Bill Text: FL S0610 | 2012 | Regular Session | Comm Sub
Bill Title: Captive Insurance
Spectrum: Slight Partisan Bill (? 2-1)
Status: (Introduced - Dead) 2012-03-09 - Died on Calendar, companion bill(s) passed, see CS/CS/HB 1101 (Ch. [S0610 Detail]
Download: Florida-2012-S0610-Comm_Sub.html
Florida Senate - 2012 CS for CS for SB 610
By the Committees on Budget Subcommittee on General Government
Appropriations; and Banking and Insurance; and Senator Diaz de
la Portilla
601-01880-12 2012610c2
1 A bill to be entitled
2 An act relating to captive insurance; amending s.
3 628.901, F.S.; providing definitions; amending s.
4 628.905, F.S.; expanding the kinds of insurance for
5 which a captive insurer may seek licensure; limiting
6 the risks that certain captive insurers may insure;
7 specifying requirements and conditions relating to a
8 captive insurer’s authority to conduct business;
9 requiring that before licensure certain captive
10 insurers must file or submit to the Office of
11 Insurance Regulation specified information, documents,
12 and statements; requiring a captive insurance company
13 to file specific evidence with the office relating to
14 the financial condition and quality of management and
15 operations of the company; specifying certain fees to
16 be paid by captive insurance companies; authorizing a
17 foreign or alien captive insurance company to become a
18 domestic captive insurance company by complying with
19 specified requirements; authorizing the office to
20 waive any requirements for public hearings relating to
21 the redomestication of an alien captive insurance
22 company; creating s. 628.906, F.S.; requiring
23 biographical affidavits, background investigations,
24 and fingerprint cards for all officers and directors;
25 providing restrictions on officers and directors
26 involved with insolvent insurers under certain
27 conditions; providing restrictions on officers and
28 directors that are found guilty of, or have pleaded
29 guilty or nolo contendere to, any felony or crime
30 involving moral turpitude, including a crime of
31 dishonesty or breach of trust; amending s. 628.907,
32 F.S.; revising capitalization requirements for
33 specified captive insurance companies; requiring
34 capital of specified captive insurance companies to be
35 held in certain forms; requiring contributions to
36 captive insurance companies that are stock insurer
37 corporations to be in a certain form; authorizing the
38 office to issue a captive insurance company license
39 conditioned upon certain evidence relating to
40 possession of specified capital; authorizing
41 revocation of a conditional license under certain
42 circumstances; authorizing the office to prescribe
43 certain additional capital and net asset requirements;
44 requiring such additional requirements relating to
45 capital and net assets to be held in specified forms;
46 requiring dividends or distributions of capital or
47 surplus to meet certain conditions and be approved by
48 the office; requiring certain irrevocable letters of
49 credit to meet certain standards; creating s. 628.908,
50 F.S.; prohibiting the issuance of a license to
51 specified captive insurance companies unless such
52 companies possess and maintain certain levels of
53 unimpaired surplus; authorizing the office to
54 condition issuance of a captive insurance company
55 license upon the provision of certain evidence
56 relating to the possession of a minimum amount of
57 unimpaired surplus; authorizing revocation of a
58 conditional license under certain circumstances;
59 requiring dividends or distributions of capital or
60 surplus to meet certain conditions and be approved by
61 the office; requiring certain irrevocable letters of
62 credit to meet certain standards; amending s. 628.909,
63 F.S.; providing for applicability of certain statutory
64 provisions to specified captive insurers; creating s.
65 628.910, F.S.; providing requirements, options, and
66 conditions relating to how a captive insurance company
67 may be incorporated or organized as a business;
68 amending s. 628.911, F.S.; providing reporting
69 requirements for specified captive insurance companies
70 and captive reinsurance companies; creating s.
71 628.912, F.S.; authorizing a captive reinsurance
72 company to discount specified losses subject to
73 certain conditions; amending s. 628.913, F.S.;
74 authorizing a captive reinsurance company to apply to
75 the office for licensure to write reinsurance covering
76 property and casualty insurance or reinsurance
77 contracts; authorizing the office to allow a captive
78 reinsurance company to write reinsurance contracts
79 covering risks in any state; specifying that a captive
80 reinsurance company is subject to specified
81 requirements and must meet specified conditions in
82 order to conduct business in this state; creating s.
83 628.914, F.S.; specifying requirements and conditions
84 relating to the capitalization or maintenance of
85 reserves by a captive reinsurance company; creating s.
86 628.9141, F.S.; specifying requirements and conditions
87 relating to the incorporation of a captive reinsurance
88 company; creating s. 628.9142, F.S.; providing for the
89 effect on reserves of certain actions taken by a
90 captive insurance company relating to providing
91 reinsurance for specified risks; creating s. 628.918,
92 F.S.; requiring a specified percentage of a captive
93 reinsurance company’s assets to be managed by an asset
94 manager domiciled in this state; creating s. 628.919,
95 F.S.; authorizing the Financial Services Commission to
96 adopt rules establishing certain standards for control
97 of an unaffiliated business by a parent or affiliated
98 company relating to coverage by a pure captive
99 insurance company; creating s. 628.920, F.S.;
100 requiring that a licensed captive insurance company
101 must be considered for issuance of a certificate of
102 authority as an insurer under certain circumstances;
103 amending s. 626.7491, F.S.; conforming a cross
104 reference; repealing s. 628.903, F.S., relating to the
105 definition of the term “industrial insured captive
106 insurer,” to conform to changes made by the act;
107 providing an effective date.
108
109 Be It Enacted by the Legislature of the State of Florida:
110
111 Section 1. Section 628.901, Florida Statutes, is amended to
112 read:
113 628.901 Definitions “Captive insurer” defined.—As used in
114 For the purposes of this part, the term: except as provided in
115 s. 628.903, a “captive insurer” is a domestic insurer
116 established under part I to insure the risks of a specific
117 corporation or group of corporations under common ownership
118 owned by the corporation or corporations from which it accepts
119 risk under a contract of insurance.
120 (1) “Affiliated company” means a company in the same
121 corporate system as a parent, an industrial insured, or a member
122 organization by virtue of common ownership, control, operation,
123 or management.
124 (2) “Captive insurance company” means a domestic insurer
125 established under this part. A captive insurance company
126 includes a pure captive insurance company, special purpose
127 captive insurance company, or industrial insured captive
128 insurance company formed and licensed under this part.
129 (3) “Captive reinsurance company” means a reinsurance
130 company that is formed and licensed under this part and is
131 wholly owned by a qualifying reinsurance parent company. A
132 captive reinsurance company is a stock corporation and may not
133 directly insure risks. A captive reinsurance company may
134 reinsure only risks.
135 (4) “Consolidated debt to total capital ratio” means the
136 ratio of the sum of all debts and hybrid capital instruments as
137 described in paragraph (a) to total capital as described in
138 paragraph (b).
139 (a) Debts and hybrid capital instruments include, but are
140 not limited to, all borrowings from banks, all senior debt, all
141 subordinated debts, all trust preferred shares, and all other
142 hybrid capital instruments that are not included in the
143 determination of consolidated GAAP net worth issued and
144 outstanding.
145 (b) Total capital consists of all debts and hybrid capital
146 instruments as described in paragraph (a) plus owners’ equity
147 determined in accordance with GAAP for reporting to the United
148 States Securities and Exchange Commission.
149 (5) “Consolidated GAAP net worth” means the consolidated
150 owners’ equity determined in accordance with generally accepted
151 accounting principles for reporting to the United States
152 Securities and Exchange Commission.
153 (6) “Controlled unaffiliated business” means a company:
154 (a) That is not in the corporate system of a parent and
155 affiliated companies;
156 (b) That has an existing contractual relationship with a
157 parent or affiliated company; and
158 (c) Whose risks are managed by a captive insurance company
159 in accordance with s. 628.919.
160 (7) “GAAP” means generally accepted accounting principles.
161 (8) “Industrial insured” means an insured that:
162 (a) Has gross assets in excess of $50 million;
163 (b) Procures insurance through the use of a full-time
164 employee of the insured who acts as an insurance manager or
165 buyer or through the services of a person licensed as a property
166 and casualty insurance agent, broker, or consultant in such
167 person’s state of domicile;
168 (c) Has at least 100 full-time employees; and
169 (d) Pays annual premiums of at least $200,000 for each line
170 of insurance purchased from the industrial insured captive
171 insurer or at least $75,000 for any line of coverage in excess
172 of at least $25 million in the annual aggregate. The purchase of
173 umbrella or general liability coverage in excess of $25 million
174 in the annual aggregate shall be deemed to be the purchase of a
175 single line of insurance.
176 (9) “Industrial insured captive insurance company” means a
177 captive insurance company that provides insurance only to the
178 industrial insureds that are its stockholders or members, and
179 affiliates thereof, or to the stockholders, and affiliates
180 thereof, of its parent corporation. An industrial insured
181 captive insurance company can also provide reinsurance to
182 insurers only on risks written by such insurers for the
183 industrial insureds that are the stockholders or members, and
184 affiliates thereof, of the industrial insured captive insurer,
185 or the stockholders, and affiliates thereof, of the parent
186 corporation of the industrial insured captive insurer.
187 (10) “Office” means the Office of Insurance Regulation.
188 (11) “Parent” means any corporation, limited liability
189 company, partnership, or individual that directly or indirectly
190 owns, controls, or holds with power to vote more than 50 percent
191 of the outstanding voting interests of a captive insurance
192 company.
193 (12) “Pure captive insurance company” means a company that
194 insures risks of its parent, affiliated companies, controlled
195 unaffiliated businesses, or a combination thereof.
196 (13) “Qualifying reinsurer parent company” means a
197 reinsurer which currently holds a certificate of authority,
198 letter of eligibility or is an accredited or a satisfactory non
199 approved reinsurer in this state possessing a consolidated GAAP
200 net worth of at least $500 million and a consolidated debt to
201 total capital ratio of not greater than 0.50.
202 (14) “Special purpose captive insurance company” means a
203 captive insurance company that is formed or licensed under this
204 chapter that does not meet the definition of any other type of
205 captive insurance company defined in this section.
206 (15) “Treasury rates” means the United States Treasury
207 STRIPS asked yield as published in the Wall Street Journal as of
208 a balance sheet date.
209 Section 2. Section 628.905, Florida Statutes, is amended to
210 read:
211 628.905 Licensing; authority.—
212 (1) A Any captive insurer, if when permitted by its charter
213 or articles of incorporation, may apply to the office for a
214 license to do any and all insurance authorized under the
215 insurance code, provide commercial property, commercial
216 casualty, and commercial marine insurance coverage other than
217 workers’ compensation and employer’s liability, life, health,
218 personal motor vehicle, and personal residential property
219 insurance coverage, except that: an industrial insured captive
220 insurer may apply for a license to provide workers’ compensation
221 and employer’s liability insurance as set forth in subsection
222 (6).
223 (a) A pure captive insurance company may not insure any
224 risks other than those of its parent, affiliated companies,
225 controlled unaffiliated businesses, or a combination thereof.
226 (b) An industrial insured captive insurance company may not
227 insure any risks other than those of the industrial insureds
228 that comprise the industrial insured group and their affiliated
229 companies.
230 (c) A special purpose captive insurance company may insure
231 only the risks of its parent.
232 (d) A captive insurance company may not accept or cede
233 reinsurance except as provided in this part.
234 (2) To conduct insurance business in this state, a No
235 captive insurer, other than an industrial insured captive
236 insurer must:, shall insure or accept reinsurance on any risks
237 other than those of its parent and affiliated companies.
238 (a) Obtain from the office a license authorizing it to
239 conduct insurance business in this state;
240 (b) Hold at least one board of directors’ meeting each year
241 in this state;
242 (c) Maintain its principal place of business in this state;
243 and
244 (d) Appoint a resident registered agent to accept service
245 of process and to otherwise act on its behalf in this state. In
246 the case of a captive insurance company formed as a corporation
247 or a nonprofit corporation, if the registered agent cannot with
248 reasonable diligence be found at the registered office of the
249 captive insurance company, the Chief Financial Officer of this
250 state must be an agent of the captive insurance company upon
251 whom any process, notice, or demand may be served.
252 (3) Before receiving a license, a captive insurance company
253 formed as a corporation or a nonprofit corporation must file
254 with the office a certified copy of its articles of
255 incorporation and bylaws, a statement under oath of its
256 president and secretary showing its financial condition, and any
257 other statements or documents required by the office. In
258 addition, an applicant captive insurance company must file with
259 the office evidence of:
260 (a) The amount and liquidity of the proposed captive
261 insurance company’s assets relative to the risks to be assumed;
262 (b) The adequacy of the expertise, experience, and
263 character of the person or persons who will manage the company;
264 (c) The overall soundness of the company’s plan of
265 operation;
266 (d) The adequacy of the loss prevention programs of the
267 company’s parent, member organizations, or industrial insureds,
268 as applicable; and
269 (e) Any other factors considered relevant by the office in
270 ascertaining whether the company will be able to meet its policy
271 obligations. In addition to information otherwise required by
272 this code, each applicant captive insurer shall file with the
273 office evidence of the adequacy of the loss prevention program
274 of its insureds.
275 (4) A captive insurance company or captive reinsurance
276 company must pay to the office a nonrefundable fee of $1,500 for
277 processing its application for license.
278 (a) A captive insurance company or captive reinsurance
279 company must also pay an annual renewal fee of $1,000.
280 (b) The office may charge a fee of $5 for any document
281 requiring certification of authenticity or the signature of the
282 commissioner or his or her designee. An industrial insured
283 captive insurer need not be incorporated in this state if it has
284 been validly incorporated under the laws of another
285 jurisdiction.
286 (5) If the commissioner is satisfied that the documents and
287 statements filed by the captive insurance company comply with
288 this chapter, the commissioner may grant a license authorizing
289 the company to conduct insurance business in this state until
290 the next succeeding March 1, at which time the license may be
291 renewed. An industrial insured captive insurer is subject to all
292 provisions of this part except as otherwise indicated.
293 (6) Upon approval of the office, a foreign or alien captive
294 insurance company may become a domestic captive insurance
295 company by complying with all of the requirements of law
296 relative to the organization and licensing of a domestic captive
297 insurance company of the same or equivalent type in this state
298 and by filing with the Secretary of State its charter or other
299 organizational documents, together with any appropriate
300 amendments that have been adopted in accordance with the laws of
301 this state to bring the charter or other organizational
302 documents into compliance with the laws of this state, along
303 with a certificate of good standing issued by the office. The
304 captive insurance company is then entitled to the necessary or
305 appropriate certificates and licenses to continue transacting
306 business in this state and is subject to the authority and
307 jurisdiction of this state. In connection with this
308 redomestication, the office may waive any requirements for
309 public hearings. It is not necessary for a captive insurance
310 company redomesticating into this state to merge, consolidate,
311 transfer assets, or otherwise engage in any other
312 reorganization, other than as specified in this section. An
313 industrial insured captive insurer may not provide workers’
314 compensation and employer’s liability insurance except in excess
315 of at least $25 million in the annual aggregate.
316 (7) An industrial insured captive insurance company need
317 not be incorporated in this state if it has been validly
318 incorporated under the laws of another jurisdiction.
319 Section 3. Section 628.906, Florida Statutes, is created to
320 read:
321 628.906 Application requirements; restrictions on
322 eligibility of officers and directors.—
323 (1) To evidence competence and trustworthiness of its
324 officers and directors, the application for a license to act as
325 a captive insurance company or captive reinsurance company shall
326 include, but not be limited to, background investigations,
327 biographical affidavits, and fingerprint cards for all officers
328 and directors. Fingerprints must be taken by a law enforcement
329 agency or other entity approved by the office, be accompanied by
330 the fingerprint processing fee specified in s. 624.501, and
331 processed in accordance with s. 624.34.
332 (2) The office may deny, suspend, or revoke the license to
333 transact captive insurance or captive reinsurance in this state
334 if any person who was an officer or director of an insurer,
335 reinsurer, captive insurance company, captive reinsurance
336 company, financial institution, or financial services business
337 doing business in the United States, any state, or under the law
338 of any other country and who served in that capacity within the
339 2-year period prior to the date the insurer, reinsurer, captive
340 insurance company, captive reinsurance company, financial
341 institution, or financial services business became insolvent,
342 serves as an officer or director of a captive insurance company
343 or officer or director of a captive reinsurance company licensed
344 in this state unless the officer or director demonstrates that
345 his or her personal actions or omissions were not a contributing
346 cause to the insolvency or unless the officer or director is
347 immediately removed from the captive insurance company or
348 captive reinsurance company.
349 (3) The office may deny, suspend, or revoke the license to
350 transact insurance or reinsurance in this state of a captive
351 insurance company or captive reinsurance company if any officer
352 or director, any stockholder that owns 10 percent or more of the
353 outstanding voting securities of the captive insurance company
354 or captive reinsurance company, or incorporator has been found
355 guilty of, or has pleaded guilty or nolo contendere to, any
356 felony or crime involving moral turpitude, including a crime of
357 dishonesty or breach of trust, punishable by imprisonment of 1
358 year or more under the law of the United States or any state
359 thereof or under the law of any other country without regard to
360 whether a judgment of conviction has been entered by the court
361 having jurisdiction in such case. However, in the case of a
362 captive insurance company or captive reinsurance company
363 operating under a subsisting license, the captive insurance
364 company or captive reinsurance company shall remove any such
365 person immediately upon discovery of the conditions set forth in
366 this subsection when applicable to such person or upon the order
367 of the office, and the failure to so act shall be grounds for
368 revocation or suspension of the captive insurance company’s or
369 captive reinsurance company’s license.
370 Section 4. Section 628.907, Florida Statutes, is amended to
371 read:
372 628.907 Minimum capital and net assets requirements;
373 restriction on payment of dividends surplus.—
374 (1) A No captive insurer may not shall be issued a license
375 unless it possesses and thereafter maintains:
376 (1) unimpaired paid-in capital of:
377 (a) In the case of a pure captive insurance company, at
378 least $100,000. $500,000; and
379 (b) In the case of an industrial insured captive insurance
380 company incorporated as a stock insurer, at least $200,000.
381 (c) In the case of a special purpose captive insurance
382 company, an amount determined by the office after giving due
383 consideration to the company’s business plan, feasibility study,
384 and pro forma financial statements and projections, including
385 the nature of the risks to be insured.
386 (2) The office may not issue a license to a captive
387 insurance company incorporated as a nonprofit corporation unless
388 the company possesses and maintains unrestricted net assets of:
389 (a) In the case of a pure captive insurance company,
390 Unimpaired surplus of at least $250,000.
391 (b) In the case of a special purpose captive insurance
392 company, an amount determined by the office after giving due
393 consideration to the company’s business plan, feasibility study,
394 and pro forma financial statements and projections, including
395 the nature of the risks to be insured.
396 (3) Contributions to a captive insurance company
397 incorporated as a nonprofit corporation must be in the form of
398 cash, cash equivalent, or an irrevocable letter of credit issued
399 by a bank chartered by this state or a member bank of the
400 Federal Reserve System with a branch office in this state, or as
401 approved by the office.
402 (4) For purposes of this section, the office may issue a
403 license expressly conditioned upon the captive insurance company
404 providing to the office satisfactory evidence of possession of
405 the minimum required unimpaired paid-in capital. Until this
406 evidence is provided, the captive insurance company may not
407 issue any policy, assume any liability, or otherwise provide
408 coverage. The office may revoke the conditional license if
409 satisfactory evidence of the required capital is not provided
410 within a maximum period of time, not to exceed 1 year, to be
411 established by the office at the time the conditional license is
412 issued.
413 (5) The office may prescribe additional capital or net
414 assets based upon the type, volume, and nature of insurance
415 business transacted. Contributions in connection with these
416 prescribed additional net assets or capital must be in the form
417 of:
418 (a) Cash;
419 (b) Cash equivalent;
420 (c) An irrevocable letter of credit issued by a bank
421 chartered by this state or a member bank of the Federal Reserve
422 System with a branch office in this state, or as approved by the
423 office; or
424 (d) Securities invested as provided in part II of chapter
425 625.
426 (6) A captive insurance company may not pay a dividend out
427 of, or other distribution with respect to, capital or surplus in
428 excess of the limitations set forth in this chapter without the
429 prior approval of the office. Approval of an ongoing plan for
430 the payment of dividends or other distributions must be
431 conditioned upon the retention, at the time of each payment, of
432 capital or surplus in excess of amounts specified by, or
433 determined in accordance with formulas approved by, the office.
434 (7) An irrevocable letter of credit that is issued by a
435 financial institution other than a bank chartered by this state
436 or a member bank of the Federal Reserve System must meet the
437 same standards as an irrevocable letter of credit that has been
438 issued by a bank chartered by this state or a member bank of the
439 Federal Reserve System.
440 Section 5. Section 628.908, Florida Statutes, is created to
441 read:
442 628.908 Surplus requirements; restriction on payment of
443 dividends.—
444 (1) The office may not issue a license to a captive
445 insurance company unless the company possesses and maintains
446 unimpaired surplus of:
447 (a) In the case of a pure captive insurance company, at
448 least $150,000.
449 (b) In the case of an industrial insured captive insurance
450 company incorporated as a stock insurer, at least $300,000.
451 (c) In the case of an industrial insured captive insurance
452 company incorporated as a mutual insurer, at least $500,000.
453 (d) In the case of a special purpose captive insurance
454 company, an amount determined by the office after giving due
455 consideration to the company’s business plan, feasibility study,
456 and pro forma financial statements and projections, including
457 the nature of the risks to be insured.
458 (2) For purposes of this section, the office may issue a
459 license expressly conditioned upon the captive insurance company
460 providing to the office satisfactory evidence of possession of
461 the minimum required unimpaired surplus. Until this evidence is
462 provided, the captive insurance company may not issue any
463 policy, assume any liability, or otherwise provide coverage. The
464 office may revoke the conditional license if satisfactory
465 evidence of the required surplus is not provided within a
466 maximum period of time, not to exceed 1 year, to be established
467 by the office at the time the conditional license is issued.
468 (3) A captive insurance company may not pay a dividend out
469 of, or other distribution with respect to, capital or surplus in
470 excess of the limitations set forth in this chapter without the
471 prior approval of the office. Approval of an ongoing plan for
472 the payment of dividends or other distribution must be
473 conditioned upon the retention, at the time of each payment, of
474 capital or surplus in excess of amounts specified by, or
475 determined in accordance with formulas approved by, the office.
476 (4) An irrevocable letter of credit that is issued by a
477 financial institution other than a bank chartered by this state
478 or a member bank of the Federal Reserve System must meet the
479 same standards as an irrevocable letter of credit that has been
480 issued by a bank chartered by this state or a member bank of the
481 Federal Reserve System.
482 Section 6. Section 628.909, Florida Statutes, is amended to
483 read:
484 628.909 Applicability of other laws.—
485 (1) The Florida Insurance Code does shall not apply to
486 captive insurers or industrial insured captive insurers except
487 as provided in this part and subsections (2) and (3).
488 (2) The following provisions of the Florida Insurance Code
489 shall apply to captive insurers who are not industrial insured
490 captive insurers to the extent that such provisions are not
491 inconsistent with this part:
492 (a) Chapter 624, except for ss. 624.407, 624.408, 624.4085,
493 624.40851, 624.4095, 624.425, and 624.426.
494 (b) Chapter 625, part II.
495 (c) Chapter 626, part IX.
496 (d) Sections 627.730-627.7405, when no-fault coverage is
497 provided.
498 (e) Chapter 628.
499 (3) The following provisions of the Florida Insurance Code
500 shall apply to industrial insured captive insurers to the extent
501 that such provisions are not inconsistent with this part:
502 (a) Chapter 624, except for ss. 624.407, 624.408, 624.4085,
503 624.40851, 624.4095, 624.425, 624.426, and 624.609(1).
504 (b) Chapter 625, part II, if the industrial insured captive
505 insurer is incorporated in this state.
506 (c) Chapter 626, part IX.
507 (d) Sections 627.730-627.7405 when no-fault coverage is
508 provided.
509 (e) Chapter 628, except for ss. 628.341, 628.351, and
510 628.6018.
511 Section 7. Section 628.910, Florida Statutes, is created to
512 read:
513 628.910 Incorporation options and requirements.—
514 (1) A pure captive insurance company may be:
515 (a) Incorporated as a stock insurer with its capital
516 divided into shares and held by the stockholders; or
517 (b) Incorporated as a public benefit, mutual benefit, or
518 religious nonprofit corporation with members in accordance with
519 the Florida Not For Profit Corporation Act.
520 (2) An industrial insured captive insurance company may be:
521 (a) Incorporated as a stock insurer with its capital
522 divided into shares and held by the stockholders; or
523 (b) Incorporated as a mutual insurer without capital stock,
524 the governing body of which is elected by its members.
525 (3) A captive insurance company may not have fewer than
526 three incorporators of whom not fewer than two must be residents
527 of this state.
528 (4) In the case of a captive insurance company formed as a
529 corporation or a nonprofit corporation, before the articles of
530 incorporation are transmitted to the Secretary of State, the
531 incorporators shall file the articles of incorporation in
532 triplicate with the office. The office shall promptly examine
533 the articles of incorporation. If it finds that the articles of
534 incorporation conform to law, it shall endorse its approval on
535 each of the triplicate originals of the articles of
536 incorporation, retain one copy for its files, and return the
537 remaining copies to the incorporators for filing with the
538 Department of State.
539 (5) The articles of incorporation, the certificate issued
540 pursuant to this section, and the organization fees required by
541 the Florida Business Corporation Act or the Florida Not For
542 Profit Corporation Act, as applicable, must be transmitted to
543 the Secretary of State, who must record the articles of
544 incorporation and the certificate.
545 (6) The capital stock of a captive insurance company
546 incorporated as a stock insurer must be issued at par value of
547 not less than $1 or more than $100 per share.
548 (7) In the case of a captive insurance company formed as a
549 corporation or a nonprofit corporation, at least one of the
550 members of the board of directors of a captive insurance company
551 incorporated in this state must be a resident of this state.
552 (8) A captive insurance company formed as a corporation or
553 a nonprofit corporation, pursuant to the provisions of this
554 chapter, has the privileges and is subject to the provisions of
555 the general corporation law, including the Florida Not For
556 Profit Corporation Act for nonprofit corporations, as
557 applicable, as well as the applicable provisions contained in
558 this chapter. If a conflict occurs between a provision of the
559 general corporation law, including the Florida Not For Profit
560 Corporation Act for nonprofit corporations, as applicable, and a
561 provision of this chapter, the latter controls. The provisions
562 of this title pertaining to mergers, consolidations,
563 conversions, mutualizations, and redomestications apply in
564 determining the procedures to be followed by a captive insurance
565 company in carrying out any of the transactions described in
566 such provisions, except that the office may waive or modify the
567 requirements for public notice and hearing in accordance with
568 rules the office may adopt addressing categories of
569 transactions. If a notice of public hearing is required, but no
570 one requests a hearing, the office may cancel the hearing.
571 (9) The articles of incorporation or bylaws of a captive
572 insurance company may authorize a quorum of a board of directors
573 to consist of no fewer than one-third of the fixed or prescribed
574 number of directors as provided for by the Florida Business
575 Corporation Act or the Florida Not For Profit Corporation Act.
576 Section 8. Section 628.911, Florida Statutes, is amended to
577 read:
578 628.911 Reports and statements.—
579 (1) A captive insurance company may insurer shall not be
580 required to make any annual report except as provided in this
581 part section.
582 (2) Annually no later than March 1, a captive insurance
583 company or a captive reinsurance company insurer shall, within
584 60 days after the end of its fiscal year and as often as the
585 office may deem necessary, submit to the office a report of its
586 financial condition verified by oath of two of its executive
587 officers. Except as provided in this part, a captive insurance
588 company or a captive reinsurance company must report using
589 generally accepted accounting principles, unless the office
590 approves the use of statutory accounting principles, with useful
591 or necessary modifications or adaptations required or approved
592 or accepted by the office for the type of insurance and kinds of
593 insurers to be reported upon, and as supplemented by additional
594 information required by the office. The Financial Services
595 Commission may adopt by rule the form in which captive insurance
596 companies insurers shall report.
597 (3) A captive insurance company may make written
598 application for filing the required report on a fiscal year end
599 that is consistent with the parent company’s fiscal year. If an
600 alternative reporting date is granted, the annual report is due
601 60 days after the fiscal year end.
602 Section 9. Section 628.912, Florida Statutes, is created to
603 read:
604 628.912 Discounting of loss and loss adjustment expense
605 reserves.—
606 (1) A captive reinsurance company may discount its loss and
607 loss adjustment expense reserves at treasury rates applied to
608 the applicable payments projected through the use of the
609 expected payment pattern associated with the reserves.
610 (2) A captive reinsurance company must file annually an
611 actuarial opinion on loss and loss adjustment expense reserves
612 provided by an independent actuary. The actuary may not be an
613 employee of the captive reinsurance company or its affiliates.
614 (3) The office may disallow the discounting of reserves if
615 a captive reinsurance company violates a provision of this part.
616 Section 10. Section 628.913, Florida Statutes, is amended
617 to read:
618 (Substantial rewording of section. See
619 s. 628.913, F.S., for present text.)
620 628.913 Captive reinsurance companies.—
621 (1) A captive reinsurance company, if permitted by its
622 articles of incorporation or charter, may apply to the office
623 for a license to write reinsurance covering property and
624 casualty insurance or reinsurance contracts. A captive
625 reinsurance company authorized by the office may write
626 reinsurance contracts covering risks in any state; however, a
627 captive reinsurance company authorized by the office may not
628 directly insure risks.
629 (2) To conduct business in this state, a captive
630 reinsurance company must:
631 (a) Obtain from the office a license authorizing it to
632 conduct business as a captive reinsurance company in this state;
633 (b) Hold at least one board of directors’ meeting each year
634 in this state;
635 (c) Maintain its principal place of business in this state;
636 and
637 (d) Appoint a registered agent to accept service of process
638 and act otherwise on its behalf in this state.
639 (3) Before receiving a license, a captive reinsurance
640 company must file with the office:
641 (a) A certified copy of its charter and bylaws;
642 (b) A statement under oath of its president and secretary
643 showing its financial condition; and
644 (c) Other documents required by the office.
645 (4) In addition to the information required by this
646 section, the captive reinsurance company must file with the
647 office evidence of:
648 (a) The amount and liquidity of the captive reinsurance
649 company’s assets relative to the risks to be assumed;
650 (b) The adequacy of the expertise, experience, and
651 character of the person who manages the company;
652 (c) The overall soundness of the company’s plan of
653 operation; and
654 (d) Other overall factors considered relevant by the office
655 in ascertaining if the company would be able to meet its policy
656 obligations.
657 Section 11. Section 628.914, Florida Statutes, is created
658 to read:
659 628.914 Minimum capitalization or reserves for captive
660 reinsurance companies.—
661 (1) The office may not issue a license to a captive
662 reinsurance company unless the company possesses and maintains
663 capital or unimpaired surplus of at least the greater of $300
664 million or 10 percent of reserves. The surplus may be in the
665 form of cash or securities as permitted by part II of chapter
666 625.
667 (2) The office may prescribe additional capital or surplus
668 based upon the type, volume, and nature of the insurance
669 business transacted.
670 (3) A captive reinsurance company may not pay a dividend
671 out of, or other distribution with respect to, capital or
672 surplus in excess of the limitations without the prior approval
673 of the office. Approval of an ongoing plan for the payment of
674 dividends or other distributions must be conditioned upon the
675 retention, at the time of each payment, of capital or surplus in
676 excess of amounts specified by, or determined in accordance with
677 formulas approved by, the office.
678 Section 12. Section 628.9141, Florida Statutes, is created
679 to read:
680 628.9141 Incorporation of a captive reinsurance company.—
681 (1) A captive reinsurance company must be incorporated as a
682 stock insurer with its capital divided into shares and held by
683 its shareholders.
684 (2) A captive reinsurance company may not have fewer than
685 three incorporators of whom at least two must be residents of
686 this state.
687 (3) Before the articles of incorporation are transmitted to
688 the Secretary of State, the incorporators must comply with all
689 the requirements of s. 628.091.
690 (4) The capital stock of a captive reinsurance company must
691 be issued at par value of not less than $1 or more than $100 per
692 share.
693 (5) At least one of the members of the board of directors
694 of a captive reinsurance company incorporated in this state must
695 be a resident of this state.
696 Section 13. Section 628.9142, Florida Statutes, is created
697 to read:
698 628.9142 Reinsurance; effect on reserves.—
699 (1) A captive insurance company may provide reinsurance, as
700 authorized in this part, on risks ceded by any other insurer.
701 (2) A captive insurance company may take credit for
702 reserves on risks or portions of risks ceded to authorized
703 insurers or reinsurers and unauthorized insurers or reinsurers
704 complying with s. 624.610. A captive insurer may not take credit
705 for reserves on risks or portions of risks ceded to an
706 unauthorized insurer or reinsurer if the insurer or reinsurer is
707 not in compliance with s. 624.610.
708 Section 14. Section 628.918, Florida Statutes, is created
709 to read:
710 628.918 Management of assets of captive reinsurance
711 company.—At least 35 percent of the assets of a captive
712 reinsurance company must be managed by an asset manager
713 domiciled in this state.
714 Section 15. Section 628.919, Florida Statutes, is created
715 to read:
716 628.919 Standards to ensure risk management control by
717 parent company.—The Financial Services Commission shall adopt
718 rules establishing standards to ensure that a parent or
719 affiliated company is able to exercise control of the risk
720 management function of any controlled unaffiliated business to
721 be insured by the pure captive insurance company.
722 Section 16. Section 628.920, Florida Statutes, is created
723 to read:
724 628.920 Eligibility of licensed captive insurance company
725 for certificate of authority to act as insurer.—A licensed
726 captive insurance company that meets the necessary requirements
727 of this part imposed upon an insurer must be considered for
728 issuance of a certificate of authority to act as an insurer in
729 this state.
730 Section 17. Paragraph (e) of subsection (2) of section
731 626.7491, Florida Statutes, is amended to read:
732 626.7491 Business transacted with producer controlled
733 property and casualty insurer.—
734 (2) DEFINITIONS.—As used in this section:
735 (e) “Licensed insurer” or “insurer” means any person, firm,
736 association, or corporation licensed to transact a property or
737 casualty insurance business in this state. The following are not
738 licensed insurers for the purposes of this section:
739 1. Any risk retention group as defined in:
740 a. The Superfund Amendments Reauthorization Act of 1986,
741 Pub. L. No. 99-499, 100 Stat. 1613 (1986);
742 b. The Risk Retention Act, 15 U.S.C. ss. 3901 et seq. (1982
743 and Supp. 1986); or
744 c. Section 627.942(9).
745 2. Any residual market pool or joint underwriting authority
746 or association; and
747 3. Any captive insurance company insurer as defined in s.
748 628.901.
749 Section 18. Section 628.903, Florida Statutes, is repealed.
750 Section 19. This act shall take effect upon becoming a law.
