Bill Text: FL S1568 | 2011 | Regular Session | Comm Sub
Bill Title: Insurer Insolvency
Spectrum: Slight Partisan Bill (? 2-1)
Status: (Introduced - Dead) 2011-05-02 - Read 2nd time -SJ 638 [S1568 Detail]
Download: Florida-2011-S1568-Comm_Sub.html
Florida Senate - 2011 CS for CS for SB 1568 By the Committees on Budget; and Banking and Insurance; and Senator Montford 576-04686-11 20111568c2 1 A bill to be entitled 2 An act relating to insurer insolvency; amending s. 3 215.5595, F.S.; authorizing a residential property 4 insurer to renegotiate a note issued by the Insurance 5 Capital Build-Up Incentive Program under certain 6 circumstances; amending s. 624.424, F.S.; revising the 7 time limitations on an insurer’s use of the same 8 accountant for preparing its annual statement; 9 amending s. 624.610, F.S.; specifying the rating 10 organizations that are deemed acceptable by the 11 Financial Services Commission to assess certain 12 insurers providing reinsurance; amending s. 631.152, 13 F.S.; authorizing the Department of Financial Services 14 to request appointment as ancillary receiver if 15 necessary in order to obtain records to adjudicate 16 covered claims; providing for the reimbursement of 17 specified costs associated with ancillary delinquency 18 proceedings; creating s. 631.2715, F.S.; providing for 19 the State Risk Management Trust Fund to cover 20 specified officers, employees, agents, and other 21 representatives of the Department of Financial 22 Services for liability under specified federal laws 23 relating to receiverships; amending s. 631.391, F.S.; 24 imposing penalties on persons who fail to cooperate in 25 providing records; amending s. 631.54, F.S.; revising 26 the definition of the term “covered claim” to exclude 27 a claim rejected or denied by another state’s guaranty 28 fund based upon that state’s statutory exclusions; 29 amending s. 631.56, F.S.; providing that a board 30 member of the Florida Insurance Guaranty Association 31 representing an insurer in receivership shall be 32 terminated as a board member; specifying a termination 33 date; amending s. 631.904, F.S.; revising the 34 definition of the term “covered claim” to exclude a 35 claim rejected or denied by another state’s guaranty 36 fund based upon that state’s statutory exclusions; 37 amending s. 631.912, F.S.; providing that any board 38 member of the Florida Workers’ Compensation Insurance 39 Guaranty Association who is employed by, or has a 40 material relationship with, an insurer in receivership 41 shall be terminated as a board member; specifying a 42 termination date; providing an effective date. 43 44 Be It Enacted by the Legislature of the State of Florida: 45 46 Section 1. Subsection (11) of section 215.5595, Florida 47 Statutes, is amended to read: 48 215.5595 Insurance Capital Build-Up Incentive Program.— 49 (11) For a surplus note issued under this section before 50 January 1, 2011, the insurer may request that the board 51 renegotiate terms of the note as provided in this subsection. 52 The request must be submitted to the board by January 1, 2012. 53 If the insurer agrees to accelerate the payment period of the 54 note by at least 5 years, the board shall agree to exempt the 55 insurer from the premium-to-surplus ratios required under 56 paragraph (2)(d). If the insurer requesting the renegotiation 57 agrees to an acceleration of the payment period of less than 5 58 years, the board may, after consultation with the Office of 59 Insurance Regulation, agree to an appropriate revision of the 60 premium-to-surplus ratios for the remaining term of the note. 61 However, the revised ratios may not be lower than a minimum 62 writing ratio of net premium to surplus of at least 1 to 1, and 63 alternatively, a minimum writing ratio of gross premium to 64 surplus of at least 3 to 1.On January 15, 2009, the State Board65of Administration shall transfer to Citizens Property Insurance66Corporation any funds that have not been committed or reserved67for insurers approved to receive such funds under the program,68from the funds that were transferred from Citizens Property69Insurance Corporation in 2008-2009 for such purposes.70 Section 2. Paragraph (d) of subsection (8) of section 71 624.424, Florida Statutes, is amended to read: 72 624.424 Annual statement and other information.— 73 (8) 74 (d) An insurer may not use the same accountant or partner 75 of an accounting firm responsible for preparing the report 76 required by this subsection for more than 57consecutive years. 77 Following this period, the insurer may not use such accountant 78 or partner for 5a period of2years, but may use another 79 accountant or partner of the same firm. An insurer may request 80 the office to waive this prohibition based upon an unusual 81 hardship to the insurer and a determination that the accountant 82 is exercising independent judgment that is not unduly influenced 83 by the insurer considering such factors as the number of 84 partners, expertise of the partners or the number of insurance 85 clients of the accounting firm; the premium volume of the 86 insurer; and the number of jurisdictions in which the insurer 87 transacts business. 88 Section 3. Paragraph (e) of subsection (3) of section 89 624.610, Florida Statutes, is amended to read: 90 624.610 Reinsurance.— 91 (3) 92 (e) If the reinsurance is ceded to an assuming insurer not 93 meeting the requirements of paragraph (a), paragraph (b), 94 paragraph (c), or paragraph (d), the commissioner may allow 95 credit, but only if the assuming insurer holds surplus in excess 96 of $250$100million and has a secure financial strength rating 97 from at least twonationally recognizedstatistical rating 98 organizations deemed acceptable by the commissioner as having 99 experience and expertise in rating insurers doing business in 100 this state, including, but not limited to, Standard & Poor’s, 101 Moody’s Investors Service, Fitch Ratings, A.M. Best Company, and 102 Demotech. In determining whether credit should be allowed, the 103 commissioner shall considerthe following: 104 1. The domiciliary regulatory jurisdiction of the assuming 105 insurer. 106 2. The structure and authority of the domiciliary regulator 107 with regard to solvency regulation requirements and the 108 financial surveillance of the reinsurer. 109 3. The substance of financial and operating standards for 110 reinsurers in the domiciliary jurisdiction. 111 4. The form and substance of financial reports required to 112 be filed by the reinsurers in the domiciliary jurisdiction or 113 other public financial statements filed in accordance with 114 generally accepted accounting principles. 115 5. The domiciliary regulator’s willingness to cooperate 116 with United States regulators in general and the office in 117 particular. 118 6. The history of performance by reinsurers in the 119 domiciliary jurisdiction. 120 7. Any documented evidence of substantial problems with the 121 enforcement of valid United States judgments in the domiciliary 122 jurisdiction. 123 8. Any other matters deemed relevant by the commissioner. 124 The commissioner shall give appropriate consideration to insurer 125 group ratings that may have been issued.The commissioner may,126 In lieu of granting full credit under this subsection, the 127 commissioner may reduce the amount required to be held in trust 128 under paragraph (c). 129 Section 4. Section 631.152, Florida Statutes, is amended to 130 read: 131 631.152 Conduct of delinquency proceeding; foreign 132 insurers.— 133 (1) IfWhenever under this chapteran ancillary receiver is 134 to be appointed under this chapter in a delinquency proceeding 135 for an insurer not domiciled in this state, the court shall 136 appoint the department as ancillary receiver. The department 137 shall file a petition requesting the appointment on the grounds 138 set forth in s. 631.091: 139 (a) If it finds that there are sufficient assets of the 140 insurer located in this state to justify the appointment of an 141 ancillary receiver;, or142 (b) If 10 or more persons resident in this state having 143 claims against such insurer file a petition with the department 144 or office requesting the appointment of such ancillary receiver; 145 or.146 (c) If it finds it is necessary in order to obtain records 147 to adjudicate the covered claims of policyholders in this state. 148 (2) The domiciliary receiver for the purpose of liquidating 149 an insurer domiciled in a reciprocal state isshall bevested by 150 operation of law with the title to all of the property (except 151 statutory deposits, special statutory deposits, and property 152 located in this state subject to a security interest), 153 contracts, and rights of action, and all of the books and 154 records of the insurer located in this state, anditshall have 155 the immediate right to recover balances due from local agents 156 andtoobtain possession of any books and records of the insurer 157 found in this state. The domiciliary receiver isIt shallalso 158beentitled to recover the property subject to a security 159 interest, statutory deposits, and special statutory deposits of 160 the insurer located in this state, except that upon the 161 appointment of an ancillary receiver in this state, the 162 ancillary receiver shall during the ancillary receivership 163 proceeding have the sole right to recover such other assets. The 164 ancillary receiver shall, as soon as practicable, liquidate from 165 their respective securities those special deposit claims and 166 secured claims which are proved and allowed in the ancillary 167 proceeding in this state, andshallpay the necessary expenses 168 of the proceeding. The ancillary receiver shall promptly 169 transfer all remaining assetsit shall promptly transferto the 170 domiciliary receiver. Subject to the foregoing provisions, the 171 ancillary receiver and its agentsshallhave the same powers and 172 arebesubject to the same duties with respect to the 173 administration of such assets as a receiver of an insurer 174 domiciled in this state. 175 (3) The domiciliary receiver of an insurer domiciled in a 176 reciprocal state may sue in this state to recover any assets of 177 such insurer to which it may be entitled under the laws of this 178 state. 179 (4) The provisions of s. 631.141(7)(b) apply to ancillary 180 delinquency proceedings opened for the purpose of obtaining 181 records necessary to adjudicate the covered claims of 182 policyholders in this state. 183 Section 5. Section 631.2715, Florida Statutes, is created 184 to read: 185 631.2715 Liability under federal priority of claims law. 186 The State Risk Management Trust Fund shall cover department 187 officers, employees, agents, and other representatives for any 188 liability under the federal act relating to priority of claims, 189 31 U.S.C. s. 3713, for any action taken by them in the 190 performance of their powers and duties under this chapter. 191 Section 6. Subsection (6) is added to section 631.391, 192 Florida Statutes, to read: 193 631.391 Cooperation of officers and employees.— 194 (6) Any person referred to in subsection (1) who refuses to 195 cooperate in providing records upon the request of the 196 department or office is liable for any penalties, fines, or 197 other costs assessed against the guaranty association or the 198 receiver which result from the refusal or delay to provide 199 records. 200 Section 7. Subsection (3) of section 631.54, Florida 201 Statutes, is amended to read: 202 631.54 Definitions.—As used in this part: 203 (3) “Covered claim” means an unpaid claim, including one of 204 unearned premiums, which arises out of, and is within the 205 coverage, and not in excess of, the applicable limits of an 206 insurance policy to which this part applies, issued by an 207 insurer, if such insurer becomes an insolvent insurer and the 208 claimant or insured is a resident of this state at the time of 209 the insured event or the property from which the claim arises is 210 permanently located in this state. For entities other than 211 individuals, the residence of a claimant, insured, or 212 policyholder is the state in which the entity’s principal place 213 of business is located at the time of the insured event. 214 “Covered claim” doesshallnot include: 215 (a) Any amount due any reinsurer, insurer, insurance pool, 216 or underwriting association, sought directly or indirectly 217 through a third party, as subrogation, contribution, 218 indemnification, or otherwise; or 219 (b) Any claim that would otherwise be a covered claim under 220 this part that has been rejected or denied by any other state 221 guaranty fund based upon that state’s statutory exclusions, 222 including, but not limited to, those based on coverage, policy 223 type, or an insured’s net worthon the grounds that an insured’s224net worth is greater than that allowed under that state’s225guaranty law. Member insurersshallhave no right of 226 subrogation, contribution, indemnification, or otherwise, sought 227 directly or indirectly through a third party, against the 228 insured of any insolvent member. 229 Section 8. Subsection (4) is added to section 631.56, 230 Florida Statutes, to read: 231 631.56 Board of directors.— 232 (4) Any board member representing an insurer in 233 receivership shall be terminated as a board member, effective as 234 of the date of the entry of the order of receivership. 235 Section 9. Subsection (2) of section 631.904, Florida 236 Statutes, is amended to read: 237 631.904 Definitions.—As used in this part, the term: 238 (2) “Covered claim” means an unpaid claim, including a 239 claim for return of unearned premiums, which arises out of, is 240 within the coverage of, and is not in excess of the applicable 241 limits of, an insurance policy to which this part applies, which 242 policy was issued by an insurer and which claim is made on 243 behalf of a claimant or insured who was a resident of this state 244 at the time of the injury. The term“covered claim”includes 245 unpaid claims under any employer liability coverage of a 246 workers’ compensation policy limited to the lesser of $300,000 247 or the limits of the policy. The term“covered claim”does not 248 include any amount sought as a return of premium under any 249 retrospective rating plan; any amount due any reinsurer, 250 insurer, insurance pool, or underwriting association, as 251 subrogation recoveries or otherwise; any claim that would 252 otherwise be a covered claim that has been rejected or denied by 253 any other state guaranty fund based upon that state’s statutory 254 exclusions, including, but not limited to, those based on 255 coverage, policy type, or an insured’s net worthon the grounds256that the insured’s net worth is greater than that allowed under257that state’s guaranty fund or liquidation law, except this 258 exclusion from the definition of covered claim doesshallnot 259 apply to employers who, beforeprior toApril 30, 2004, entered 260 into an agreement with the corporation preserving the employer’s 261 right to seek coverage of claims rejected by another state’s 262 guaranty fund; or any return of premium resulting from a policy 263 that was not in force on the date of the final order of 264 liquidation. Member insurers have no right of subrogation 265 against the insured of any insolvent insurer. This provision 266 appliesshall be appliedretroactively to cover claims of an 267 insolvent self-insurance fund resulting from accidents or losses 268 incurred beforeprior toJanuary 1, 1994, regardless of the date 269 the petition in circuit court was filed alleging insolvency and 270 the date the court entered an order appointing a receiver. 271 Section 10. Subsection (3) is added to section 631.912, 272 Florida Statutes, to read: 273 631.912 Board of directors.— 274 (3) Any board member who is employed by, or has a material 275 relationship with, an insurer in receivership shall be 276 terminated as a board member, effective as of the date of the 277 entry of the order of receivership. 278 Section 11. This act shall take effect July 1, 2011.