Florida Senate - 2012                       CS for CS for SB 610
       
       
       
       By the Committees on Budget Subcommittee on General Government
       Appropriations; and Banking and Insurance; and Senator Diaz de
       la Portilla
       
       
       601-01880-12                                           2012610c2
    1                        A bill to be entitled                      
    2         An act relating to captive insurance; amending s.
    3         628.901, F.S.; providing definitions; amending s.
    4         628.905, F.S.; expanding the kinds of insurance for
    5         which a captive insurer may seek licensure; limiting
    6         the risks that certain captive insurers may insure;
    7         specifying requirements and conditions relating to a
    8         captive insurer’s authority to conduct business;
    9         requiring that before licensure certain captive
   10         insurers must file or submit to the Office of
   11         Insurance Regulation specified information, documents,
   12         and statements; requiring a captive insurance company
   13         to file specific evidence with the office relating to
   14         the financial condition and quality of management and
   15         operations of the company; specifying certain fees to
   16         be paid by captive insurance companies; authorizing a
   17         foreign or alien captive insurance company to become a
   18         domestic captive insurance company by complying with
   19         specified requirements; authorizing the office to
   20         waive any requirements for public hearings relating to
   21         the redomestication of an alien captive insurance
   22         company; creating s. 628.906, F.S.; requiring
   23         biographical affidavits, background investigations,
   24         and fingerprint cards for all officers and directors;
   25         providing restrictions on officers and directors
   26         involved with insolvent insurers under certain
   27         conditions; providing restrictions on officers and
   28         directors that are found guilty of, or have pleaded
   29         guilty or nolo contendere to, any felony or crime
   30         involving moral turpitude, including a crime of
   31         dishonesty or breach of trust; amending s. 628.907,
   32         F.S.; revising capitalization requirements for
   33         specified captive insurance companies; requiring
   34         capital of specified captive insurance companies to be
   35         held in certain forms; requiring contributions to
   36         captive insurance companies that are stock insurer
   37         corporations to be in a certain form; authorizing the
   38         office to issue a captive insurance company license
   39         conditioned upon certain evidence relating to
   40         possession of specified capital; authorizing
   41         revocation of a conditional license under certain
   42         circumstances; authorizing the office to prescribe
   43         certain additional capital and net asset requirements;
   44         requiring such additional requirements relating to
   45         capital and net assets to be held in specified forms;
   46         requiring dividends or distributions of capital or
   47         surplus to meet certain conditions and be approved by
   48         the office; requiring certain irrevocable letters of
   49         credit to meet certain standards; creating s. 628.908,
   50         F.S.; prohibiting the issuance of a license to
   51         specified captive insurance companies unless such
   52         companies possess and maintain certain levels of
   53         unimpaired surplus; authorizing the office to
   54         condition issuance of a captive insurance company
   55         license upon the provision of certain evidence
   56         relating to the possession of a minimum amount of
   57         unimpaired surplus; authorizing revocation of a
   58         conditional license under certain circumstances;
   59         requiring dividends or distributions of capital or
   60         surplus to meet certain conditions and be approved by
   61         the office; requiring certain irrevocable letters of
   62         credit to meet certain standards; amending s. 628.909,
   63         F.S.; providing for applicability of certain statutory
   64         provisions to specified captive insurers; creating s.
   65         628.910, F.S.; providing requirements, options, and
   66         conditions relating to how a captive insurance company
   67         may be incorporated or organized as a business;
   68         amending s. 628.911, F.S.; providing reporting
   69         requirements for specified captive insurance companies
   70         and captive reinsurance companies; creating s.
   71         628.912, F.S.; authorizing a captive reinsurance
   72         company to discount specified losses subject to
   73         certain conditions; amending s. 628.913, F.S.;
   74         authorizing a captive reinsurance company to apply to
   75         the office for licensure to write reinsurance covering
   76         property and casualty insurance or reinsurance
   77         contracts; authorizing the office to allow a captive
   78         reinsurance company to write reinsurance contracts
   79         covering risks in any state; specifying that a captive
   80         reinsurance company is subject to specified
   81         requirements and must meet specified conditions in
   82         order to conduct business in this state; creating s.
   83         628.914, F.S.; specifying requirements and conditions
   84         relating to the capitalization or maintenance of
   85         reserves by a captive reinsurance company; creating s.
   86         628.9141, F.S.; specifying requirements and conditions
   87         relating to the incorporation of a captive reinsurance
   88         company; creating s. 628.9142, F.S.; providing for the
   89         effect on reserves of certain actions taken by a
   90         captive insurance company relating to providing
   91         reinsurance for specified risks; creating s. 628.918,
   92         F.S.; requiring a specified percentage of a captive
   93         reinsurance company’s assets to be managed by an asset
   94         manager domiciled in this state; creating s. 628.919,
   95         F.S.; authorizing the Financial Services Commission to
   96         adopt rules establishing certain standards for control
   97         of an unaffiliated business by a parent or affiliated
   98         company relating to coverage by a pure captive
   99         insurance company; creating s. 628.920, F.S.;
  100         requiring that a licensed captive insurance company
  101         must be considered for issuance of a certificate of
  102         authority as an insurer under certain circumstances;
  103         amending s. 626.7491, F.S.; conforming a cross
  104         reference; repealing s. 628.903, F.S., relating to the
  105         definition of the term “industrial insured captive
  106         insurer,” to conform to changes made by the act;
  107         providing an effective date.
  108  
  109  Be It Enacted by the Legislature of the State of Florida:
  110  
  111         Section 1. Section 628.901, Florida Statutes, is amended to
  112  read:
  113         628.901 Definitions “Captive insurer” defined.—As used in
  114  For the purposes of this part, the term: except as provided in
  115  s. 628.903, a “captive insurer” is a domestic insurer
  116  established under part I to insure the risks of a specific
  117  corporation or group of corporations under common ownership
  118  owned by the corporation or corporations from which it accepts
  119  risk under a contract of insurance.
  120         (1) “Affiliated company” means a company in the same
  121  corporate system as a parent, an industrial insured, or a member
  122  organization by virtue of common ownership, control, operation,
  123  or management.
  124         (2) “Captive insurance company” means a domestic insurer
  125  established under this part. A captive insurance company
  126  includes a pure captive insurance company, special purpose
  127  captive insurance company, or industrial insured captive
  128  insurance company formed and licensed under this part.
  129         (3) “Captive reinsurance company” means a reinsurance
  130  company that is formed and licensed under this part and is
  131  wholly owned by a qualifying reinsurance parent company. A
  132  captive reinsurance company is a stock corporation and may not
  133  directly insure risks. A captive reinsurance company may
  134  reinsure only risks.
  135         (4) “Consolidated debt to total capital ratio” means the
  136  ratio of the sum of all debts and hybrid capital instruments as
  137  described in paragraph (a) to total capital as described in
  138  paragraph (b).
  139         (a) Debts and hybrid capital instruments include, but are
  140  not limited to, all borrowings from banks, all senior debt, all
  141  subordinated debts, all trust preferred shares, and all other
  142  hybrid capital instruments that are not included in the
  143  determination of consolidated GAAP net worth issued and
  144  outstanding.
  145         (b) Total capital consists of all debts and hybrid capital
  146  instruments as described in paragraph (a) plus owners’ equity
  147  determined in accordance with GAAP for reporting to the United
  148  States Securities and Exchange Commission.
  149         (5) “Consolidated GAAP net worth” means the consolidated
  150  owners’ equity determined in accordance with generally accepted
  151  accounting principles for reporting to the United States
  152  Securities and Exchange Commission.
  153         (6) “Controlled unaffiliated business” means a company:
  154         (a) That is not in the corporate system of a parent and
  155  affiliated companies;
  156         (b) That has an existing contractual relationship with a
  157  parent or affiliated company; and
  158         (c) Whose risks are managed by a captive insurance company
  159  in accordance with s. 628.919.
  160         (7) “GAAP” means generally accepted accounting principles.
  161         (8) “Industrial insured” means an insured that:
  162         (a) Has gross assets in excess of $50 million;
  163         (b) Procures insurance through the use of a full-time
  164  employee of the insured who acts as an insurance manager or
  165  buyer or through the services of a person licensed as a property
  166  and casualty insurance agent, broker, or consultant in such
  167  person’s state of domicile;
  168         (c) Has at least 100 full-time employees; and
  169         (d) Pays annual premiums of at least $200,000 for each line
  170  of insurance purchased from the industrial insured captive
  171  insurer or at least $75,000 for any line of coverage in excess
  172  of at least $25 million in the annual aggregate. The purchase of
  173  umbrella or general liability coverage in excess of $25 million
  174  in the annual aggregate shall be deemed to be the purchase of a
  175  single line of insurance.
  176         (9) “Industrial insured captive insurance company” means a
  177  captive insurance company that provides insurance only to the
  178  industrial insureds that are its stockholders or members, and
  179  affiliates thereof, or to the stockholders, and affiliates
  180  thereof, of its parent corporation. An industrial insured
  181  captive insurance company can also provide reinsurance to
  182  insurers only on risks written by such insurers for the
  183  industrial insureds that are the stockholders or members, and
  184  affiliates thereof, of the industrial insured captive insurer,
  185  or the stockholders, and affiliates thereof, of the parent
  186  corporation of the industrial insured captive insurer.
  187         (10) “Office” means the Office of Insurance Regulation.
  188         (11) “Parent” means any corporation, limited liability
  189  company, partnership, or individual that directly or indirectly
  190  owns, controls, or holds with power to vote more than 50 percent
  191  of the outstanding voting interests of a captive insurance
  192  company.
  193         (12) “Pure captive insurance company” means a company that
  194  insures risks of its parent, affiliated companies, controlled
  195  unaffiliated businesses, or a combination thereof.
  196         (13) “Qualifying reinsurer parent company” means a
  197  reinsurer which currently holds a certificate of authority,
  198  letter of eligibility or is an accredited or a satisfactory non
  199  approved reinsurer in this state possessing a consolidated GAAP
  200  net worth of at least $500 million and a consolidated debt to
  201  total capital ratio of not greater than 0.50.
  202         (14) “Special purpose captive insurance company” means a
  203  captive insurance company that is formed or licensed under this
  204  chapter that does not meet the definition of any other type of
  205  captive insurance company defined in this section.
  206         (15) “Treasury rates” means the United States Treasury
  207  STRIPS asked yield as published in the Wall Street Journal as of
  208  a balance sheet date.
  209         Section 2. Section 628.905, Florida Statutes, is amended to
  210  read:
  211         628.905 Licensing; authority.—
  212         (1) A Any captive insurer, if when permitted by its charter
  213  or articles of incorporation, may apply to the office for a
  214  license to do any and all insurance authorized under the
  215  insurance code, provide commercial property, commercial
  216  casualty, and commercial marine insurance coverage other than
  217  workers’ compensation and employer’s liability, life, health,
  218  personal motor vehicle, and personal residential property
  219  insurance coverage, except that: an industrial insured captive
  220  insurer may apply for a license to provide workers’ compensation
  221  and employer’s liability insurance as set forth in subsection
  222  (6).
  223         (a) A pure captive insurance company may not insure any
  224  risks other than those of its parent, affiliated companies,
  225  controlled unaffiliated businesses, or a combination thereof.
  226         (b) An industrial insured captive insurance company may not
  227  insure any risks other than those of the industrial insureds
  228  that comprise the industrial insured group and their affiliated
  229  companies.
  230         (c) A special purpose captive insurance company may insure
  231  only the risks of its parent.
  232         (d) A captive insurance company may not accept or cede
  233  reinsurance except as provided in this part.
  234         (2) To conduct insurance business in this state, a No
  235  captive insurer, other than an industrial insured captive
  236  insurer must:, shall insure or accept reinsurance on any risks
  237  other than those of its parent and affiliated companies.
  238         (a) Obtain from the office a license authorizing it to
  239  conduct insurance business in this state;
  240         (b) Hold at least one board of directors’ meeting each year
  241  in this state;
  242         (c) Maintain its principal place of business in this state;
  243  and
  244         (d) Appoint a resident registered agent to accept service
  245  of process and to otherwise act on its behalf in this state. In
  246  the case of a captive insurance company formed as a corporation
  247  or a nonprofit corporation, if the registered agent cannot with
  248  reasonable diligence be found at the registered office of the
  249  captive insurance company, the Chief Financial Officer of this
  250  state must be an agent of the captive insurance company upon
  251  whom any process, notice, or demand may be served.
  252         (3) Before receiving a license, a captive insurance company
  253  formed as a corporation or a nonprofit corporation must file
  254  with the office a certified copy of its articles of
  255  incorporation and bylaws, a statement under oath of its
  256  president and secretary showing its financial condition, and any
  257  other statements or documents required by the office. In
  258  addition, an applicant captive insurance company must file with
  259  the office evidence of:
  260         (a) The amount and liquidity of the proposed captive
  261  insurance company’s assets relative to the risks to be assumed;
  262         (b) The adequacy of the expertise, experience, and
  263  character of the person or persons who will manage the company;
  264         (c) The overall soundness of the company’s plan of
  265  operation;
  266         (d) The adequacy of the loss prevention programs of the
  267  company’s parent, member organizations, or industrial insureds,
  268  as applicable; and
  269         (e) Any other factors considered relevant by the office in
  270  ascertaining whether the company will be able to meet its policy
  271  obligations. In addition to information otherwise required by
  272  this code, each applicant captive insurer shall file with the
  273  office evidence of the adequacy of the loss prevention program
  274  of its insureds.
  275         (4) A captive insurance company or captive reinsurance
  276  company must pay to the office a nonrefundable fee of $1,500 for
  277  processing its application for license.
  278         (a) A captive insurance company or captive reinsurance
  279  company must also pay an annual renewal fee of $1,000.
  280         (b) The office may charge a fee of $5 for any document
  281  requiring certification of authenticity or the signature of the
  282  commissioner or his or her designee. An industrial insured
  283  captive insurer need not be incorporated in this state if it has
  284  been validly incorporated under the laws of another
  285  jurisdiction.
  286         (5) If the commissioner is satisfied that the documents and
  287  statements filed by the captive insurance company comply with
  288  this chapter, the commissioner may grant a license authorizing
  289  the company to conduct insurance business in this state until
  290  the next succeeding March 1, at which time the license may be
  291  renewed. An industrial insured captive insurer is subject to all
  292  provisions of this part except as otherwise indicated.
  293         (6) Upon approval of the office, a foreign or alien captive
  294  insurance company may become a domestic captive insurance
  295  company by complying with all of the requirements of law
  296  relative to the organization and licensing of a domestic captive
  297  insurance company of the same or equivalent type in this state
  298  and by filing with the Secretary of State its charter or other
  299  organizational documents, together with any appropriate
  300  amendments that have been adopted in accordance with the laws of
  301  this state to bring the charter or other organizational
  302  documents into compliance with the laws of this state, along
  303  with a certificate of good standing issued by the office. The
  304  captive insurance company is then entitled to the necessary or
  305  appropriate certificates and licenses to continue transacting
  306  business in this state and is subject to the authority and
  307  jurisdiction of this state. In connection with this
  308  redomestication, the office may waive any requirements for
  309  public hearings. It is not necessary for a captive insurance
  310  company redomesticating into this state to merge, consolidate,
  311  transfer assets, or otherwise engage in any other
  312  reorganization, other than as specified in this section. An
  313  industrial insured captive insurer may not provide workers’
  314  compensation and employer’s liability insurance except in excess
  315  of at least $25 million in the annual aggregate.
  316         (7) An industrial insured captive insurance company need
  317  not be incorporated in this state if it has been validly
  318  incorporated under the laws of another jurisdiction.
  319         Section 3. Section 628.906, Florida Statutes, is created to
  320  read:
  321         628.906 Application requirements; restrictions on
  322  eligibility of officers and directors.—
  323         (1) To evidence competence and trustworthiness of its
  324  officers and directors, the application for a license to act as
  325  a captive insurance company or captive reinsurance company shall
  326  include, but not be limited to, background investigations,
  327  biographical affidavits, and fingerprint cards for all officers
  328  and directors. Fingerprints must be taken by a law enforcement
  329  agency or other entity approved by the office, be accompanied by
  330  the fingerprint processing fee specified in s. 624.501, and
  331  processed in accordance with s. 624.34.
  332         (2) The office may deny, suspend, or revoke the license to
  333  transact captive insurance or captive reinsurance in this state
  334  if any person who was an officer or director of an insurer,
  335  reinsurer, captive insurance company, captive reinsurance
  336  company, financial institution, or financial services business
  337  doing business in the United States, any state, or under the law
  338  of any other country and who served in that capacity within the
  339  2-year period prior to the date the insurer, reinsurer, captive
  340  insurance company, captive reinsurance company, financial
  341  institution, or financial services business became insolvent,
  342  serves as an officer or director of a captive insurance company
  343  or officer or director of a captive reinsurance company licensed
  344  in this state unless the officer or director demonstrates that
  345  his or her personal actions or omissions were not a contributing
  346  cause to the insolvency or unless the officer or director is
  347  immediately removed from the captive insurance company or
  348  captive reinsurance company.
  349         (3) The office may deny, suspend, or revoke the license to
  350  transact insurance or reinsurance in this state of a captive
  351  insurance company or captive reinsurance company if any officer
  352  or director, any stockholder that owns 10 percent or more of the
  353  outstanding voting securities of the captive insurance company
  354  or captive reinsurance company, or incorporator has been found
  355  guilty of, or has pleaded guilty or nolo contendere to, any
  356  felony or crime involving moral turpitude, including a crime of
  357  dishonesty or breach of trust, punishable by imprisonment of 1
  358  year or more under the law of the United States or any state
  359  thereof or under the law of any other country without regard to
  360  whether a judgment of conviction has been entered by the court
  361  having jurisdiction in such case. However, in the case of a
  362  captive insurance company or captive reinsurance company
  363  operating under a subsisting license, the captive insurance
  364  company or captive reinsurance company shall remove any such
  365  person immediately upon discovery of the conditions set forth in
  366  this subsection when applicable to such person or upon the order
  367  of the office, and the failure to so act shall be grounds for
  368  revocation or suspension of the captive insurance company’s or
  369  captive reinsurance company’s license.
  370         Section 4. Section 628.907, Florida Statutes, is amended to
  371  read:
  372         628.907 Minimum capital and net assets requirements;
  373  restriction on payment of dividends surplus.—
  374         (1)A No captive insurer may not shall be issued a license
  375  unless it possesses and thereafter maintains:
  376         (1) unimpaired paid-in capital of:
  377         (a) In the case of a pure captive insurance company, at
  378  least $100,000. $500,000; and
  379         (b) In the case of an industrial insured captive insurance
  380  company incorporated as a stock insurer, at least $200,000.
  381         (c) In the case of a special purpose captive insurance
  382  company, an amount determined by the office after giving due
  383  consideration to the company’s business plan, feasibility study,
  384  and pro forma financial statements and projections, including
  385  the nature of the risks to be insured.
  386         (2) The office may not issue a license to a captive
  387  insurance company incorporated as a nonprofit corporation unless
  388  the company possesses and maintains unrestricted net assets of:
  389         (a) In the case of a pure captive insurance company,
  390  Unimpaired surplus of at least $250,000.
  391         (b) In the case of a special purpose captive insurance
  392  company, an amount determined by the office after giving due
  393  consideration to the company’s business plan, feasibility study,
  394  and pro forma financial statements and projections, including
  395  the nature of the risks to be insured.
  396         (3) Contributions to a captive insurance company
  397  incorporated as a nonprofit corporation must be in the form of
  398  cash, cash equivalent, or an irrevocable letter of credit issued
  399  by a bank chartered by this state or a member bank of the
  400  Federal Reserve System with a branch office in this state, or as
  401  approved by the office.
  402         (4) For purposes of this section, the office may issue a
  403  license expressly conditioned upon the captive insurance company
  404  providing to the office satisfactory evidence of possession of
  405  the minimum required unimpaired paid-in capital. Until this
  406  evidence is provided, the captive insurance company may not
  407  issue any policy, assume any liability, or otherwise provide
  408  coverage. The office may revoke the conditional license if
  409  satisfactory evidence of the required capital is not provided
  410  within a maximum period of time, not to exceed 1 year, to be
  411  established by the office at the time the conditional license is
  412  issued.
  413         (5) The office may prescribe additional capital or net
  414  assets based upon the type, volume, and nature of insurance
  415  business transacted. Contributions in connection with these
  416  prescribed additional net assets or capital must be in the form
  417  of:
  418         (a) Cash;
  419         (b) Cash equivalent;
  420         (c) An irrevocable letter of credit issued by a bank
  421  chartered by this state or a member bank of the Federal Reserve
  422  System with a branch office in this state, or as approved by the
  423  office; or
  424         (d) Securities invested as provided in part II of chapter
  425  625.
  426         (6) A captive insurance company may not pay a dividend out
  427  of, or other distribution with respect to, capital or surplus in
  428  excess of the limitations set forth in this chapter without the
  429  prior approval of the office. Approval of an ongoing plan for
  430  the payment of dividends or other distributions must be
  431  conditioned upon the retention, at the time of each payment, of
  432  capital or surplus in excess of amounts specified by, or
  433  determined in accordance with formulas approved by, the office.
  434         (7) An irrevocable letter of credit that is issued by a
  435  financial institution other than a bank chartered by this state
  436  or a member bank of the Federal Reserve System must meet the
  437  same standards as an irrevocable letter of credit that has been
  438  issued by a bank chartered by this state or a member bank of the
  439  Federal Reserve System.
  440         Section 5. Section 628.908, Florida Statutes, is created to
  441  read:
  442         628.908 Surplus requirements; restriction on payment of
  443  dividends.—
  444         (1) The office may not issue a license to a captive
  445  insurance company unless the company possesses and maintains
  446  unimpaired surplus of:
  447         (a) In the case of a pure captive insurance company, at
  448  least $150,000.
  449         (b) In the case of an industrial insured captive insurance
  450  company incorporated as a stock insurer, at least $300,000.
  451         (c) In the case of an industrial insured captive insurance
  452  company incorporated as a mutual insurer, at least $500,000.
  453         (d) In the case of a special purpose captive insurance
  454  company, an amount determined by the office after giving due
  455  consideration to the company’s business plan, feasibility study,
  456  and pro forma financial statements and projections, including
  457  the nature of the risks to be insured.
  458         (2) For purposes of this section, the office may issue a
  459  license expressly conditioned upon the captive insurance company
  460  providing to the office satisfactory evidence of possession of
  461  the minimum required unimpaired surplus. Until this evidence is
  462  provided, the captive insurance company may not issue any
  463  policy, assume any liability, or otherwise provide coverage. The
  464  office may revoke the conditional license if satisfactory
  465  evidence of the required surplus is not provided within a
  466  maximum period of time, not to exceed 1 year, to be established
  467  by the office at the time the conditional license is issued.
  468         (3) A captive insurance company may not pay a dividend out
  469  of, or other distribution with respect to, capital or surplus in
  470  excess of the limitations set forth in this chapter without the
  471  prior approval of the office. Approval of an ongoing plan for
  472  the payment of dividends or other distribution must be
  473  conditioned upon the retention, at the time of each payment, of
  474  capital or surplus in excess of amounts specified by, or
  475  determined in accordance with formulas approved by, the office.
  476         (4) An irrevocable letter of credit that is issued by a
  477  financial institution other than a bank chartered by this state
  478  or a member bank of the Federal Reserve System must meet the
  479  same standards as an irrevocable letter of credit that has been
  480  issued by a bank chartered by this state or a member bank of the
  481  Federal Reserve System.
  482         Section 6. Section 628.909, Florida Statutes, is amended to
  483  read:
  484         628.909 Applicability of other laws.—
  485         (1) The Florida Insurance Code does shall not apply to
  486  captive insurers or industrial insured captive insurers except
  487  as provided in this part and subsections (2) and (3).
  488         (2) The following provisions of the Florida Insurance Code
  489  shall apply to captive insurers who are not industrial insured
  490  captive insurers to the extent that such provisions are not
  491  inconsistent with this part:
  492         (a) Chapter 624, except for ss. 624.407, 624.408, 624.4085,
  493  624.40851, 624.4095, 624.425, and 624.426.
  494         (b) Chapter 625, part II.
  495         (c) Chapter 626, part IX.
  496         (d) Sections 627.730-627.7405, when no-fault coverage is
  497  provided.
  498         (e) Chapter 628.
  499         (3) The following provisions of the Florida Insurance Code
  500  shall apply to industrial insured captive insurers to the extent
  501  that such provisions are not inconsistent with this part:
  502         (a) Chapter 624, except for ss. 624.407, 624.408, 624.4085,
  503  624.40851, 624.4095, 624.425, 624.426, and 624.609(1).
  504         (b) Chapter 625, part II, if the industrial insured captive
  505  insurer is incorporated in this state.
  506         (c) Chapter 626, part IX.
  507         (d) Sections 627.730-627.7405 when no-fault coverage is
  508  provided.
  509         (e) Chapter 628, except for ss. 628.341, 628.351, and
  510  628.6018.
  511         Section 7. Section 628.910, Florida Statutes, is created to
  512  read:
  513         628.910 Incorporation options and requirements.—
  514         (1) A pure captive insurance company may be:
  515         (a) Incorporated as a stock insurer with its capital
  516  divided into shares and held by the stockholders; or
  517         (b) Incorporated as a public benefit, mutual benefit, or
  518  religious nonprofit corporation with members in accordance with
  519  the Florida Not For Profit Corporation Act.
  520         (2) An industrial insured captive insurance company may be:
  521         (a) Incorporated as a stock insurer with its capital
  522  divided into shares and held by the stockholders; or
  523         (b) Incorporated as a mutual insurer without capital stock,
  524  the governing body of which is elected by its members.
  525         (3) A captive insurance company may not have fewer than
  526  three incorporators of whom not fewer than two must be residents
  527  of this state.
  528         (4) In the case of a captive insurance company formed as a
  529  corporation or a nonprofit corporation, before the articles of
  530  incorporation are transmitted to the Secretary of State, the
  531  incorporators shall file the articles of incorporation in
  532  triplicate with the office. The office shall promptly examine
  533  the articles of incorporation. If it finds that the articles of
  534  incorporation conform to law, it shall endorse its approval on
  535  each of the triplicate originals of the articles of
  536  incorporation, retain one copy for its files, and return the
  537  remaining copies to the incorporators for filing with the
  538  Department of State.
  539         (5) The articles of incorporation, the certificate issued
  540  pursuant to this section, and the organization fees required by
  541  the Florida Business Corporation Act or the Florida Not For
  542  Profit Corporation Act, as applicable, must be transmitted to
  543  the Secretary of State, who must record the articles of
  544  incorporation and the certificate.
  545         (6) The capital stock of a captive insurance company
  546  incorporated as a stock insurer must be issued at par value of
  547  not less than $1 or more than $100 per share.
  548         (7) In the case of a captive insurance company formed as a
  549  corporation or a nonprofit corporation, at least one of the
  550  members of the board of directors of a captive insurance company
  551  incorporated in this state must be a resident of this state.
  552         (8) A captive insurance company formed as a corporation or
  553  a nonprofit corporation, pursuant to the provisions of this
  554  chapter, has the privileges and is subject to the provisions of
  555  the general corporation law, including the Florida Not For
  556  Profit Corporation Act for nonprofit corporations, as
  557  applicable, as well as the applicable provisions contained in
  558  this chapter. If a conflict occurs between a provision of the
  559  general corporation law, including the Florida Not For Profit
  560  Corporation Act for nonprofit corporations, as applicable, and a
  561  provision of this chapter, the latter controls. The provisions
  562  of this title pertaining to mergers, consolidations,
  563  conversions, mutualizations, and redomestications apply in
  564  determining the procedures to be followed by a captive insurance
  565  company in carrying out any of the transactions described in
  566  such provisions, except that the office may waive or modify the
  567  requirements for public notice and hearing in accordance with
  568  rules the office may adopt addressing categories of
  569  transactions. If a notice of public hearing is required, but no
  570  one requests a hearing, the office may cancel the hearing.
  571         (9) The articles of incorporation or bylaws of a captive
  572  insurance company may authorize a quorum of a board of directors
  573  to consist of no fewer than one-third of the fixed or prescribed
  574  number of directors as provided for by the Florida Business
  575  Corporation Act or the Florida Not For Profit Corporation Act.
  576         Section 8. Section 628.911, Florida Statutes, is amended to
  577  read:
  578         628.911 Reports and statements.—
  579         (1) A captive insurance company may insurer shall not be
  580  required to make any annual report except as provided in this
  581  part section.
  582         (2) Annually no later than March 1, a captive insurance
  583  company or a captive reinsurance company insurer shall, within
  584  60 days after the end of its fiscal year and as often as the
  585  office may deem necessary, submit to the office a report of its
  586  financial condition verified by oath of two of its executive
  587  officers. Except as provided in this part, a captive insurance
  588  company or a captive reinsurance company must report using
  589  generally accepted accounting principles, unless the office
  590  approves the use of statutory accounting principles, with useful
  591  or necessary modifications or adaptations required or approved
  592  or accepted by the office for the type of insurance and kinds of
  593  insurers to be reported upon, and as supplemented by additional
  594  information required by the office. The Financial Services
  595  Commission may adopt by rule the form in which captive insurance
  596  companies insurers shall report.
  597         (3) A captive insurance company may make written
  598  application for filing the required report on a fiscal year end
  599  that is consistent with the parent company’s fiscal year. If an
  600  alternative reporting date is granted, the annual report is due
  601  60 days after the fiscal year end.
  602         Section 9. Section 628.912, Florida Statutes, is created to
  603  read:
  604         628.912 Discounting of loss and loss adjustment expense
  605  reserves.—
  606         (1) A captive reinsurance company may discount its loss and
  607  loss adjustment expense reserves at treasury rates applied to
  608  the applicable payments projected through the use of the
  609  expected payment pattern associated with the reserves.
  610         (2) A captive reinsurance company must file annually an
  611  actuarial opinion on loss and loss adjustment expense reserves
  612  provided by an independent actuary. The actuary may not be an
  613  employee of the captive reinsurance company or its affiliates.
  614         (3) The office may disallow the discounting of reserves if
  615  a captive reinsurance company violates a provision of this part.
  616         Section 10. Section 628.913, Florida Statutes, is amended
  617  to read:
  618         (Substantial rewording of section. See
  619         s. 628.913, F.S., for present text.)
  620         628.913 Captive reinsurance companies.—
  621         (1) A captive reinsurance company, if permitted by its
  622  articles of incorporation or charter, may apply to the office
  623  for a license to write reinsurance covering property and
  624  casualty insurance or reinsurance contracts. A captive
  625  reinsurance company authorized by the office may write
  626  reinsurance contracts covering risks in any state; however, a
  627  captive reinsurance company authorized by the office may not
  628  directly insure risks.
  629         (2) To conduct business in this state, a captive
  630  reinsurance company must:
  631         (a) Obtain from the office a license authorizing it to
  632  conduct business as a captive reinsurance company in this state;
  633         (b) Hold at least one board of directors’ meeting each year
  634  in this state;
  635         (c) Maintain its principal place of business in this state;
  636  and
  637         (d) Appoint a registered agent to accept service of process
  638  and act otherwise on its behalf in this state.
  639         (3) Before receiving a license, a captive reinsurance
  640  company must file with the office:
  641         (a) A certified copy of its charter and bylaws;
  642         (b) A statement under oath of its president and secretary
  643  showing its financial condition; and
  644         (c) Other documents required by the office.
  645         (4) In addition to the information required by this
  646  section, the captive reinsurance company must file with the
  647  office evidence of:
  648         (a) The amount and liquidity of the captive reinsurance
  649  company’s assets relative to the risks to be assumed;
  650         (b) The adequacy of the expertise, experience, and
  651  character of the person who manages the company;
  652         (c) The overall soundness of the company’s plan of
  653  operation; and
  654         (d) Other overall factors considered relevant by the office
  655  in ascertaining if the company would be able to meet its policy
  656  obligations.
  657         Section 11. Section 628.914, Florida Statutes, is created
  658  to read:
  659         628.914 Minimum capitalization or reserves for captive
  660  reinsurance companies.—
  661         (1) The office may not issue a license to a captive
  662  reinsurance company unless the company possesses and maintains
  663  capital or unimpaired surplus of at least the greater of $300
  664  million or 10 percent of reserves. The surplus may be in the
  665  form of cash or securities as permitted by part II of chapter
  666  625.
  667         (2) The office may prescribe additional capital or surplus
  668  based upon the type, volume, and nature of the insurance
  669  business transacted.
  670         (3) A captive reinsurance company may not pay a dividend
  671  out of, or other distribution with respect to, capital or
  672  surplus in excess of the limitations without the prior approval
  673  of the office. Approval of an ongoing plan for the payment of
  674  dividends or other distributions must be conditioned upon the
  675  retention, at the time of each payment, of capital or surplus in
  676  excess of amounts specified by, or determined in accordance with
  677  formulas approved by, the office.
  678         Section 12. Section 628.9141, Florida Statutes, is created
  679  to read:
  680         628.9141 Incorporation of a captive reinsurance company.—
  681         (1) A captive reinsurance company must be incorporated as a
  682  stock insurer with its capital divided into shares and held by
  683  its shareholders.
  684         (2) A captive reinsurance company may not have fewer than
  685  three incorporators of whom at least two must be residents of
  686  this state.
  687         (3) Before the articles of incorporation are transmitted to
  688  the Secretary of State, the incorporators must comply with all
  689  the requirements of s. 628.091.
  690         (4) The capital stock of a captive reinsurance company must
  691  be issued at par value of not less than $1 or more than $100 per
  692  share.
  693         (5) At least one of the members of the board of directors
  694  of a captive reinsurance company incorporated in this state must
  695  be a resident of this state.
  696         Section 13. Section 628.9142, Florida Statutes, is created
  697  to read:
  698         628.9142 Reinsurance; effect on reserves.—
  699         (1) A captive insurance company may provide reinsurance, as
  700  authorized in this part, on risks ceded by any other insurer.
  701         (2) A captive insurance company may take credit for
  702  reserves on risks or portions of risks ceded to authorized
  703  insurers or reinsurers and unauthorized insurers or reinsurers
  704  complying with s. 624.610. A captive insurer may not take credit
  705  for reserves on risks or portions of risks ceded to an
  706  unauthorized insurer or reinsurer if the insurer or reinsurer is
  707  not in compliance with s. 624.610.
  708         Section 14. Section 628.918, Florida Statutes, is created
  709  to read:
  710         628.918 Management of assets of captive reinsurance
  711  company.—At least 35 percent of the assets of a captive
  712  reinsurance company must be managed by an asset manager
  713  domiciled in this state.
  714         Section 15. Section 628.919, Florida Statutes, is created
  715  to read:
  716         628.919 Standards to ensure risk management control by
  717  parent company.—The Financial Services Commission shall adopt
  718  rules establishing standards to ensure that a parent or
  719  affiliated company is able to exercise control of the risk
  720  management function of any controlled unaffiliated business to
  721  be insured by the pure captive insurance company.
  722         Section 16. Section 628.920, Florida Statutes, is created
  723  to read:
  724         628.920 Eligibility of licensed captive insurance company
  725  for certificate of authority to act as insurer.—A licensed
  726  captive insurance company that meets the necessary requirements
  727  of this part imposed upon an insurer must be considered for
  728  issuance of a certificate of authority to act as an insurer in
  729  this state.
  730         Section 17. Paragraph (e) of subsection (2) of section
  731  626.7491, Florida Statutes, is amended to read:
  732         626.7491 Business transacted with producer controlled
  733  property and casualty insurer.—
  734         (2) DEFINITIONS.—As used in this section:
  735         (e) “Licensed insurer” or “insurer” means any person, firm,
  736  association, or corporation licensed to transact a property or
  737  casualty insurance business in this state. The following are not
  738  licensed insurers for the purposes of this section:
  739         1. Any risk retention group as defined in:
  740         a. The Superfund Amendments Reauthorization Act of 1986,
  741  Pub. L. No. 99-499, 100 Stat. 1613 (1986);
  742         b. The Risk Retention Act, 15 U.S.C. ss. 3901 et seq. (1982
  743  and Supp. 1986); or
  744         c. Section 627.942(9).
  745         2. Any residual market pool or joint underwriting authority
  746  or association; and
  747         3. Any captive insurance company insurer as defined in s.
  748  628.901.
  749         Section 18. Section 628.903, Florida Statutes, is repealed.
  750         Section 19. This act shall take effect upon becoming a law.