Bill Text: FL H1007 | 2011 | Regular Session | Engrossed

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Bill Title: Insurer Insolvency

Spectrum: Slight Partisan Bill (Democrat 4-1-1)

Status: (Engrossed - Dead) 2011-05-02 - Ordered enrolled -HJ 1004 [H1007 Detail]

Download: Florida-2011-H1007-Engrossed.html

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CS/HB 1007

1	A bill to be entitled
2	An act relating to insurer insolvency; amending s.
3	215.5595, F.S., relating to the Insurance Capital Build-Up
4	Incentive Program; providing for renegotiation of surplus
5	notes issued before a specified date; providing for an
6	exemption from certain premium-to-surplus ratios in
7	certain circumstances; amending s. 624.610, F.S.; revising
8	surplus requirements for assuming insurers in connection
9	with reinsurance credits; specifying rating agencies that
10	may rate such assuming insurers; creating s. 631.400,
11	F.S.; providing for rehabilitation plans for title
12	insurers; providing that each title insurer doing business
13	in this state is liable for an assessment for claims
14	against title insurers ordered into rehabilitation;
15	providing for an annual assessment upon request of a
16	receiver; providing for emergency assessments in certain
17	circumstances; providing limits on the amount of an
18	assessment; providing that assessments are considered an
19	asset of the estate and subject to specified provisions;
20	providing for use of assessment proceeds; providing for
21	availability of information concerning unpaid claims;
22	specifying circumstances for release of title insurers
23	from rehabilitation; prohibiting a title insurer in
24	rehabilitation from issuing new policies until released
25	from rehabilitation and permission to issue new policies
26	granted; providing that officers, directors, and
27	shareholders of a title insurer who served in that
28	capacity within the 2-year period prior to the date the
29	insurer was ordered into rehabilitation or liquidation may
30	not thereafter serve in that capacity unless the officer,
31	director, and shareholder meets specified criteria;
32	creating s. 631.401, F.S.; providing for surcharges on
33	title insurance policies to collect the amount needed to
34	cover an assessment for an insolvent insurer; providing
35	for a maximum period for a surcharge; providing a maximum
36	for a surcharge; providing for responsibility for payment
37	of a surcharge; providing for collection of surcharges by
38	a title insurer doing business in the state writing no
39	premiums in the prior calendar year; providing for
40	remission and collection of surcharges within a specified
41	period; specifying a limit on the amount in surcharges
42	that may be retained by a title insurer; requiring
43	notification when the collection of an assessment is
44	completed; requiring an accounting of assessments paid and
45	surcharges collected; providing for disposition of
46	surcharges collected in excess of the amount assessed;
47	amending s. 631.152, F.S.; authorizing the Department of
48	Financial Services to request appointment as ancillary
49	receiver if necessary for obtaining records to adjudicate
50	covered claims; providing for the reimbursement of
51	specified costs associated with ancillary delinquency
52	proceedings; creating s. 631.2715, F.S.; providing for
53	State Risk Management Trust Fund coverage for specified
54	officers, employees, agents, and other representatives of
55	the Department of Financial Services for liability under
56	specified federal laws relating to receiverships; amending
57	s. 631.391, F.S.; providing liability to persons who fail
58	to cooperate in the providing of records; amending s.
59	631.54, F.S.; providing that a covered claim for purposes
60	of specified guaranty provisions does not include a claim
61	rejected or denied by another state's guaranty fund based
62	upon that state's statutory exclusions; amending s.
63	631.56, F.S.; providing that any board member of the
64	Florida Insurance Guaranty Association representing an
65	insurer in receivership shall be terminated as a board
66	member; specifying a termination date; amending s.
67	631.904, F.S.; providing that a covered claim for purposes
68	of specified guaranty provisions does not include a claim
69	rejected or denied by another state's guaranty fund based
70	upon that state's statutory exclusions; amending s.
71	631.912, F.S.; providing that any board member of the
72	Florida Workers' Compensation Insurance Guaranty
73	Association who is employed by, or has a material
74	relationship with, an insurer in receivership shall be
75	terminated as a board member; specifying a termination
76	date; amending s. 631.717, F.S.; providing that specified
77	provisions relieving the Florida Life and Health Insurance
78	Guaranty Association of liability for certain acts of a
79	member insurer do not relieve the association of liability
80	for valid insurance policy or contract claims if warranted
81	after a specified review; providing an effective date.
82
83	Be It Enacted by the Legislature of the State of Florida:
84
85	Section 1.  Subsection (11) of section 215.5595, Florida
86	Statutes, is amended to read:
87	215.5595  Insurance Capital Build-Up Incentive Program.-
88	(11)  For a surplus note issued under this section before
89	January 1, 2011, the insurer may request that the board
90	renegotiate terms of the note as provided in this subsection.
91	The request must be submitted to the board by January 1, 2012.
92	If the insurer agrees to accelerate the payment period of the
93	note by at least 5 years, the board shall agree to exempt the
94	insurer from the premium-to-surplus ratios required under
95	paragraph (2)(d). If the insurer requesting the renegotiation
96	agrees to an acceleration of the payment period of less than 5
97	years, the board may, after consultation with the Office of
98	Insurance Regulation, agree to an appropriate revision of the
99	premium-to-surplus ratios required under paragraph (2)(d) for
100	the remaining term of the note. However, the revised ratios may
101	not be lower than a minimum writing ratio of net premium to
102	surplus of at least 1:1, and alternatively, a minimum writing
103	ratio of gross premium to surplus of at least 3:1 On January 15,
104	2009, the State Board of Administration shall transfer to
105	Citizens Property Insurance Corporation any funds that have not
106	been committed or reserved for insurers approved to receive such
107	funds under the program, from the funds that were transferred
108	from Citizens Property Insurance Corporation in 2008-2009 for
109	such purposes.
110	Section 2.  Paragraph (e) of subsection (3) of section
111	624.610, Florida Statutes, is amended to read:
112	624.610  Reinsurance.-
113	(3)
114	(e)  If the reinsurance is ceded to an assuming insurer not
115	meeting the requirements of paragraph (a), paragraph (b),
116	paragraph (c), or paragraph (d), the commissioner may allow
117	credit, but only if the assuming insurer holds surplus in excess
118	of $250 $100 million and has a secure financial strength rating
119	from at least two nationally recognized statistical rating
120	organizations deemed acceptable by the commissioner as having
121	experience and expertise in rating insurers doing business in
122	Florida, including, but not limited to, Standard & Poor's,
123	Moody's Investors Service, Fitch Ratings, A.M. Best Company, and
124	Demotech. In determining whether credit should be allowed, the
125	commissioner shall consider the following:
126	1.  The domiciliary regulatory jurisdiction of the assuming
127	insurer.
128	2.  The structure and authority of the domiciliary
129	regulator with regard to solvency regulation requirements and
130	the financial surveillance of the reinsurer.
131	3.  The substance of financial and operating standards for
132	reinsurers in the domiciliary jurisdiction.
133	4.  The form and substance of financial reports required to
134	be filed by the reinsurers in the domiciliary jurisdiction or
135	other public financial statements filed in accordance with
136	generally accepted accounting principles.
137	5.  The domiciliary regulator's willingness to cooperate
138	with United States regulators in general and the office in
139	particular.
140	6.  The history of performance by reinsurers in the
141	domiciliary jurisdiction.
142	7.  Any documented evidence of substantial problems with
143	the enforcement of valid United States judgments in the
144	domiciliary jurisdiction.
145	8.  Any other matters deemed relevant by the commissioner.
146	The commissioner shall give appropriate consideration to insurer
147	group ratings that may have been issued. The commissioner may,
148	in lieu of granting full credit under this subsection, reduce
149	the amount required to be held in trust under paragraph (c).
150	Section 3.  Section 631.400, Florida Statutes, is created
151	to read:
152	631.400  Rehabilitation of title insurer.-
153	(1)  After the entry of an order of rehabilitation, the
154	receiver shall review the condition of the insurer and file a
155	plan of rehabilitation for approval with the court. The plan of
156	rehabilitation shall provide:
157	(a)  That policies on real property in this state issued by
158	the title insurer in rehabilitation shall remain in force unless
159	the receiver determines the assessment capacity provided by this
160	section is insufficient to pay claims in the ordinary course of
161	business.
162	(b)  That policies on real property located outside the
163	this state may be canceled as of a date provided by the receiver
164	and approved by the court if the state in which the property is
165	located does not have statutory provisions to pay future losses
166	on those policies.
167	(c)  A claims filing deadline for policies on real property
168	located outside this state which are canceled under paragraph
169	(b).
170	(d)  A proposed percentage of the remaining estate assets
171	to fund out-of-state claims where policies have been canceled,
172	with any unused funds being returned to the general assets of
173	the estate.
174	(e)  A proposed percentage of the remaining estate assets
175	to fund out-of-state claims where policies remain in force.
176	(f)  That the funds allocated to pay claims on policies
177	located outside of this state shall be based on the pro rata
178	share of premiums written in each state over each of the 5
179	calendar years preceding the date of an order of rehabilitation.
180	(2)  As a condition of doing business in this state, each
181	title insurer shall be liable for an assessment to pay all
182	unpaid title insurance claims and expenses of administering and
183	settling those claims on real property in this state for any
184	title insurer that is ordered into rehabilitation.
185	(3)  The office shall order an assessment if requested by
186	the receiver on an annual basis in an amount that the receiver
187	deems sufficient for the payment of known claims, loss
188	adjustment expenses, and the cost of administration of the
189	rehabilitation expenses. The receiver shall consider the
190	remaining assets of the insurer in receivership when making its
191	request to the office. Annual assessments may be made until no
192	more policies of the title insurer in rehabilitation are in
193	force or the potential future liability has been satisfied. The
194	office may exempt or limit the assessment of a title insurer if
195	such assessment would result in a reduction to surplus as to
196	policyholders below the minimum required to maintain the
197	insurer's certificate of authority in any state.
198	(4)  Assessments shall be based on the total of the direct
199	title insurance premiums written in this state as reported to
200	the office for the most recent calendar year. Each title insurer
201	doing business in this state shall be assessed on a pro rata
202	share basis of the total direct title insurance premiums written
203	in this state.
204	(5)  Assessments shall be paid to the receiver within 90
205	days after notice of the assessment or pursuant to a quarterly
206	installment plan approved by the receiver. Any insurer that
207	elects to pay an assessment on an installment plan shall also
208	pay a financing charge to be determined by the receiver.
209	(6)  The office shall order an emergency assessment if
210	requested by the receiver. The total of any emergency
211	assessment, when added to any annual assessment in a single
212	calendar year, may not exceed the limitation in subsection (7).
213	(7)  No title insurer shall be required to pay an
214	assessment in any one year that exceeds 3 percent of its surplus
215	to policyholders as of the end of the previous calendar year or
216	more than 10 percent of its surplus to policyholders over any
217	consecutive 5-year period. The 10 percent limitation shall be
218	calculated as the sum of the percentages of surplus to
219	policyholders assessed in each of those 5 years.
220	(8)  Assessments and emergency assessments once ordered by
221	the office shall be considered assets of the estate and subject
222	to the provisions of s. 631.154.
223	(9)  In an effort to keep in force the policies on real
224	property located in this state issued by the title insurer in
225	rehabilitation, the receiver may use the proceeds of an
226	assessment to acquire reinsurance or otherwise provide for the
227	assumption of policy obligations by another insurer.
228	(10)  The receiver shall make available information
229	regarding unpaid claims on a quarterly basis.
230	(11)  A title insurer in rehabilitation may not be released
231	from rehabilitation until all of the assessed insurers have
232	recovered the amount assessed either through surcharges
233	collected pursuant to s. 631.401 or payments from the insurer in
234	rehabilitation.
235	(12)  A title insurer in rehabilitation for which an
236	assessment has been ordered pursuant to this section may not
237	issue any new policies until released from rehabilitation and it
238	shall have received approval from the office to resume issuing
239	policies.
240	(13)  Officers, directors, and shareholders of a title
241	insurer who served in that capacity within the 2-year period
242	prior to the date the title insurer was ordered into
243	rehabilitation or liquidation may not thereafter serve as an
244	officer, director, or shareholder of an insurer authorized in
245	this state unless the officer, director, or shareholder
246	demonstrates to the office for the 2-year period immediately
247	preceding the receivership that:
248	(a)  His or her personal actions or omissions were not a
249	significant contributing cause to the receivership;
250	(b)  He or she did not willfully violate any order of the
251	office;
252	(c)  He or she did not receive directly or indirectly any
253	distribution of funds from the insurer in excess of amounts
254	authorized in writing by the office;
255	(d)  The financial statements filed with the office were
256	true and correct statements of the title insurer's financial
257	contrition;
258	(e)  He or she did not engage in any business practices
259	which were hazardous to the policyholders, creditors, or the
260	public; and
261	(f)  He or she at all times acted in the best interests of
262	the title insurer.
263	Section 4.  Section 631.401, Florida Statutes, is created
264	to read:
265	631.401  Recovery of assessments and assumed policy
266	obligations.-
267	(1)  Upon the making of any assessment allowed by s.
268	631.400, the office shall order a surcharge on each title
269	insurance policy thereafter issued insuring an interest in real
270	property in this state. The office shall set the per transaction
271	surcharge at an amount estimated to generate sufficient funds to
272	recover the amount assessed over a period of not more than 7
273	years. The amount of the surcharge ordered under this section
274	may not exceed $25 per transaction for each impaired title
275	insurer. If additional surcharges are occasioned by additional
276	title insurers becoming impaired, the office shall order an
277	increase in the amount of the surcharge to reflect the aggregate
278	surcharge.
279	(2)  The party responsible for payment of title insurance
280	premium, unless otherwise agreed between the parties, shall be
281	responsible for the payment of the surcharge. No surcharge will
282	be due or owing as to any policy of title insurance issued at
283	the simultaneous issue rate. For all other purposes, the
284	surcharge will be considered a governmental assessment to be
285	separately stated on any settlement statement. The surcharge is
286	not subject to premium tax or reserve requirements under chapter
287	625.
288	(3)  Title insurers doing business in this state writing no
289	premiums in the prior calendar year shall collect the same per
290	transaction surcharge as provided by this section. Such
291	surcharge collected shall be paid to the receiver within 60 days
292	after receipt from the title agent or agency.
293	(4)  Each title insurance agent, agency, or direct title
294	operation shall collect the surcharge as to each title insurance
295	policy written and remit those surcharges along with the
296	policies and premiums within 60 days to the title insurer on
297	whom the policy was written.
298	(5)  A title insurer may not retain more in surcharges for
299	an ordered assessment than the amount of assessment that title
300	insurer paid.
301	(6)  Each title insurer collecting surcharges shall
302	promptly notify the office when it has collected surcharges
303	equal to the amount of the assessment paid pursuant to s.
304	631.400. The office shall notify all companies, including those
305	collecting surcharges as required by subsection (3), to cease
306	collecting surcharges when notified that all assessments have
307	been recovered.
308	(7)  In conjunction with the filing of each quarterly
309	financial statement, each title insurer shall provide the office
310	with an accounting of assessments paid and surcharges collected
311	during the period. Any surcharges collected in excess of the
312	amount assessed shall be paid to the Insurance Regulatory Trust
313	Fund.
314	Section 5.  Section 631.152, Florida Statutes, is amended
315	to read:
316	631.152  Conduct of delinquency proceeding; foreign
317	insurers.-
318	(1)  Whenever under this chapter an ancillary receiver is
319	to be appointed in a delinquency proceeding for an insurer not
320	domiciled in this state, the court shall appoint the department
321	as ancillary receiver. The department shall file a petition
322	requesting the appointment on the grounds set forth in s.
323	631.091:
324	(a)  If it finds that there are sufficient assets of the
325	insurer located in this state to justify the appointment of an
326	ancillary receiver;, or
327	(b)  If 10 or more persons resident in this state having
328	claims against such insurer file a petition with the department
329	or office requesting the appointment of such ancillary receiver;
330	or.
331	(c)  If it finds it is necessary to obtain records to
332	adjudicate the covered claims of Florida policyholders.
333	(2)  The domiciliary receiver for the purpose of
334	liquidating an insurer domiciled in a reciprocal state shall be
335	vested by operation of law with the title to all of the property
336	(except statutory deposits, special statutory deposits, and
337	property located in this state subject to a security interest),
338	contracts, and rights of action, and all of the books and
339	records of the insurer located in this state, and it shall have
340	the immediate right to recover balances due from local agents
341	and to obtain possession of any books and records of the insurer
342	found in this state. It shall also be entitled to recover the
343	property subject to a security interest, statutory deposits, and
344	special statutory deposits of the insurer located in this state,
345	except that upon the appointment of an ancillary receiver in
346	this state, the ancillary receiver shall during the ancillary
347	receivership proceeding have the sole right to recover such
348	other assets. The ancillary receiver shall, as soon as
349	practicable, liquidate from their respective securities those
350	special deposit claims and secured claims which are proved and
351	allowed in the ancillary proceeding in this state, and shall pay
352	the necessary expenses of the proceeding. All remaining assets
353	it shall promptly transfer to the domiciliary receiver. Subject
354	to the foregoing provisions, the ancillary receiver and its
355	agents shall have the same powers and be subject to the same
356	duties with respect to the administration of such assets as a
357	receiver of an insurer domiciled in this state.
358	(3)  The domiciliary receiver of an insurer domiciled in a
359	reciprocal state may sue in this state to recover any assets of
360	such insurer to which it may be entitled under the laws of this
361	state.
362	(4)  Section 631.141(7)(b) applies to ancillary delinquency
363	proceedings opened for the purpose of obtaining records
364	necessary to adjudicate the covered claims of Florida
365	policyholders.
366	Section 6.  Section 631.2715, Florida Statutes, is created
367	to read:
368	631.2715  Liability under federal priority of claims law.-
369	The State Risk Management Trust Fund shall cover department
370	officers, employees, agents, and other representatives for any
371	liability under the federal act relating to priority of claims,
372	31 U.S.C. s. 3713, for any action taken by them in the
373	performance of their powers and duties under this chapter.
374	Section 7.  Subsection (6) is added to section 631.391,
375	Florida Statutes, to read:
376	631.391  Cooperation of officers and employees.-
377	(6)  Any person referred to in subsection (1) who refuses
378	to cooperate in providing records upon the request of the
379	department or office is liable for any penalties, fines, or
380	other costs assessed against the guaranty association or the
381	receiver that result from the refusal or delay to provide
382	records.
383	Section 8.  Subsection (3) of section 631.54, Florida
384	Statutes, is amended to read:
385	631.54  Definitions.-As used in this part:
386	(3)  "Covered claim" means an unpaid claim, including one
387	of unearned premiums, which arises out of, and is within the
388	coverage, and not in excess of, the applicable limits of an
389	insurance policy to which this part applies, issued by an
390	insurer, if such insurer becomes an insolvent insurer and the
391	claimant or insured is a resident of this state at the time of
392	the insured event or the property from which the claim arises is
393	permanently located in this state. For entities other than
394	individuals, the residence of a claimant, insured, or
395	policyholder is the state in which the entity's principal place
396	of business is located at the time of the insured event.
397	"Covered claim" does shall not include:
398	(a)  Any amount due any reinsurer, insurer, insurance pool,
399	or underwriting association, sought directly or indirectly
400	through a third party, as subrogation, contribution,
401	indemnification, or otherwise; or
402	(b)  Any claim that would otherwise be a covered claim
403	under this part that has been rejected or denied by any other
404	state guaranty fund based upon that state's statutory
405	exclusions, including, but not limited to, those based on
406	coverage, policy type, or an insured's net worth on the grounds
407	that an insured's net worth is greater than that allowed under
408	that state's guaranty law. Member insurers shall have no right
409	of subrogation, contribution, indemnification, or otherwise,
410	sought directly or indirectly through a third party, against the
411	insured of any insolvent member.
412	Section 9.  Subsection (4) is added to section 631.56,
413	Florida Statutes, to read:
414	631.56  Board of directors.-
415	(4)  Any board member representing an insurer in
416	receivership shall be terminated as a board member, effective as
417	of the date of the entry of the order of receivership.
418	Section 10.  Subsection (2) of section 631.904, Florida
419	Statutes, is amended to read:
420	631.904  Definitions.-As used in this part, the term:
421	(2)  "Covered claim" means an unpaid claim, including a
422	claim for return of unearned premiums, which arises out of, is
423	within the coverage of, and is not in excess of the applicable
424	limits of, an insurance policy to which this part applies, which
425	policy was issued by an insurer and which claim is made on
426	behalf of a claimant or insured who was a resident of this state
427	at the time of the injury. The term "covered claim" includes
428	unpaid claims under any employer liability coverage of a
429	workers' compensation policy limited to the lesser of $300,000
430	or the limits of the policy. The term "covered claim" does not
431	include any amount sought as a return of premium under any
432	retrospective rating plan; any amount due any reinsurer,
433	insurer, insurance pool, or underwriting association, as
434	subrogation recoveries or otherwise; any claim that would
435	otherwise be a covered claim that has been rejected or denied by
436	any other state guaranty fund based upon that state's statutory
437	exclusions, including, but not limited to, those based on
438	coverage, policy type, or an insured's net worth on the grounds
439	that the insured's net worth is greater than that allowed under
440	that state's guaranty fund or liquidation law, except this
441	exclusion from the definition of covered claim does shall not
442	apply to employers who, prior to April 30, 2004, entered into an
443	agreement with the corporation preserving the employer's right
444	to seek coverage of claims rejected by another state's guaranty
445	fund; or any return of premium resulting from a policy that was
446	not in force on the date of the final order of liquidation.
447	Member insurers have no right of subrogation against the insured
448	of any insolvent insurer. This provision applies shall be
449	applied retroactively to cover claims of an insolvent self-
450	insurance fund resulting from accidents or losses incurred prior
451	to January 1, 1994, regardless of the date the petition in
452	circuit court was filed alleging insolvency and the date the
453	court entered an order appointing a receiver.
454	Section 11.  Subsection (3) is added to section 631.912,
455	Florida Statutes, to read:
456	631.912  Board of directors.-
457	(3)  Any board member who is employed by, or has a material
458	relationship with, an insurer in receivership shall be
459	terminated as a board member, effective as of the date of the
460	entry of the order of receivership.
461	Section 12.  Subsection (11) of section 631.717, Florida
462	Statutes, is amended to read:
463	631.717  Powers and duties of the association.-
464	(11)  The association shall not be liable for any civil
465	action under s. 624.155 arising from any acts alleged to have
466	been committed by a member insurer prior to its liquidation.
467	This subsection does not affect the association's obligation to
468	pay valid insurance policy or contract claims if warranted after
469	its independent de novo review of the policies, contracts, and
470	claims presented to it, whether domestic or foreign, after a
471	Florida domestic rehabilitation or a liquidation ; however, this
472	subsection does not affect the association's obligation to pay
473	valid claims presented to it.
474	Section 13.  This act shall take effect July 1, 2011.

CODING: Words stricken are deletions; words underlined are additions.