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: 44 626.8621 Adjustments 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) “NetDirect written premiums” means direct gross 65 premiums written in this state on insurance policies to which 66 this part applies, less return premiums thereonand dividends67paid or credited to policyholderson 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 in85the proportion that each insurer’s net direct written premiums86in this state in the classes protected by the account bears to87the total of said net direct written premiums received in this88state by all such insurers for the preceding calendar year for89the 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). 92Each insurer so assessed shall have at least 30 days’ written93notice as to the date the initial assessment payment is due and94payable.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’snetdirect 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’snetwritten 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 quarterly12 monthly147 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 thenetdirect 184 written premium in this state for the classes protected by the 185 accountamountfrom 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 193netdirect 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 onnetdirect 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 quarterlymonthly221 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 quarterlymonthlyassessment. The office may, in the order 229 levying the assessment on insurers, specify that the assessment 230 is due and payable quarterlymonthlyas 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 quarterlymonthlyinstallment 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 asmonthlyinstallments 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 thenet262 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 ofnetdirect 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 insurerinitially estimated in the proportion that the insurer’s291net direct written premiums in this state bears to the total of292said net direct written premiums received in this state by all293such workers’ compensation insurers for the preceding calendar294year. Assessments levied against insurers and self-insurance 295 funds pursuant to this paragraph must be computed and levied on 296 the basis ofthe full policy premium value onthenetdirect 297 written premium amount as set forth in the state for workers’ 298 compensation insurancewithout consideration of any applicable299discount 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 uniform309percentage applicable to the net direct written premiums of each310insurer 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’snetdirect 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 officedirecting insurers to pay an assessment to324the 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’snetdirect written premiums in 331 this state. 332 (d) The association may use an installment method to 333 require the insurer to remit the policy surchargeassessmentas 334 collectedpremium is writtenor may require the insurer to remit 335 the assessment to the association before collecting the policy 336policyholdersurcharge.If the assessment is remitted before the337surcharge is collected, the assessment remitted must be based on338an estimate of the assessment due based on the proportion of339each insurer’s net direct written premium in this state for the340preceding calendar year as described in paragraph (a) and341adjusted following the end of the 12-month period during which342the 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 surchargeassessmentis due and payable 346 quarterly as collectedpremium is writtenthroughout 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 collectedpremium354writtenoffset by the obligation to the association. 355 2. If the association elects to require insurers to remit 356 the assessment before surcharging the policypolicyholder, 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 andare372 paid by an insurer constitute advances of funds from the insurer 373 to the associationbefore policy surcharges are billedand 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 collectedwritten premium pursuant390to paragraph (a)for the assessment year. If the insurer’s 391 reconciledassessmentobligation 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 reconciledassessmentobligation 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 collectedAssessments leviedunder 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 policyassessment-relatedsurcharges as a 401 failure to pay premium. An insurer is not liable for any 402 uncollectible policyassessment-relatedsurcharges 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.