Bill Text: FL S0540 | 2020 | Regular Session | Enrolled


Bill Title: Insurance Guaranty Associations

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Passed) 2020-06-22 - Chapter No. 2020-54 [S0540 Detail]

Download: Florida-2020-S0540-Enrolled.html
       ENROLLED
       2020 Legislature                                          SB 540
       
       
       
       
       
       
                                                              2020540er
    1  
    2         An act relating to insurance guaranty associations;
    3         creating s. 626.8621, F.S.; authorizing certain
    4         guaranty association employees to adjust losses for
    5         the Florida Insurance Guaranty Association if certain
    6         conditions are met; amending s. 631.54, F.S.;
    7         redefining the term “net direct written premiums” as
    8         “direct written premiums” and revising the definition
    9         of that term; amending s. 631.57, F.S.; deleting a
   10         calculation of initial estimated assessments levied by
   11         the Office of Insurance Regulation on insurers in the
   12         Florida Insurance Guaranty Association; providing that
   13         a notice requirement for initial assessments applies
   14         to emergency assessments; revising the frequency of
   15         payable installments for assessments if an installment
   16         method is elected by the association; revising the
   17         basis of calculating initial payments of assessments
   18         for certain insurers; conforming a provision to
   19         changes made by the act; amending ss. 625.012, 631.59,
   20         and 631.912, F.S.; conforming provisions to changes
   21         made by the act; amending s. 631.914, F.S.; deleting a
   22         calculation of initial estimated assessments levied by
   23         the office on insurers in the Florida Workers’
   24         Compensation Insurance Guaranty Association; revising
   25         the method for calculating assessments; authorizing
   26         the association to audit certain reports by insurers
   27         and self-insurance funds; specifying a requirement for
   28         the office in levying policy surcharges; revising a
   29         procedure for collecting policy surcharges; revising
   30         an installment method of payments to apply to policy
   31         surcharges rather than to assessments; revising
   32         requirements if the association elects to require
   33         insurers to remit assessments before surcharging
   34         policies; revising a requirement for annual
   35         reconciliation reports by insurers; revising
   36         construction; revising the applicability of premium
   37         taxes, fees, and commissions; providing an effective
   38         date.
   39          
   40  Be It Enacted by the Legislature of the State of Florida:
   41  
   42         Section 1. Section 626.8621, Florida Statutes, is created
   43  to read:
   44         626.8621Adjustments by guaranty association employees.—
   45         (1)An employee of the Florida Insurance Guaranty
   46  Association, created under part II of chapter 631, may adjust
   47  losses for the association if such employee holds, or has held
   48  within the past 10 years, licensure in this state which allows
   49  for the adjustment of such losses.
   50         (2)An employee of a guaranty association established by
   51  another state whose insurance regulators are members of the
   52  National Association of Insurance Commissioners may adjust
   53  losses for the Florida Insurance Guaranty Association. The
   54  authorization for such employees to adjust losses must be
   55  included in a contract with the Florida Insurance Guaranty
   56  Association and the employee’s guaranty association or
   57  association’s authorized representative. The Florida Insurance
   58  Guaranty Association shall contract only for employees of other
   59  state guaranty associations who maintain the appropriate
   60  experience and training for adjusting such claims.
   61         Section 2. Subsection (9) of section 631.54, Florida
   62  Statutes, is amended to read:
   63         631.54 Definitions.—As used in this part:
   64         (9) “Net Direct written premiums” means direct gross
   65  premiums written in this state on insurance policies to which
   66  this part applies, less return premiums thereon and dividends
   67  paid or credited to policyholders on such direct business. The
   68  term “Net direct written premiums” does not include premiums on
   69  contracts between insurers or reinsurers.
   70         Section 3. Paragraphs (a), (e), and (f) of subsection (3)
   71  of section 631.57, Florida Statutes, are amended to read:
   72         631.57 Powers and duties of the association.—
   73         (3)(a) To the extent necessary to secure funds for the
   74  respective accounts for the payment of covered claims, to pay
   75  the reasonable costs to administer such accounts, and to secure
   76  funds for the account specified in s. 631.55(2)(b) or to retire
   77  indebtedness, including, without limitation, the principal,
   78  redemption premium, if any, and interest on, and related costs
   79  of issuance of, bonds issued under s. 631.695 and the funding of
   80  reserves and other payments required under the bond resolution
   81  or trust indenture pursuant to which such bonds have been
   82  issued, the office, upon certification of the board of
   83  directors, shall levy assessments, in accordance with
   84  subparagraph (f)1. or subparagraph (f)2., initially estimated in
   85  the proportion that each insurer’s net direct written premiums
   86  in this state in the classes protected by the account bears to
   87  the total of said net direct written premiums received in this
   88  state by all such insurers for the preceding calendar year for
   89  the kinds of insurance included within such account. Assessments
   90  shall be remitted to and administered by the board of directors
   91  in the manner specified by the approved plan and paragraph (f).
   92  Each insurer so assessed shall have at least 30 days’ written
   93  notice as to the date the initial assessment payment is due and
   94  payable. Every assessment shall be a uniform percentage. The
   95  assessments levied against any insurer may not exceed in any one
   96  calendar year more than 2 percent of that insurer’s net direct
   97  written premiums in this state for the kinds of insurance
   98  included within such account.
   99         (e)1. In addition to assessments authorized in paragraph
  100  (a), and to the extent necessary to secure the funds for the
  101  account specified in s. 631.55(2)(b) for the direct payment of
  102  covered claims of insurers rendered insolvent by the effects of
  103  a hurricane and to pay the reasonable costs to administer such
  104  claims, or to retire indebtedness, including, without
  105  limitation, the principal, redemption premium, if any, and
  106  interest on, and related costs of issuance of, bonds issued
  107  under s. 631.695 and the funding of any reserves and other
  108  payments required under the bond resolution or trust indenture
  109  pursuant to which such bonds have been issued, the office, upon
  110  certification of the board of directors, shall levy emergency
  111  assessments upon insurers holding a certificate of authority.
  112  The emergency assessments levied against any insurer may not
  113  exceed in any one calendar year more than 2 percent of that
  114  insurer’s net written premiums in this state for the kinds of
  115  insurance within the account specified in s. 631.55(2)(b).
  116         2. Emergency assessments authorized under this paragraph
  117  shall be levied by the office upon insurers in accordance with
  118  paragraph (f), upon certification as to the need for such
  119  assessments by the board of directors. If the board participates
  120  in the issuance of bonds in accordance with s. 631.695,
  121  emergency assessments shall be levied in each year that bonds
  122  issued under s. 631.695 and secured by such emergency
  123  assessments are outstanding in amounts up to such 2-percent
  124  limit as required in order to provide for the full and timely
  125  payment of the principal of, redemption premium, if any, and
  126  interest on, and related costs of issuance of, such bonds. The
  127  emergency assessments are assigned and pledged to the
  128  municipality, county, or legal entity issuing bonds under s.
  129  631.695 for the benefit of the holders of such bonds in order to
  130  provide for the payment of the principal of, redemption premium,
  131  if any, and interest on such bonds, the cost of issuance of such
  132  bonds, and the funding of any reserves and other payments
  133  required under the bond resolution or trust indenture pursuant
  134  to which such bonds have been issued, without further action by
  135  the association, the office, or any other party. If bonds are
  136  issued under s. 631.695 and the association determines to secure
  137  such bonds by a pledge of revenues received from the emergency
  138  assessments, such bonds, upon such pledge of revenues, shall be
  139  secured by and payable from the proceeds of such emergency
  140  assessments, and the proceeds of emergency assessments levied
  141  under this paragraph shall be remitted directly to and
  142  administered by the trustee or custodian appointed for such
  143  bonds.
  144         3. Emergency assessments used to defease bonds issued under
  145  this part may be payable in a single payment or, at the option
  146  of the association, may be payable in quarterly 12 monthly
  147  installments, with the first installment being due and payable
  148  at the end of the month after an emergency assessment is levied
  149  and subsequent installments being due by the end of each
  150  succeeding month.
  151         4. If emergency assessments are imposed, the report
  152  required by s. 631.695(7) must include an analysis of the
  153  revenues generated from the emergency assessments imposed under
  154  this paragraph.
  155         5. If emergency assessments are imposed, the references in
  156  sub-subparagraph (1)(a)3.b. and s. 631.695(2) and (7) to
  157  assessments levied under paragraph (a) must include emergency
  158  assessments imposed under this paragraph.
  159         6. If the board of directors participates in the issuance
  160  of bonds in accordance with s. 631.695, an annual assessment
  161  under this paragraph shall continue while the bonds issued with
  162  respect to which the assessment was imposed are outstanding,
  163  including any bonds the proceeds of which were used to refund
  164  bonds issued pursuant to s. 631.695, unless adequate provision
  165  has been made for the payment of the bonds in the documents
  166  authorizing the issuance of such bonds.
  167         (f)1. The association, office, and insurers remitting
  168  assessments pursuant to paragraph (a) or paragraph (e) must
  169  comply with the following:
  170         a. In the order levying an assessment, the office shall
  171  specify the actual percentage amount to be collected uniformly
  172  from all the policyholders of insurers subject to the assessment
  173  and the date on which the assessment year begins, which may not
  174  begin before 90 days after the association board certifies such
  175  an assessment.
  176         b. Insurers shall make an initial payment to the
  177  association before the beginning of the assessment year on or
  178  before the date specified in the order of the office. Each
  179  insurer shall have at least 30 days’ written notice as to the
  180  date on which the initial assessment payment is due and payable.
  181         c. Insurers that have written insurance in the calendar
  182  year before the year in which the assessment is certified by the
  183  board shall make an initial payment based on the net direct
  184  written premium in this state for the classes protected by the
  185  account amount from the previous calendar year as set forth in
  186  the insurer’s annual statement, multiplied by the uniform
  187  percentage of premium specified in the order issued by the
  188  office. Insurers that have not written insurance in the previous
  189  calendar year in any of the lines under the account which are
  190  being assessed, but which are writing insurance as of, or after,
  191  the date the board certifies the assessment to the office, shall
  192  pay an amount based on a good faith estimate of the amount of
  193  net direct written premium anticipated to be written in the
  194  subject lines of business for the assessment year, multiplied by
  195  the uniform percentage of premium specified in the order issued
  196  by the office.
  197         d. Insurers shall file a reconciliation report with the
  198  association which indicates the amount of the initial payment to
  199  the association before the assessment year, whether such amount
  200  was based on net direct written premium contained in a previous
  201  calendar year annual statement or a good faith projection, the
  202  amount actually collected during the assessment year, and such
  203  other information contained on a form adopted by the association
  204  and provided to the insurers in advance. If the insurer
  205  collected from policyholders more than the amount initially
  206  paid, the insurer shall pay the excess amount to the
  207  association. If the insurer collected from policyholders an
  208  amount which is less than the amount initially paid to the
  209  association, the association shall credit the insurer that
  210  amount against future assessments. Such payment reconciliation
  211  report, and any payment of excess amounts collected from
  212  policyholders, shall be completed and remitted to the
  213  association within 90 days after the end of the assessment year.
  214  The association shall send a final reconciliation report on all
  215  insurers to the office within 120 days after each assessment
  216  year.
  217         e. Insurers remitting reconciliation reports under this
  218  paragraph to the association are subject to s. 626.9541(1)(e).
  219         2. For assessments required under paragraph (a) or
  220  paragraph (e), the association may use a quarterly monthly
  221  installment method instead of the method described in sub
  222  subparagraphs 1.b. and c. or in combination thereof based on the
  223  association’s projected cash flow. If the association projects
  224  that it has cash on hand for the payment of anticipated claims
  225  in the applicable account for at least 6 months, the board may
  226  make an estimate of the assessment needed and may recommend to
  227  the office the assessment percentage that may be collected as a
  228  quarterly monthly assessment. The office may, in the order
  229  levying the assessment on insurers, specify that the assessment
  230  is due and payable quarterly monthly as the funds are collected
  231  from insureds throughout the assessment year, in which case the
  232  assessment shall be a uniform percentage of premium collected
  233  during the assessment year and shall be collected from all
  234  policyholders with policies in the classes protected by the
  235  account. All insurers shall collect the assessment without
  236  regard to whether the insurers reported premium in the year
  237  preceding the assessment. Insurers are not required to advance
  238  funds if the association and the office elect to use the
  239  quarterly monthly installment option. All funds collected shall
  240  be retained by the association for the payment of current or
  241  future claims. This subparagraph does not alter the obligation
  242  of an insurer to remit assessments levied pursuant to this
  243  subsection to the association.
  244         Section 4. Paragraph (b) of subsection (15) of section
  245  625.012, Florida Statutes, is amended to read:
  246         625.012 “Assets” defined.—In any determination of the
  247  financial condition of an insurer, there shall be allowed as
  248  “assets” only such assets as are owned by the insurer and which
  249  consist of:
  250         (15)
  251         (b) Assessments levied as monthly installments pursuant to
  252  s. 631.57(3)(e)3. or s. 631.914 which are paid after policy
  253  surcharges are collected so that the recognition of assets is
  254  based on actual premium written offset by the obligation to the
  255  Florida Insurance Guaranty Association or the Florida Workers’
  256  Compensation Insurance Guaranty Association, Incorporated.
  257         Section 5. Subsection (3) of section 631.59, Florida
  258  Statutes, is amended to read:
  259         631.59 Duties and powers of department and office.—
  260         (3) The office shall, upon request of the board of
  261  directors, provide the association with a statement of the net
  262  direct written premiums of each member insurer.
  263         Section 6. Subsection (1) of section 631.912, Florida
  264  Statutes, is amended to read:
  265         631.912 Board of directors.—
  266         (1) The board of directors of the corporation shall consist
  267  of 11 persons, 1 of whom is the insurance consumer advocate
  268  appointed under s. 627.0613 or designee and 1 of whom is
  269  designated by the Chief Financial Officer. The department shall
  270  appoint to the board 6 persons selected by private carriers from
  271  among the 20 workers’ compensation insurers with the largest
  272  amount of net direct written premium as determined by the
  273  department, and 2 persons selected by the self-insurance funds.
  274  The Governor shall appoint one person who has commercial
  275  insurance experience. At least two of the private carriers shall
  276  be foreign carriers authorized to do business in this state. The
  277  board shall elect a chairperson from among its members. The
  278  Chief Financial Officer may remove any board member for cause.
  279  Each board member shall be appointed to serve a 4-year term and
  280  may be reappointed. A vacancy on the board shall be filled for
  281  the remaining period of the term in the same manner by which the
  282  original appointment was made.
  283         Section 7. Subsections (1), (2), and (3) of section
  284  631.914, Florida Statutes, are amended to read:
  285         631.914 Assessments.—
  286         (1)(a) To the extent necessary to secure the funds for the
  287  payment of covered claims, and also to pay the reasonable costs
  288  to administer the same, the Office of Insurance Regulation, upon
  289  certification by the board, shall levy assessments on each
  290  insurer initially estimated in the proportion that the insurer’s
  291  net direct written premiums in this state bears to the total of
  292  said net direct written premiums received in this state by all
  293  such workers’ compensation insurers for the preceding calendar
  294  year. Assessments levied against insurers and self-insurance
  295  funds pursuant to this paragraph must be computed and levied on
  296  the basis of the full policy premium value on the net direct
  297  written premium amount as set forth in the state for workers’
  298  compensation insurance without consideration of any applicable
  299  discount or credit for deductibles. An insurer’s direct written
  300  premium calculated for the purposes of determining the insurer’s
  301  assessment or policy surcharge may not be reduced by any
  302  discount or credit for deductibles in a policy or by any premium
  303  adjustment to a retrospectively rated policy. Insurers and self
  304  insurance funds must report premiums in compliance with this
  305  paragraph, and the association may audit the reports.
  306  Assessments shall be remitted to and administered by the board
  307  of directors in the manner specified by the approved plan of
  308  operation and paragraph (d). Each assessment shall be a uniform
  309  percentage applicable to the net direct written premiums of each
  310  insurer writing workers’ compensation insurance. Assessments
  311  levied against insurers and self-insurance funds shall not
  312  exceed in any calendar year more than 2 percent of that
  313  insurer’s net direct written premiums in this state for workers’
  314  compensation insurance.
  315         (c)(b)The office shall levy the uniform surcharge
  316  percentage on all policies of the same kind or line as were
  317  considered by the office in determining the assessment liability
  318  of the insurer. Member insurers shall collect policy surcharges
  319  at a uniform percentage rate on new and renewal policies issued
  320  and effective during the period of 12 months beginning on
  321  January 1, April 1, July 1, or October 1, whichever is the first
  322  day of the following calendar quarter as specified in an order
  323  issued by the office directing insurers to pay an assessment to
  324  the association. The policy surcharge may not begin until 90
  325  days after the board of directors certifies the assessment.
  326         (b)(c) If assessments otherwise authorized in paragraph (a)
  327  are insufficient to make all payments on reimbursements then
  328  owing to claimants in a calendar year, then upon certification
  329  by the board, the office shall levy additional assessments of up
  330  to 1.5 percent of the insurer’s net direct written premiums in
  331  this state.
  332         (d) The association may use an installment method to
  333  require the insurer to remit the policy surcharge assessment as
  334  collected premium is written or may require the insurer to remit
  335  the assessment to the association before collecting the policy
  336  policyholder surcharge. If the assessment is remitted before the
  337  surcharge is collected, the assessment remitted must be based on
  338  an estimate of the assessment due based on the proportion of
  339  each insurer’s net direct written premium in this state for the
  340  preceding calendar year as described in paragraph (a) and
  341  adjusted following the end of the 12-month period during which
  342  the assessment is levied.
  343         1. If the association elects to use the installment method,
  344  the office may, in the order levying the assessment on insurers,
  345  specify that the policy surcharge assessment is due and payable
  346  quarterly as collected premium is written throughout the
  347  assessment year. Insurers shall collect policy surcharges at a
  348  uniform percentage rate specified by order as described in
  349  paragraph (c) (b). Insurers are not required to advance funds if
  350  the association and the office elect to use the installment
  351  option. Assessments levied under this subparagraph are paid
  352  after policy surcharges are collected, and the recognition of
  353  assets is based on actual policy surcharges collected premium
  354  written offset by the obligation to the association.
  355         2. If the association elects to require insurers to remit
  356  the assessment before surcharging the policy policyholder, the
  357  following shall apply:
  358         a.On or before the date specified in the order of the
  359  office, insurers shall make an initial payment to the
  360  association of the percentage specified in the order multiplied
  361  by the insurer’s direct written premiums received in this state
  362  for the preceding calendar year for the kinds of insurance
  363  included within such account before the beginning of the
  364  assessment year.
  365         b.a. The levy order shall provide each insurer so assessed
  366  at least 30 days’ written notice of the date the initial
  367  assessment payment is due and payable by the insurer.
  368         c.b. Insurers shall collect policy surcharges at a uniform
  369  percentage rate specified by the order, as described in
  370  paragraph (c) (b).
  371         d.c. Assessments levied under this subparagraph and are
  372  paid by an insurer constitute advances of funds from the insurer
  373  to the association before policy surcharges are billed and
  374  result in a receivable for policy surcharges to be billed in the
  375  future. The amount of billed policy surcharges, to the extent it
  376  is likely that it will be realized, meets the definition of an
  377  admissible asset as specified in the National Association of
  378  Insurance Commissioners’ Statement of Statutory Accounting
  379  Principles No. 4. The asset shall be established and recorded
  380  separately from the liability. If an insurer is unable to fully
  381  recoup the amount of the assessment, the amount recorded as an
  382  asset shall be reduced to the amount reasonably expected to be
  383  recouped.
  384         3. Insurers must submit a reconciliation report to the
  385  association within 120 days after the end of the 12-month
  386  assessment period and annually thereafter for a period of 3
  387  years. The report must indicate the amount of the initial
  388  payment or installment payments made to the association and the
  389  amount of policy surcharges collected written premium pursuant
  390  to paragraph (a) for the assessment year. If the insurer’s
  391  reconciled assessment obligation is more than the amount paid to
  392  the association, the insurer shall pay the excess policy
  393  surcharges collected to the association. If the insurer’s
  394  reconciled assessment obligation is less than the initial amount
  395  paid to the association, the association shall return the
  396  overpayment to the insurer.
  397         (2) Policy surcharges collected Assessments levied under
  398  this section are not premium and are not subject to any premium
  399  tax, fees, or commissions. Insurers shall treat the failure of
  400  an insured to pay policy assessment-related surcharges as a
  401  failure to pay premium. An insurer is not liable for any
  402  uncollectible policy assessment-related surcharges levied
  403  pursuant to this section.
  404         (3) Assessments levied under this section may be levied
  405  only upon insurers. This section does not create a cause of
  406  action by a policyholder with respect to the levying of an
  407  assessment or a policyholder’s duty to pay assessment-related
  408  policy surcharges.
  409         Section 8. This act shall take effect July 1, 2020.

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