Bill Text: FL S1836 | 2011 | Regular Session | Introduced
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Insurance
Spectrum: Slight Partisan Bill (? 2-1)
Status: (Introduced - Dead) 2011-05-07 - Indefinitely postponed and withdrawn from consideration [S1836 Detail]
Download: Florida-2011-S1836-Introduced.html
Bill Title: Insurance
Spectrum: Slight Partisan Bill (? 2-1)
Status: (Introduced - Dead) 2011-05-07 - Indefinitely postponed and withdrawn from consideration [S1836 Detail]
Download: Florida-2011-S1836-Introduced.html
Florida Senate - 2011 SB 1836 By Senator Diaz de la Portilla 36-00500-11 20111836__ 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 Commissioner of 11 Insurance Regulation specified information, documents, 12 and statements; requiring a captive insurance company 13 to file specific evidence with the commissioner 14 relating to the financial condition and quality of 15 management and operations of the company; requiring an 16 applicant-sponsored captive insurer to file with the 17 commissioner a business plan, certain statements, 18 sample contracts, and certain evidence relating to 19 expenses; requiring a captive insurance company to pay 20 certain fees and costs relating to an application for 21 licensure and renewal; authorizing initial licensure 22 until a date certain and requiring annual renewal 23 thereafter on such date; authorizing a foreign or 24 alien captive insurance company to become a domestic 25 captive insurance company by complying with specified 26 requirements; authorizing the commissioner to waive 27 any requirements for public hearings relating to the 28 redomestication of an alien captive insurance company; 29 amending s. 628.907, F.S.; revising capitalization and 30 security requirements for specified captive insurance 31 companies; requiring capital of specified captive 32 insurance companies to be held in certain forms; 33 requiring contributions to captive insurance companies 34 that are nonprofit corporations to be in a certain 35 form; authorizing the commission to issue a captive 36 insurance company license conditioned upon certain 37 evidence relating to possession of specified capital; 38 authorizing revocation of a conditional license under 39 certain circumstances; authorizing the commissioner to 40 prescribe certain additional capital and net asset 41 requirements; requiring such additional requirements 42 relating to capital and net assets to be held in 43 specified forms; requiring certain security of a 44 branch captive insurance company to be trust funded by 45 specified types of assets made payable to certain 46 policyholders and insurers; providing limitations on 47 the payment of dividends by a captive insurance 48 company; prohibiting distributions by a captive 49 insurance company that is a nonprofit corporation 50 without commissioner approval; requiring certain 51 irrevocable letters of credit to meet certain 52 standards; creating s. 628.908, F.S.; prohibiting the 53 issuance of a license to specified captive insurance 54 companies unless such companies possess and maintain 55 certain levels of unimpaired surplus; requiring 56 unimpaired surplus to be in specified forms; 57 authorizing a sponsored captive insurance company that 58 does not assume risk to maintain unimpaired surplus in 59 certain securities approved by the commissioner; 60 requiring a captive insurance company that is 61 organized as a reciprocal insurer to maintain a 62 specified amount of unimpaired surplus; authorizing 63 the commissioner to condition issuance of a captive 64 insurance company license upon the provision of 65 certain evidence relating to the possession of a 66 minimum amount of unimpaired surplus; authorizing 67 revocation of a conditional license under certain 68 circumstances; authorizing the commissioner to require 69 additional surplus in specified forms; requiring 70 dividends or distributions of capital or surplus to 71 meet certain conditions and be approved by the 72 commissioner; requiring certain letters of credit to 73 meet certain standards; amending s. 628.909, F.S.; 74 providing for applicability of certain statutory 75 provisions to specified captive insurers; creating s. 76 628.910, F.S.; providing requirements, options, and 77 conditions relating to how a pure captive insurance 78 company or a sponsored captive insurance company may 79 be incorporated or organized as a business; amending 80 s. 628.911, F.S.; providing reporting requirements for 81 specified captive insurance companies and captive 82 reinsurance companies; creating s. 628.912, F.S.; 83 authorizing a sponsored captive insurance company and 84 a captive reinsurance company to discount specified 85 losses subject to certain conditions; amending s. 86 628.913, F.S.; authorizing a captive reinsurance 87 company to apply to the commission for licensure to 88 write reinsurance covering property and casualty 89 insurance or reinsurance contracts; authorizing the 90 commissioner to allow a captive reinsurance company to 91 write reinsurance contracts covering risks in any 92 state; specifying that a captive reinsurance company 93 is subject to specified requirements and must meet 94 specified conditions to conduct business in this 95 state; creating s. 628.914, F.S.; specifying 96 requirements and conditions relating to the 97 capitalization or maintenance of reserves by a captive 98 reinsurance company; creating s. 628.9141, F.S.; 99 specifying requirements and conditions relating to the 100 incorporation of a captive reinsurance company; 101 creating s. 628.9142, F.S.; providing for the effect 102 on reserves of certain actions taken by a captive 103 insurance company relating to providing reinsurance 104 for specified risks; creating s. 628.9143, F.S.; 105 requiring a captive reinsurance company to annually 106 pay a specified tax amount; prohibiting any other 107 taxation of a captive reinsurance company other than 108 an occupation tax and certain ad valorem taxes; 109 subjecting a captive reinsurance company to sanctions 110 for failures relating to the payment of taxes; 111 creating s. 628.918, F.S.; requiring a specified 112 percentage of a captive reinsurance company’s assets 113 to be managed by an asset manager domiciled in this 114 state; creating s. 628.919, F.S.; authorizing the 115 Financial Services Commission to adopt rules 116 establishing certain standards for control of an 117 unaffiliated business by a parent or affiliated 118 company relating to coverage by a pure captive 119 insurance company; creating s. 628.920, F.S.; 120 providing for the conversion of certain stock, mutual 121 corporations, or limited liability companies into 122 reciprocal insurers; requiring a specified plan for 123 such conversions or mergers; specifying requirements 124 and conditions for the approval of a conversion or 125 merger plan by the commissioner; creating s. 628.921, 126 F.S.; providing requirements and conditions relating 127 to the formation of a sponsored captive insurance 128 company and the establishment of protected cells; 129 creating s. 628.922, F.S.; providing requirements and 130 conditions applicable to a sponsor of a sponsored 131 captive insurance company; creating s. 628.923, F.S.; 132 authorizing specified entities to be participants in 133 sponsored captive insurance companies under certain 134 circumstances; creating s. 628.924, F.S.; requiring 135 that a licensed captive insurance company must be 136 considered for issuance of a certificate of authority 137 as an insurer under certain circumstances; providing 138 an effective date. 139 140 Be It Enacted by the Legislature of the State of Florida: 141 142 Section 1. Section 628.901, Florida Statutes, is amended to 143 read: 144 628.901 Definitions“Captive insurer” defined.—As used in 145For the purposes ofthis part, unless the context requires 146 otherwise:except as provided in s.628.903, a “captive insurer”147is a domestic insurer established under part I to insure the148risks of a specific corporation or group of corporations under149common ownership owned by the corporation or corporations from150which it accepts risk under a contract of insurance.151 (1) “Affiliated company” means a company in the same 152 corporate system as a parent, an industrial insured, or a member 153 organization by virtue of common ownership, control, operation, 154 or management. 155 (2) “Alien captive insurance company” means an insurance 156 company formed to write insurance business for its parents and 157 affiliates and licensed under the laws of an alien jurisdiction 158 which imposes statutory or regulatory standards in a form 159 acceptable to the commissioner on companies transacting the 160 business of insurance in the alien jurisdiction. 161 (3) “Association” means a legal association of individuals, 162 corporations, limited liability companies, partnerships, 163 political subdivisions, or associations that has been in 164 continuous existence for at least 1 year: 165 (a) The member organizations of which collectively, or 166 which does itself: 167 1. Own, control, or hold with power to vote all of the 168 outstanding voting securities of an association captive 169 insurance company incorporated as a stock insurer or organized 170 as a limited liability company; or 171 2. Have complete voting control over an association captive 172 insurance company organized as a mutual insurer; or 173 (b) The member organizations of which collectively 174 constitute all of the subscribers of an association captive 175 insurance company formed as a reciprocal insurer. 176 (4) “Association captive insurance company” means a company 177 that insures risks of the member organizations of the 178 association and their affiliated companies. 179 (5) “Branch business” means any insurance business 180 transacted by a branch captive insurance company in this state. 181 (6) “Branch captive insurance company” means an alien 182 captive insurance company licensed by the commissioner to 183 transact the business of insurance in this state through a 184 business unit with a principal place of business in this state. 185 (7) “Branch operations” means any business operations of a 186 branch captive insurance company in this state. 187 (8) “Captive insurance company” means a pure captive 188 insurance company, association captive insurance company, 189 captive reinsurance company, sponsored captive insurance 190 company, special purpose captive insurance company, or 191 industrial insured captive insurance company formed or licensed 192 under this chapter. For purposes of this chapter, a branch 193 captive insurance company must be a pure captive insurance 194 company with respect to operations in this state, unless 195 otherwise permitted by the commissioner. 196 (9) “Captive reinsurance company” means a reinsurance 197 company that is formed or licensed under this chapter and is 198 wholly owned by a qualifying reinsurance parent company. A 199 captive reinsurance company is a stock corporation. 200 (10) “Commissioner” means the Commissioner of the Office of 201 Insurance Regulation or the commissioner’s designee. 202 (11) “Consolidated debt to total capital ratio” means the 203 ratio of the sum of all debts and hybrid capital instruments as 204 described in paragraph (a) to total capital as described in 205 paragraph (b). 206 (a) Debts and hybrid capital instruments include, but are 207 not limited to, all borrowings from banks, all senior debt, all 208 subordinated debts, all trust preferred shares, and all other 209 hybrid capital instruments that are not included in the 210 determination of consolidated GAAP net worth issued and 211 outstanding. 212 (b) Total capital consists of all debts and hybrid capital 213 instruments as described in paragraph (a) plus owners’ equity 214 determined in accordance with GAAP for reporting to the United 215 States Securities and Exchange Commission. 216 (12) “Consolidated GAAP net worth” means the consolidated 217 owners’ equity determined in accordance with generally accepted 218 accounting principles for reporting to the United States 219 Securities and Exchange Commission. 220 (13) “Controlled unaffiliated business” means a company: 221 (a) That is not in the corporate system of a parent and 222 affiliated companies; 223 (b) That has an existing contractual relationship with a 224 parent or affiliated company; and 225 (c) Whose risks are managed by a captive insurance company 226 in accordance with s. 628.919. 227 (14) “GAAP” means generally accepted accounting principles. 228 (15) “Industrial insured” means an insured as defined in s. 229 628.903(1). 230 (16) “Industrial insured captive insurance company” means a 231 company that insures risks of the industrial insureds that 232 comprise the industrial insured group and their affiliated 233 companies. 234 (17) “Industrial insured group” means a group that meets 235 either of the following criteria: 236 (a) A group of industrial insureds that collectively: 237 1. Own, control, or hold with power to vote all of the 238 outstanding voting securities of an industrial insured captive 239 insurance company incorporated as a stock insurer or limited 240 liability company; or 241 2. Have complete voting control over an industrial insured 242 captive insurance company incorporated as a mutual insurer; or 243 (b) A group which is created under the Liability Risk 244 Retention Act of 1986, 15 U.S.C. s. 3901, et seq., as amended, 245 and a corporation or other limited liability association taxable 246 as a stock insurance company or a mutual insurer under the 247 insurance code. 248 (18) “Member organization” means any individual, 249 corporation, limited liability company, partnership, or 250 association that belongs to an association. 251 (19) “Office” means the Office of Insurance Regulation. 252 (20) “Parent” means any corporation, limited liability 253 company, partnership, or individual that directly or indirectly 254 owns, controls, or holds with power to vote more than 50 percent 255 of the outstanding voting interests of a captive insurance 256 company. 257 (21) “Participant” means an entity as defined in s. 258 628.923, and any affiliates of that entity, that are insured by 259 a sponsored captive insurance company, where the losses of the 260 participant are limited through a participant contract to the 261 assets of a protected cell. 262 (22) “Participant contract” means a contract by which a 263 sponsored captive insurance company insures the risks of a 264 participant and limits the losses of the participant to the 265 assets of a protected cell. 266 (23) “Protected cell” means a separate account established 267 and maintained by a sponsored captive insurance company for one 268 participant. 269 (24) “Pure captive insurance company” means a company that 270 insures risks of its parent, affiliated companies, controlled 271 unaffiliated business, or a combination thereof. 272 (25) “Qualifying reinsurer parent company” means a 273 reinsurer authorized to write reinsurance by this state and that 274 has a consolidated GAAP net worth of not less than $500 million 275 and a consolidated debt to total capital ratio of not greater 276 than 0.50. 277 (26) “Special purpose captive insurance company” means a 278 captive insurance company that is formed or licensed under this 279 chapter that does not meet the definition of any other type of 280 captive insurance company defined in this section. 281 (27) “Sponsor” means an entity that meets the requirements 282 of s. 628.922, and is approved by the commissioner to provide 283 all or part of the capital and surplus required by applicable 284 law and to organize and operate a sponsored captive insurance 285 company. 286 (28) “Sponsored captive insurance company” means a captive 287 insurance company: 288 (a) In which the minimum capital and surplus required by 289 applicable law is provided by one or more sponsors; 290 (b) That is formed or licensed under this chapter; 291 (c) That insures the risks of separate participants through 292 the contract; and 293 (d) That segregates each participant’s liability through 294 one or more protected cells. 295 (29) “Treasury rates” means the United States Treasury 296 strips asked yield as published in the Wall Street Journal as of 297 a balance sheet date. 298 Section 2. Section 628.905, Florida Statutes, is amended to 299 read: 300 628.905 Licensing; authority.— 301 (1) Any captive insurer, when permitted by its charter or 302 articles of incorporation, may apply to the commissioneroffice303 for a license to do any and all insurance authorized under the 304 insurance code,provide commercial property, commercial305casualty, and commercial marine insurance coverageother than 306 workers’ compensationand employer’s liabilityinsurance, except 307 that:coverage, except that an industrial insured captive308insurer may apply for a license to provide workers’ compensation309and employer’s liability insurance as set forth in subsection310(6).311 (a) A pure captive insurance company may not insure any 312 risks other than those of its parent, affiliated companies, 313 controlled unaffiliated businesses, or a combination thereof. 314 (b) An association captive insurance company may not insure 315 any risks other than those of the member organizations of its 316 association and their affiliated companies. 317 (c) An industrial insured captive insurance company may not 318 insure any risks other than those of the industrial insureds 319 that comprise the industrial insured group and their affiliated 320 companies. 321 (d) In general, a special purpose captive insurance company 322 may only insure the risks of its parent. Notwithstanding any 323 other provisions of this chapter, a special purpose captive 324 insurance company may provide insurance or reinsurance, or both, 325 for risks as approved by the commissioner. 326 (e) A captive insurance company may not provide personal 327 motor vehicle or homeowners’ insurance coverage or any component 328 of such coverages. 329 (f) A captive insurance company may not accept or cede 330 reinsurance except as provided in this part. 331 (2) To conduct insurance business in this state, aNo332captive insurer, other than an industrial insuredcaptive 333 insurer,shall:insure or accept reinsurance on any risks other334than those of its parent and affiliated companies.335 (a) Obtain from the commissioner a license authorizing it 336 to conduct insurance business in this state; 337 (b) Hold at least one board of directors’ meeting or, in 338 the case of a reciprocal insurer, a subscriber’s advisory 339 committee meeting or, in the case of a limited liability 340 company, a meeting of the managing board each year in this 341 state; 342 (c) Maintain its principal place of business in this state 343 or, in the case of a branch captive insurance company, maintain 344 the principal place of business for its branch operations in 345 this state; and 346 (d) Appoint a resident registered agent to accept service 347 of process and to otherwise act on its behalf in this state. In 348 the case of a captive insurance company: 349 1. Formed as a corporation, a nonprofit corporation, or a 350 limited liability company, whenever the registered agent cannot 351 with reasonable diligence be found at the registered office of 352 the captive insurance company, the Chief Financial Officer of 353 this state must be an agent of the captive insurance company 354 upon whom any process, notice, or demand may be served. 355 2. Formed as a reciprocal insurer, whenever the registered 356 agent cannot with reasonable diligence be found at the 357 registered office of the captive insurance company, the Chief 358 Financial Officer of this state must be an agent of the captive 359 insurance company upon whom any process, notice, or demand may 360 be served. 361 (3)(a) Before receiving a license, a captive insurance 362 company: 363 1. Formed as a corporation or a nonprofit corporation must 364 file with the commissioner a certified copy of its articles of 365 incorporation and bylaws, a statement under oath of its 366 president and secretary showing its financial condition, and any 367 other statements or documents required by the commissioner. 368 2. Formed as a limited liability company must file with the 369 commissioner a certified copy of its articles of organization 370 and operating agreement, a statement under oath by its managers 371 showing its financial condition, and any other statements or 372 documents required by the commissioner. 373 3. Formed as a reciprocal must: 374 a. File with the commissioner a certified copy of the power 375 of attorney of its attorney-in-fact, a certified copy of its 376 subscribers’ agreement, a statement under oath of its attorney 377 in-fact showing its financial condition, and any other 378 statements or documents required by the commissioner; and 379 b. Submit to the commissioner for approval a description of 380 the coverages, deductibles, coverage limits, and rates and any 381 other information the commissioner may reasonably require. If 382 there is a subsequent material change in an item in the 383 description, the reciprocal captive insurance company must 384 submit to the commissioner for approval an appropriate revision 385 and may not offer any additional kinds of insurance until a 386 revision of the description is approved by the commissioner. The 387 reciprocal captive insurance company must inform the 388 commissioner of any material change in rates within 30 days 389 after the adoption of the change. 390 (b) In addition to the information required by paragraph 391 (a), an applicant captive insurance company must file with the 392 commissioner evidence of: 393 1. The amount and liquidity of the proposed captive 394 insurance company’s assets relative to the risks to be assumed; 395 2. The adequacy of the expertise, experience, and character 396 of the person or persons who will manage the company; 397 3. The overall soundness of the company’s plan of 398 operation; 399 4. The adequacy of the loss prevention programs of the 400 company’s parent, member organizations, or industrial insureds, 401 as applicable; and 402 5. Any other factors considered relevant by the 403 commissioner in ascertaining whether the company will be able to 404 meet its policy obligations. 405 (c) In addition to the information required by paragraphs 406 (a) and (b), an applicant-sponsored captive insurance company 407 must file with the commissioner: 408 1. A business plan demonstrating how the applicant will 409 account for the loss and expense experience of each protected 410 cell at a level of detail found to be sufficient by the 411 commissioner and how the applicant will report the experience to 412 the commissioner; 413 2. A statement acknowledging that all financial records of 414 the sponsored captive insurance company, including records 415 pertaining to any protected cells, must be made available for 416 inspection or examination by the commissioner; 417 3. All contracts or sample contracts between the sponsored 418 captive insurance company and any participants; and 419 4. Evidence that expenses will be allocated to each 420 protected cell in an equitable mannerIn addition to information421otherwise required by this code, each applicant captive insurer422shall file with the office evidence of the adequacy of the loss423prevention program of its insureds. 424 (4)(a) A captive insurance company must pay to the office a 425 nonrefundable fee of $200 for processing its application for 426 license. In addition, the commissioner may retain legal, 427 financial, and examination services from outside the office to 428 examine and investigate the application, the reasonable cost of 429 which may be charged against the applicant, or the commissioner 430 may use internal resources to examine and investigate the 431 application for a fee of $2,400. 432 (b) In addition, a captive insurance company must pay a 433 license fee of $300 for 1 year of registration and an annual 434 renewal fee of $500. 435 (c) The office may charge a fee of $15 for any document 436 requiring certification of authenticity or the signature of the 437 commissioner or his or her designeeAn industrial insured438captive insurer need not be incorporated in this state if it has439been validly incorporated under the laws of another440jurisdiction. 441 (5) If the commissioner is satisfied that the documents and 442 statements filed by the captive insurance company comply with 443 the provisions of this chapter, the commissioner may grant a 444 license authorizing the company to conduct insurance business in 445 this state until the next succeeding March 1, at which time the 446 license may be renewedAn industrial insured captive insurer is447subject to all provisions of this part except as otherwise448indicated. 449 (6) Upon approval of the commissioner or his or her 450 designee, a foreign or alien captive insurance company may 451 become a domestic captive insurance company by complying with 452 all of the requirements of law relative to the organization and 453 licensing of a domestic captive insurance company of the same or 454 equivalent type in this state and by filing with the Secretary 455 of State its articles of association, charter, or other 456 organizational documents, together with any appropriate 457 amendments that have been adopted in accordance with the laws of 458 this state to bring those articles of association, charter, or 459 other organizational documents into compliance with the laws of 460 this state, along with a certificate of good standing issued by 461 the commissioner. After this is accomplished, the captive 462 insurance company is entitled to the necessary or appropriate 463 certificates and licenses to continue transacting business in 464 this state and is subject to the authority and jurisdiction of 465 this state. In connection with this redomestication, the 466 commissioner may waive any requirements for public hearings. It 467 is not necessary for a company redomesticating into this state 468 to merge, consolidate, transfer assets, or otherwise engage in 469 any other reorganization, other than as specified in this 470 sectionAn industrial insured captive insurer may not provide471workers’ compensation and employer’s liability insurance except472in excess of at least $25 million in the annual aggregate. 473 Section 3. Section 628.907, Florida Statutes, is amended to 474 read: 475 628.907 Capitalization requirements; security requirements 476 for branch captive insurance companies; restriction on payment 477 of dividendsMinimum capital and surplus.— 478 (1) ANocaptive insurer may notshallbe issued a license 479 unless it possesses and thereafter maintains unimpaired paid-in 480 capital of: 481 (a)(1)In the case of a pure captive insurance company, not 482 less than $100,000.Unimpaired paid-in capital of at least483$500,000; and484 (b)(2)In the case of an association captive insurance 485 company incorporated as a stock insurer or organized as a 486 limited liability company, not less than $400,000.Unimpaired487surplus of at least $250,000.488 (c) In the case of an industrial insured captive insurance 489 company incorporated as a stock insurer or organized as a 490 limited liability company, not less than $200,000. 491 (d) In the case of a sponsored captive insurance company, 492 not less than $500,000. However, if the sponsored captive 493 insurance company does not assume any risk, the risks insured by 494 the protected cells are homogeneous, and there are no more than 495 10 cells, the commissioner may reduce this amount to an amount 496 not less than $150,000. 497 (e) In the case of a special purpose captive insurance 498 company, an amount determined by the commissioner after giving 499 due consideration to the company’s business plan, feasibility 500 study, and pro forma financial statements and projections, 501 including the nature of the risks to be insured. 502 (2)(a) Except for a sponsored captive insurance company 503 that does not assume any risk, the capital must be in the form 504 of cash, cash equivalent, or an irrevocable letter of credit 505 issued by a bank chartered by this state or a member bank of the 506 Federal Reserve System with a branch office in this state, or as 507 approved by the commissioner. 508 (b) For a sponsored captive insurance company that does not 509 assume any risk, the capital may also be in the form of other 510 high-quality securities as approved by the commissioner. 511 (3) The commissioner may not issue a license to a captive 512 insurance company incorporated as a nonprofit corporation unless 513 the company possesses and maintains unrestricted net assets of: 514 (a) In the case of a pure captive insurance company, not 515 less than $250,000. 516 (b) In the case of a special purpose captive insurance 517 company, an amount determined by the commissioner after giving 518 due consideration to the company’s business plan, feasibility 519 study, and pro forma financial statements and projections, 520 including the nature of the risks to be insured. 521 (4) Contributions to a captive insurance company 522 incorporated as a nonprofit corporation must be in the form of 523 cash, cash equivalent, or an irrevocable letter of credit issued 524 by a bank chartered by this state or a member bank of the 525 Federal Reserve System with a branch office in this state, or as 526 approved by the commissioner. 527 (5) For purposes of this section, the commissioner may 528 issue a license expressly conditioned upon the captive insurance 529 company providing to the commissioner satisfactory evidence of 530 possession of the minimum required unimpaired paid-in capital. 531 Until this evidence is provided, the captive insurance company 532 may not issue any policy, assume any liability, or otherwise 533 provide coverage. The commissioner may revoke the conditional 534 license without legal recourse by the company if satisfactory 535 evidence of the required capital is not provided within a 536 maximum period of time, not to exceed 1 year, to be established 537 by the commissioner at the time the conditional license is 538 issued. 539 (6) The commissioner may prescribe additional capital or 540 net assets based upon the type, volume, and nature of insurance 541 business transacted. Contributions in connection with these 542 prescribed additional net assets or capital must be in the form 543 of: 544 (a) Cash; 545 (b) Cash equivalent; 546 (c) An irrevocable letter of credit issued by a bank 547 chartered by this state or a member bank of the Federal Reserve 548 System with a branch office in this state, or as approved by the 549 commissioner; or 550 (d) Securities invested as provided in part II of chapter 551 625. 552 (7) In the case of a branch captive insurance company, as 553 security for the payment of liabilities attributable to branch 554 operations, the commissioner must require that a trust fund, 555 funded by an irrevocable letter of credit or other acceptable 556 asset, be established and maintained in the United States for 557 the benefit of United States policyholders and United States 558 ceding insurers under insurance policies issued or reinsurance 559 contracts issued or assumed, by the branch captive insurance 560 company through its branch operations. The amount of the 561 security may be no less than the capital and surplus required by 562 this chapter and the reserves on these insurance policies or 563 reinsurance contracts, including reserves for losses, allocated 564 loss adjustment expenses, incurred but not reported losses, and 565 unearned premiums with regard to business written through branch 566 operations. However, the commissioner may permit a branch 567 captive insurance company that is required to post security for 568 loss reserves on branch business by its reinsurer to reduce the 569 funds in the trust account required by this section by the same 570 amount as long as the security remains posted with the 571 reinsurer. If the form of security selected is a letter of 572 credit, the letter of credit must be established by, or issued 573 or confirmed by, a bank chartered in this state or a member bank 574 of the Federal Reserve System. 575 (8)(a) A captive insurance company may not pay a dividend 576 out of, or other distribution with respect to, capital or 577 surplus in excess of the limitations set forth in this chapter 578 without the prior approval of the commissioner. Approval of an 579 ongoing plan for the payment of dividends or other distributions 580 must be conditioned upon the retention, at the time of each 581 payment, of capital or surplus in excess of amounts specified 582 by, or determined in accordance with formulas approved by, the 583 commissioner. 584 (b) A captive insurance company incorporated as a nonprofit 585 corporation may not make any distributions without the prior 586 approval of the commissioner. 587 (9) An irrevocable letter of credit, which is issued by a 588 financial institution other than a bank chartered by this state 589 or a member bank of the Federal Reserve System, must meet the 590 same standards as an irrevocable letter of credit which has been 591 issued by a bank chartered by this state or a member bank of the 592 Federal Reserve System. 593 Section 4. Section 628.908, Florida Statutes, is created to 594 read: 595 628.908 Surplus requirements; restriction on payment of 596 dividends.— 597 (1) The commissioner may not issue a license to a captive 598 insurance company unless the company possesses and maintains 599 unimpaired surplus of: 600 (a) In the case of a pure captive insurance company, not 601 less than $150,000. 602 (b) In the case of an association captive insurance company 603 incorporated as a stock insurer or organized as a limited 604 liability company, not less than $350,000. 605 (c) In the case of an industrial insured captive insurance 606 company incorporated as a stock insurer or organized as a 607 limited liability company, not less than $300,000. 608 (d) In the case of an association captive insurance company 609 incorporated as a mutual insurer, not less than $750,000. 610 (e) In the case of an industrial insured captive insurance 611 company incorporated as a mutual insurer, not less than 612 $500,000. 613 (f) In the case of a sponsored captive insurance company, 614 not less than $500,000. However, if the sponsored captive 615 insurance company does not assume any risk, the risks insured by 616 the protected cells are homogeneous, and there are no more than 617 10 cells, the commissioner may reduce this amount to an amount 618 not less than $150,000. 619 (g) In the case of a special purpose captive insurance 620 company, an amount determined by the commissioner after giving 621 due consideration to the company’s business plan, feasibility 622 study, and pro forma financial statements and projections, 623 including the nature of the risks to be insured. 624 (2)(a) Except for a sponsored captive insurance company 625 that does not assume any risk, the surplus must be in the form 626 of cash, cash equivalent, or an irrevocable letter of credit 627 issued by a bank chartered by this state or a member bank of the 628 Federal Reserve System with the branch office in this state and 629 approved by the commissioner. 630 (b) For a sponsored captive insurance company that does not 631 assume any risk, the surplus may also be in the form of other 632 high-quality securities, as approved by the commissioner. 633 (3) Notwithstanding the requirements of this section, a 634 captive insurance company organized as a reciprocal insurer 635 under this chapter may not be issued a license unless it 636 possesses and thereafter maintains unimpaired surplus of $1 637 million. 638 (4) For purposes of subsections (1) and (2), the 639 commissioner may issue a license expressly conditioned upon the 640 captive insurance company providing to the commissioner 641 satisfactory evidence of possession of the minimum required 642 unimpaired surplus. Until this evidence is provided, the captive 643 insurance company may not issue any policy, assume any 644 liability, or otherwise provide coverage. The commissioner may 645 revoke the conditional license without legal recourse by the 646 company if satisfactory evidence of the required capital is not 647 provided within a maximum period of time, not to exceed 1 year, 648 to be established by the commissioner at the time the 649 conditional license is issued. 650 (5) A captive insurance company may not pay a dividend out 651 of, or other distribution with respect to, capital or surplus in 652 excess of the limitations set forth in this chapter without the 653 prior approval of the commissioner. Approval of an ongoing plan 654 for the payment of dividends or other distribution must be 655 conditioned upon the retention, at the time of each payment, of 656 capital or surplus in excess of amounts specified by, or 657 determined in accordance with formulas approved by, the 658 commissioner. 659 (6) An irrevocable letter of credit, which is issued by a 660 financial institution other than a bank chartered by this state 661 or a member bank of the Federal Reserve System, must meet the 662 same standards as an irrevocable letter of credit which has been 663 issued by a bank chartered by this state or a member bank of the 664 Federal Reserve System. 665 Section 5. Section 628.909, Florida Statutes, is amended to 666 read: 667 628.909 Applicability of other laws.— 668 (1) The Florida Insurance Code shall not apply to captive 669 insurers or industrial insured captive insurers except as 670 provided in this part and subsections (2) and (3). 671 (2) The following provisions of the Florida Insurance Code 672 shall apply to captive insurers who are not industrial insured 673 captive insurers to the extent that such provisions are not 674 inconsistent with this part: 675 (a) Chapter 624, except for ss. 624.407, 624.408, 624.4085, 676 624.40851, 624.4095, 624.425, and 624.426. 677 (b) Chapter 625, part II. 678 (c) Chapter 626, part IX. 679 (d) Sections 627.730-627.7405, when no-fault coverage is 680 provided. 681 (e) Chapter 628. 682 (3) The following provisions of the Florida Insurance Code 683 shall apply to industrial insured captive insurers to the extent 684 that such provisions are not inconsistent with this part: 685 (a) Chapter 624, except for ss. 624.407, 624.408, 624.4085, 686 624.40851, 624.4095, 624.425, 624.426, and 624.609(1). 687 (b) Chapter 625, part II, if the industrial insured captive 688 insurer is incorporated in this state. 689 (c) Chapter 626, part IX. 690 (d) Sections 627.730-627.7405 when no-fault coverage is 691 provided. 692 (e) Chapter 628, except for ss. 628.341, 628.351, and 693 628.6018. 694 Section 6. Section 628.910, Florida Statutes, is created to 695 read: 696 628.910 Incorporation options and requirements.— 697 (1) A pure captive insurance company or a sponsored captive 698 insurance company may be: 699 (a) Incorporated as a stock insurer with its capital 700 divided into shares and held by the stockholders; 701 (b) Incorporated as a public benefit, mutual benefit, or 702 religious nonprofit corporation with members in accordance with 703 the Florida Not For Profit Corporation Act; or 704 (c) Organized as a limited liability company with its 705 capital divided into capital accounts and held by its members. 706 (2) An association captive insurance company or an 707 industrial insured captive insurance company may be: 708 (a) Incorporated as a stock insurer with its capital 709 divided into shares and held by the stockholders; 710 (b) Organized as a limited liability company with its 711 capital divided into capital accounts and held by its members; 712 (c) Incorporated as a mutual insurer without capital stock, 713 the governing body of which is elected by the member 714 organizations of its association; or 715 (d) Organized as a reciprocal insurer in accordance with 716 chapter 629. 717 (3) A captive insurance company may not have fewer than 718 three incorporators or organizers of whom not fewer than two 719 must be residents of this state. 720 (4) In the case of a captive insurance company formed as a 721 corporation, a nonprofit corporation, or a limited liability 722 company, before the articles of incorporation or articles of 723 organization are transmitted to the Secretary of State, the 724 incorporators or organizers shall petition the commissioner to 725 issue a certificate setting forth a finding that the 726 establishment and maintenance of the proposed entity will 727 promote the general good of the state. In arriving at this 728 finding, the commissioner must consider: 729 (a) The character, reputation, financial standing, and 730 purposes of the incorporators or organizers; 731 (b) The character, reputation, financial responsibility, 732 insurance experience, and business qualifications of the 733 officers and directors or managers; and 734 (c) Other aspects as the commissioner considers advisable. 735 (5) The articles of incorporation or articles of 736 organization, the certificate issued pursuant to this section, 737 and the organization fees required by the Florida Business 738 Corporation Act or the Florida Not For Profit Corporation Act, 739 as applicable, must be transmitted to the Secretary of State, 740 who must record both the articles of incorporation or articles 741 of organization and the certificate. 742 (6) In the case of a captive insurance company formed as a 743 reciprocal insurer, the organizers must petition the 744 commissioner to issue a certificate setting forth the 745 commissioner’s finding that the establishment and maintenance of 746 the proposed association will promote the general good of the 747 state. In arriving at this finding, the commissioner must 748 consider: 749 (a) The character, reputation, financial standing, and 750 purposes of the incorporators or organizers; 751 (b) The character, reputation, financial responsibility, 752 insurance experience, and business qualifications of the 753 officers and directors or managers; and 754 (c) Other aspects the commissioner considers advisable. 755 (7) In the case of a captive insurance company licensed as 756 a branch captive insurance company, the alien captive insurance 757 company must petition the commissioner to issue a certificate 758 setting forth the commissioner’s finding that, after considering 759 the character, reputation, financial responsibility, insurance 760 experience, and business qualifications of the officers and 761 directors or managers of the alien captive insurance company, 762 the licensing and maintenance of the branch operations will 763 promote the general good of the state. The alien captive 764 insurance company may register to do business in this state 765 after the commissioner’s certificate has been issued. 766 (8) The capital stock or membership interests of a captive 767 insurance company incorporated as a stock insurer or limited 768 liability company must be issued at not less than par value. 769 (9) In the case of a captive insurance company formed as a 770 corporation or a nonprofit corporation, at least one of the 771 members of the board of directors of a captive insurance company 772 incorporated in this state must be a resident of this state. 773 (10) In the case of a captive insurance company formed as a 774 limited liability company, at least one of the managers of the 775 captive insurance company must be a resident of this state. 776 (11) In the case of a captive insurance company formed as a 777 reciprocal insurer, at least one of the members of the 778 subscribers’ advisory committee must be a resident of this 779 state. 780 (12) A captive insurance company formed as a corporation, a 781 nonprofit corporation, or a limited liability company, pursuant 782 to the provisions of this chapter, has the privileges and is 783 subject to the provisions of the general corporation law, 784 including the Florida Not For Profit Corporation Act for 785 nonprofit corporations and the Florida Limited Liability Company 786 Act for limited liability companies, as applicable, as well as 787 the applicable provisions contained in this chapter. If a 788 conflict occurs between a provision of the general corporation 789 law, including the Florida Not For Profit Corporation Act for 790 nonprofit corporations and the Florida Limited Liability Company 791 Act for limited liability companies, as applicable, and a 792 provision of this chapter, the latter controls. The provisions 793 of this title pertaining to mergers, consolidations, 794 conversions, mutualizations, and redomestications apply in 795 determining the procedures to be followed by a captive insurance 796 company in carrying out any of the transactions described in 797 such provisions, except the commissioner may waive or modify the 798 requirements for public notice and hearing in accordance with 799 regulations which the commissioner may adopt addressing 800 categories of transactions. If a notice of public hearing is 801 required, but no one requests a hearing, the commissioner may 802 cancel the hearing. 803 (13) A captive insurance company formed as a reciprocal 804 insurer pursuant to the provisions of this chapter has the 805 privileges and is subject to chapter 629 in addition to the 806 applicable provisions of this part. If a conflict occurs between 807 the provisions of chapter 629 and the provisions of this part, 808 the latter controls. To the extent a reciprocal insurer is made 809 subject to other provisions of this title pursuant to chapter 810 629, the provisions are not applicable to a reciprocal insurer 811 formed pursuant to the provisions of this chapter unless the 812 provisions are expressly made applicable to a captive insurance 813 company pursuant to the provisions of this chapter. 814 (14) The articles of incorporation or bylaws of a captive 815 insurance company may authorize a quorum of a board of directors 816 to consist of no fewer than one-third of the fixed or prescribed 817 number of directors as provided for by the Florida Business 818 Corporation Act or the Florida Not For Profit Corporation Act. 819 In the case of a limited liability company, the articles of 820 organization or operating agreement of a captive insurance 821 company may authorize a quorum to consist of no fewer than one 822 third of the managers required by the articles of organization 823 or the operating agreement. 824 Section 7. Section 628.911, Florida Statutes, is amended to 825 read: 826 628.911 Reports and statements.— 827 (1) A captive insurance company mayinsurer shallnot be 828 required to make any annual report except as provided in this 829 partsection. 830 (2) Annually before March 1, a captive insurance company or 831 a captive reinsurance companyinsurershall, within 60 days832after the end of its fiscal year and as often as the office may833deem necessary,submit to the commissionerofficea report of 834 its financial condition verified by oath of two of its executive 835 officers. Except as provided in this part, a captive insurance 836 company or a captive reinsurance company must report using 837 generally accepted accounting principles, unless the 838 commissioner approves the use of statutory accounting 839 principles, with useful or necessary modifications or 840 adaptations required or approved or accepted by the commissioner 841 for the type of insurance and kinds of insurers to be reported 842 upon, and as supplemented by additional information required by 843 the commissioner. The Financial Services Commission may adopt by 844 rule the form in which captive insurance companiesinsurers845 shall report. 846 (3)(a) A pure captive insurance company may make written 847 application for filing the required report on a fiscal year-end 848 that is consistent with the parent company’s fiscal year. If an 849 alternative reporting date is granted, the annual report is due 850 60 days after the fiscal year-end. 851 (b) In order to provide sufficient detail to support the 852 premium tax return, the pure captive insurance company must file 853 before March 1 of each year for each calendar year-end pages 1-7 854 of the NAIC Annual Statement, verified by oath of two of its 855 executive officers. 856 (4) Sixty days after the fiscal year end, a branch captive 857 insurance company must file with the commissioner a copy of all 858 reports and statements required to be filed under the laws of 859 the jurisdiction in which the alien captive insurance company is 860 formed, verified by oath by two of its executive officers. If 861 the commissioner is satisfied that the annual report filed by 862 the alien captive insurance company in its domiciliary 863 jurisdiction provides adequate information concerning the 864 financial condition of the alien captive insurance company, the 865 commissioner may waive the requirement for completion of the 866 captive annual statement for business written in the alien 867 jurisdiction. Such waiver must be in writing and subject to 868 public inspection. 869 Section 8. Section 628.912, Florida Statutes, is created to 870 read: 871 628.912 Discounting of loss and loss adjustment expense 872 reserves.— 873 (1) A sponsored captive insurance company and a captive 874 reinsurance company may discount its loss and loss adjustment 875 expense reserves at treasury rates applied to the applicable 876 payments projected through the use of the expected payment 877 pattern associated with the reserves. 878 (2) A sponsored captive insurance company and a captive 879 reinsurance company must file annually an actuarial opinion on 880 loss and loss adjustment expense reserves provided by an 881 independent actuary. The actuary may not be an employee of the 882 captive company or its affiliates. 883 (3) The commissioner may disallow the discounting of 884 reserves if a sponsored captive insurance company or a captive 885 reinsurance company violates a provision of this part. 886 Section 9. Section 628.913, Florida Statutes, is amended to 887 read: 888 (Substantial rewording of section. See 889 s. 628.913, F.S., for present text.) 890 628.913 Captive reinsurance companies.— 891 (1) A captive reinsurance company, if permitted by its 892 articles of incorporation or charter, may apply to the 893 commissioner for a license to write reinsurance covering 894 property and casualty insurance or reinsurance contracts. A 895 captive reinsurance company authorized by the commissioner may 896 write reinsurance contracts covering risks in any state. 897 (2) To conduct business in this state, a captive 898 reinsurance company must: 899 (a) Obtain from the commissioner a license authorizing it 900 to conduct business as a captive reinsurance company in this 901 state; 902 (b) Hold at least one board of directors’ meeting each year 903 in this state; 904 (c) Maintain its principal place of business in this state; 905 and 906 (d) Appoint a registered agent to accept service of process 907 and act otherwise on its behalf in this state. 908 (3) Before receiving a license, a captive reinsurance 909 company must file with the commissioner: 910 (a) A certified copy of its charter and bylaws; 911 (b) A statement under oath of its president and secretary 912 showing its financial condition; and 913 (c) Other documents required by the commissioner. 914 (4) In addition to the information required by this 915 section, the captive reinsurance company must file with the 916 commissioner evidence of: 917 (a) The amount and liquidity of the captive reinsurance 918 company’s assets relative to the risks to be assumed; 919 (b) The adequacy of the expertise, experience, and 920 character of the person who manages the company; 921 (c) The overall soundness of the company’s plan of 922 operation; and 923 (d) Other overall factors considered relevant by the 924 commissioner in ascertaining if the company would be able to 925 meet its policy obligations. 926 Section 10. Section 628.914, Florida Statutes, is created 927 to read: 928 628.914 Minimum capitalization or reserves for captive 929 reinsurance companies.— 930 (1) The commissioner may not issue a license to a captive 931 reinsurance company unless the company possesses and maintains 932 capital or unimpaired surplus of not less than the greater of 933 $300 million or 10 percent of reserves. The surplus may be in 934 the form of cash or securities. 935 (2) The commissioner may prescribe additional capital or 936 surplus based upon the type, volume, and nature of the insurance 937 business transacted. 938 (3) A captive reinsurance company may not pay a dividend 939 out of, or other distribution with respect to, capital or 940 surplus in excess of the limitations without the prior approval 941 of the commissioner. Approval of an ongoing plan for the payment 942 of dividends or other distributions must be conditioned upon the 943 retention, at the time of each payment, of capital or surplus in 944 excess of amounts specified by, or determined in accordance with 945 formulas approved by, the commissioner. 946 Section 11. Section 628.9141, Florida Statutes, is created 947 to read: 948 628.9141 Incorporation of a captive reinsurance company.— 949 (1) A captive reinsurance company must be incorporated as a 950 stock insurer with its capital divided into shares and held by 951 its shareholders. 952 (2) A captive reinsurance company may not have fewer than 953 three incorporators of whom at least two must be residents of 954 this state. 955 (3) Before the articles of incorporation are transmitted to 956 the Secretary of State, the incorporators shall petition the 957 commissioner to issue a certificate finding that the 958 establishment and maintenance of the proposed corporation 959 promotes the general good of this state. In arriving at this 960 finding, the commissioner must consider: 961 (a) The character, reputation, financial standing, and 962 purposes of the incorporators; 963 (b) The character, reputation, financial responsibility, 964 insurance experience, and business qualifications of the 965 officers and directors; and 966 (c) Other factors the commissioner considers advisable. 967 (4) The capital stock of a captive reinsurance company must 968 be issued at par value or greater. 969 (5) At least one of the members of the board of directors 970 of a captive reinsurance company incorporated in this state must 971 be a resident of this state. 972 Section 12. Section 628.9142, Florida Statutes, is created 973 to read: 974 628.9142 Reinsurance; effect on reserves.— 975 (1) A captive insurance company may provide reinsurance, as 976 authorized in this part, on risks ceded by any other insurer. 977 (2) A captive insurance company may take credit for 978 reserves on risks or portions of risks ceded to authorized 979 insurers or reinsurers and unauthorized insurers or reinsurers 980 complying with the provisions of s. 624.610. A captive insurer 981 may not take credit for reserves on risks or portions of risks 982 ceded to an unauthorized insurer or reinsurer if the insurer or 983 reinsurer is not in compliance with s. 624.610. 984 Section 13. Section 628.9143, Florida Statutes, is created 985 to read: 986 628.9143 Annual captive reinsurance tax.— 987 (1) A captive reinsurance company must pay to the office by 988 March 1 of each year a captive reinsurance tax of $5,000. 989 (2) The tax provided in this section is the only tax 990 collectible under the laws of this state from a captive 991 reinsurance company, and no tax on reinsurance premiums, other 992 than occupation tax, nor any other taxes, except ad valorem 993 taxes on real and personal property used in the production of 994 income, may be levied or collected from a captive reinsurance 995 company by the state or a county, city, or municipality within 996 this state. 997 (3) A captive reinsurance company failing to make returns 998 or to pay all taxes required by this section is subject to 999 sanctions provided in this part. 1000 Section 14. Section 628.918, Florida Statutes, is created 1001 to read: 1002 628.918 Management of assets of captive reinsurance 1003 company.—At least 35 percent of the assets of a captive 1004 reinsurance company must be managed by an asset manager 1005 domiciled in this state. 1006 Section 15. Section 628.919, Florida Statutes, is created 1007 to read: 1008 628.919 Regulations establishing standards to ensure risk 1009 management control by parent company.—The Financial Services 1010 Commission shall adopt rules establishing standards to ensure 1011 that a parent or affiliated company is able to exercise control 1012 of the risk management function of any controlled unaffiliated 1013 business to be insured by the pure captive insurance company. 1014 Section 16. Section 628.920, Florida Statutes, is created 1015 to read: 1016 628.920 Conversion of certain stock, mutual corporations, 1017 or limited liability companies into reciprocal insurers; plan 1018 for conversion.— 1019 (1) An association captive insurance company or industrial 1020 insured group formed as a stock or mutual corporation or a 1021 limited liability company may be converted to or merged with and 1022 into a reciprocal insurer in accordance with a plan and the 1023 provisions of this section. 1024 (2) A plan for this conversion or merger: 1025 (a) Must be fair and equitable to the: 1026 1. Shareholders, in the case of a stock insurer; 1027 2. Members, in the case of a limited liability company; or 1028 3. Policyholders, in the case of a mutual insurer; and 1029 (b) Must provide for the purchase of the shares of any 1030 nonconsenting shareholder of a stock insurer, of the member 1031 interest of any nonconsenting member of a limited liability 1032 company, of the policyholder interest of any nonconsenting 1033 policyholder of a mutual insurer in substantially the same 1034 manner and subject to the same rights and conditions as are 1035 accorded a dissenting shareholder, dissenting member, or a 1036 dissenting policyholder pursuant to the provisions of this 1037 chapter, provided the merger of a limited liability company 1038 requires the consent of all members unless waived in an 1039 operating agreement signed by all of the members of the limited 1040 liability company. 1041 (3) In the case of a conversion authorized under this 1042 section: 1043 (a) The conversion must be accomplished under a reasonable 1044 plan and procedure as may be approved by the commissioner. 1045 However, the commissioner may not approve the plan of conversion 1046 unless the plan: 1047 1. Satisfies the provisions of this section; 1048 2. Provides for a hearing, of which notice has been given 1049 to the insurer, its directors, officers, and stockholders, in 1050 the case of a stock insurer; members and managers, in the case 1051 of a limited liability company; or policyholders, in the case of 1052 a mutual insurer, all of whom have the right to appear at the 1053 hearing, except that the director may waive or modify the 1054 requirements for the hearing. However, if a notice of hearing is 1055 required, but no hearing is requested, the commissioner may 1056 cancel the hearing; 1057 3. Provides for the conversion of existing stockholder, 1058 member, or policyholder interests into subscriber interests in 1059 the resulting reciprocal insurer, proportionate to stockholder, 1060 member, or policyholder interests in the stock or mutual insurer 1061 or limited liability company; and 1062 4. Is approved: 1063 a. In the case of a stock insurer or limited liability 1064 company, by a majority of the shares or interests entitled to 1065 vote represented in person or by proxy at a duly called regular 1066 or special meeting at which a quorum is present; 1067 b. In the case of a mutual insurer, by a majority of the 1068 voting interests of policyholders represented in person or by 1069 proxy at a duly called regular or special meeting at which a 1070 quorum is present; 1071 (b) The commissioner shall approve the plan of conversion 1072 if the commissioner finds that the conversion will promote the 1073 general good of the state in conformity with those standards 1074 provided in this part; 1075 (c) If the commissioner approves the plan, the commissioner 1076 must amend the converting insurer’s certificate of authority to 1077 reflect conversion to a reciprocal insurer and issue the amended 1078 certificate of authority to the company’s attorney-in-fact; 1079 (d) Upon issuance of an amended certificate of authority of 1080 a reciprocal insurer by the commissioner, the conversion is 1081 effective; and 1082 (e) Upon the effectiveness of the conversion, the corporate 1083 existence of the converting insurer must cease and the resulting 1084 reciprocal insurer must notify the Secretary of State of the 1085 conversion. 1086 (4) A merger authorized pursuant to the provisions of this 1087 section must be accomplished substantially in accordance with 1088 the procedures provided in this part, except that, only for 1089 purposes of the merger: 1090 (a) The plan or merger must satisfy the requirements of 1091 subsection (2); 1092 (b) The subscribers’ advisory committee of a reciprocal 1093 insurer must be equivalent to the board of directors of a stock 1094 or mutual insurance company or the managers of a limited 1095 liability company; 1096 (c) The subscribers of a reciprocal insurer must be the 1097 equivalent of the policyholders of a mutual insurance company; 1098 (d) If a subscribers’ advisory committee does not have a 1099 president or secretary, the officers of the committee having 1100 substantially equivalent duties are considered the president and 1101 secretary of the committee; 1102 (e) The commissioner must approve the articles of merger if 1103 the commissioner finds that the merger will promote the general 1104 good of the state in conformity with those standards provided in 1105 this part. If the commissioner approves the articles of merger, 1106 the commissioner must endorse his or her approval on the 1107 articles and the surviving insurer must present the endorsement 1108 of the commissioner to the Secretary of State at the Secretary 1109 of State’s office; 1110 (f) Notwithstanding the provisions of this part, the 1111 commissioner may permit the formation, without surplus, of a 1112 captive insurance company organized as a reciprocal insurer, 1113 into which an existing captive insurance company may be merged 1114 for the purpose of facilitating a transaction provided for in 1115 this section. However, there may be no more than one authorized 1116 insurance company surviving the merger; and 1117 (g) An alien insurer may be a party to a merger authorized 1118 pursuant to the provisions of subsection (1) if the requirements 1119 for the merger between a domestic and a foreign insurer pursuant 1120 to the provisions of this chapter apply to a merger between a 1121 domestic and an alien insurer provided by this subsection. The 1122 alien insurer must be treated as a foreign insurer pursuant to 1123 the provisions of this chapter and other jurisdictions must be 1124 the equivalent of a state. 1125 Section 17. Section 628.921, Florida Statutes, is created 1126 to read: 1127 628.921 Formation of sponsored captive insurance company; 1128 establishing protected cells.— 1129 (1) One or more sponsors may form a sponsored captive 1130 insurance company under this part. 1131 (2) A sponsored captive insurance company formed or 1132 licensed under this part may establish and maintain one or more 1133 protected cells to insure risks of one or more participants, 1134 subject to the following conditions: 1135 (a) The shareholders of a sponsored captive insurance 1136 company must be limited to its participants and sponsors; 1137 (b) Each protected cell must be accounted for separately on 1138 the books and records of the sponsored captive insurance company 1139 to reflect the financial condition and results of operations of 1140 the protected cell, net income or loss, dividends or other 1141 distributions to participants, and other factors that may be 1142 provided in the participant contract or required by the 1143 commissioner; 1144 (c) The assets of a protected cell must not be chargeable 1145 with liabilities arising out of any other insurance business the 1146 sponsored captive insurance company may conduct; 1147 (d) Sale, exchange, or other transfer of assets may not be 1148 made by the sponsored captive insurance company between or among 1149 any of its protected cells without the consent of the protected 1150 cells; 1151 (e) Sale, exchange, transfer of assets, dividend, or 1152 distribution may not be made from a protected cell to a sponsor 1153 or participant without the commissioner’s approval, nor may the 1154 approval be given if the sale, exchange, transfer, dividend, or 1155 distribution would result in insolvency or impairment with 1156 respect to a protected cell; 1157 (f) A sponsored captive insurance company must annually 1158 file with the commissioner financial reports the commissioner 1159 requires, which must include, but are not limited to, accounting 1160 statements detailing the financial experience of each protected 1161 cell; 1162 (g) A sponsored captive insurance company must notify the 1163 commissioner in writing within 10 business days after a 1164 protected cell becomes insolvent or otherwise unable to meet its 1165 claim or expense obligations; and 1166 (h) A participant contract may not take effect without the 1167 commissioner’s prior written approval, and the addition of each 1168 new protected cell and withdrawal of any participant of any 1169 existing protected cell constitutes a change in the business 1170 plan, which requires the commissioner’s prior written approval. 1171 Section 18. Section 628.922, Florida Statutes, is created 1172 to read: 1173 628.922 Requirements applicable to sponsors.—A sponsor of a 1174 sponsored captive insurance company must be an insurer licensed 1175 pursuant to the laws of a state, an insurance holding company 1176 that controls an insurer licensed under the laws of any state 1177 and subject to registration under the insurance holding company 1178 system laws of the state of domicile of the insurer, a reinsurer 1179 authorized or approved under the laws of a state, or a captive 1180 insurance company formed or licensed under this chapter. A risk 1181 retention group may not be either a sponsor or a participant of 1182 a sponsored captive insurance company. The business written by a 1183 sponsored captive insurance company with respect to each 1184 protected cell must be: 1185 (1) Fronted by an insurance company licensed under the laws 1186 of: 1187 (a) Any state; or 1188 (b) Any jurisdiction if the insurance company is a wholly 1189 owned subsidiary of an insurance company licensed under the laws 1190 of any state; 1191 (2) Reinsured by a reinsurer authorized or approved by this 1192 state; or 1193 (3) Secured by a trust fund in the United States for the 1194 benefit of policyholders and claimants funded by an irrevocable 1195 letter of credit or other asset acceptable to the commissioner. 1196 The amount of security provided by the trust fund may not be 1197 less than the reserves associated with those liabilities, 1198 including reserves for losses, allocated loss adjustment 1199 expenses, incurred but unreported losses, and unearned premiums 1200 for business written through the participant’s protected cell. 1201 The commissioner may require the sponsored captive to increase 1202 the funding of a trust established under this subsection. If the 1203 form of security in the trust is a letter of credit, the letter 1204 of credit must be established, issued, or confirmed by a bank 1205 chartered in this state, a member of the Federal Reserve System, 1206 or a bank chartered by another state if that state-chartered 1207 bank is acceptable to the commissioner. A trust and trust 1208 instrument maintained under this subsection must be in a form 1209 and upon terms approved by the commissioner. 1210 Section 19. Section 628.923, Florida Statutes, is created 1211 to read: 1212 628.923 Participants in sponsored captive insurance 1213 companies.— 1214 (1) An association, a corporation, a limited liability 1215 company, a partnership, a trust, or another business entity may 1216 be a participant in a sponsored captive insurance company formed 1217 or licensed under this part. 1218 (2) A sponsor may be a participant in a sponsored captive 1219 insurance company. 1220 (3) A participant need not be a shareholder of the 1221 sponsored captive insurance company or an affiliate of the 1222 company. 1223 (4) A participant may insure only its own risks through a 1224 sponsored captive insurance company, unless otherwise approved 1225 by the commissioner. 1226 Section 20. Section 628.924, Florida Statutes, is created 1227 to read: 1228 628.924 Eligibility of licensed captive insurance company 1229 for certificate of authority to act as insurer.—A licensed 1230 captive insurance company that meets the necessary requirements 1231 of this part imposed upon an insurer must be considered for 1232 issuance of a certificate of authority to act as an insurer in 1233 this state. 1234 Section 21. This act shall take effect July 1, 2011.