Bill Text: FL S1402 | 2022 | Regular Session | Engrossed


Bill Title: Domestic Surplus Lines Insurers

Spectrum: Partisan Bill (Republican 1-0)

Status: (Failed) 2022-03-14 - Died in Messages [S1402 Detail]

Download: Florida-2022-S1402-Engrossed.html
       SB 1402                                          First Engrossed
       
       
       
       
       
       
       
       
       20221402e1
       
    1                        A bill to be entitled                      
    2         An act relating to domestic surplus lines insurers;
    3         amending s. 626.914, F.S.; defining the term “domestic
    4         surplus lines insurer”; revising the definition of the
    5         term “eligible surplus lines insurer” to include
    6         domestic surplus lines insurers; creating s.
    7         626.91805, F.S.; defining the term “nonadmitted
    8         insurer”; providing that specified nonadmitted
    9         insurers are eligible to transact insurance as
   10         domestic surplus lines insurers under certain
   11         circumstances; requiring domestic surplus lines
   12         insurers to maintain a minimum surplus amount;
   13         requiring such insurers to be deemed eligible surplus
   14         lines insurers and to be included in the list of
   15         eligible surplus lines insurers; authorizing such
   16         insurers to write certain kinds of insurance;
   17         requiring such insurers to be considered unauthorized
   18         insurers for specified purposes; requiring such
   19         insurers to be considered nonadmitted insurers for
   20         specified purposes; authorizing domestic surplus lines
   21         insurers to write only surplus lines insurance under a
   22         specified circumstance; prohibiting such insurers from
   23         simultaneously holding any certificate of authority to
   24         operate as admitted insurers; authorizing such
   25         insurers to write surplus lines insurance in any
   26         jurisdiction if specified requirements are met;
   27         providing applicability of specified requirements of
   28         the Florida Insurance Code to such insurers; providing
   29         an exception; providing an exemption from a specified
   30         law for such insurers; providing exemptions from
   31         specified requirements for surplus lines insurance
   32         policies issued by such insurers; providing that such
   33         policies are subject to specified taxes but are not
   34         subject to certain other taxes; providing that such
   35         policies are not subject to the protections and
   36         requirements of specified acts and a specified fund;
   37         prohibiting such insurers from issuing certain
   38         homeowners’ policies under a specified circumstance;
   39         providing nonapplicability; prohibiting such insurers
   40         from issuing certain policies to satisfy specified
   41         laws; amending ss. 458.320, 459.0085, and 464.0123,
   42         F.S.; conforming cross-references; amending s.
   43         629.401, F.S.; specifying cross-references; providing
   44         an effective date.
   45          
   46  Be It Enacted by the Legislature of the State of Florida:
   47  
   48         Section 1. Section 626.914, Florida Statutes, is amended to
   49  read:
   50         626.914 Definitions.—As used in this Surplus Lines Law, the
   51  term:
   52         (5)(1) “Surplus lines agent” means an individual licensed
   53  as provided in this part to handle the placement of insurance
   54  coverages with unauthorized insurers and to place such coverages
   55  with authorized insurers as to which the licensee is not
   56  licensed as an agent.
   57         (2) “Domestic surplus lines insurer” means a nonadmitted
   58  insurer domiciled in this state which has been deemed eligible
   59  and authorized by the office to write surplus lines insurance in
   60  this state. The authorization to write surplus lines insurance
   61  is not contingent on the company’s holding of an existing
   62  certificate of authority.
   63         (3)(2) “Eligible surplus lines insurer” means:
   64         (a) An unauthorized insurer that which has been made
   65  eligible by the office to issue insurance coverage under this
   66  Surplus Lines Law; or
   67         (b) A domestic surplus lines insurer.
   68         (4)(3)“Export” “To export” means to place, in an
   69  unauthorized insurer under this Surplus Lines Law, insurance
   70  covering a subject of insurance resident, located, or to be
   71  performed in this state.
   72         (1)(4) “Diligent effort” means seeking coverage from and
   73  having been rejected by at least three authorized insurers
   74  currently writing this type of coverage and documenting these
   75  rejections. However, if the residential structure has a dwelling
   76  replacement cost of $700,000 or more, the term means seeking
   77  coverage from and having been rejected by at least one
   78  authorized insurer currently writing this type of coverage and
   79  documenting this rejection.
   80         Section 2. Section 626.91805, Florida Statutes, is created
   81  to read:
   82         626.91805 Domestic surplus lines insurers.—
   83         (1) As used in this section, the term “nonadmitted insurer”
   84  has the same meaning as provided in the federal Nonadmitted and
   85  Reinsurance Reform Act of 2010.
   86         (2) Notwithstanding any other law, a nonadmitted insurer
   87  possessing a policyholder surplus of at least $15 million is,
   88  under a resolution by its board of directors and with the
   89  written approval of the office, eligible to transact insurance
   90  as a domestic surplus lines insurer. A domestic surplus lines
   91  insurer must maintain surplus of at least $15 million at all
   92  times.
   93         (3) Notwithstanding s. 626.918(2), a domestic surplus lines
   94  insurer shall be deemed an eligible surplus lines insurer and
   95  shall be included in the list of eligible surplus lines insurers
   96  required by s. 626.918(3). Eligible surplus lines insurers
   97  listed in s. 626.918(3) may write any kind of insurance that an
   98  unauthorized insurer not domiciled in this state is eligible to
   99  write.
  100         (4) For purposes of writing surplus lines insurance
  101  pursuant to the Surplus Lines Law, a domestic surplus lines
  102  insurer shall be considered an unauthorized insurer.
  103         (5) For purposes of the federal Nonadmitted and Reinsurance
  104  Reform Act of 2010, a domestic surplus lines insurer shall be
  105  considered a nonadmitted insurer.
  106         (6) A domestic surplus lines insurer may write only surplus
  107  lines insurance in this state which is procured from a surplus
  108  lines agent pursuant to the Surplus Lines Law. Such insurer may
  109  not simultaneously hold any certificate of authority authorizing
  110  it to operate as an admitted insurer.
  111         (7) A domestic surplus lines insurer may write surplus
  112  lines insurance in any jurisdiction if such insurer complies
  113  with the requirements of that jurisdiction.
  114         (8) All requirements imposed by the Florida Insurance Code
  115  on admitted domestic insurers apply to domestic surplus lines
  116  insurers unless otherwise exempted in this section.
  117         (9) A domestic surplus lines insurer is exempt from s.
  118  624.408.
  119         (10) A surplus lines insurance policy issued by a domestic
  120  surplus lines insurer is exempt from all statutory requirements
  121  relating to insurance rating and rating plans; policy forms;
  122  premiums charged to insureds; policy cancellation, nonrenewal,
  123  and renewal; and other statutory requirements in the same manner
  124  and to the same extent as surplus lines policies issued by a
  125  surplus lines insurer domiciled in another state.
  126         (11) Notwithstanding any other law, a policy issued by a
  127  domestic surplus lines insurer is subject to taxes assessed upon
  128  surplus lines policies issued by nonadmitted insurers, including
  129  surplus lines premium taxes, but is not subject to other taxes
  130  levied upon admitted insurers, whether domestic or foreign.
  131         (12) A policy issued by a domestic surplus lines insurer is
  132  not subject to the protections or requirements of the Florida
  133  Insurance Guaranty Association Act, the Florida Life and Health
  134  Insurance Guaranty Association Act, the Florida Workers’
  135  Compensation Insurance Guaranty Association Act, or the Florida
  136  Hurricane Catastrophe Fund.
  137         (13) A domestic surplus lines insurer may not issue a
  138  homeowner’s policy covering personal residential property
  139  located in this state within 12 months following the effective
  140  date of the nonrenewal or cancellation of such policy by an
  141  admitted carrier affiliate as that term is defined in s. 624.10.
  142  This restriction does not apply to a nonrenewal or cancellation
  143  provided at the insured’s request. A domestic surplus lines
  144  insurer may not issue a policy designed to satisfy the motor
  145  vehicle financial responsibility requirements of this state
  146  under chapter 324, the Workers’ Compensation Law under chapter
  147  440, or any other law of this state mandating insurance coverage
  148  by an admitted insurer.
  149         Section 3. Paragraph (b) of subsection (1) and paragraph
  150  (b) of subsection (2) of section 458.320, Florida Statutes, are
  151  amended to read:
  152         458.320 Financial responsibility.—
  153         (1) As a condition of licensing and maintaining an active
  154  license, and prior to the issuance or renewal of an active
  155  license or reactivation of an inactive license for the practice
  156  of medicine, an applicant must by one of the following methods
  157  demonstrate to the satisfaction of the board and the department
  158  financial responsibility to pay claims and costs ancillary
  159  thereto arising out of the rendering of, or the failure to
  160  render, medical care or services:
  161         (b) Obtaining and maintaining professional liability
  162  coverage in an amount not less than $100,000 per claim, with a
  163  minimum annual aggregate of not less than $300,000, from an
  164  authorized insurer as defined under s. 624.09, from a surplus
  165  lines insurer as defined under s. 626.914 s. 626.914(2), from a
  166  risk retention group as defined under s. 627.942, from the Joint
  167  Underwriting Association established under s. 627.351(4), or
  168  through a plan of self-insurance as provided in s. 627.357. The
  169  required coverage amount set forth in this paragraph may not be
  170  used for litigation costs or attorney’s fees for the defense of
  171  any medical malpractice claim.
  172         (2) Physicians who perform surgery in an ambulatory
  173  surgical center licensed under chapter 395 and, as a continuing
  174  condition of hospital staff privileges, physicians who have
  175  staff privileges must also establish financial responsibility by
  176  one of the following methods:
  177         (b) Obtaining and maintaining professional liability
  178  coverage in an amount not less than $250,000 per claim, with a
  179  minimum annual aggregate of not less than $750,000 from an
  180  authorized insurer as defined under s. 624.09, from a surplus
  181  lines insurer as defined under s. 626.914 s. 626.914(2), from a
  182  risk retention group as defined under s. 627.942, from the Joint
  183  Underwriting Association established under s. 627.351(4),
  184  through a plan of self-insurance as provided in s. 627.357, or
  185  through a plan of self-insurance which meets the conditions
  186  specified for satisfying financial responsibility in s. 766.110.
  187  The required coverage amount set forth in this paragraph may not
  188  be used for litigation costs or attorney attorney’s fees for the
  189  defense of any medical malpractice claim.
  190  
  191  This subsection shall be inclusive of the coverage in subsection
  192  (1).
  193         Section 4. Paragraph (b) of subsection (1) and paragraph
  194  (b) of subsection (2) of section 459.0085, Florida Statutes, are
  195  amended to read:
  196         459.0085 Financial responsibility.—
  197         (1) As a condition of licensing and maintaining an active
  198  license, and prior to the issuance or renewal of an active
  199  license or reactivation of an inactive license for the practice
  200  of osteopathic medicine, an applicant must by one of the
  201  following methods demonstrate to the satisfaction of the board
  202  and the department financial responsibility to pay claims and
  203  costs ancillary thereto arising out of the rendering of, or the
  204  failure to render, medical care or services:
  205         (b) Obtaining and maintaining professional liability
  206  coverage in an amount not less than $100,000 per claim, with a
  207  minimum annual aggregate of not less than $300,000, from an
  208  authorized insurer as defined under s. 624.09, from a surplus
  209  lines insurer as defined under s. 626.914 s. 626.914(2), from a
  210  risk retention group as defined under s. 627.942, from the Joint
  211  Underwriting Association established under s. 627.351(4), or
  212  through a plan of self-insurance as provided in s. 627.357. The
  213  required coverage amount set forth in this paragraph may not be
  214  used for litigation costs or attorney’s fees for the defense of
  215  any medical malpractice claim.
  216         (2) Osteopathic physicians who perform surgery in an
  217  ambulatory surgical center licensed under chapter 395 and, as a
  218  continuing condition of hospital staff privileges, osteopathic
  219  physicians who have staff privileges must also establish
  220  financial responsibility by one of the following methods:
  221         (b) Obtaining and maintaining professional liability
  222  coverage in an amount not less than $250,000 per claim, with a
  223  minimum annual aggregate of not less than $750,000 from an
  224  authorized insurer as defined under s. 624.09, from a surplus
  225  lines insurer as defined under s. 626.914 s. 626.914(2), from a
  226  risk retention group as defined under s. 627.942, from the Joint
  227  Underwriting Association established under s. 627.351(4),
  228  through a plan of self-insurance as provided in s. 627.357, or
  229  through a plan of self-insurance that meets the conditions
  230  specified for satisfying financial responsibility in s. 766.110.
  231  The required coverage amount set forth in this paragraph may not
  232  be used for litigation costs or attorney’s fees for the defense
  233  of any medical malpractice claim.
  234  
  235  This subsection shall be inclusive of the coverage in subsection
  236  (1).
  237         Section 5. Paragraph (a) of subsection (2) of section
  238  464.0123, Florida Statutes, is amended to read:
  239         464.0123 Autonomous practice by an advanced practice
  240  registered nurse.—
  241         (2) FINANCIAL RESPONSIBILITY.—
  242         (a) An advanced practice registered nurse registered under
  243  this section must, by one of the following methods, demonstrate
  244  to the satisfaction of the board and the department financial
  245  responsibility to pay claims and costs ancillary thereto arising
  246  out of the rendering of, or the failure to render, nursing care,
  247  treatment, or services:
  248         1. Obtaining and maintaining professional liability
  249  coverage in an amount not less than $100,000 per claim, with a
  250  minimum annual aggregate of not less than $300,000, from an
  251  authorized insurer as defined in s. 624.09, from a surplus lines
  252  insurer as defined in s. 626.914(3) s. 626.914(2), from a risk
  253  retention group as defined in s. 627.942, from the Joint
  254  Underwriting Association established under s. 627.351(4), or
  255  through a plan of self-insurance as provided in s. 627.357; or
  256         2. Obtaining and maintaining an unexpired, irrevocable
  257  letter of credit, established pursuant to chapter 675, in an
  258  amount of not less than $100,000 per claim, with a minimum
  259  aggregate availability of credit of not less than $300,000. The
  260  letter of credit must be payable to the advanced practice
  261  registered nurse as beneficiary upon presentment of a final
  262  judgment indicating liability and awarding damages to be paid by
  263  the advanced practice registered nurse or upon presentment of a
  264  settlement agreement signed by all parties to such agreement
  265  when such final judgment or settlement is a result of a claim
  266  arising out of the rendering of, or the failure to render,
  267  nursing care and services.
  268         Section 6. Paragraph (b) of subsection (6) of section
  269  629.401, Florida Statutes, is amended to read:
  270         629.401 Insurance exchange.—
  271         (6)
  272         (b) In addition to the insurance laws specified in
  273  paragraph (a), the office shall regulate the exchange pursuant
  274  to the following powers, rights, and duties:
  275         1. General examination powers.—The office shall examine the
  276  affairs, transactions, accounts, records, and assets of any
  277  security fund, exchange, members, and associate brokers as often
  278  as it deems advisable. The examination may be conducted by the
  279  accredited examiners of the office at the offices of the entity
  280  or person being examined. The office shall examine in like
  281  manner each prospective member or associate broker applying for
  282  membership in an exchange.
  283         2. Office approval and applications of underwriting
  284  members.—No underwriting member shall commence operation without
  285  the approval of the office. Before commencing operation, an
  286  underwriting member shall provide a written application
  287  containing:
  288         a. Name, type, and purpose of the underwriting member.
  289         b. Name, residence address, business background, and
  290  qualifications of each person associated or to be associated in
  291  the formation or financing of the underwriting member.
  292         c. Full disclosure of the terms of all understandings and
  293  agreements existing or proposed among persons so associated
  294  relative to the underwriting member, or the formation or
  295  financing thereof, accompanied by a copy of each such agreement
  296  or understanding.
  297         d. Full disclosure of the terms of all understandings and
  298  agreements existing or proposed for management or exclusive
  299  agency contracts.
  300         3. Investigation of underwriting member applications.—In
  301  connection with any proposal to establish an underwriting
  302  member, the office shall make an investigation of:
  303         a. The character, reputation, financial standing, and
  304  motives of the organizers, incorporators, or subscribers
  305  organizing the proposed underwriting member.
  306         b. The character, financial responsibility, insurance
  307  experience, and business qualifications of its proposed
  308  officers.
  309         c. The character, financial responsibility, business
  310  experience, and standing of the proposed stockholders and
  311  directors, or owners.
  312         4. Notice of management changes.—An underwriting member
  313  shall promptly give the office written notice of any change
  314  among the directors or principal officers of the underwriting
  315  member within 30 days after such change. The office shall
  316  investigate the new directors or principal officers of the
  317  underwriting member. The office’s investigation shall include an
  318  investigation of the character, financial responsibility,
  319  insurance experience, and business qualifications of any new
  320  directors or principal officers. As a result of the
  321  investigation, the office may require the underwriting member to
  322  replace any new directors or principal officers.
  323         5. Alternate financial statement.—In lieu of any financial
  324  examination, the office may accept an audited financial
  325  statement.
  326         6. Correction and reconstruction of records.—If the office
  327  finds any accounts or records to be inadequate, or inadequately
  328  kept or posted, it may employ experts to reconstruct, rewrite,
  329  post, or balance them at the expense of the person or entity
  330  being examined if such person or entity has failed to maintain,
  331  complete, or correct such records or accounts after the office
  332  has given him or her or it notice and reasonable opportunity to
  333  do so.
  334         7. Obstruction of examinations.—Any person or entity who or
  335  which willfully obstructs the office or its examiner in an
  336  examination is guilty of a misdemeanor of the second degree,
  337  punishable as provided in s. 775.082 or s. 775.083.
  338         8. Filing of annual statement.—Each underwriting member
  339  shall file with the office a full and true statement of its
  340  financial condition, transactions, and affairs. The statement
  341  shall be filed on or before March 1 of each year, or within such
  342  extension of time as the office for good cause grants, and shall
  343  be for the preceding calendar year. The statement shall contain
  344  information generally included in insurer financial statements
  345  prepared in accordance with generally accepted insurance
  346  accounting principles and practices and in a form generally
  347  utilized by insurers for financial statements, sworn to by at
  348  least two executive officers of the underwriting member. The
  349  form of the financial statements shall be the approved form of
  350  the National Association of Insurance Commissioners or its
  351  successor organization. The commission may by rule require each
  352  insurer to submit any part of the information contained in the
  353  financial statement in a computer-readable form compatible with
  354  the office’s electronic data processing system. In addition to
  355  information furnished in connection with its annual statement,
  356  an underwriting member must furnish to the office as soon as
  357  reasonably possible such information about its transactions or
  358  affairs as the office requests in writing. All information
  359  furnished pursuant to the office’s request must be verified by
  360  the oath of two executive officers of the underwriting member.
  361         9. Record maintenance.—Each underwriting member shall have
  362  and maintain its principal place of business in this state and
  363  shall keep therein complete records of its assets, transactions,
  364  and affairs in accordance with such methods and systems as are
  365  customary for or suitable to the kind or kinds of insurance
  366  transacted.
  367         10. Examination of agents.—If the department has reason to
  368  believe that any agent, as defined in s. 626.015 or s.
  369  626.914(5) s. 626.914, has violated or is violating any
  370  provision of the insurance law, or upon receipt of a written
  371  complaint signed by any interested person indicating that any
  372  such violation may exist, the department shall conduct such
  373  examination as it deems necessary of the accounts, records,
  374  documents, and transactions pertaining to or affecting the
  375  insurance affairs of such agent.
  376         11. Written reports of office.—The office or its examiner
  377  shall make a full and true written report of any examination.
  378  The report shall contain only information obtained from
  379  examination of the records, accounts, files, and documents of or
  380  relative to the person or entity examined or from testimony of
  381  individuals under oath, together with relevant conclusions and
  382  recommendations of the examiner based thereon. The office shall
  383  furnish a copy of the report to the person or entity examined
  384  not less than 30 days prior to filing the report in its office.
  385  If such person or entity so requests in writing within such 30
  386  day period, the office shall grant a hearing with respect to the
  387  report and shall not file the report until after the hearing and
  388  after such modifications have been made therein as the office
  389  deems proper.
  390         12. Admissibility of reports.—The report of an examination
  391  when filed shall be admissible in evidence in any action or
  392  proceeding brought by the office against the person or entity
  393  examined, or against his or her or its officers, employees, or
  394  agents. The office or its examiners may at any time testify and
  395  offer other proper evidence as to information secured or matters
  396  discovered during the course of an examination, whether or not a
  397  written report of the examination has been either made,
  398  furnished, or filed in the office.
  399         13. Publication of reports.—After an examination report has
  400  been filed, the office may publish the results of any such
  401  examination in one or more newspapers published in this state
  402  whenever it deems it to be in the public interest.
  403         14. Consideration of examination reports by entity
  404  examined.—After the examination report of an underwriting member
  405  has been filed, an affidavit shall be filed with the office, not
  406  more than 30 days after the report has been filed, on a form
  407  furnished by the office and signed by the person or a
  408  representative of any entity examined, stating that the report
  409  has been read and that the recommendations made in the report
  410  will be considered within a reasonable time.
  411         15. Examination costs.—Each person or entity examined by
  412  the office shall pay to the office the expenses incurred in such
  413  examination.
  414         16. Exchange costs.—An exchange shall reimburse the office
  415  for any expenses incurred by it relating to the regulation of
  416  the exchange and its members, except as specified in
  417  subparagraph 15.
  418         17. Powers of examiners.—Any examiner appointed by the
  419  office, as to the subject of any examination, investigation, or
  420  hearing being conducted by him or her, may administer oaths,
  421  examine and cross-examine witnesses, and receive oral and
  422  documentary evidence, and shall have the power to subpoena
  423  witnesses, compel their attendance and testimony, and require by
  424  subpoena the production of books, papers, records, files,
  425  correspondence, documents, or other evidence which the examiner
  426  deems relevant to the inquiry. If any person refuses to comply
  427  with any such subpoena or to testify as to any matter concerning
  428  which he or she may be lawfully interrogated, the Circuit Court
  429  of Leon County or the circuit court of the county wherein such
  430  examination, investigation, or hearing is being conducted, or of
  431  the county wherein such person resides, on the office’s
  432  application may issue an order requiring such person to comply
  433  with the subpoena and to testify; and any failure to obey such
  434  an order of the court may be punished by the court as a contempt
  435  thereof. Subpoenas shall be served, and proof of such service
  436  made, in the same manner as if issued by a circuit court.
  437  Witness fees and mileage, if claimed, shall be allowed the same
  438  as for testimony in a circuit court.
  439         18. False testimony.—Any person willfully testifying
  440  falsely under oath as to any matter material to any examination,
  441  investigation, or hearing shall upon conviction thereof be
  442  guilty of perjury and shall be punished accordingly.
  443         19. Self-incrimination.—
  444         a. If any person asks to be excused from attending or
  445  testifying or from producing any books, papers, records,
  446  contracts, documents, or other evidence in connection with any
  447  examination, hearing, or investigation being conducted by the
  448  office or its examiner, on the ground that the testimony or
  449  evidence required of the person may tend to incriminate him or
  450  her or subject him or her to a penalty or forfeiture, and the
  451  person notwithstanding is directed to give such testimony or
  452  produce such evidence, he or she shall, if so directed by the
  453  office and the Department of Legal Affairs, nonetheless comply
  454  with such direction; but the person shall not thereafter be
  455  prosecuted or subjected to any penalty or forfeiture for or on
  456  account of any transaction, matter, or thing concerning which he
  457  or she may have so testified or produced evidence, and no
  458  testimony so given or evidence so produced shall be received
  459  against him or her upon any criminal action, investigation, or
  460  proceeding; except that no such person so testifying shall be
  461  exempt from prosecution or punishment for any perjury committed
  462  by him or her in such testimony, and the testimony or evidence
  463  so given or produced shall be admissible against him or her upon
  464  any criminal action, investigation, or proceeding concerning
  465  such perjury, nor shall he or she be exempt from the refusal,
  466  suspension, or revocation of any license, permission, or
  467  authority conferred, or to be conferred, pursuant to the
  468  insurance law.
  469         b. Any such individual may execute, acknowledge, and file
  470  with the office a statement expressly waiving such immunity or
  471  privilege in respect to any transaction, matter, or thing
  472  specified in such statement, and thereupon the testimony of such
  473  individual or such evidence in relation to such transaction,
  474  matter, or thing may be received or produced before any judge or
  475  justice, court, tribunal, grand jury, or otherwise; and if such
  476  testimony or evidence is so received or produced, such
  477  individual shall not be entitled to any immunity or privileges
  478  on account of any testimony so given or evidence so produced.
  479         20. Penalty for failure to testify.—Any person who refuses
  480  or fails, without lawful cause, to testify relative to the
  481  affairs of any member, associate broker, or other person when
  482  subpoenaed and requested by the office to so testify, as
  483  provided in subparagraph 17., shall, in addition to the penalty
  484  provided in subparagraph 17., be guilty of a misdemeanor of the
  485  second degree, punishable as provided in s. 775.082 or s.
  486  775.083.
  487         21. Name selection.—No underwriting member shall be formed
  488  or authorized to transact insurance in this state under a name
  489  which is the same as that of any authorized insurer or is so
  490  nearly similar thereto as to cause or tend to cause confusion or
  491  under a name which would tend to mislead as to the type of
  492  organization of the insurer. Before incorporating under or using
  493  any name, the underwriting syndicate or proposed underwriting
  494  syndicate shall submit its name or proposed name to the office
  495  for the approval of the office.
  496         22. Capitalization.—An underwriting member approved on or
  497  after July 2, 1987, shall provide an initial paid-in capital and
  498  surplus of $3 million and thereafter shall maintain a minimum
  499  policyholder surplus of $2 million in order to be permitted to
  500  write insurance. Underwriting members approved prior to July 2,
  501  1987, shall maintain a minimum policyholder surplus of $1
  502  million. After June 29, 1988, underwriting members approved
  503  prior to July 2, 1987, must maintain a minimum policyholder
  504  surplus of $1.5 million to write insurance. After June 29, 1989,
  505  underwriting members approved prior to July 2, 1987, must
  506  maintain a minimum policyholder surplus of $1.75 million to
  507  write insurance. After December 30, 1989, all underwriting
  508  members, regardless of the date they were approved, must
  509  maintain a minimum policyholder surplus of $2 million to write
  510  insurance. Except for that portion of the paid-in capital and
  511  surplus which shall be maintained in a security fund of an
  512  exchange, the paid-in capital and surplus shall be invested by
  513  an underwriting member in a manner consistent with ss. 625.301
  514  625.340. The portion of the paid-in capital and surplus in any
  515  security fund of an exchange shall be invested in a manner
  516  limited to investments for life insurance companies under the
  517  Florida insurance laws.
  518         23. Limitations on coverage written.—
  519         a. Limit of risk.—No underwriting member shall expose
  520  itself to any loss on any one risk in an amount exceeding 10
  521  percent of its surplus to policyholders. Any risk or portion of
  522  any risk which shall have been reinsured in an assuming
  523  reinsurer authorized or approved to do such business in this
  524  state shall be deducted in determining the limitation of risk
  525  prescribed in this section.
  526         b. Restrictions on premiums written.—If the office has
  527  reason to believe that the underwriting member’s ratio of actual
  528  or projected annual gross written premiums to policyholder
  529  surplus exceeds 8 to 1 or the underwriting member’s ratio of
  530  actual or projected annual net premiums to policyholder surplus
  531  exceeds 4 to 1, the office may establish maximum gross or net
  532  annual premiums to be written by the underwriting member
  533  consistent with maintaining the ratios specified in this sub
  534  subparagraph.
  535         (I) Projected annual net or gross premiums shall be based
  536  on the actual writings to date for the underwriting member’s
  537  current calendar year, its writings for the previous calendar
  538  year, or both. Ratios shall be computed on an annualized basis.
  539         (II) For purposes of this sub-subparagraph, the term “gross
  540  written premiums” means direct premiums written and reinsurance
  541  assumed.
  542         c. Surplus as to policyholders.—For the purpose of
  543  determining the limitation on coverage written, surplus as to
  544  policyholders shall be deemed to include any voluntary reserves,
  545  or any part thereof, which are not required by or pursuant to
  546  law and shall be determined from the last sworn statement of
  547  such underwriting member with the office, or by the last report
  548  or examination filed by the office, whichever is more recent at
  549  the time of assumption of such risk.
  550         24. Unearned premium reserves.—An underwriting member must
  551  at all times maintain an unearned premium reserve equal to 50
  552  percent of the net written premiums of the subscribers on
  553  policies having 1 year or less to run, and pro rata on those for
  554  longer periods, except that all premiums on any marine or
  555  transportation insurance trip risk shall be deemed unearned
  556  until the trip is terminated. For the purpose of this
  557  subparagraph, the term “net written premiums” means the premium
  558  payments made by subscribers plus the premiums due from
  559  subscribers, after deducting the amounts specifically provided
  560  in the subscribers’ agreements for expenses, including
  561  reinsurance costs and fees paid to the attorney in fact,
  562  provided that the power of attorney agreement contains an
  563  explicit provision requiring the attorney in fact to refund any
  564  unearned subscribers fees on a pro-rata basis for canceled
  565  policies. If there is no such provision, the unearned premium
  566  reserve shall be calculated without any adjustment for fees paid
  567  to the attorney in fact. If the unearned premium reserves at any
  568  time do not amount to $100,000, there shall be maintained on
  569  deposit at the exchange at all times additional funds in cash or
  570  eligible securities which, together with the unearned premium
  571  reserves, equal $100,000. In calculating the foregoing reserves,
  572  the amount of the attorney’s bond, as filed with the office and
  573  as required by s. 629.121, shall be included in such reserves.
  574  If at any time the unearned premium reserves are less than the
  575  foregoing requirements, the subscribers, or the attorney in
  576  fact, shall advance funds to make up the deficiency. Such
  577  advances shall only be repaid out of the surplus of the exchange
  578  and only after receiving written approval from the office.
  579         25. Loss reserves.—All underwriting members of an exchange
  580  shall maintain loss reserves, including a reserve for incurred
  581  but not reported claims. The reserves shall be subject to review
  582  by the office, and, if loss experience shows that an
  583  underwriting member’s loss reserves are inadequate, the office
  584  shall require the underwriting member to maintain loss reserves
  585  in such additional amount as is needed to make them adequate.
  586         26. Distribution of profits.—An underwriting member shall
  587  not distribute any profits in the form of cash or other assets
  588  to owners except out of that part of its available and
  589  accumulated surplus funds which is derived from realized net
  590  operating profits on its business and realized capital gains. In
  591  any one year such payments to owners shall not exceed 30 percent
  592  of such surplus as of December 31 of the immediately preceding
  593  year, unless otherwise approved by the office. No distribution
  594  of profits shall be made that would render an underwriting
  595  member either impaired or insolvent.
  596         27. Stock dividends.—A stock dividend may be paid by an
  597  underwriting member out of any available surplus funds in excess
  598  of the aggregate amount of surplus advanced to the underwriting
  599  member under subparagraph 29.
  600         28. Dividends from earned surplus.—A dividend otherwise
  601  lawful may be payable out of an underwriting member’s earned
  602  surplus even though the total surplus of the underwriting member
  603  is then less than the aggregate of its past contributed surplus
  604  resulting from issuance of its capital stock at a price in
  605  excess of the par value thereof.
  606         29. Borrowing of money by underwriting members.—
  607         a. An underwriting member may borrow money to defray the
  608  expenses of its organization, provide it with surplus funds, or
  609  for any purpose of its business, upon a written agreement that
  610  such money is required to be repaid only out of the underwriting
  611  member’s surplus in excess of that stipulated in such agreement.
  612  The agreement may provide for interest not exceeding 15 percent
  613  simple interest per annum. The interest shall or shall not
  614  constitute a liability of the underwriting member as to its
  615  funds other than such excess of surplus, as stipulated in the
  616  agreement. No commission or promotion expense shall be paid in
  617  connection with any such loan. The use of any surplus note and
  618  any repayments thereof shall be subject to the approval of the
  619  office.
  620         b. Money so borrowed, together with any interest thereon if
  621  so stipulated in the agreement, shall not form a part of the
  622  underwriting member’s legal liabilities except as to its surplus
  623  in excess of the amount thereof stipulated in the agreement, nor
  624  be the basis of any setoff; but until repayment, financial
  625  statements filed or published by an underwriting member shall
  626  show as a footnote thereto the amount thereof then unpaid,
  627  together with any interest thereon accrued but unpaid.
  628         30. Liquidation, rehabilitation, and restrictions.—The
  629  office, upon a showing that a member or associate broker of an
  630  exchange has met one or more of the grounds contained in part I
  631  of chapter 631, may restrict sales by type of risk, policy or
  632  contract limits, premium levels, or policy or contract
  633  provisions; increase surplus or capital requirements of
  634  underwriting members; issue cease and desist orders; suspend or
  635  restrict a member’s or associate broker’s right to transact
  636  business; place an underwriting member under conservatorship or
  637  rehabilitation; or seek an order of liquidation as authorized by
  638  part I of chapter 631.
  639         31. Prohibited conduct.—The following acts by a member,
  640  associate broker, or affiliated person shall constitute
  641  prohibited conduct:
  642         a. Fraud.
  643         b. Fraudulent or dishonest acts committed by a member or
  644  associate broker prior to admission to an exchange, if the facts
  645  and circumstances were not disclosed to the office upon
  646  application to become a member or associate broker.
  647         c. Conduct detrimental to the welfare of an exchange.
  648         d. Unethical or improper practices or conduct, inconsistent
  649  with just and equitable principles of trade as set forth in, but
  650  not limited to, ss. 626.951-626.9641 and 626.973.
  651         e. Failure to use due diligence to ascertain the insurance
  652  needs of a client or a principal.
  653         f. Misstatements made under oath or upon an application for
  654  membership on an exchange.
  655         g. Failure to testify or produce documents when requested
  656  by the office.
  657         h. Willful violation of any law of this state.
  658         i. Failure of an officer or principal to testify under oath
  659  concerning a member, associate broker, or other person’s affairs
  660  as they relate to the operation of an exchange.
  661         j. Violation of the constitution and bylaws of the
  662  exchange.
  663         32. Penalties for participating in prohibited conduct.—
  664         a. The office may order the suspension of further
  665  transaction of business on the exchange of any member or
  666  associate broker found to have engaged in prohibited conduct. In
  667  addition, any member or associate broker found to have engaged
  668  in prohibited conduct may be subject to reprimand, censure,
  669  and/or a fine not exceeding $25,000 imposed by the office.
  670         b. Any member which has an affiliated person who is found
  671  to have engaged in prohibited conduct shall be subject to
  672  involuntary withdrawal or in addition thereto may be subject to
  673  suspension, reprimand, censure, and/or a fine not exceeding
  674  $25,000.
  675         33. Reduction of penalties.—Any suspension, reprimand,
  676  censure, or fine may be remitted or reduced by the office on
  677  such terms and conditions as are deemed fair and equitable.
  678         34. Other offenses.—Any member or associate broker that is
  679  suspended shall be deprived, during the period of suspension, of
  680  all rights and privileges of a member or of an associate broker
  681  and may be proceeded against by the office for any offense
  682  committed either before or after the date of suspension.
  683         35. Reinstatement.—Any member or associate broker that is
  684  suspended may be reinstated at any time on such terms and
  685  conditions as the office may specify.
  686         36. Remittance of fines.—Fines imposed under this section
  687  shall be remitted to the office and shall be paid into the
  688  Insurance Regulatory Trust Fund.
  689         37. Failure to pay fines.—When a member or associate broker
  690  has failed to pay a fine for 15 days after it becomes payable,
  691  such member or associate broker shall be suspended, unless the
  692  office has granted an extension of time to pay such fine.
  693         38. Changes in ownership or assets.—In the event of a major
  694  change in the ownership or a major change in the assets of an
  695  underwriting member, the underwriting member shall report such
  696  change in writing to the office within 30 days of the effective
  697  date thereof. The report shall set forth the details of the
  698  change. Any change in ownership or assets of more than 5 percent
  699  shall be considered a major change.
  700         39. Retaliation.—
  701         a. When by or pursuant to the laws of any other state or
  702  foreign country any taxes, licenses, or other fees, in the
  703  aggregate, and any fines, penalties, deposit requirements, or
  704  other material obligations, prohibitions, or restrictions are or
  705  would be imposed upon an exchange or upon the agents or
  706  representatives of such exchange which are in excess of such
  707  taxes, licenses, and other fees, in the aggregate, or which are
  708  in excess of such fines, penalties, deposit requirements, or
  709  other obligations, prohibitions, or restrictions directly
  710  imposed upon similar exchanges or upon the agents or
  711  representatives of such exchanges of such other state or country
  712  under the statutes of this state, so long as such laws of such
  713  other state or country continue in force or are so applied, the
  714  same taxes, licenses, and other fees, in the aggregate, or
  715  fines, penalties, deposit requirements, or other material
  716  obligations, prohibitions, or restrictions of whatever kind
  717  shall be imposed by the office upon the exchanges, or upon the
  718  agents or representatives of such exchanges, of such other state
  719  or country doing business or seeking to do business in this
  720  state.
  721         b. Any tax, license, or other obligation imposed by any
  722  city, county, or other political subdivision or agency of a
  723  state, jurisdiction, or foreign country on an exchange, or on
  724  the agents or representatives on an exchange, shall be deemed to
  725  be imposed by such state, jurisdiction, or foreign country
  726  within the meaning of sub-subparagraph a.
  727         40. Agents.—
  728         a. Agents as defined in ss. 626.015 and 626.914(5) 626.914
  729  who are broker members or associate broker members of an
  730  exchange shall be allowed only to place on an exchange the same
  731  kind or kinds of business that the agent is licensed to place
  732  pursuant to Florida law. Direct Florida business as defined in
  733  s. 626.916 or s. 626.917 shall be written through a broker
  734  member who is a surplus lines agent as defined in s. 626.914.
  735  The activities of each broker member or associate broker with
  736  regard to an exchange shall be subject to all applicable
  737  provisions of the insurance laws of this state, and all such
  738  activities shall constitute transactions under his or her
  739  license as an insurance agent for purposes of the Florida
  740  insurance law.
  741         b. Premium payments and other requirements.—If an
  742  underwriting member has assumed the risk as to a surplus lines
  743  coverage and if the premium therefor has been received by the
  744  surplus lines agent who placed such insurance, then in all
  745  questions thereafter arising under the coverage as between the
  746  underwriting member and the insured, the underwriting member
  747  shall be deemed to have received the premium due to it for such
  748  coverage; and the underwriting member shall be liable to the
  749  insured as to losses covered by such insurance, and for unearned
  750  premiums which may become payable to the insured upon
  751  cancellation of such insurance, whether or not in fact the
  752  surplus lines agent is indebted to the underwriting member with
  753  respect to such insurance or for any other cause.
  754         41. Improperly issued contracts, riders, and endorsements.—
  755         a. Any insurance policy, rider, or endorsement issued by an
  756  underwriting member and otherwise valid which contains any
  757  condition or provision not in compliance with the requirements
  758  of this section shall not be thereby rendered invalid, except as
  759  provided in s. 627.415, but shall be construed and applied in
  760  accordance with such conditions and provisions as would have
  761  applied had such policy, rider, or endorsement been in full
  762  compliance with this section. In the event an underwriting
  763  member issues or delivers any policy for an amount which exceeds
  764  any limitations otherwise provided in this section, the
  765  underwriting member shall be liable to the insured or his or her
  766  beneficiary for the full amount stated in the policy in addition
  767  to any other penalties that may be imposed.
  768         b. Any insurance contract delivered or issued for delivery
  769  in this state governing a subject or subjects of insurance
  770  resident, located, or to be performed in this state which,
  771  pursuant to the provisions of this section, the underwriting
  772  member may not lawfully insure under such a contract shall be
  773  cancelable at any time by the underwriting member, any provision
  774  of the contract to the contrary notwithstanding; and the
  775  underwriting member shall promptly cancel the contract in
  776  accordance with the request of the office therefor. No such
  777  illegality or cancellation shall be deemed to relieve the
  778  underwriting syndicate of any liability incurred by it under the
  779  contract while in force or to prohibit the underwriting
  780  syndicate from retaining the pro rata earned premium thereon.
  781  This provision does not relieve the underwriting syndicate from
  782  any penalty otherwise incurred by the underwriting syndicate.
  783         42. Satisfaction of judgments.—
  784         a. Every judgment or decree for the recovery of money
  785  heretofore or hereafter entered in any court of competent
  786  jurisdiction against any underwriting member shall be fully
  787  satisfied within 60 days from and after the entry thereof or, in
  788  the case of an appeal from such judgment or decree, within 60
  789  days from and after the affirmance of the judgment or decree by
  790  the appellate court.
  791         b. If the judgment or decree is not satisfied as required
  792  under sub-subparagraph a., and proof of such failure to satisfy
  793  is made by filing with the office a certified transcript of the
  794  docket of the judgment or the decree together with a certificate
  795  by the clerk of the court wherein the judgment or decree remains
  796  unsatisfied, in whole or in part, after the time provided in
  797  sub-subparagraph a., the office shall forthwith prohibit the
  798  underwriting member from transacting business. The office shall
  799  not permit such underwriting member to write any new business
  800  until the judgment or decree is wholly paid and satisfied and
  801  proof thereof is filed with the office under the official
  802  certificate of the clerk of the court wherein the judgment was
  803  recovered, showing that the judgment or decree is satisfied of
  804  record, and until the expenses and fees incurred in the case are
  805  also paid by the underwriting syndicate.
  806         43. Tender and exchange offers.—No person shall conclude a
  807  tender offer or an exchange offer or otherwise acquire 5 percent
  808  or more of the outstanding voting securities of an underwriting
  809  member or controlling company or purchase 5 percent or more of
  810  the ownership of an underwriting member or controlling company
  811  unless such person has filed with, and obtained the approval of,
  812  the office and sent to such underwriting member a statement
  813  setting forth:
  814         a. The identity of, and background information on, each
  815  person by whom, or on whose behalf, the acquisition is to be
  816  made; and, if the acquisition is to be made by or on behalf of a
  817  corporation, association, or trust, the identity of and
  818  background information on each director, officer, trustee, or
  819  other natural person performing duties similar to those of a
  820  director, officer, or trustee for the corporation, association,
  821  or trust.
  822         b. The source and amount of the funds or other
  823  consideration used, or to be used, in making the acquisition.
  824         c. Any plans or proposals which such person may have to
  825  liquidate such member, to sell its assets, or to merge or
  826  consolidate it.
  827         d. The percentage of ownership which such person proposes
  828  to acquire and the terms of the offer or exchange, as the case
  829  may be.
  830         e. Information as to any contracts, arrangements, or
  831  understandings with any party with respect to any securities of
  832  such member or controlling company, including, but not limited
  833  to, information relating to the transfer of any securities,
  834  option arrangements, or puts or calls or the giving or
  835  withholding of proxies, naming the party with whom such
  836  contract, arrangements, or understandings have been entered and
  837  giving the details thereof.
  838         f. The office may disapprove any acquisition subject to the
  839  provisions of this subparagraph by any person or any affiliated
  840  person of such person who:
  841         (I) Willfully violates this subparagraph;
  842         (II) In violation of an order of the office issued pursuant
  843  to sub-subparagraph j., fails to divest himself or herself of
  844  any stock obtained in violation of this subparagraph, or fails
  845  to divest himself or herself of any direct or indirect control
  846  of such stock, within 25 days after such order; or
  847         (III) In violation of an order issued by the office
  848  pursuant to sub-subparagraph j., acquires additional stock of
  849  the underwriting member or controlling company, or direct or
  850  indirect control of such stock, without complying with this
  851  subparagraph.
  852         g. The person or persons filing the statement required by
  853  this subparagraph have the burden of proof. The office shall
  854  approve any such acquisition if it finds, on the basis of the
  855  record made during any proceeding or on the basis of the filed
  856  statement if no proceeding is conducted, that:
  857         (I) Upon completion of the acquisition, the underwriting
  858  member will be able to satisfy the requirements for the approval
  859  to write the line or lines of insurance for which it is
  860  presently approved;
  861         (II) The financial condition of the acquiring person or
  862  persons will not jeopardize the financial stability of the
  863  underwriting member or prejudice the interests of its
  864  policyholders or the public;
  865         (III) Any plan or proposal which the acquiring person has,
  866  or acquiring persons have, made:
  867         (A) To liquidate the insurer, sell its assets, or merge or
  868  consolidate it with any person, or to make any other major
  869  change in its business or corporate structure or management; or
  870         (B) To liquidate any controlling company, sell its assets,
  871  or merge or consolidate it with any person, or to make any major
  872  change in its business or corporate structure or management
  873  which would have an effect upon the underwriting member
  874  
  875  is fair and free of prejudice to the policyholders of the
  876  underwriting member or to the public;
  877         (IV) The competence, experience, and integrity of those
  878  persons who will control directly or indirectly the operation of
  879  the underwriting member indicate that the acquisition is in the
  880  best interest of the policyholders of the underwriting member
  881  and in the public interest;
  882         (V) The natural persons for whom background information is
  883  required to be furnished pursuant to this subparagraph have such
  884  backgrounds as to indicate that it is in the best interests of
  885  the policyholders of the underwriting member, and in the public
  886  interest, to permit such persons to exercise control over such
  887  underwriting member;
  888         (VI) The officers and directors to be employed after the
  889  acquisition have sufficient insurance experience and ability to
  890  assure reasonable promise of successful operation;
  891         (VII) The management of the underwriting member after the
  892  acquisition will be competent and trustworthy and will possess
  893  sufficient managerial experience so as to make the proposed
  894  operation of the underwriting member not hazardous to the
  895  insurance-buying public;
  896         (VIII) The management of the underwriting member after the
  897  acquisition will not include any person who has directly or
  898  indirectly through ownership, control, reinsurance transactions,
  899  or other insurance or business relations unlawfully manipulated
  900  the assets, accounts, finances, or books of any insurer or
  901  underwriting member or otherwise acted in bad faith with respect
  902  thereto;
  903         (IX) The acquisition is not likely to be hazardous or
  904  prejudicial to the underwriting member’s policyholders or the
  905  public; and
  906         (X) The effect of the acquisition of control would not
  907  substantially lessen competition in insurance in this state or
  908  would not tend to create a monopoly therein.
  909         h. No vote by the stockholder of record, or by any other
  910  person, of any security acquired in contravention of the
  911  provisions of this subparagraph is valid. Any acquisition of any
  912  security contrary to the provisions of this subparagraph is
  913  void. Upon the petition of the underwriting member or
  914  controlling company, the circuit court for the county in which
  915  the principal office of such underwriting member is located may,
  916  without limiting the generality of its authority, order the
  917  issuance or entry of an injunction or other order to enforce the
  918  provisions of this subparagraph. There shall be a private right
  919  of action in favor of the underwriting member or controlling
  920  company to enforce the provisions of this subparagraph. No
  921  demand upon the office that it perform its functions shall be
  922  required as a prerequisite to any suit by the underwriting
  923  member or controlling company against any other person, and in
  924  no case shall the office be deemed a necessary party to any
  925  action by such underwriting member or controlling company to
  926  enforce the provisions of this subparagraph. Any person who
  927  makes or proposes an acquisition requiring the filing of a
  928  statement pursuant to this subparagraph, or who files such a
  929  statement, shall be deemed to have thereby designated the Chief
  930  Financial Officer as such person’s agent for service of process
  931  under this subparagraph and shall thereby be deemed to have
  932  submitted himself or herself to the administrative jurisdiction
  933  of the office and to the jurisdiction of the circuit court.
  934         i. Any approval by the office under this subparagraph does
  935  not constitute a recommendation by the office for an
  936  acquisition, tender offer, or exchange offer. It is unlawful for
  937  a person to represent that the office’s approval constitutes a
  938  recommendation. A person who violates the provisions of this
  939  sub-subparagraph is guilty of a felony of the third degree,
  940  punishable as provided in s. 775.082, s. 775.083, or s. 775.084.
  941  The statute-of-limitations period for the prosecution of an
  942  offense committed under this sub-subparagraph is 5 years.
  943         j. Upon notification to the office by the underwriting
  944  member or a controlling company that any person or any
  945  affiliated person of such person has acquired 5 percent or more
  946  of the outstanding voting securities of the underwriting member
  947  or controlling company without complying with the provisions of
  948  this subparagraph, the office shall order that the person and
  949  any affiliated person of such person cease acquisition of any
  950  further securities of the underwriting member or controlling
  951  company; however, the person or any affiliated person of such
  952  person may request a proceeding, which proceeding shall be
  953  convened within 7 days after the rendering of the order for the
  954  sole purpose of determining whether the person, individually or
  955  in connection with any affiliated person of such person, has
  956  acquired 5 percent or more of the outstanding voting securities
  957  of an underwriting member or controlling company. Upon the
  958  failure of the person or affiliated person to request a hearing
  959  within 7 days, or upon a determination at a hearing convened
  960  pursuant to this sub-subparagraph that the person or affiliated
  961  person has acquired voting securities of an underwriting member
  962  or controlling company in violation of this subparagraph, the
  963  office may order the person and affiliated person to divest
  964  themselves of any voting securities so acquired.
  965         k.(I) The office shall, if necessary to protect the public
  966  interest, suspend or revoke the certificate of authority of any
  967  underwriting member or controlling company:
  968         (A) The control of which is acquired in violation of this
  969  subparagraph;
  970         (B) That is controlled, directly or indirectly, by any
  971  person or any affiliated person of such person who, in violation
  972  of this subparagraph, has obtained control of an underwriting
  973  member or controlling company; or
  974         (C) That is controlled, directly or indirectly, by any
  975  person who, directly or indirectly, controls any other person
  976  who, in violation of this subparagraph, acquires control of an
  977  underwriting member or controlling company.
  978         (II) If any underwriting member is subject to suspension or
  979  revocation pursuant to sub-sub-subparagraph (I), the
  980  underwriting member shall be deemed to be in such condition, or
  981  to be using or to have been subject to such methods or practices
  982  in the conduct of its business, as to render its further
  983  transaction of insurance presently or prospectively hazardous to
  984  its policyholders, creditors, or stockholders or to the public.
  985         l.(I) For the purpose of this sub-sub-subparagraph, the
  986  term “affiliated person” of another person means:
  987         (A) The spouse of such other person;
  988         (B) The parents of such other person and their lineal
  989  descendants and the parents of such other person’s spouse and
  990  their lineal descendants;
  991         (C) Any person who directly or indirectly owns or controls,
  992  or holds with power to vote, 5 percent or more of the
  993  outstanding voting securities of such other person;
  994         (D) Any person 5 percent or more of the outstanding voting
  995  securities of which are directly or indirectly owned or
  996  controlled, or held with power to vote, by such other person;
  997         (E) Any person or group of persons who directly or
  998  indirectly control, are controlled by, or are under common
  999  control with such other person; or any officer, director,
 1000  partner, copartner, or employee of such other person;
 1001         (F) If such other person is an investment company, any
 1002  investment adviser of such company or any member of an advisory
 1003  board of such company;
 1004         (G) If such other person is an unincorporated investment
 1005  company not having a board of directors, the depositor of such
 1006  company; or
 1007         (H) Any person who has entered into an agreement, written
 1008  or unwritten, to act in concert with such other person in
 1009  acquiring or limiting the disposition of securities of an
 1010  underwriting member or controlling company.
 1011         (II) For the purposes of this section, the term
 1012  “controlling company” means any corporation, trust, or
 1013  association owning, directly or indirectly, 25 percent or more
 1014  of the voting securities of one or more underwriting members.
 1015         m. The commission may adopt, amend, or repeal rules that
 1016  are necessary to implement the provisions of this subparagraph,
 1017  pursuant to chapter 120.
 1018         44. Background information.—The information as to the
 1019  background and identity of each person about whom information is
 1020  required to be furnished pursuant to sub-subparagraph 43.a.
 1021  shall include, but shall not be limited to:
 1022         a. Such person’s occupations, positions of employment, and
 1023  offices held during the past 10 years.
 1024         b. The principal business and address of any business,
 1025  corporation, or other organization in which each such office was
 1026  held or in which such occupation or position of employment was
 1027  carried on.
 1028         c. Whether, at any time during such 10-year period, such
 1029  person was convicted of any crime other than a traffic
 1030  violation.
 1031         d. Whether, during such 10-year period, such person has
 1032  been the subject of any proceeding for the revocation of any
 1033  license and, if so, the nature of such proceeding and the
 1034  disposition thereof.
 1035         e. Whether, during such 10-year period, such person has
 1036  been the subject of any proceeding under the federal Bankruptcy
 1037  Act or whether, during such 10-year period, any corporation,
 1038  partnership, firm, trust, or association in which such person
 1039  was a director, officer, trustee, partner, or other official has
 1040  been subject to any such proceeding, either during the time in
 1041  which such person was a director, officer, trustee, partner, or
 1042  other official, or within 12 months thereafter.
 1043         f. Whether, during such 10-year period, such person has
 1044  been enjoined, either temporarily or permanently, by a court of
 1045  competent jurisdiction from violating any federal or state law
 1046  regulating the business of insurance, securities, or banking, or
 1047  from carrying out any particular practice or practices in the
 1048  course of the business of insurance, securities, or banking,
 1049  together with details of any such event.
 1050         45. Security fund.—All underwriting members shall be
 1051  members of the security fund of any exchange.
 1052         46. Underwriting member defined.—Whenever the term
 1053  “underwriting member” is used in this subsection, it shall be
 1054  construed to mean “underwriting syndicate.”
 1055         47. Offsets.—Any action, requirement, or constraint imposed
 1056  by the office shall reduce or offset similar actions,
 1057  requirements, or constraints of any exchange.
 1058         48. Restriction on member ownership.—
 1059         a. Investments existing prior to July 2, 1987.—The
 1060  investment in any member by brokers, agents, and intermediaries
 1061  transacting business on the exchange, and the investment in any
 1062  such broker, agent, or intermediary by any member, directly or
 1063  indirectly, shall in each case be limited in the aggregate to
 1064  less than 20 percent of the total investment in such member,
 1065  broker, agent, or intermediary, as the case may be. After
 1066  December 31, 1987, the aggregate percent of the total investment
 1067  in such member by any broker, agent, or intermediary and the
 1068  aggregate percent of the total investment in any such broker,
 1069  agent, or intermediary by any member, directly or indirectly,
 1070  shall not exceed 15 percent. After June 30, 1988, such aggregate
 1071  percent shall not exceed 10 percent and after December 31, 1988,
 1072  such aggregate percent shall not exceed 5 percent.
 1073         b. Investments arising on or after July 2, 1987.—The
 1074  investment in any underwriting member by brokers, agents, or
 1075  intermediaries transacting business on the exchange, and the
 1076  investment in any such broker, agent, or intermediary by any
 1077  underwriting member, directly or indirectly, shall in each case
 1078  be limited in the aggregate to less than 5 percent of the total
 1079  investment in such underwriting member, broker, agent, or
 1080  intermediary.
 1081         49. “Underwriting manager” defined.—“Underwriting manager”
 1082  as used in this subparagraph includes any person, partnership,
 1083  corporation, or organization providing any of the following
 1084  services to underwriting members of the exchange:
 1085         a. Office management and allied services, including
 1086  correspondence and secretarial services.
 1087         b. Accounting services, including bookkeeping and financial
 1088  report preparation.
 1089         c. Investment and banking consultations and services.
 1090         d. Underwriting functions and services including the
 1091  acceptance, rejection, placement, and marketing of risk.
 1092         50. Prohibition of underwriting manager investment.—Any
 1093  direct or indirect investment in any underwriting manager by a
 1094  broker member or any affiliated person of a broker member or any
 1095  direct or indirect investment in a broker member by an
 1096  underwriting manager or any affiliated person of an underwriting
 1097  manager is prohibited. “Affiliated person” for purposes of this
 1098  subparagraph is defined in subparagraph 43.
 1099         51. An underwriting member may not accept reinsurance on an
 1100  assumed basis from an affiliate or a controlling company, nor
 1101  may a broker member or management company place reinsurance from
 1102  an affiliate or controlling company of theirs with an
 1103  underwriting member. “Affiliate and controlling company” for
 1104  purposes of this subparagraph is defined in subparagraph 43.
 1105         52. Premium defined.—“Premium” is the consideration for
 1106  insurance, by whatever name called. Any “assessment” or any
 1107  “membership,” “policy,” “survey,” “inspection,” “service” fee or
 1108  charge or similar fee or charge in consideration for an
 1109  insurance contract is deemed part of the premium.
 1110         53. Rules.—The commission shall adopt rules necessary for
 1111  or as an aid to the effectuation of any provision of this
 1112  section.
 1113         Section 7. This act shall take effect July 1, 2022.

feedback