Bill Text: FL S1422 | 2016 | Regular Session | Engrossed

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Insurer Regulatory Reporting

Spectrum: Slight Partisan Bill (? 2-1)

Status: (Passed) 2016-04-08 - Chapter No. 2016-206, companion bill(s) passed, see CS/CS/SB 1416 (Ch. 2016-205) [S1422 Detail]

Download: Florida-2016-S1422-Engrossed.html

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       CS for CS for SB 1422                            First Engrossed
       
       
       
       
       
       
       
       
       20161422e1
       
    1                        A bill to be entitled                      
    2         An act relating to insurer regulatory reporting;
    3         creating s. 628.8015, F.S.; defining terms; requiring
    4         an insurer to maintain a risk management framework;
    5         requiring certain insurers and insurance groups to
    6         conduct an own-risk and solvency assessment; providing
    7         requirements for the preparation and submission of an
    8         own-risk and solvency assessment summary report;
    9         providing exemptions and waivers; requiring certain
   10         insurers and members of an insurance group to prepare
   11         and submit a corporate governance annual disclosure;
   12         requiring the initial corporate governance annual
   13         disclosure to be submitted to the Office of Insurance
   14         Regulation by a specified date; authorizing the office
   15         to require an insurer or insurance group to provide a
   16         corporate governance annual disclosure before such
   17         date under certain circumstances; specifying
   18         requirements for preparing and annually filing the
   19         corporate governance annual disclosure; specifying
   20         privilege requirements and prohibitions for certain
   21         filings and related documents; authorizing the office
   22         to retain third-party consultants for certain
   23         purposes; providing certain requirements for the
   24         National Association of Insurance Commissioners or
   25         third-party consultants in an agreement; authorizing
   26         the Financial Services Commission to adopt rules;
   27         amending s. 628.803, F.S.; revising provisions
   28         relating to penalties to conform to the act; providing
   29         for contingent repeal of the act; providing a
   30         contingent effective date.
   31          
   32  Be It Enacted by the Legislature of the State of Florida:
   33  
   34         Section 1. Section 628.8015, Florida Statutes, is created
   35  to read:
   36         628.8015 Own-risk and solvency assessment; corporate
   37  governance annual disclosure.—
   38         (1) DEFINITIONS.—As used in this section, the term:
   39         (a) “Corporate governance annual disclosure” means a report
   40  filed by an insurer or insurance group in accordance with this
   41  section.
   42         (b) “Insurance group” means insurers and affiliates
   43  included within an insurance holding company system.
   44         (c) “Insurer” has the same meaning as in s. 624.03.
   45  However, the term does not include agencies, authorities,
   46  instrumentalities, possessions, or territories of the United
   47  States, the Commonwealth of Puerto Rico, or the District of
   48  Columbia; or agencies, authorities, instrumentalities, or
   49  political subdivisions of a state.
   50         (d) “Own-risk and solvency assessment” or “ORSA” means an
   51  internal assessment, appropriate to the nature, scale, and
   52  complexity of an insurer or insurance group, conducted by that
   53  insurer or insurance group, of the material and relevant risks
   54  associated with the business plan of an insurer or insurance
   55  group and the sufficiency of capital resources to support those
   56  risks.
   57         (e) “ORSA guidance manual” means the own-risk and solvency
   58  assessment guidance manual developed and adopted by the National
   59  Association of Insurance Commissioners.
   60         (f) “ORSA summary report” means a high-level ORSA summary
   61  of an insurer or insurance group, consisting of a single report
   62  or combination of reports.
   63         (g) “Senior management” means any corporate officer
   64  responsible for reporting information to the board of directors
   65  at regular intervals or providing information to shareholders or
   66  regulators and includes, but is not limited to, the chief
   67  executive officer, chief financial officer, chief operations
   68  officer, chief risk officer, chief procurement officer, chief
   69  legal officer, chief information officer, chief technology
   70  officer, chief revenue officer, chief visionary officer, or any
   71  other executive performing one or more of these functions.
   72         (2) OWN-RISK AND SOLVENCY ASSESSMENT.—
   73         (a) Risk management framework.—An insurer shall maintain a
   74  risk management framework to assist in identifying, assessing,
   75  monitoring, managing, and reporting its material and relevant
   76  risks. An insurer may satisfy this requirement by being a member
   77  of an insurance group with a risk management framework
   78  applicable to the operations of the insurer.
   79         (b) ORSA requirement.—Subject to paragraph (c), an insurer,
   80  or the insurance group of which the insurer is a member, shall
   81  regularly conduct an ORSA consistent with and comparable to the
   82  process in the ORSA guidance manual. The ORSA must be conducted
   83  at least annually and whenever there have been significant
   84  changes to the risk profile of the insurer or the insurance
   85  group of which the insurer is a member.
   86         (c) ORSA summary report.—
   87         1.a. A domestic insurer or insurer member of an insurance
   88  group of which the office is the lead state, as determined by
   89  the procedures in the most recent National Association of
   90  Insurance Commissioners Financial Analysis Handbook, shall:
   91         (I) Submit an ORSA summary report to the office once every
   92  calendar year.
   93         (II) Notify the office of its proposed annual submission
   94  date by December 1, 2016. The initial ORSA summary report must
   95  be submitted by December 31, 2017.
   96         b. An insurer not required to submit an ORSA summary report
   97  pursuant to sub-subparagraph a. shall:
   98         (I) Submit an ORSA summary report at the request of the
   99  office, but not more than once per calendar year.
  100         (II) Notify the office of the proposed submission date
  101  within 30 days after the request of the office.
  102         2. An insurer may comply with sub-subparagraph 1.a. or sub
  103  subparagraph 1.b. by providing the most recent and substantially
  104  similar ORSA summary report submitted by the insurer, or another
  105  member of an insurance group of which the insurer is a member,
  106  to the chief insurance regulatory official of another state or
  107  the supervisor or regulator of a foreign jurisdiction. For
  108  purposes of this subparagraph, a “substantially similar” ORSA
  109  summary report is one that contains information comparable to
  110  the information described in the ORSA guidance manual as
  111  determined by the commissioner of the office. If the report is
  112  in a language other than English, it must be accompanied by an
  113  English translation.
  114         3. The chief risk officer or chief executive officer of the
  115  insurer or insurance group responsible for overseeing the
  116  enterprise risk management process must sign the ORSA summary
  117  report attesting that, to the best of his or her knowledge and
  118  belief, the insurer or insurance group applied the enterprise
  119  risk management process described in the ORSA summary report and
  120  provided a copy of the report to the board of directors or the
  121  appropriate board committee.
  122         4. The ORSA summary report must be prepared in accordance
  123  with the ORSA guidance manual. Documentation and supporting
  124  information must be maintained by the insurer and made available
  125  upon examination pursuant to s. 624.316 or upon the request of
  126  the office.
  127         5. The ORSA summary report must include a brief description
  128  of material changes and updates since the prior year report.
  129         6. The office’s review of the ORSA summary report must be
  130  conducted, and any additional requests for information must be
  131  made, using procedures similar to those used in the analysis and
  132  examination of multistate or global insurers and insurance
  133  groups.
  134         (d) Exemption.—
  135         1. An insurer is exempt from the requirements of this
  136  subsection if:
  137         a. The insurer has annual direct written and unaffiliated
  138  assumed premium, including international direct and assumed
  139  premium, but excluding premiums reinsured with the Federal Crop
  140  Insurance Corporation and the National Flood Insurance Program,
  141  of less than $500 million; or
  142         b. The insurer is a member of an insurance group and the
  143  insurance group has annual direct written and unaffiliated
  144  assumed premium, including international direct and assumed
  145  premium, but excluding premiums reinsured with the Federal Crop
  146  Insurance Corporation and the National Flood Insurance Program,
  147  of less than $1 billion.
  148         2. If an insurer is:
  149         a. Exempt under sub-subparagraph 1.a., but the insurance
  150  group of which the insurer is a member is not exempt under sub
  151  subparagraph 1.b., the ORSA summary report must include every
  152  insurer within the insurance group. The insurer may satisfy this
  153  requirement by submitting more than one ORSA summary report for
  154  any combination of insurers if any combination of reports
  155  includes every insurer within the insurance group.
  156         b. Not exempt under sub-subparagraph 1.a., but the
  157  insurance group of which it is a member is exempt under sub
  158  subparagraph 1.b., the insurer must submit to the office the
  159  ORSA summary report applicable only to that insurer.
  160         3. The office may require an exempt insurer to maintain a
  161  risk management framework, conduct an ORSA, and file an ORSA
  162  summary report:
  163         a. Based on unique circumstances, including, but not
  164  limited to, the type and volume of business written, ownership
  165  and organizational structure, federal agency requests, and
  166  international supervisor requests;
  167         b. If the insurer has risk-based capital for a company
  168  action level event pursuant to s. 624.4085(3), meets one or more
  169  of the standards of an insurer deemed to be in hazardous
  170  financial condition as defined in rules adopted by the
  171  commission pursuant to s. 624.81(11), or exhibits qualities of
  172  an insurer in hazardous financial condition as determined by the
  173  office; or
  174         c. If the office determines it is in the best interest of
  175  the state.
  176         4. If an exempt insurer becomes disqualified for an
  177  exemption because of changes in premium as reported on the most
  178  recent annual statement of the insurer or annual statements of
  179  the insurers within the insurance group of which the insurer is
  180  a member, the insurer must comply with the requirements of this
  181  section effective 1 year after the year in which the insurer
  182  exceeded the premium thresholds.
  183         (e) Waiver.—An insurer that does not qualify for an
  184  exemption under paragraph (d) may request a waiver from the
  185  office based upon unique circumstances. If the insurer is part
  186  of an insurance group with insurers domiciled in more than one
  187  state, the office must coordinate with the lead state and with
  188  the other domiciliary regulators in deciding whether to grant a
  189  waiver. In deciding whether to grant a waiver, the office may
  190  consider:
  191         1. The type and volume of business written by the insurer.
  192         2. The ownership and organizational structure of the
  193  insurer.
  194         3. Any other factor the office considers relevant to the
  195  insurer or insurance group of which the insurer is a member.
  196  
  197  A waiver granted pursuant to this paragraph is valid until
  198  withdrawn by the office.
  199         (3) CORPORATE GOVERNANCE ANNUAL DISCLOSURE.—
  200         (a) Scope.—This section does not prescribe or impose
  201  corporate governance standards and internal procedures beyond
  202  those required under applicable state corporate law or limit the
  203  authority of the office, or the rights or obligations of third
  204  parties, under s. 624.316.
  205         (b) Disclosure requirement.—
  206         1.a. An insurer, or insurer member of an insurance group,
  207  of which the office is the lead state regulator, as determined
  208  by the procedures in the most recent National Association of
  209  Insurance Commissioners Financial Analysis Handbook, shall
  210  submit a corporate governance annual disclosure to the office by
  211  June 1 of each calendar year. The initial corporate governance
  212  annual disclosure must be submitted by December 31, 2018.
  213         b. An insurer or insurance group not required to submit a
  214  corporate governance annual disclosure under sub-subparagraph a.
  215  shall do so at the request of the office, but not more than once
  216  per calendar year. The insurer or insurance group shall notify
  217  the office of the proposed submission date within 30 days after
  218  the request of the office.
  219         c. Before December 31, 2018, the office may require an
  220  insurer or insurance group to provide a corporate governance
  221  annual disclosure:
  222         (I) Based on unique circumstances, including, but not
  223  limited to, the type and volume of business written, the
  224  ownership and organizational structure, federal agency requests,
  225  and international supervisor requests;
  226         (II) If the insurer has risk-based capital for a company
  227  action level event pursuant to s. 624.4085(3), meets one or more
  228  of the standards of an insurer deemed to be in hazardous
  229  financial condition as defined in rules adopted pursuant to s.
  230  624.81(11), or exhibits qualities of an insurer in hazardous
  231  financial condition as determined by the office;
  232         (III) If the insurer is the member of an insurer group of
  233  which the office acts as the lead state regulator as determined
  234  by the procedures in the most recent National Association of
  235  Insurance Commissioners Financial Analysis Handbook; or
  236         (IV) If the office determines that it is in the best
  237  interest of the state.
  238         2. The chief executive officer or corporate secretary of
  239  the insurer or the insurance group must sign the corporate
  240  governance annual disclosure attesting that, to the best of his
  241  or her knowledge and belief, the insurer has implemented the
  242  corporate governance practices and provided a copy of the
  243  disclosure to the board of directors or the appropriate board
  244  committee.
  245         3.a. Depending on the structure of its system of corporate
  246  governance, the insurer or insurance group may provide corporate
  247  governance information at one of the following levels:
  248         (I) The ultimate controlling parent level;
  249         (II) An intermediate holding company level; or
  250         (III) The individual legal entity level.
  251         b. The insurer or insurance group may make the corporate
  252  governance annual disclosure at:
  253         (I) The level used to determine the risk appetite of the
  254  insurer or insurance group;
  255         (II) The level at which the earnings, capital, liquidity,
  256  operations, and reputation of the insurer are collectively
  257  overseen and the supervision of those factors is coordinated and
  258  exercised; or
  259         (III) The level at which legal liability for failure of
  260  general corporate governance duties would be placed.
  261  
  262  An insurer or insurance group must indicate the level of
  263  reporting used and explain any subsequent changes in the
  264  reporting level.
  265         4. The review of the corporate governance annual disclosure
  266  and any additional requests for information shall be made
  267  through the lead state as determined by the procedures in the
  268  most recent National Association of Insurance Commissioners
  269  Financial Analysis Handbook.
  270         5. An insurer or insurance group may comply with this
  271  paragraph by cross-referencing other existing relevant and
  272  applicable documents, including, but not limited to, the ORSA
  273  summary report, Holding Company Form B or F filings, Securities
  274  and Exchange Commission proxy statements, or foreign regulatory
  275  reporting requirements, if the documents contain information
  276  substantially similar to the information described in paragraph
  277  (c). The insurer or insurance group shall clearly identify and
  278  reference the specific location of the relevant and applicable
  279  information within the corporate governance annual disclosure
  280  and attach the referenced document if it has not already been
  281  filed with, or made available to, the office.
  282         6. Each year following the initial filing of the corporate
  283  governance annual disclosure, the insurer or insurance group
  284  shall file an amended version of the previously filed corporate
  285  governance annual disclosure indicating changes that have been
  286  made. If changes have not been made in the previously filed
  287  disclosure, the insurer or insurance group should so indicate.
  288         (c) Preparation of the corporate governance annual
  289  disclosure.—
  290         1. The corporate governance annual disclosure must be
  291  prepared in a manner consistent with this subsection.
  292  Documentation and supporting information must be maintained and
  293  made available upon examination pursuant to s. 624.316 or upon
  294  the request of the office.
  295         2. The corporate governance annual disclosure must be as
  296  descriptive as possible and include any attachments or example
  297  documents used in the governance process.
  298         3. The insurer or insurance group has discretion in
  299  determining the appropriate format of the corporate governance
  300  annual disclosure in communicating the required information and
  301  responding to inquiries, provided that the corporate governance
  302  annual disclosure includes material and relevant information
  303  sufficient to enable the office to understand the corporate
  304  governance structure, policies, and practices used by the
  305  insurer or insurance group.
  306         4. The corporate governance annual disclosure must describe
  307  the:
  308         a. Corporate governance framework and structure of the
  309  insurer or insurance group.
  310         b. Policies and practices of the most senior governing
  311  entity and significant committees.
  312         c. Policies and practices for directing senior management.
  313         d. Processes by which the board, its committees, and senior
  314  management ensure an appropriate amount of oversight to the
  315  critical risk areas that have an impact on the insurer’s
  316  business activities.
  317         (4) CONFIDENTIALITY.—The filings and related documents
  318  submitted pursuant to subsections (2) and (3) are privileged
  319  such that they may not be produced in response to a subpoena or
  320  other discovery directed to the office, and any such filings and
  321  related documents, if obtained from the office, are not
  322  admissible in evidence in any private civil action. However, the
  323  department or office may use these filings and related documents
  324  in the furtherance of any regulatory or legal action brought
  325  against an insurer as part of the official duties of the
  326  department or office. A waiver of any applicable claim of
  327  privilege in these filings and related documents may not occur
  328  because of a disclosure to the office under this section,
  329  because of any other provision of the Insurance Code, or because
  330  of sharing under s. 624.4212. The office or a person receiving
  331  these filings and related documents, while acting under the
  332  authority of the office, or with whom such filings and related
  333  documents are shared pursuant to s. 624.4212, is not permitted
  334  or required to testify in any private civil action concerning
  335  any such filings or related documents.
  336         (5) USE OF THIRD-PARTY CONSULTANTS.—The office may retain
  337  third-party consultants at the expense of the insurer or
  338  insurance group for the purpose of assisting it in the
  339  performance of its regulatory responsibilities under this
  340  section, including, but not limited to, the risk management
  341  framework, the ORSA, the ORSA summary report, and the corporate
  342  governance annual disclosure. The NAIC or a third-party
  343  consultant must agree, in writing, to:
  344         (a) Adhere to confidentiality standards and requirements
  345  applicable to the office governing the sharing and use of such
  346  filings and related documents as evidenced by specific
  347  procedures and protocols for maintaining the confidentiality and
  348  security of information shared with the NAIC or a third-party
  349  consultant pursuant to this section.
  350         (b) Verify to the office, with notice to the insurer, that
  351  the consultant is free of any conflict of interest.
  352         (c) Monitor compliance with applicable confidentiality and
  353  conflict of interest standards pursuant to a system of internal
  354  procedures.
  355         (d) Not store the information shared pursuant to this
  356  section in a permanent database after the underlying analysis is
  357  complete.
  358         (e) Provide prompt notice to the office and to the insurer
  359  or insurance group regarding any subpoena, request for
  360  disclosure, or request for production of the insurer’s filings
  361  and related documents submitted pursuant to subsections (2) and
  362  (3).
  363         (f) Intervention by an insurer in any judicial or
  364  administrative action in which the NAIC or a third-party
  365  consultant may be required to disclose confidential information
  366  about the insurer shared within the NAIC or a third-party
  367  consultant pursuant to this section.
  368         (6) RULE ADOPTION.—The commission may adopt rules to
  369  administer this section.
  370         Section 2. Subsections (1) and (4) of section 628.803,
  371  Florida Statutes, are amended to read:
  372         628.803 Sanctions.—
  373         (1) Any company failing, without just cause, to file any
  374  registration statement or certificate of exemption required to
  375  be filed pursuant to commission rules relating to this part or
  376  to submit an ORSA summary report or a corporate governance
  377  annual disclosure required pursuant to s. 628.8015 shall, in
  378  addition to other penalties prescribed under the Florida
  379  Insurance Code, be subject to pay a penalty of $100 for each
  380  day’s delay, not to exceed a total of $10,000.
  381         (4) If the office determines that any person violated s.
  382  628.461, or s. 628.801, or s. 628.8015, the violation may serve
  383  as an independent basis for disapproving dividends or
  384  distributions and for placing the insurer under an order of
  385  supervision in accordance with part VI of chapter 624.
  386         Section 3. Section 628.8015, Florida Statutes, and the
  387  amendments made by this act to s. 628.803, Florida Statutes, are
  388  repealed on October 2, 2021, unless, before that date, the
  389  Legislature saves from repeal through reenactment the amendments
  390  to s. 624.4212, Florida Statutes, made by SB 1416 or similar
  391  legislation.
  392         Section 4. This act shall take effect October 1, 2016, if
  393  SB 1416 or similar legislation is adopted in the same
  394  legislative session or an extension thereof and becomes a law.