid from the fund account.
2444	4.  Annually, the fund account shall furnish, upon request,
2445	audited financial reports to any fund participant and to the
2446	Office of Insurance Regulation and the Joint Legislative
2447	Auditing Committee. The reports shall be prepared in accordance
2448	with accepted accounting procedures and shall include income and
2449	such other information as may be required by the Office of
2450	Insurance Regulation or the Joint Legislative Auditing
2451	Committee.
2452	5.  Any money held in the fund account shall be invested in
2453	interest-bearing investments by the board of governors of the
2454	fund account as administrator. However, in no case may any such
2455	money be invested in the stock of any insurer participating in
2456	the Joint Underwriting Association authorized by s. 627.351(4)
2457	or in the parent company of, or company owning a controlling
2458	interest in, such insurer. All income derived from such
2459	investments shall be credited to the fund account.
2460	6.  Any health care provider participating in the fund
2461	account may withdraw from such participation only at the end of
2462	a fiscal year; however, such health care provider shall remain
2463	subject to any assessment or any refund pertaining to any year
2464	in which such member participated in the fund account.
2465	(f)  Claims procedures.--
2466	1.  Any person may file an action against a participating
2467	health care provider for damages covered under the fund account,
2468	except that the person filing the claim may not recover against
2469	the fund account unless the fund account was named as a
2470	defendant in the suit. The fund account is not required to
2471	actively defend a claim until the fund account is named therein.
2472	If, after the facts upon which the claim is based are reviewed,
2473	it appears that the claim will exceed the applicable amount set
2474	forth in paragraph (2)(f) or, if greater, the amount of the
2475	health care provider's basic coverage, the fund account shall
2476	appear and actively defend itself when named as a defendant in
2477	the suit. In so defending, the fund account shall retain counsel
2478	and pay out of the account for the appropriate year attorneys'
2479	fees and expenses, including court costs incurred in defending
2480	the fund account. In any claim, the attorney or law firm
2481	retained to defend the fund account may not be retained to
2482	defend the Joint Underwriting Association authorized by s.
2483	627.351(4) in any situation giving rise to a conflict of
2484	interest. The fund account is authorized to negotiate with any
2485	claimant having a judgment exceeding the applicable amount set
2486	forth in paragraph (2)(f) to reach an agreement as to the manner
2487	in which that portion of the judgment exceeding such amount is
2488	to be paid. Any judgment affecting the fund account may be
2489	appealed under the Florida Rules of Appellate Procedure, as with
2490	any defendant.
2491	2.  It is the responsibility of the insurer or self-insurer
2492	providing insurance or self-insurance for a health care provider
2493	who is also covered by the fund account to provide an adequate
2494	defense on any claim filed which potentially affects the fund
2495	account, with respect to such insurance contract or self-
2496	insurance contract. The insurer or self-insurer shall act in a
2497	fiduciary relationship toward the fund account with respect to
2498	any claim affecting the fund account. No settlement exceeding
2499	the applicable amount set forth in paragraph (2)(f), or any
2500	other amount which could require payment by the fund account,
2501	may be agreed to unless approved by the fund account.
2502	3.  A person who has recovered a final judgment against the
2503	fund account or against a health care provider who is covered by
2504	the fund account may file a claim with the fund account to
2505	recover that portion of such judgment which is in excess of the
2506	applicable amount set forth in paragraph (2)(f) or the amount of
2507	the health care provider's basic coverage, if greater, as set
2508	forth in paragraph (2)(b). The amount of liability of the fund
2509	account under a judgment, including court costs, reasonable
2510	attorney's fees, and interest, shall be paid in a lump sum,
2511	except that any claims for future special damages, as set forth
2512	in 768.48(1)(a) and (b), shall be paid periodically as they are
2513	incurred by the claimant. If a claimant dies while receiving
2514	periodic payments, payment for future medical expenses shall
2515	cease, but payment for future wage loss, if any, shall continue
2516	at a rate of not more than $100,000 per year. The fund account
2517	may pay a lump sum reflecting the present value of future wage
2518	losses in lieu of continuing the periodic payments.
2519	4.  Payment of settlements or judgments involving the fund
2520	account shall be paid in the order received within 60 days after
2521	the date of settlement or judgment, unless appealed by the fund
2522	account. If the account for a given year does not have enough
2523	money to pay all of the settlements or judgments, those claims
2524	received after the funds are exhausted shall be payable in the
2525	order in which they are received. However, no claimant has the
2526	right to execute against the fund account to the extent that the
2527	judgment is for a claim covered in a membership year for which
2528	the fund account has insufficient assets to pay the claim, as
2529	determined by membership fees for such year, investment income
2530	generated by such fees, and assessments collected from members
2531	for such year. When the fund account has insufficient assets to
2532	pay claims for a fund account year, the fund will not be
2533	required to post a supersedeas bond in order to stay execution
2534	of a judgment pending appeal. The fund account shall retain a
2535	reasonable sum of money for payment of administrative and claims
2536	expense, which money will not be subject to execution.
2537	5.  Except to the extent of the appropriate fund account
2538	entry level amount selected, if a judgment is entered against
2539	the fund account for a year in which there are insufficient
2540	assets to satisfy the claim, an automatic stay of execution and
2541	collection in favor of the fund account member shall exist for
2542	that portion of the judgment which exceeds the selected entry
2543	level amount, and for which fund account coverage exists. Such
2544	stay shall only be granted to those members who have fully
2545	complied with the requirements of fund account membership, and
2546	such stay shall remain in effect until adequate assessments are
2547	collected by the fund account to pay the claim. Upon competent
2548	proof that the portion of any claim covered by the fund account
2549	is uncollectible from the fund, the member's stay of execution
2550	may be vacated by the court, upon application by the plaintiff
2551	and hearing thereon.
2552	6.  If a health care provider participating in the fund
2553	account has coverage in excess of the applicable amount set
2554	forth in paragraph (2)(f), such health care provider shall be
2555	liable for losses up to the amount of his or her coverage, and
2556	such health care provider shall receive an appropriate reduction
2557	of the fees and assessments for participation in the fund
2558	account. Such reduction shall be granted only after such health
2559	care provider has proved to the satisfaction of the fund account
2560	that such health care provider had such coverage during the
2561	period of membership of the fiscal year.
2562	7.  The manager of the fund account or his or her assistant
2563	is the agent for service of process for the plan.
2564	(g)  Risk management program.--The fund account shall
2565	establish a risk management program as part of its
2566	administrative functions. All health care providers, as defined
2567	in subparagraphs (1)(b)1., 5., 6., and 7., participating in the
2568	fund account shall comply with the provisions of the risk
2569	management program established by the fund account. The risk
2570	management program shall include the following components:
2571	1.  The investigation and analysis of the frequency and
2572	causes of general categories and specific types of adverse
2573	incidents causing injury to patients;
2574	2.  The development of appropriate measures to minimize the
2575	risk of injuries and adverse incidents to patients;
2576	3.  The analysis of patient grievances which relate to
2577	patient care and the quality of medical services;
2578	4.  The development and implementation of an incident
2579	reporting system based upon the affirmative duty of all health
2580	care providers and all agents and employees of health care
2581	providers and health care facilities to report injuries and
2582	incidents; and
2583	5.  Auditing of participating health care providers to
2584	assure compliance with the provisions of the risk management
2585	program.
2586
2587	The fund account shall establish a schedule of fee surcharges
2588	which it shall levy upon participating health care providers
2589	found to be in violation of the provisions of the risk
2590	management program. Such schedule shall be subject to approval
2591	by the Office of Insurance Regulation and shall provide an
2592	escalating scale of surcharges based upon the frequency and
2593	severity of the incidents in violation of the risk management
2594	program. No health care provider shall be required to pay a
2595	surcharge if it has corrected all violations of the provisions
2596	of the risk management program and established an affirmative
2597	program to remain in compliance by the time its next fee or
2598	assessment is due.
2599	(h)  Nonavailability of coverage.--The fund account shall
2600	determine, no later than 7 days before the beginning of each
2601	fiscal year, whether the total amount of the membership fees to
2602	be charged for the fiscal year to health care provider
2603	applicants other than hospitals exceeds $5 million and whether
2604	the total amount of the membership fees to be charged to
2605	hospital applicants exceeds $12.5 million. If the total amount
2606	of the membership fees to be charged to health care provider
2607	applicants other than hospitals does not exceed $5 million, the
2608	fund account shall return the membership fees collected from
2609	such providers and shall, not later than the day before the
2610	beginning of the fiscal year, notify all such providers,
2611	advising them that coverage will not be available from the fund
2612	account. Thereafter, the fund account may not issue coverage to
2613	any health care provider, including any hospital, for that
2614	fiscal year. If the total amount of the membership fees to be
2615	charged to hospital applicants for the fiscal year does not
2616	exceed $12.5 million, the fund account shall return the
2617	membership fees collected from the hospitals and shall, not
2618	later than the day before the beginning of the fiscal year,
2619	notify such hospitals that coverage of hospitals will not be
2620	available from the fund account. Thereafter, the fund account
2621	may not issue coverage to any hospital for that fiscal year. If
2622	the fund account ceases to provide coverage to hospitals,
2623	hospitals shall continue to meet the financial responsibility
2624	requirements of subparagraph (2)(c)1., subparagraph (2)(c)2., or
2625	subparagraph (2)(c)3. An application for fund account membership
2626	for a particular fiscal year does not guarantee coverage for
2627	that year, and the fund account is not liable for coverage of an
2628	applicant for any fiscal year in which the fund account does not
2629	provide coverage in accordance with the provisions of this
2630	paragraph.
2631	Section 49.  Any domestic insurer with a certificate of
2632	authority in effect on January 1, 2005, shall have 12 months to
2633	comply with any rules adopted pursuant to this act.
2634	Section 50.  Except as otherwise provided herein, this act
2635	shall take effect October 1, 2004.

CODING: Words stricken are deletions; words underlined are additions.