Bill Text: FL S1430 | 2022 | Regular Session | Comm Sub

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

---

Bill Title: Insolvent Insurers

Spectrum: Slight Partisan Bill (? 2-1)

Status: (Introduced - Dead) 2022-03-04 - Laid on Table, refer to CS/HB 1023 [S1430 Detail]

Download: Florida-2022-S1430-Comm_Sub.html

---

       Florida Senate - 2022                             CS for SB 1430
       
       
        
       By the Committee on Banking and Insurance; and Senator Burgess
       
       
       
       
       
       597-02090-22                                          20221430c1
    1                        A bill to be entitled                      
    2         An act relating to insolvent insurers; amending s.
    3         624.4073, F.S.; revising a prohibition against certain
    4         insolvent insurers’ former officers or directors
    5         serving as officers or directors of an insurer or
    6         having direct or indirect control over certain
    7         selection or appointment of officers or directors, to
    8         allow such activities unless the Office of Insurance
    9         Regulation enters a specified order; amending s.
   10         627.072, F.S.; providing required factors to be used
   11         in the determination and fixing of rates for premiums
   12         paid to insolvent insurers for specified coverages;
   13         amending s. 631.57, F.S.; authorizing insurers
   14         remitting assessments to the Florida Insurance
   15         Guaranty Association, Incorporated, to elect not to
   16         recoup advances; revising a requirement for
   17         information regarding assessment percentages which
   18         must be specified by the Office of Insurance
   19         Regulation in orders levying assessments; authorizing
   20         the association to request that orders levying
   21         assessments issued by the office authorize a certain
   22         installment frequency for the remittance of advance
   23         payments by insurers; revising the requirement that
   24         certain insurers make payments, rather than initial
   25         payments, on a certain basis; revising insurer
   26         reconciliation reporting requirements; providing
   27         reconciliation requirements for surcharges collected
   28         from policyholders; requiring insurers to treat the
   29         failure of an insured to pay a surcharge, rather than
   30         a recoupment charge, as a failure to pay the premium;
   31         revising construction; amending s. 631.914, F.S.;
   32         revising provisions relating to insurers’ collection
   33         of surcharges and payments of assessments to the
   34         Florida Workers’ Compensation Insurance Guaranty
   35         Association, Incorporated; providing an effective
   36         date.
   37          
   38  Be It Enacted by the Legislature of the State of Florida:
   39  
   40         Section 1. Section 624.4073, Florida Statutes, is amended
   41  to read:
   42         624.4073 Officers and directors of insolvent insurers.—Any
   43  person who was an officer or director of an insurer doing
   44  business in this state and who served in that capacity within
   45  the 2-year period before the date the insurer became insolvent,
   46  for any insolvency that occurs on or after July 1, 2002, may not
   47  thereafter serve as an officer or director of an insurer
   48  authorized in this state or have direct or indirect control over
   49  the selection or appointment of an officer or director through
   50  contract, trust, or by operation of law, unless the office
   51  enters an order pursuant to s. 624.310 demonstrating that the
   52  officer or director demonstrates that his or her personal
   53  actions or omissions of the officer or director were not a
   54  significant contributing cause to the insolvency.
   55         Section 2. Subsection (1) of section 627.072, Florida
   56  Statutes, is amended to read:
   57         627.072 Making and use of rates.—
   58         (1) As to workers’ compensation and employer’s liability
   59  insurance, the following factors must shall be used in the
   60  determination and fixing of rates:
   61         (a) The past loss experience and prospective loss
   62  experience within and outside this state;
   63         (b) The impact resulting from the past loss experience and
   64  prospective loss experience for insurers whose data are missing
   65  from statewide experience due to insolvency. Prior reported data
   66  for such insurers and all other relevant information may be used
   67  to assess the impact on rates;
   68         (c) The conflagration and catastrophe hazards;
   69         (d)(c) A reasonable margin for underwriting profit and
   70  contingencies;
   71         (e)(d) Dividends, savings, or unabsorbed premium deposits
   72  allowed or returned by insurers to their policyholders, members,
   73  or subscribers;
   74         (f)(e) Investment income on unearned premium reserves and
   75  loss reserves;
   76         (g)(f) Past expenses and prospective expenses, both those
   77  countrywide and those specifically applicable to this state; and
   78         (h)(g) All other relevant factors, including judgment
   79  factors, within and outside this state.
   80         Section 3. Paragraphs (c) and (f) through (i) of subsection
   81  (3) of section 631.57, Florida Statutes, are amended to read:
   82         631.57 Powers and duties of the association.—
   83         (3)
   84         (c) The Legislature finds and declares that all assessments
   85  paid by an insurer or insurer group as a result of a levy by the
   86  office, including assessments levied pursuant to paragraph (a)
   87  and emergency assessments levied pursuant to paragraph (e),
   88  constitute advances of funds from the insurer to the
   89  association. An insurer may fully recoup such advances by
   90  applying the uniform assessment percentage levied by the office
   91  to all policies of the same kind or line as were considered by
   92  the office in determining the assessment liability of the
   93  insurer or insurer group as set forth in paragraph (f). An
   94  insurer remitting an assessment to the association as required
   95  by subparagraph (f)1. or subparagraph (f)2. may elect not to
   96  recoup advances.
   97         1. Assessments levied under subparagraph (f)1. are paid
   98  before policy surcharges are collected and result in a
   99  receivable for policy surcharges collected in the future. This
  100  amount, to the extent it is likely that it will be realized,
  101  meets the definition of an admissible asset as specified in the
  102  National Association of Insurance Commissioners’ Statement of
  103  Statutory Accounting Principles No. 4. The asset must shall be
  104  established and recorded separately from the liability
  105  regardless of whether it is based on a retrospective or
  106  prospective premium-based assessment. If an insurer is unable to
  107  fully recoup the amount of the assessment because of a reduction
  108  in writings or withdrawal from the market, the amount recorded
  109  as an asset must shall be reduced to the amount reasonably
  110  expected to be recouped.
  111         2. Assessments levied under subparagraph (f)2. are paid
  112  after policy surcharges are collected so that the recognition of
  113  assets is based on actual premium written offset by the
  114  obligation to the association.
  115         (f)1. The association, office, and insurers remitting
  116  assessments pursuant to paragraph (a) or paragraph (e) must
  117  comply with the following:
  118         a. In the order levying an assessment, the office shall
  119  specify the actual percentage amount to be advanced to the
  120  association and thereafter collected uniformly from all the
  121  policyholders of insurers subject to the assessment and the date
  122  on which the assessment year begins, which may not begin before
  123  90 days after the association board certifies such an
  124  assessment.
  125         b. Insurers shall make an initial payment to the
  126  association before the beginning of the assessment year on or
  127  before the date specified in the order of the office. Each
  128  insurer shall have at least 30 days’ written notice as to the
  129  date on which the initial assessment payment is due and payable.
  130  The association may request that the order issued by the office
  131  authorize insurers to remit the advance payments in four
  132  quarterly installments throughout the assessment year.
  133         c. Insurers that have written insurance in the calendar
  134  year before the year in which the assessment is certified by the
  135  board shall make payments an initial payment based on the direct
  136  written premium in this state for the classes protected by the
  137  account from the previous calendar year as set forth in the
  138  insurer’s annual statement, multiplied by the uniform percentage
  139  of premium specified in the order issued by the office. Insurers
  140  that have not written insurance in the previous calendar year in
  141  any of the lines under the account which are being assessed, but
  142  which are writing insurance as of, or after, the date the board
  143  certifies the assessment to the office, shall pay an amount
  144  based on a good faith estimate of the amount of direct written
  145  premium anticipated to be written in the subject lines of
  146  business for the assessment year, multiplied by the uniform
  147  percentage of premium specified in the order issued by the
  148  office.
  149         d. Insurers shall file one or more a reconciliation reports
  150  report with the association which indicate indicates the amount
  151  of the initial payment to the association before the assessment
  152  year, whether such amount was based on direct written premium
  153  contained in a previous calendar year annual statement or a good
  154  faith projection, the amount actually collected during the
  155  assessment year, and such other information contained on a form
  156  and schedule adopted by the association and provided to the
  157  insurers in advance. If the insurer collected from policyholders
  158  more surcharges than the amount initially paid, the insurer
  159  shall pay the excess amount to the association. If the insurer
  160  collected surcharges from policyholders in an amount that which
  161  is less than the amount initially paid to the association, the
  162  association shall credit the insurer that amount against future
  163  assessments. Such payment reconciliation report, and any payment
  164  of excess amounts collected from policyholders, shall be
  165  completed and remitted to the association within 90 days after
  166  the end of the assessment year. The association shall send a
  167  final reconciliation report on all insurers to the office within
  168  120 days after each assessment year.
  169         e. Insurers remitting reconciliation reports under this
  170  paragraph to the association are subject to s. 626.9541(1)(e).
  171         2. For assessments required under paragraph (a) or
  172  paragraph (e), the association may use a quarterly installment
  173  method instead of the method described in sub-subparagraphs 1.b.
  174  and c. or in combination thereof based on the association’s
  175  projected cash flow. If the association projects that it has
  176  cash on hand for the payment of anticipated claims in the
  177  applicable account for at least 6 months, the board may make an
  178  estimate of the assessment needed and may recommend to the
  179  office the assessment percentage that may be collected as a
  180  quarterly assessment. The office may, in the order levying the
  181  assessment on insurers, specify that the assessment is due and
  182  payable quarterly as the funds are collected from insureds
  183  throughout the assessment year, in which case the assessment
  184  shall be a uniform percentage of premium collected during the
  185  assessment year and shall be collected from all policyholders
  186  with policies in the classes protected by the account. All
  187  insurers shall collect the assessment without regard to whether
  188  the insurers reported premium in the year preceding the
  189  assessment. Insurers are not required to advance funds if the
  190  association and the office elect to use the quarterly
  191  installment option. All funds collected shall be retained by the
  192  association for the payment of current or future claims. This
  193  subparagraph does not alter the obligation of an insurer to
  194  remit assessments levied pursuant to this subsection to the
  195  association. Insurers shall file one or more reconciliation
  196  reports with the association which indicate the amount actually
  197  collected during the assessment year and such other information
  198  using a form and schedule adopted by the association and
  199  provided to the insurers in advance.
  200         (g) Insurers shall treat the failure of an insured to pay a
  201  surcharge recoupment charge as a failure to pay the premium.
  202         (h) Assessments levied under this subsection are levied
  203  upon insurers. This subsection does not create a cause of action
  204  by a policyholder with respect to the levying of, or a
  205  policyholder’s duty to pay, such assessments and related
  206  surcharges.
  207         (i) Assessments levied under this subsection are not
  208  premium and are not subject to the premium tax, to any fees, or
  209  to any commissions. An insurer is liable for any surcharges
  210  emergency assessments that the insurer collects and shall treat
  211  the failure of an insured to pay an emergency assessment as a
  212  failure to pay the premium. An insurer is not liable for
  213  uncollectible surcharges emergency assessments.
  214         Section 4. Paragraphs (c) and (d) of subsection (1) and
  215  paragraph (c) of subsection (4) of section 631.914, Florida
  216  Statutes, are amended to read:
  217         631.914 Assessments.—
  218         (1)
  219         (c) The office shall levy the uniform surcharge percentage
  220  on all policies of the same kind or line as were considered by
  221  the office in determining the assessment liability of the
  222  insurer. Member insurers shall collect policy surcharges at a
  223  uniform percentage rate on new and renewal policies issued and
  224  effective during the assessment year period of 12 months
  225  beginning on January 1, April 1, July 1, or October 1, whichever
  226  is the first day of the following calendar quarter as specified
  227  in an order issued by the office. The policy surcharge may not
  228  begin until 90 days after the board of directors certifies the
  229  assessment.
  230         (d) The association may use a pass-through an installment
  231  method to require the insurer to remit the policy surcharge as
  232  collected or may require the insurer to remit the assessment to
  233  the association before collecting the policy surcharge.
  234         1. If the association elects to use the pass-through
  235  installment method, the office may, in the order levying the
  236  assessment on insurers, specify that the policy surcharge is due
  237  and payable quarterly as collected throughout the assessment
  238  year. Insurers shall collect policy surcharges at a uniform
  239  percentage rate specified by order as described in paragraph
  240  (c). Insurers are not required to advance funds if the
  241  association and the office elect to use the pass-through
  242  installment option. Assessments levied under this subparagraph
  243  are paid after policy surcharges are collected, and the
  244  recognition of assets is based on actual policy surcharges
  245  collected offset by the obligation to the association.
  246         2. If the association elects to require insurers to remit
  247  the assessment before surcharging the policy, the following
  248  shall apply:
  249         a. On or before the date specified in the order of the
  250  office, insurers shall make an initial advance payment to the
  251  association of the percentage specified in the order multiplied
  252  by the insurer’s direct written premiums received in this state
  253  for the preceding calendar year for the kinds of insurance
  254  included within such account before the beginning of the
  255  assessment year. The board may authorize an insurer to pay an
  256  assessment in a single payment or on a quarterly basis, based on
  257  cash-flow needs.
  258         b. The levy order shall provide each insurer so assessed at
  259  least 30 days’ written notice of the date the initial assessment
  260  payment is due and payable by the insurer.
  261         c. Insurers shall collect policy surcharges at a uniform
  262  percentage rate specified by the order, as described in
  263  paragraph (c).
  264         d. Assessments levied under this subparagraph and paid by
  265  an insurer constitute advances of funds from the insurer to the
  266  association and result in a receivable for policy surcharges to
  267  be billed in the future. The amount of billed policy surcharges,
  268  to the extent it is likely that it will be realized, meets the
  269  definition of an admissible asset as specified in the National
  270  Association of Insurance Commissioners’ Statement of Statutory
  271  Accounting Principles No. 4. The asset shall be established and
  272  recorded separately from the liability. If an insurer is unable
  273  to fully recoup the amount of the assessment, the amount
  274  recorded as an asset shall be reduced to the amount reasonably
  275  expected to be recouped.
  276         3. Insurers must submit a reconciliation report to the
  277  association within 120 days after the end of the 12-month
  278  assessment year period and annually thereafter for a period of 2
  279  3 years. The report must indicate the amount of the initial
  280  payment or installment payments made to the association and the
  281  amount of policy surcharges collected for the assessment year.
  282  If the insurer’s reconciled obligation is more than the amount
  283  paid to the association, the insurer shall pay the excess policy
  284  surcharges collected to the association. If the insurer’s
  285  reconciled obligation is less than the initial amount paid to
  286  the association, the association shall return the overpayment to
  287  the insurer.
  288         (4)
  289         (c) The board may allow an insurer to pay an assessment on
  290  a quarterly basis.
  291         Section 5. This act shall take effect July 1, 2022.