Florida Senate - 2016 SB 622
By Senator Hukill
8-00766-16 2016622__
1 A bill to be entitled
2 An act relating to a title insurance reserve; amending
3 s. 625.111, F.S.; specifying requirements for a
4 certain unearned premium reserve for a domestic title
5 insurer under certain conditions; providing a formula
6 for the maximum amortization rate that applies to the
7 aggregate amounts earned and released from a certain
8 unearned premium reserve; revising a calculation for a
9 total unearned premium reserve; conforming provisions
10 to changes made by the act; providing an effective
11 date.
12
13 Be It Enacted by the Legislature of the State of Florida:
14
15 Section 1. Subsections (1), (3), and (4) of section
16 625.111, Florida Statutes, are amended to read:
17 625.111 Title insurance reserve.—In addition to an adequate
18 reserve as to outstanding losses relating to known claims as
19 required under s. 625.041, a domestic title insurer shall
20 establish, segregate, and maintain a guaranty fund or unearned
21 premium reserve as provided in this section. The sums to be
22 reserved for unearned premiums on title guarantees and policies
23 shall be considered and constitute unearned portions of the
24 original premiums and shall be charged as a reserve liability of
25 the insurer in determining its financial condition. Such
26 reserved funds shall be withdrawn from the use of the insurer
27 for its general purposes, impressed with a trust in favor of the
28 holders of title guarantees and policies, and held available for
29 reinsurance of the title guarantees and policies in the event of
30 the insolvency of the insurer. This section does not preclude
31 the insurer from investing such reserve in investments
32 authorized by law, and the income from such investments shall be
33 included in the general income of the insurer and may be used by
34 such insurer for any lawful purpose.
35 (1) For a domestic title insurer holding less than $50
36 million in surplus as to policyholders as of the previous year
37 end, its For an unearned premium reserve established on or after
38 July 1, 1999, such reserve must be in an amount at least equal
39 to the sum of paragraphs (a), (b), and (d). For a domestic title
40 insurer holding $50 million or more in surplus as to
41 policyholders as of the previous year end or on the 45th day
42 following the last day of the calendar quarter in which the
43 insurer transfers its domicile to this state, its unearned
44 premium reserve established on or after July 1, 1999, must be in
45 an amount at least equal to the sum of paragraphs (c) and (d),
46 and the insurer must continue to calculate its unearned premium
47 reserve in this amount, even if the surplus as to policyholders
48 as of the previous year end subsequently falls below $50
49 million. for title insurers holding less than $50 million in
50 surplus as to policyholders as of the previous year end and the
51 sum of paragraphs (c) and (d) for title insurers holding $50
52 million or more in surplus as to policyholders as of the
53 previous year end:
54 (a) A reserve with respect to unearned premiums for
55 policies written or title liability assumed in reinsurance
56 before July 1, 1999, equal to the reserve established on June
57 30, 1999, for those unearned premiums with such reserve being
58 subsequently released as provided in subsection (2). For
59 domestic title insurers subject to this section, such amounts
60 shall be calculated in accordance with state law in effect at
61 the time the associated premiums were written or assumed and as
62 amended before July 1, 1999.
63 (b) A total amount equal to 30 cents for each $1,000 of net
64 retained liability for policies written or title liability
65 assumed in reinsurance on or after July 1, 1999, with such
66 reserve being subsequently released as provided in subsection
67 (2). For the purpose of calculating this reserve, the total of
68 the net retained liability for all simultaneous issue policies
69 covering a single risk shall be equal to the liability for the
70 policy with the highest limit covering that single risk, net of
71 any liability ceded in reinsurance.
72 (c) On or after January 1, 2014, for title insurers holding
73 $50 million or more in surplus as to policyholders as of the
74 previous year end or on the 45th day following the last day of
75 the calendar quarter in which the insurer transfers its domicile
76 to this state, and for domestic title insurers that formerly
77 held $50 million or more in surplus as to policyholders, a
78 minimum of 6.5 percent of the total of the following:
79 1. Direct premiums written; and
80 2. Premiums for reinsurance assumed, plus other income,
81 less premiums for reinsurance ceded as displayed in Schedule P
82 of the title insurer’s most recent annual statement filed with
83 the office with such reserve being subsequently released as
84 provided in subsection (2). Title insurers with less than $50
85 million in surplus as to policyholders, except domestic title
86 insurers that formerly held $50 million or more in surplus as to
87 policyholders, must continue to record unearned premium reserve
88 in accordance with paragraph (b).
89 (d) An additional amount, if deemed necessary by a
90 qualified actuary, to be subsequently released as provided in
91 subsection (2). Using financial results as of December 31 of
92 each year, all domestic title insurers shall obtain a Statement
93 of Actuarial Opinion from a qualified actuary regarding the
94 insurer’s loss and loss adjustment expense reserves, including
95 reserves for known claims, incurred but not reported claims, and
96 unallocated loss adjustment expenses. The actuarial opinion must
97 conform to the annual statement instructions for title insurers
98 adopted by the National Association of Insurance Commissioners
99 and include the actuary’s professional opinion of the insurer’s
100 reserves as of the date of the annual statement. If the amount
101 of the reserve stated in the opinion and displayed in Schedule P
102 of the annual statement for that reporting date is greater than
103 the sum of the known claim reserve and unearned premium reserve
104 as calculated under this section, as of the same reporting date
105 and including any previous actuarial provisions added at earlier
106 dates, the insurer shall add to the insurer’s unearned premium
107 reserve an actuarial amount equal to the reserve shown in the
108 actuarial opinion, minus the known claim reserve and the
109 unearned premium reserve, as of the current reporting date and
110 calculated in accordance with this section, but not calculated
111 as of any date before December 31, 1999. The comparison shall be
112 made using that line on Schedule P displaying the Total Net Loss
113 and Loss Adjustment Expense which is comprised of the Known
114 Claim Reserve, and any associated Adverse Development Reserve,
115 the reserve for Incurred But Not Reported Losses, and
116 Unallocated Loss Adjustment Expenses.
117 (3)(a) If a title insurer that is organized under the laws
118 of another state transfers its domicile to this state, the
119 statutory or unearned premium reserve shall be the amount
120 required by the laws of the state of the title insurer’s former
121 state of domicile as of the date of transfer of domicile.
122 Thereafter, the aggregate of such unearned premium reserve shall
123 be earned and released from the reserve by the title insurer
124 over the subsequent 20 years at an amortization rate not to
125 exceed the formula in paragraph (c) and shall be released from
126 reserve according to the requirements of law in effect in the
127 former state at the time of domicile.
128 (b) On or after January 1, 2014, for new business written
129 after the effective date of the transfer of domicile to this
130 state, the domestic title insurer shall add to and set aside in
131 the statutory or unearned premium reserve such amount as
132 provided in subsection (1).
133 (c) The aggregate amounts set aside in the reserve required
134 under paragraph (a) shall be earned and released from the
135 reserve by the title insurer over a period of 20 years at an
136 amortization rate not to exceed the following formula: an
137 initial release of 35 percent of the aggregate of such reserves
138 on the 45th day following the last day of the calendar quarter
139 in which the insurer transfers its domicile. Thereafter, the
140 insurer shall release, with one-quarter of the amount being
141 released on March 31, June 30, September 30, and December 31 of
142 such year, a percentage of the aggregate sum as follows:
143 1. Fifteen percent during each year of the next succeeding
144 2 years;
145 2. Ten percent during the next succeeding year;
146 3. Three percent during each of the next succeeding 3
147 years;
148 4. Two percent during each of the next succeeding 3 years;
149 and
150 5. One percent during each of the next succeeding 10 years.
151 (4) At any reporting date, the amount of the required
152 releases of existing unearned premium reserves under subsections
153 subsection (2) and (3) shall be calculated and deducted from the
154 total unearned premium reserve before any additional amount is
155 established for the current calendar year in accordance with
156 paragraph (1)(d).
157 Section 2. This act shall take effect July 1, 2016.