Bill Text: FL S0758 | 2014 | Regular Session | Comm Sub
Bill Title: Title Insurer Reserves
Spectrum: Bipartisan Bill
Status: (Introduced - Dead) 2014-05-01 - Laid on Table, companion bill(s) passed, see CS/CS/HB 321 (Ch. 2014-112), CS/CS/HB 805 (Ch. 2014-132) [S0758 Detail]
Download: Florida-2014-S0758-Comm_Sub.html
Florida Senate - 2014 CS for SB 758 By the Committee on Banking and Insurance; and Senator Lee 597-02195-14 2014758c1 1 A bill to be entitled 2 An act relating to title insurer reserves; amending s. 3 625.041, F.S.; specifying that a title insurer is 4 liable for all of its unpaid losses and claims; 5 amending s. 625.111, F.S.; revising and specifying the 6 reserves certain title insurers must set aside; 7 specifying how such reserves will be released; 8 specifying which state law governs the amount of the 9 reserve when a title insurer transfers its domicile to 10 this state; defining “bulk reserve”; amending ss. 11 624.407 and 624.408, F.S.; conforming cross 12 references; providing an effective date. 13 14 Be It Enacted by the Legislature of the State of Florida: 15 16 Section 1. Section 625.041, Florida Statutes, is amended to 17 read: 18 625.041 Liabilities, in general.—In any determination of 19 the financial condition of an insurer, liabilities to be charged 20 against its assetsshallinclude: 21 (1) The amount, estimated in accordanceconsistentwiththe22provisions ofthis code, necessary to pay all of its unpaid 23 losses and claims incurred on or prior to the date of statement, 24 whether reported or unreported, together with the expenses of 25 adjustment or settlement thereof. 26 (2) With respect to title insurance, the amount, estimated 27 in accordance with this code, necessary to pay all of its known 28 unpaid losses and claims incurred on or before the date of 29 statement, together with the expenses of adjustment or 30 settlement thereof. This requirement is in addition to the 31 reserves required under s. 625.111. 32 (3)(2)With respectreferenceto life and health insurance 33 and annuity contracts: 34 (a) The amount of reserves on life insurance policies and 35 annuity contracts in force, valued according to the tables of 36 mortality, rates of interest, and methods adopted pursuant to 37 this code which are applicable thereto. 38 (b) Reserves for disability benefits, for both active and 39 disabled lives. 40 (c) Reserves for accidental death benefits. 41 (d) Any additional reserves that may be required by the 42 office in accordanceconsistentwith practice formulated or 43 approved by the National Association of Insurance Commissioners 44 or its successor organization, on account of such insurance, 45 including contract and premium deficiency reserves. 46 (4)(3)With respectreferenceto insurance other than that 47 specified in subsections (2) and (3)subsection (2), and other48than title insurance, the amount of reserves equal to the 49 unearned portions of the gross premiums charged on policies in 50 force, computed in accordance with this part. 51 (5)(4)Taxes, expenses, and other obligations due or 52 accrued at the date of the statement. 53 (6)(5)AnAnyinsurer in this state that writes workers’ 54 compensation insurance shall accrue a liability on its financial 55 statements for all Special Disability Trust Fund assessments 56 that are due within the current calendar year.In addition,57 Those insurers shall also disclose in the notes to the financial 58 statements required to be filed pursuant to s. 624.424 an 59 estimate of future Special Disability Trust Fund assessments,if 60 the assessments are likely to occur and can be estimated with 61 reasonable certainty. 62 Section 2. Section 625.111, Florida Statutes, is amended to 63 read: 64 625.111 Title insurance reserve.—In addition to an adequate 65 reserve as to outstanding losses relating to known claims,as 66 required under s. 625.041, a domestic title insurer shall 67 establish, segregate, and maintain a guaranty fund or unearned 68 premium reserve as provided in this section. The sumsrequired69under this sectionto be reserved for unearned premiums on title 70 guarantees and policiesat all times and for all purposesshall 71 be considered and constitute unearned portions of the original 72 premiums and shall be charged as a reserve liability of thesuch73 insurer in determining its financial condition.WhileSuchsums74are soreserved funds, theyshall be withdrawn from the use of 75 the insurer for its general purposes, impressed with a trust in 76 favor of the holders of title guarantees and policies, and held 77 available for reinsurance of the title guarantees and policies 78 in the event of the insolvency of the insurer.Nothing contained79inThis section does notshallpreclude thesuchinsurer from 80 investing such reserve in investments authorized by law,for81such an insurerand the income from such investmentsinvested82reserveshall be included in the general income of the insurer 83 and maytobe used by such insurer for any lawful purpose. 84 (1) For an unearned premium reservereservesestablished on 85 or after July 1, 1999, suchunearned premiumreserve must be in 86shallconsist ofnot less thanan amount at least equal to the 87 sum of the amounts specified in paragraphs (a), (b), and (d) for 88 title insurers holding less than $50 million in surplus as to 89 policyholders as of the previous year end, and the sum of the 90 amounts specified in paragraphs (c) and (d) for title insurers 91 holding $50 million or more in surplus as to policyholders as of 92 the previous year end: 93 (a) A reserve with respect to unearned premiums for 94 policies written or title liability assumed in reinsurance 95 before July 1, 1999, equal to the reserve established on June 96 30, 1999, for those unearned premiums with such reserve being 97 subsequently released as provided in subsection (2). For 98 domestic title insurers subject to this section, such amounts 99 shall be calculated in accordance withprovisions of law of this100 state law in effect at the time the associated premiums were 101 written or assumed and as amended beforeprior toJuly 1, 1999. 102 (b) A total amount equal to 30 cents for each $1,000 of net 103 retained liability for policies written or title liability 104 assumed in reinsurance on or after July 1, 1999, with such 105 reserve being subsequently released as provided in subsection 106 (2). For the purpose of calculating this reserve, the total of 107 the net retained liability for all simultaneous issue policies 108 covering a single risk shall be equal to the liability for the 109 policy with the highest limit covering that single risk, net of 110 any liability ceded in reinsurance. 111 (c) On or after January 1, 2014, for title insurers holding 112 $50 million or more in surplus as to policyholders as of the 113 previous year-end, a minimum of 6.5 percent of the total of the 114 following: 115 1. Direct premiums written; and 116 2. Premiums for reinsurance assumed, plus other income, 117 less premiums for reinsurance ceded as displayed in Schedule P 118 of the title insurer’s most recent annual statement filed with 119 the office with such reserve being subsequently released as 120 provided in subsection (2). Title insurers with less than $50 121 million in surplus as to policyholders must continue to record 122 unearned premium reserve in accordance with paragraph (b). 123 (d)(c)An additional amount, if deemed necessary by a 124 qualified actuary, towhich shallbe subsequently released as 125 provided in subsection (2). Using financial results as of 126 December 31 of each year, all domestic title insurers shall 127 obtain a Statement of Actuarial Opinion from a qualified actuary 128 regarding the insurer’s loss and loss adjustment expense 129 reserves, including reserves for known claims,adverse130development on known claims,incurred but not reported claims, 131 and unallocated loss adjustment expenses. The actuarial opinion 132 mustshallconform to the annual statement instructions for 133 title insurers adopted by the National Association of Insurance 134 Commissioners andshallinclude the actuary’s professional 135 opinion of the insurer’s reserves as of the date of the annual 136 statement. If the amount of the reserve stated in the opinion 137 and displayed in Schedule P of the annual statement for that 138 reporting date is greater than the sum of the known claim 139 reserve and unearned premium reserve as calculated under this 140 section, as of the same reporting date and including any 141 previous actuarial provisions added at earlier dates, the 142 insurer shall add to the insurer’s unearned premium reserve an 143 actuarial amount equal to the reserve shown in the actuarial 144 opinion, minus the known claim reserve and the unearned premium 145 reserve, as of the current reporting date and calculated in 146 accordance with this section, but notin no eventcalculated as 147 of any date beforeprior toDecember 31, 1999. The comparison 148 shall be made using that line on Schedule P displaying the Total 149 Net Loss and Loss Adjustment Expense which is comprised of the 150 Known Claim Reserve, and any associated Adverse Development 151 Reserve, the reserve for Incurred But Not Reported Losses, and 152 Unallocated Loss Adjustment Expenses. 153 (2)(a)With respect to reservesthe reserveestablished in 154 accordance with: 155 (a) Paragraph (1)(a), the domestic title insurer shall 156 release the reserve over the subsequenta period of20 157subsequentyears as provided in this paragraph. The insurer 158 shall release 30 percent of the initial aggregate sum during 159 1999, with one quarter of that amount being released on March 160 31, June 30, September 30, and December 31, 1999, with the March 161 31 and June 30 releases to be retroactive and reflected on the 162 September 30 financial statements. Thereafter, the insurer shall 163 release, on the same quarterly basis as specified for reserves 164 released during 1999, a percentage of the initial aggregate sum 165 as follows: 15 percent during calendar year 2000, 10 percent 166 during each of calendar years 2001 and 2002, 5 percent during 167 each of calendar years 2003 and 2004, 3 percent during each of 168 calendar years 2005 and 2006, 2 percent during each of calendar 169 years 2007-2013, and 1 percent during each of calendar years 170 2014-2018. 171 (b)With respect to reserves established in accordance with172 Paragraph (1)(b), the unearned premium for policies written or 173 title liability assumed during a particular calendar year shall 174 be earned, and released from reserve, over the subsequenta175period of20subsequentyears as provided in this paragraph. The 176 insurer shall release 30 percent of the initial sum during the 177 year followingnext succeedingthe year the premium was written 178 or assumed, with one quarter of that amount being released on 179 March 31, June 30, September 30, and December 31 of such year. 180 Thereafter, the insurer shall release, on the same quarterly 181 basis as specified for reserves released during the year 182 followingfirst succeedingthe year the premium was written or 183 assumed, a percentage of the initial sum as follows: 15 percent 184 during the next succeeding year, 10 percent during each of the 185 next succeeding 2 years, 5 percent during each of the next 186 succeeding 2 years, 3 percent during each of the next succeeding 187 2 years, 2 percent during each of the next succeeding 7 years, 188 and 1 percent during each of the next succeeding 5 years. 189 (c)With respect to reserves established in accordance with190 Paragraph (1)(c), the unearned premium for policies written or 191 title liability assumed during a particular calendar year shall 192 be earned, and released from reserve, over the subsequent 20 193 years at an amortization rate not to exceed the formula in this 194 paragraph. The insurer shall release 35 percent of the initial 195 sum during the year following the year the premium was written 196 or assumed, with one quarter of that amount being released on 197 March 31, June 30, September 30, and December 31 of such year. 198 Thereafter, the insurer shall release, on the same quarterly 199 basis as specified for reserve released during the year 200 following the year the premium was written or assumed, a 201 percentage of the initial sum as follows: 15 percent during each 202 year of the next succeeding 2 years, 10 percent during the next 203 succeeding year, 3 percent during each of the next succeeding 3 204 years, 2 percent during each of the next succeeding 3 years, and 205 1 percent during each of the next succeeding 10 years. 206 (d) Paragraph (1)(d), any additional amount established in 207 any calendar year shall be released in the years subsequent to 208 its establishment as provided in paragraph (c)(b), with the 209 timing and percentage of releases being in all respects 210 identical to those of unearned premium reserves that are 211 calculated as provided in paragraph (c)(b)and established with 212 regard to premiums written or liability assumed in reinsurance 213 in the same year as the year in which any additional amount was 214 originally established. 215 (3) If a title insurer that is organized under the laws of 216 another state transfers its domicile to this state, the 217 statutory or unearned premium reserve shall be the amount 218 required by the laws of the title insurer’s former state of 219 domicile as of the date of transfer of domicile and shall be 220 released from reserve according to the requirements of law in 221 effect in the former state at the time of domicile. On or after 222 January 1, 2014, for new business written after the effective 223 date of the transfer of domicile to this state, the domestic 224 title insurer shall add to and set aside in the statutory or 225 unearned premium reserve such amount as provided in paragraph 226 (1)(c). 227 (4)(3)At any reporting date, the amount of the required 228 releases of existing unearned premium reserves under subsection 229 (2) shall be calculated and deducted from the total unearned 230 premium reserve before any additional amount is established for 231 the current calendar year in accordance withthe provisions of232 paragraph (1)(d)(1)(c). 233 (5) A domestic title insurer is not required to record a 234 separate bulk reserve. However, if a separate bulk reserve is 235 recorded, the statutory premium reserve must be reduced by the 236 amount recorded for such bulk reserve. 237 (6)(4)As used in this section, the term: 238 (a) “Bulk reserve” means provision for subsequent 239 development on known claims. 240 (b)(a)“Net retained liability” means the total liability 241 retained by a title insurer for a single risk, after taking into 242 account the deduction for ceded liability, if any. 243 (c)(b)“Qualified actuary” means a person who is, as 244 detailed in the National Association of Insurance Commissioners’ 245 Annual Statement Instructions: 246 1. A member in good standing of the Casualty Actuarial 247 Society; 248 2. A member in good standing of the American Academy of 249 Actuaries who has been approved as qualified for signing 250 casualty loss reserve opinions by the Casualty Practice Council 251 of the American Academy of Actuaries; or 252 3. A person who otherwise has competency in loss reserve 253 evaluation as demonstrated to the satisfaction of the insurance 254 regulatory official of the domiciliary state. In such case, at 255 least 90 days beforeprior to thefilingofits annual 256 statement, the insurer must requestapprovalthat the person be 257 deemed qualified and that request must be approved or denied. 258 The request must include the National Association of Insurance 259 Commissioners’ Biographical Form and a list of all loss reserve 260 opinions issued in the last 3 years by this person. 261 (d)(c)“Single risk” means the insured amount of aany262 title insurance policy, except that where two or more title 263 insurance policies are issued simultaneously covering different 264 estates in the same real property, “single risk” means the sum 265 of the insured amounts of all suchtitle insurancepolicies. A 266Anytitle insurance policy insuring a mortgage interest, a claim 267 payment under which reduces the insured amount of a fee or 268 leasehold title insurance policy, shall be excluded in computing 269 the amount of a single risk to the extent that the insured 270 amount of the mortgage title insurance policy does not exceed 271 the insured amount of the fee or leasehold title insurance 272 policy. 273 Section 3. Subsection (5) of section 624.407, Florida 274 Statutes, is amended to read: 275 624.407 Surplus required; new insurers.— 276 (5) For the purposes of this section, liabilities do not 277 include liabilities required under s. 625.041(5)s.625.041(4). 278 For purposes of computing minimum surplus as to policyholders 279 pursuant to s. 625.305(1), liabilities include liabilities 280 required under s. 625.041(5)s.625.041(4). 281 Section 4. Subsection (2) of section 624.408, Florida 282 Statutes, is amended to read: 283 624.408 Surplus required; current insurers.— 284 (2) For purposes of this section, liabilities do not 285 include liabilities required under s. 625.041(5)s.625.041(4). 286 For purposes of computing minimum surplus as to policyholders 287 pursuant to s. 625.305(1), liabilities include liabilities 288 required under s. 625.041(5)s.625.041(4). 289 Section 5. This act shall take effect upon becoming a law.