The Florida Senate

624.610  Reinsurance.--

(1)  An insurer may assume reinsurance only of such risks, and retain risk thereon within such limits, as it is otherwise authorized to insure or reinsure.

(2)

(a)  If a ceding insurer reinsures all or any part of any particular risk or class of risks with an approved reinsurer, the ceding insurer may receive credit in accounting and financial statements on account of such reinsurance ceded. An approved reinsurer is:

1.  An assuming insurer authorized by the department to transact such line of insurance or reinsurance in this state. Subject to the other requirements of this code, credit may be taken for reinsurance with an authorized insurer.

2.  An assuming insurer approved by the department to transact such line of reinsurance in this state. The department shall approve only solvent insurers meeting the criteria established for authorized insurers in this state. From time to time, the department shall publish a list of insurers approved pursuant to this subsection. Subject to the other requirements of this code, credit may be taken for reinsurance with an approved reinsurer.

3.  An assuming underwriting member of an insurance exchange domiciled in any other state or jurisdiction in the United States, which insurance exchange was licensed and in operation on or before January 1, 1993, provided the insurance exchange presents to the department for its approval, and maintains, satisfactory evidence that such assuming underwriting member maintains the standards and meets the financial requirements applicable to an authorized insurer. Subject to the other requirements of this section, credit may be taken for reinsurance with members approved under this subsection by the department.

4.  A group of individual, unincorporated, or incorporated alien insurers which maintains funds in an amount not less than $50 million held in trust for United States policyholders and beneficiaries in a bank or trust company that is subject to supervision by any state of the United States or that is a member of the Federal Reserve System and which group satisfies the department by annually filing evidence that it can meet its obligations under its reinsurance agreements. Subject to the other requirements of this section, credit may be taken for reinsurance with a group approved under this subsection by the department.

(b)  Credit in accounting and financial statements on account of reinsurance ceded to a nonapproved reinsurer may be allowed only:

1.  When it is demonstrated by the ceding insurer to the satisfaction of the department that such reinsurer maintains the standards and meets the financial requirements applicable to an authorized insurer;

2.  To the extent of deposits by, or funds withheld from, such reinsurer pursuant to express provision therefor in the reinsurance contract as security for the payment of the obligations thereunder if such deposits or funds are held subject to withdrawal by, and under the control of, the ceding insurer or such deposits or funds are placed in trust for such purposes in a bank which is a member of the Federal Reserve System if withdrawals from the trust cannot be made without the consent of the ceding insurer. The funds withheld may be cash or securities which are qualified as admitted assets under part II of chapter 625 and which have a market value equal to or greater than the credit taken; or

3.  To the extent that the amount of a clean, unconditional, evergreen, and irrevocable letter of credit, issued for a term of not less than 1 year and in conformity with the requirements set forth in this subparagraph, equals or exceeds the liability of an unauthorized or unapproved reinsurer for unearned premiums, outstanding losses, and an adequate reserve for incurred but not reported losses under a specific reinsurance agreement. The requirements are that such a clean and irrevocable letter of credit be issued under arrangements satisfactory to the department as constituting security to the ceding insurer substantially equal to that of a deposit under subparagraph 2. and that the letter be issued by a banking institution which is a member of the Federal Reserve System and which has financial standing satisfactory to the commissioner. The department may adopt rules requiring that the letter adhere in its wording to a format for letters of credit as the format has been or may be adopted or approved by the National Association of Insurance Commissioners.

4.  When the reinsurance is ceded to a reinsurer which maintains a trust fund, in a bank or trust company that is subject to supervision by any state of the United States or that is a member of the Federal Reserve System, for the payment of the valid claims for business written in the United States. The trust shall consist of a trusteed account in an amount not less than the reinsurer's liabilities attributable to reinsurance by ceding insurers for business written in the United States and, in addition, the reinsurer shall maintain a trusteed surplus of not less than $20 million. Such trust shall be established in a form approved, and any amendments to the trust approved, by the insurance commissioner where the trust is domiciled, or the insurance commissioner of another state who, pursuant to the terms of the trust agreement, has accepted principal regulatory oversight of the trust. The trust shall remain in effect for as long as the reinsurer has outstanding obligations due under the reinsurance agreements subject to the trust. The trust assets must be in cash or securities which are qualified as admitted assets under part II of chapter 625 and which have a market value of the required liabilities and trusteed surplus. The reinsurer shall report quarterly to the insurance commissioner information substantially the same as that required to be reported on the National Association of Insurance Commissioners Annual Statement form by licensed insurers to enable the insurance commissioner to determine the sufficiency of the trust fund. The trust and the reinsurer shall be subject to examination as determined by the commissioner.

5.  The credit permitted by subparagraph 4. and the credit permitted by subparagraph 2. shall not be allowed unless the assuming insurer in substance agrees in the trust agreement to the following conditions:

a.  Notwithstanding any other provisions in the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by the department or, if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the superintendent with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the superintendent with regulatory oversight all of the assets of United States trust beneficiaries.

b.  The assets shall be distributed by, and claims of United States trust beneficiaries shall be filed with and valued by, the superintendent with regulatory oversight in accordance with the laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic insurance companies.

c.  If the superintendent with regulatory oversight determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims for business written in the United States, the assets or any part thereof shall be returned by the superintendent with regulatory oversight to the trustee for distribution in accordance with the trust agreement.

d.  The grantor shall waive any right otherwise available to it under United States law that is inconsistent with this provision.

(c)  For the purposes of this subsection only, the term "ceding insurer" shall include any health maintenance organization operating under a certificate of authority issued under part I of chapter 641.

(3)  A ceding insurer which assumes a substantial volume of reinsurance may retrocede all or part of any particular risk or class of risks with any assuming insurer and take credit for such reinsurance, whether or not the assuming insurer is authorized or approved by the department and whether or not funds are withheld by the ceding insurer, unless such retrocessions are found by the department to be for the purpose of evasion of other requirements or prohibitions of this code.

(4)  The department shall disallow any credit which it finds would be contrary to the proper interests of the policyholders or stockholders of a ceding domestic insurer.

(5)  No credit may be allowed for reinsurance in an unauthorized or unapproved assuming insurer unless such insurer designates the commissioner or a person resident in the United States as agent for service of process in any action arising out of, or in connection with such reinsurance.

(6)  Credit shall be allowed to any ceding insurer for reinsurance otherwise complying with this section only when the reinsurance is payable by the assuming insurer on the basis of the liability of the ceding insurer under the contract or contracts reinsured without diminution because of insolvency of the ceding insurer; and such credit shall be allowed to the ceding insurer for reinsurance otherwise complying with this section only when the reinsurance agreement provides that payments by the assuming insurer will be made directly to the ceding insurer or its receiver, except when:

(a)  The reinsurance contract specifically provides payment to the named insured, assignee, or named beneficiary of the policy issued by the ceding insurer in the event of the insolvency of the ceding insurer; or

(b)  The assuming insurer, with the consent of the named insured, has assumed the policy obligations of the ceding insurer as direct obligations of the assuming insurer in substitution for the obligations of the ceding insurer to the named insured.

(7)  No person, other than the ceding insurer, has any rights against the reinsurer which are not specifically set forth in the contract of reinsurance or in a specific written, signed agreement between the reinsurer and the person.

(8)  No authorized insurer may knowingly accept as assuming reinsurer any risk covering a subject of insurance resident, located, or to be performed in this state and written directly by any insurer not then authorized to transact such insurance in this state, other than as to surplus lines insurance lawfully written under part VIII of chapter 626.

(9)  Any authorized insurer ceding directly written risks of loss under this section shall within 30 days of receipt of a cover note or similar confirmation of coverage, or in no event no later than 6 months after the effective date of the reinsurance treaty, file with the department one copy of a summary statement containing the following information about each treaty:

(a)  The contract period;

(b)  The nature of the reinsured's business;

(c)  An indication as to whether the treaty is proportional, nonproportional, coinsurance, modified coinsurance, or indemnity, as applicable;

(d)  The ceding company's loss retention per risk;

(e)  The reinsured limits;

(f)  Any special contract restrictions;

(g)  A schedule of reinsurers assuming the risks of loss;

(h)  An indication as to whether payments to the assuming insurer are based on written premiums or earned premiums;

(i)  Identification of any intermediary or broker used in obtaining the reinsurance and the commission paid them if known; and

(j)  Ceding commissions and allowances.

The summary statement shall be signed and attested to by either the chief executive officer or the chief financial officer of the reporting insurer. In addition to the summary statement, the Insurance Commissioner may require the filing of any supporting information relating to the ceding of such risks as she or he deems necessary. If the summary statement prepared by the ceding insurer discloses that the net effect of a reinsurance treaty or treaties (or series of treaties with one or more affiliated reinsurers entered into for the purpose of avoiding the following threshold amount) at any time results in an increase of more than 25 percent to the insurer's surplus as to policyholders, then the insurer shall certify in writing to the department that the relevant reinsurance treaty or treaties complies with the accounting requirements contained in any rule promulgated by the department pursuant to subsection (10) or subsection (12). If such certificate is filed after the summary statement of such reinsurance treaty or treaties, the insurer shall refile the summary statement with the certificate. In any event, the certificate shall state that a copy of the certificate was sent to the reinsurer under the reinsurance treaty. This subsection applies to cessions of directly written risk of loss. This subsection does not apply to contracts of facultative reinsurance or to any ceding insurer with surplus as to policyholder that exceeds $100 million as of the immediately preceding December 31. Additionally, any ceding insurer otherwise subject to this section with less than $500,000 in direct premiums written in this state during the preceding calendar year or with less than 1,000 policyholders at the end of the preceding calendar year is exempt from the requirements of this subsection. However, any ceding insurer otherwise subject to this section with more than $250,000 in direct premiums written in this state during the preceding calendar quarter is not exempt from the requirements of this subsection. The Insurance Commissioner may, upon a showing of good cause, waive the requirements of this subsection.

(10)  The department may disallow any credit in accounting and financial statements on account of the reinsurance of direct insurance risks whereby a ceding direct insurer increases its surplus to policyholders as a result of payment of consideration to an assuming reinsurer for underwriting any loss obligation already incurred in excess of the consideration paid; or where the consideration paid by the ceding insurer in connection with transferring any loss obligation already incurred is derived from present value or discounting concepts based upon anticipated investment income.

(11)  If the department finds that a reinsurance agreement creates a substantial risk of insolvency to either insurer entering into the reinsurance agreement, the department may by order require a cancellation of the reinsurance agreement.

(12)  No credit shall be allowed for reinsurance with regard to which the reinsurance agreement does not create a meaningful transfer of risk of loss to the reinsurer. The department shall adopt rules which are in substantial conformity with the 1991 National Association of Insurance Commissioners Practices and Procedures Manual for Property and Casualty Insurers and the NAIC Practices and Procedures Manual for Life and Health Insurers providing the criteria for determining whether a meaningful transfer of risk of loss has been accomplished.

History.--s. 108, ch. 59-205; ss. 13, 35, ch. 69-106; s. 1, ch. 74-203; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 85, 86, 809(1st), ch. 82-243; s. 1, ch. 83-165; s. 2, ch. 85-177; s. 10, ch. 85-245; s. 1, ch. 86-86; s. 8, ch. 86-160; s. 14, ch. 87-226; s. 37, ch. 89-360; ss. 45, 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 5, ch. 92-146; s. 9, ch. 93-410; s. 200, ch. 97-102; s. 2, ch. 97-214.