Meeting Packet - Insurance & Banking Subcommittee (March 4, 2021)
Summary
Meeting packet of the Insurance & Banking Subcommittee of The Florida House of Representatives Commerce Committee for Thursday, March 4, 2021, 10:00 AM to 12:00 PM at Morris Hall (17 HOB). The agenda lists HB 273 Motor Vehicle Insurance Coverage Exclusions (Plakon), HB 423 Hurricane Loss Mitigation Program (Tuck), HB 717 Consumer Protection (Clemons), HB 733 Credit for Reinsurance (Fetterhoff) and HB 797 Florida Life and Health Insurance Guaranty Association (Robinson, W). The staff analysis of HB 273 says there is no authority under the motor vehicle insurance laws for an insurer to exclude a specific individual, so an insurer may choose not to write a policy. The packet ends with the text of HB 797, whose Section 5 sets an effective date of July 1, 2021.
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Insurance & Banking Subcommittee
Thursday, March 4, 2021
10:00 AM - 12:00 PM
Morris Hall (17 HOB)
Meeting Packet
Chris Sprowls Nick DiCeglie
Speaker Chair
The Florida House of Representatives
Commerce Committee
Insurance & Banking Subcommittee
Chris Sprowls Nick DiCeglie
Speaker Chair
Meeting Agenda
Thursday, March 4, 2021
10:00 AM – 12:00 PM
Morris Hall (17 HOB)
I. Call to Order
II. Roll Call
III. Welcome and Opening Remarks
IV. Consideration of the following bill(s):
• HB 273 Motor Vehicle Insurance Coverage Exclusions by Plakon
• HB 423 Hurricane Loss Mitigation Program by Tuck
• HB 619 Pub. Rec./Application for a De Novo Banking Charter by Barnaby
• HB 717 Consumer Protection by Clemons
• HB 733 Credit for Reinsurance by Fetterhoff
• HB 797 Florida Life and Health Insurance Guaranty Association by Robinson, W
V. Closing Remarks
VI. Adjournment
303 House Office Building, 402 South Monroe Street, Tallahassee, FL 32399-1300
(850) 717-4870
HB 273
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 273 Motor Vehicle Insurance Coverage Exclusions
SPONSOR(S): Plakon
TIED BILLS: IDEN./SIM. BILLS: SB 420
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Insurance & Banking Subcommittee Rowley Luczynski
2) Commerce Committee
SUMMARY ANALYSIS
Chapter 627, part XI, F.S., Motor Vehicle and Casualty Insurance Contracts, and ch. 324, F.S., the Financial
Responsibility Law of 1955, establish motor vehicle insurance coverage requirements. Motor vehicle insurance
includes two types of coverage: financial responsibility (i.e., bodily injury, death, and property damage or
(BI/PD) and no-fault (i.e., personal injury protection or PIP). A policy providing coverage for BI/PD is required to
cover individuals named on the policy and anyone operating a motor vehicle listed on the policy when the
operator has the express or implied permission of the insured motor vehicle owner. A policy providing PIP
coverage is required to cover the motor vehicle owner, persons operating the insured motor vehicle, relatives
residing in the same household as the policyholder, passengers in the motor vehicle, anyone struck and
injured by the motor vehicle while not a passenger in a self-propelled vehicle, and anyone specifically named
on the policy. For motor vehicle policies covering BI/PD, PIP, or both, neither the policyholder nor the insurer
can exclude an individual required to be covered by law.
Because there is no authority under the motor vehicle insurance laws for an insurer to exclude a specific
individual (i.e., an excluded named driver) from coverage, an insurer may choose not to write a policy in order
to avoid covering specific individuals (e.g., a high insurance risk driver). This results in some consumers being
denied opportunities to purchase motor vehicle insurance or having to pay more because they live with
individuals the policyholder or insurer would like to exclude from the policy. Additionally, policyholders may
have their policies cancelled if the license or registration of a co-resident is suspended or revoked.
The bill authorizes the specific exclusion of named drivers from private passenger motor vehicle insurance
coverages, except for periods when the excluded named driver is not operating a covered vehicle (e.g., when
he or she is a passenger in the vehicle), if the exclusion is unfairly discriminatory, or if the exclusion is
inconsistent with filed underwriting guidelines. The exclusion of a named driver is contingent upon the written
consent of the named insured. The bill requires insurers to list excluded drivers on the policy’s declarations
page or on a policy endorsement.
The bill does not appear to have a fiscal impact on state or local government. It has positive and negative
impacts on the private sector.
The bill has an effective date of July 1, 2021.
This document does not reflect the intent or official position of the bill sponsor or House of Representatives .
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FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Chapter 627, part XI, F.S., Motor Vehicle and Casualty Insurance Contracts, and ch. 324, F.S., the
Financial Responsibility Law of 1955, establish motor vehicle insurance coverage requirements.
Owners and operators of motor vehicles must maintain the ability to respond in damages at specified
minimum amounts for personal injury protection, bodily injury or death, and property damage.
Motor vehicle insurance includes two types of coverage: financial responsibility (i.e., bodily injury,
death, and property damage or BI/PD) and no-fault (i.e., personal injury protection or PIP). A policy
providing coverage for bodily injury, death, and property damage is required to provide coverage for: 1
Individuals named on the policy; and
Anyone operating a motor vehicle listed on the policy when the operator has the express or
implied permission of the insured motor vehicle owner.
A policy providing PIP coverage is required to cover: 2
The owner of the motor vehicle;
Persons operating the insured motor vehicle;
Relatives residing in the same household3 as the policyholder;
Passengers in the motor vehicle;
Anyone struck by the motor vehicle who suffers bodily injury while not occupying a self-
propelled vehicle; and
Anyone specifically named on the policy.
For motor vehicle policies covering BI/PD, PIP, or both, neither the policyholder nor the insurer can
exclude an individual required to be covered by law. 4 The law also prohibits an insurer from “knowingly
making or permitting unfair discrimination between individuals of the same actuarially supportable class
and equal expectation of life.”5 However, an insurer may cancel a motor vehicle insurance policy if the
policyholder or any operator who resides in the same household or customarily operates a motor
vehicle insured under the policy has her or his driver license revoked or suspended.6
Because the law does not expressly permit insurers to exclude or remove specifically named
individuals from motor vehicle insurance policies, individuals with resident relatives considered by
insurers to be high insurance risks may have existing policies cancelled and/or be denied opportunities
to purchase new policies.
Effect of the Bill
The bill authorizes insurers and the named insured to exclude specific individuals from a private
passenger motor vehicle insurance policy. An excluded individual would not be covered for damages
1 S. 324.151(1), F.S.
2 Ss. 627.736(1) and (4)(e) and 627.7407(5)(b), F.S.
3 “Relative residing in the same household” means a relative of any degree by blood or by marriage who usually makes
her or his home in the same family unit, whether or not temporarily living elsewhere. S. 627.732(6), F.S.
4 The insurer may shift certain liabilities from BI/PD and PIP coverage to uninsured/underinsured vehicle coverage (UM).
S. 627.727(3)(c), F.S. UM coverage includes damages caused to a policyholder, a resident relative of the policyholder, or
an individual named on the policy who is injured by non-family member who was operating an insured vehicle, if the BI/PD
and PIP coverage excludes coverage of these damages.
5 S. 626.9541(1)(g), F.S.
6 Ss. 627.7275 and 627.728, F.S.
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that occur if he or she operates a motor vehicle that is insured under a policy that excludes the
individual by name. The bill prohibits exclusion for periods when the excluded named driver is not
operating a motor vehicle covered under the policy (e.g., a passenger in the vehicle), if the exclusion is
unfairly discriminatory by law, as determined by the Office of Insurance Regulation (OIR), or if the
exclusion is inconsistent with the underwriting guidelines filed by the insurer with OIR. The exclusion is
contingent upon the written consent of the named insured. The bill requires insurers to list excluded
named drivers on the policy’s declarations page or on a policy endorsement.
B. SECTION DIRECTORY:
Section 1. Creates s. 627.747, F.S., relating to named driver exclusion.
Section 2. Amends s. 324.151, F.S., relating to motor vehicle liability policies; required provisions.
Section 3. Amends s. 627.736, F.S., relating to required personal injury protection benefits; exclusions;
priority; claims.
Section 4. Amends s. 627.7407, F.S., relating to application of the Florida Motor Vehicle No-Fault Law.
Section 5. Provides an effective date of July 1, 2021.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The bill may positively affect consumers by increased availability and/or lowered premiums of motor
vehicle insurance written with named driver exclusions. However, high-risk consumers may experience
increased application denials or higher premiums if they need to secure their own coverage following
exclusion from a policy.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
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1. Applicability of Municipality/County Mandates Provision:
Not Applicable. The bill does not appear to affect county or municipal governments.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
None.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/ COMMITTEE SUBSTITUTE CHANGES
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 273 2021
1 A bill to be entitled
2 An act relating to motor vehicle insurance coverage
3 exclusions; creating s. 627.747, F.S.; providing that
4 private passenger motor vehicle policies may exclude
5 certain identified individuals from specified
6 coverages under certain circumstances; providing that
7 such policies may not exclude coverage under certain
8 circumstances; amending ss. 324.151, 627.736, and
9 627.7407, F.S.; conforming provisions to changes made
10 by the act; providing an effective date.
11
12 Be It Enacted by the Legislature of the State of Florida:
13
14 Section 1. Section 627.747, Florida Statutes, is created
15 to read:
16 627.747 Named driver exclusion.—
17 (1) A private passenger motor vehicle policy may exclude
18 an identified individual who is not a named insured from the
19 following coverages while the identified individual is operating
20 a motor vehicle, provided the identified individual is named on
21 the declarations page or by endorsement and the named insured
22 consents in writing to such exclusion:
23 (a) Notwithstanding the Florida Motor Vehicle No-Fault
24 Law, the personal injury protection coverage specifically
25 applicable to the identified individual's injuries, lost wages,
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26 and death benefits.
27 (b) Property damage liability coverage.
28 (c) Bodily injury liability coverage, if required by law
29 and purchased by the named insured.
30 (d) Uninsured motorist coverage for any damages sustained
31 by the identified excluded individual, if the named insured has
32 purchased such coverage.
33 (e) Any coverage the named insured is not required by law
34 to purchase.
35 (2) A private passenger motor vehicle policy may not
36 exclude coverage when:
37 (a) The identified individual is injured while not
38 operating a motor vehicle;
39 (b) The exclusion is unfairly discriminatory under the
40 Florida Insurance Code, as determined by the office; or
41 (c) The exclusion is inconsistent with the underwriting
42 rules filed by the insurer pursuant to s. 627.0651(13)(a).
43 Section 2. Paragraph (a) of subsection (1) of section
44 324.151, Florida Statutes, is amended to read:
45 324.151 Motor vehicle liability policies; required
46 provisions.—
47 (1) A motor vehicle liability policy to be proof of
48 financial responsibility under s. 324.031(1), shall be issued to
49 owners or operators under the following provisions:
50 (a) An owner's liability insurance policy must shall
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51 designate by explicit description or by appropriate reference
52 all motor vehicles with respect to which coverage is thereby
53 granted, must and shall insure the owner named therein, and,
54 except for a named driver excluded under s. 627.747, must insure
55 any other person as operator using such motor vehicle or motor
56 vehicles with the express or implied permission of such owner
57 against loss from the liability imposed by law for damage
58 arising out of the ownership, maintenance, or use of such motor
59 vehicle or motor vehicles within the United States or the
60 Dominion of Canada, subject to limits, exclusive of interest and
61 costs with respect to each such motor vehicle as is provided for
62 under s. 324.021(7). Insurers may make available, with respect
63 to property damage liability coverage, a deductible amount not
64 to exceed $500. In the event of a property damage loss covered
65 by a policy containing a property damage deductible provision,
66 the insurer shall pay to the third-party claimant the amount of
67 any property damage liability settlement or judgment, subject to
68 policy limits, as if no deductible existed.
69 Section 3. Subsection (1) of section 627.736, Florida
70 Statutes, is amended to read:
71 627.736 Required personal injury protection benefits;
72 exclusions; priority; claims.—
73 (1) REQUIRED BENEFITS.—An insurance policy complying with
74 the security requirements of s. 627.733 must provide personal
75 injury protection to the named insured, relatives residing in
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76 the same household unless excluded under s. 627.747, persons
77 operating the insured motor vehicle, passengers in the motor
78 vehicle, and other persons struck by the motor vehicle and
79 suffering bodily injury while not an occupant of a self-
80 propelled vehicle, subject to subsection (2) and paragraph
81 (4)(e), to a limit of $10,000 in medical and disability benefits
82 and $5,000 in death benefits resulting from bodily injury,
83 sickness, disease, or death arising out of the ownership,
84 maintenance, or use of a motor vehicle as follows:
85 (a) Medical benefits.—Eighty percent of all reasonable
86 expenses for medically necessary medical, surgical, X-ray,
87 dental, and rehabilitative services, including prosthetic
88 devices and medically necessary ambulance, hospital, and nursing
89 services if the individual receives initial services and care
90 pursuant to subparagraph 1. within 14 days after the motor
91 vehicle accident. The medical benefits provide reimbursement
92 only for:
93 1. Initial services and care that are lawfully provided,
94 supervised, ordered, or prescribed by a physician licensed under
95 chapter 458 or chapter 459, a dentist licensed under chapter
96 466, a chiropractic physician licensed under chapter 460, or an
97 advanced practice registered nurse registered under s. 464.0123
98 or that are provided in a hospital or in a facility that owns,
99 or is wholly owned by, a hospital. Initial services and care may
100 also be provided by a person or entity licensed under part III
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101 of chapter 401 which provides emergency transportation and
102 treatment.
103 2. Upon referral by a provider described in subparagraph
104 1., followup services and care consistent with the underlying
105 medical diagnosis rendered pursuant to subparagraph 1. which may
106 be provided, supervised, ordered, or prescribed only by a
107 physician licensed under chapter 458 or chapter 459, a
108 chiropractic physician licensed under chapter 460, a dentist
109 licensed under chapter 466, or an advanced practice registered
110 nurse registered under s. 464.0123, or, to the extent permitted
111 by applicable law and under the supervision of such physician,
112 osteopathic physician, chiropractic physician, or dentist, by a
113 physician assistant licensed under chapter 458 or chapter 459 or
114 an advanced practice registered nurse licensed under chapter
115 464. Followup services and care may also be provided by the
116 following persons or entities:
117 a. A hospital or ambulatory surgical center licensed under
118 chapter 395.
119 b. An entity wholly owned by one or more physicians
120 licensed under chapter 458 or chapter 459, chiropractic
121 physicians licensed under chapter 460, advanced practice
122 registered nurses registered under s. 464.0123, or dentists
123 licensed under chapter 466 or by such practitioners and the
124 spouse, parent, child, or sibling of such practitioners.
125 c. An entity that owns or is wholly owned, directly or
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126 indirectly, by a hospital or hospitals.
127 d. A physical therapist licensed under chapter 486, based
128 upon a referral by a provider described in this subparagraph.
129 e. A health care clinic licensed under part X of chapter
130 400 which is accredited by an accrediting organization whose
131 standards incorporate comparable regulations required by this
132 state, or
133 (I) Has a medical director licensed under chapter 458,
134 chapter 459, or chapter 460;
135 (II) Has been continuously licensed for more than 3 years
136 or is a publicly traded corporation that issues securities
137 traded on an exchange registered with the United States
138 Securities and Exchange Commission as a national securities
139 exchange; and
140 (III) Provides at least four of the following medical
141 specialties:
142 (A) General medicine.
143 (B) Radiography.
144 (C) Orthopedic medicine.
145 (D) Physical medicine.
146 (E) Physical therapy.
147 (F) Physical rehabilitation.
148 (G) Prescribing or dispensing outpatient prescription
149 medication.
150 (H) Laboratory services.
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151 3. Reimbursement for services and care provided in
152 subparagraph 1. or subparagraph 2. up to $10,000 if a physician
153 licensed under chapter 458 or chapter 459, a dentist licensed
154 under chapter 466, a physician assistant licensed under chapter
155 458 or chapter 459, or an advanced practice registered nurse
156 licensed under chapter 464 has determined that the injured
157 person had an emergency medical condition.
158 4. Reimbursement for services and care provided in
159 subparagraph 1. or subparagraph 2. is limited to $2,500 if a
160 provider listed in subparagraph 1. or subparagraph 2. determines
161 that the injured person did not have an emergency medical
162 condition.
163 5. Medical benefits do not include massage as defined in
164 s. 480.033 or acupuncture as defined in s. 457.102, regardless
165 of the person, entity, or licensee providing massage or
166 acupuncture, and a licensed massage therapist or licensed
167 acupuncturist may not be reimbursed for medical benefits under
168 this section.
169 6. The Financial Services Commission shall adopt by rule
170 the form that must be used by an insurer and a health care
171 provider specified in sub-subparagraph 2.b., sub-subparagraph
172 2.c., or sub-subparagraph 2.e. to document that the health care
173 provider meets the criteria of this paragraph. Such rule must
174 include a requirement for a sworn statement or affidavit.
175 (b) Disability benefits.—Sixty percent of any loss of
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176 gross income and loss of earning capacity per individual from
177 inability to work proximately caused by the injury sustained by
178 the injured person, plus all expenses reasonably incurred in
179 obtaining from others ordinary and necessary services in lieu of
180 those that, but for the injury, the injured person would have
181 performed without income for the benefit of his or her
182 household. All disability benefits payable under this provision
183 must be paid at least every 2 weeks.
184 (c) Death benefits.—Death benefits of $5,000 per
185 individual. Death benefits are in addition to the medical and
186 disability benefits provided under the insurance policy. The
187 insurer may pay death benefits to the executor or administrator
188 of the deceased, to any of the deceased's relatives by blood,
189 legal adoption, or marriage, or to any person appearing to the
190 insurer to be equitably entitled to such benefits.
191
192 Only insurers writing motor vehicle liability insurance in this
193 state may provide the required benefits of this section, and
194 such insurer may not require the purchase of any other motor
195 vehicle coverage other than the purchase of property damage
196 liability coverage as required by s. 627.7275 as a condition for
197 providing such benefits. Insurers may not require that property
198 damage liability insurance in an amount greater than $10,000 be
199 purchased in conjunction with personal injury protection. Such
200 insurers shall make benefits and required property damage
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201 liability insurance coverage available through normal marketing
202 channels. An insurer writing motor vehicle liability insurance
203 in this state who fails to comply with such availability
204 requirement as a general business practice violates part IX of
205 chapter 626, and such violation constitutes an unfair method of
206 competition or an unfair or deceptive act or practice involving
207 the business of insurance. An insurer committing such violation
208 is subject to the penalties provided under that part, as well as
209 those provided elsewhere in the insurance code.
210 Section 4. Paragraph (a) of subsection (5) of section
211 627.7407, Florida Statutes, is amended to read:
212 627.7407 Application of the Florida Motor Vehicle No-Fault
213 Law.—
214 (5) No later than November 15, 2007, each motor vehicle
215 insurer shall provide notice of the provisions of this section
216 to each motor vehicle insured who is subject to subsection (1).
217 The notice is not subject to approval by the Office of Insurance
218 Regulation. The notice must clearly inform the policyholder:
219 (a) That beginning on January 1, 2008, Florida law
220 requires the policyholder to maintain personal injury protection
221 ("PIP") insurance coverage and that this insurance pays covered
222 medical expenses for injuries sustained in a motor vehicle crash
223 by the policyholder, passengers, and relatives residing in the
224 policyholder's household unless excluded under s. 627.747.
225 Section 5. This act shall take effect July 1, 2021.
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INSURANCE & BANKING SUBCOMMITTEE
HB 273 by Rep. Plakon
Named Driver Exclusion
AMENDMENT SUMMARY
March 4, 2021
Amendment 1 by Rep. Plakon (Line 39): The amendment clarifies that the type of
discrimination prohibited by subsection 2(b) is discrimination based on individual characteristics
(i.e., race, color, religion, sex, national origin, age, handicap, pregnancy, or marital status),
rather than discrimination based on ratemaking factors.
COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 273 (2021)
Amendment No. 1
COMMITTEE/SUBCOMMITTEE ACTION
ADOPTED (Y/N)
ADOPTED AS AMENDED (Y/N)
ADOPTED W/O OBJECTION (Y/N)
FAILED TO ADOPT (Y/N)
WITHDRAWN (Y/N)
OTHER
1 Committee/Subcommittee hearing bill: Insurance & Banking
2 Subcommittee
3 Representative Plakon offered the following:
4
5 Amendment
6 Remove lines 39-40 and insert:
7 (b) The identified individual is being excluded solely
8 because of his or her race, color, religion, sex, national
9 origin, age, handicap, pregnancy, or marital status.
747559 - h0273-line39.docx
Published On: 3/3/2021 2:36:35 PM
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HB 423
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 423 Hurricane Loss Mitigation Program
SPONSOR(S): Tuck and others
TIED BILLS: IDEN./SIM. BILLS:
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Pandemics & Public Emergencies Committee 18 Y, 0 N Skinner Dearden
2) Insurance & Banking Subcommittee Haas Luczynski
3) Appropriations Committee
4) Commerce Committee
SUMMARY ANALYSIS
In 1993, the Legislature created the Florida Hurricane Catastrophe Fund (FHCF), a tax-exempt trust fund. The
FHCP was created in response to the problems that developed in the residential property insurance industry
following property losses incurred through a serious of catastrophic events, including Hurricane Andrew in
1992. When the Internal Revenue Service issued a private letter ruling granting tax-exempt status to the
FHCF, it required a certain amount of FHCF funds to be appropriated for hurricane mitigation purposes.
Since fiscal year 1997-98 and annually thereafter, the Legislature has been required to appropriate from the
investment income of the FHCF no less than $10 million, but no more than 35 percent, from the investment
income of the FHCF from the prior fiscal year. The FHCF appropriation provides funding to state agencies,
local governments, public and private educational institutions, and nonprofit organizations to support programs
intended to:
Improve hurricane preparedness;
Reduce potential losses in the event of a hurricane;
Provide research into means to reduce such losses;
Assist the public in determining the appropriateness of upgrades to structures or financing upgrades; or
Protect local infrastructure from potential hurricane damage.
In 1999, the Legislature created the Hurricane Loss Mitigation Program (HLMP), which is now established
under the Division of Emergency Management. The HLMP is funded by the annual appropriation of $10 million
from the FHCF. The funds are to be used as follows:
$3 million is directed towards retrofitting public facilities for use as hurricane shelters.
$7 million is directed toward programs to improve the wind resistance of residences and mobile homes,
educating persons concerning the Florida Building Code cooperative programs with local governments
and the Federal Government, and other efforts to prevent or reduce losses or reduce the cost of
rebuilding after a disaster. These funds are further directed as follows:
o $2.8 million to the Mobile Home Tie-Down Program;
o $700,000 to the Florida International University center for hurricane research; and
o $3.5 million to the Hurricane Loss Mitigation Program Retrofit Grant for the purpose of improving
community resiliency.
The HLMP expires on June 30, 2021. The bill extends the Hurricane Loss Mitigation Program repeal date to
June 30, 2031.
The bill has no fiscal impact on the General Revenue fund. Annually, $10 million is appropriated from the
FHFC to the HLMP. Should this bill become law, these funds would continue to be appropriated until June 30,
2031. The bill has an indeterminate but likely positive impact on the private sector.
This document does not reflect the intent or official position of the bill sponsor or House of Representatives .
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FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
In 1993, the Legislature created the Florida Hurricane Catastrophe Fund (FHCF), a tax-exempt trust
fund. 1 The FHCP was created in response to the problems that developed in the residential property
insurance industry following property losses incurred through a series of catastrophic events, including
Hurricane Andrew in 1992.2 It was determined that state action was required to correct the inability of
the private sector insurance and reinsurance market to maintain sufficient capacity.3 The program is
intended to provide a stable and ongoing source of reimbursement to insurers for a portion of their
catastrophic hurricane losses, creating additional insurance capacity for the state.4 The FHCF is
administered by the State Board of Administration, which is governed by a three member Board of
Trustees, comprised of the Governor, who serves as chair, the Chief Financial Officer, and the Attorney
General.5
The private letter ruling6 issued by the Internal Revenue Service granting tax-exempt status to the
FHCF requires a certain amount of FHCF funds to be appropriated for hurricane mitigation purposes.7
Beginning in fiscal year (FY) 1997-98 and annually thereafter, the Legislature is required to appropriate
no less than $10 million, but not more than 35 percent, from the investment income of the FHCF from
the prior fiscal year. The FHCF appropriation provides funding for state agencies, local governments,
public and private educational institutions, and nonprofit organizations to support programs intended to:
Improve hurricane preparedness;
Reduce potential losses in the event of a hurricane;
Provide research into means to reduce such losses;
Assist the public in determining the appropriateness of upgrades to structures or financing
upgrades; or
Protect local infrastructure from potential hurricane damage.8
In 1999,9 the Legislature created the Hurricane Loss Mitigation Program (HLMP) within the Department
of Community Affairs (DCA). The HLMP is funded by the annual appropriation of $10 million from the
FHCF. The HLMP is now established under the Division of Emergency Management (Division).10
1 Ch. 93-409, Laws of Fla.
2 S. 215.555(1)(b), F.S.
3 S. 215.555(1)(c), F.S.
4 S. 215.555(1)(e), F.S.
5 S. 215.555(3), F.S.; S. 215.44(1), F.S.
6 A “private letter ruling,” or PLR, is a written statement issued to a taxpayer that interprets and applies tax laws to the
taxpayer’s specific set of facts. A PLR is issued to establish with certainty the federal tax consequences of a particular
transaction before the transaction is consummated or before the taxpayer’s return is filed. A PLR is issued in response to
a written request submitted by a taxpayer and is binding on the IRS if the taxpayer fully and accurately described the
proposed transaction in the request and carries out the transaction as described. Internal Revenue Service,
Understanding IRS Guidance – A Brief Primer, https://www.irs.gov/newsroom/understanding-irs-guidance-a-brief-primer
(last visited Feb. 11, 2021).
7 State Board of Administration of Florida, Florida Hurricane Catastrophe Fund Fiscal Year 2008-2009 Annual Report, p.
16,
https://www.sbafla.com/fhcf/Portals/FHCF/Content/Reports/Annual/20100413_SBA_CATF_Annual_Report.pdf?ver=2016-
06-08-121914-787 (last visited Feb. 26, 2021).
8 S. 215.555(7)(c), F.S
9 Ch. 99-305, Laws of Fla.
10 S. 215.559, F.S.
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Current law requires the funds to be used as follows:
Three million dollars ($3 million) is directed towards retrofitting public facilities for use as hurricane
shelters. The Division must prioritize funds for projects included in the annual Shelter Retrofit
Report and projects in regional planning council areas with shelter deficits.11
The Division’s 2020 Shelter Retrofit Report indicates that significant success has been made
toward reducing the deficit of safe12 public hurricane evacuation shelter space (shelter space).13
The combination of existing building surveys, retrofit projects, and the availability of retrofit and
mitigation-related funds, as well as the application of enhanced hurricane resistance design and
construction standards has increased the number of shelter spaces.14 As of 2020, the amount of
available shelter spaces has increased to 1,060,767.15 Available shelter space is projected to
increase to 1,120,174 by August 2021.16
Seven million dollars ($7 million) must be used for programs that:
o Improve the wind resistance of residences and mobile homes, through loans, subsidies, grants,
demonstration projects, and direct assistance;
o Educate persons concerning the Florida Building Code cooperative programs with local
governments and the Federal Government; and
o Prevent or reduce losses or costs of rebuilding after a disaster.17
Of the $7 million allocated to the uses described above:
Forty percent ($2.8 million) is directed to the Mobile Home Tie-Down Program.18 This program is
administered by Tallahassee Community College (TCC) and is used to mitigate future losses for
mobile homes and to provide tie-downs for mobile homes in communities throughout the state.19
Over the years, the Mobile Home Tie-Down Program has been reviewed and audited. In 2016, the
Department of Financial Services Bureau of Auditing (Bureau) audited the Mobile Home Tie-Down
Program and determined that a contractual agreement should exist between the Division and
TCC.20 The Bureau determined an agreement is required due to the funds being classified as “grant
and aid.”21 The Bureau recommended a written agreement that incorporates the relevant statutory
requirements, a clear scope of work, deliverables, monitoring, and financial consequences.22 The
Division and TCC subsequently executed a written agreement for the program that incorporated the
Bureau’s recommendations, including a scope of work.23 The program’s scope of work requires the
mobile home tie-down improvements under this program to meet or exceed the standards
11 S. 215.559(1)(b), F.S.
12 “‘Safe’ is defined as meeting the intent of American Red Cross (ARC) Hurricane Evacuation Shelter Selection
Standards (June 2018).” Florida Division of Emergency Management, 2020 State Retrofit Report (Nov. 2020),
https://portal.floridadisaster.org/shelters/External/Current/2020%20SRR/2020%20Shelter%20Retrofit%20Report.pdf (last
visited Feb. 12, 2021).
13 Id.
14 Id.
15 Id.
16 Id.
17 S. 215.559(1)(a), F.S.
18 S. 215.559 (2)(a), F.S.
19 Florida Division of Emergency Management, Florida Hurricane Loss Mitigation Program 2020 Annual Report (Jan. 1,
2021),
https://portal.floridadisaster.org/mitigation/HLMP/Internet%20Documents/Reports/2020%20HLMP%20Annual%20Report.
pdf (last visited Feb. 12, 2021).
20 May 10, 2016 Letter from Department of Financial Services Bureau of Auditing to Division of Emergency Management
Director Bryan Koon, https://www.myfloridacfo.com/division/aa/Aud_Act/docs/DEM%20Report%20dtd%205-10-
2016_Redacted.pdf (last visited Feb. 12, 2021).
21 Id.
22 Id.
23 Id.
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established in Rules 15C-1.0101 through 15C-1.0109, F.A.C.24 However, the program is not
intended to bring an existing mobile home up to building code standards.25
In FY 2019-20, ten counties (Manatee, Pinellas, Hillsborough, Volusia, Palm Beach, Charlotte,
Brevard, Highlands, Collier, and Pasco) benefitted from the Mobile Home Tie-Down Program. A
total of 1,702 manufactured or mobile homes were retrofitted.26 Currently, the program is not
accepting new applications, as the waiting list exceeds five years; new applications will be accepted
once the waiting list is reduced to three years.27
Ten percent ($700,000) is directed to the Florida International University (FIU) center for hurricane
research.28
Research conducted by FIU during Fiscal Year 2019-2020 included:
o Experimental and Analytical Assessment of Effects of Leakage around Doors, Windows,
and Other Openings on Internal Pressures in Residential Buildings;
o Numerical and Experimental Investigation to Codify Wind Pressure Distribution of Elevated
House;
o Codification Wind-induced Loads on Irregular Shaped Buildings;
o Development of integrated storm tide and freshwater flooding model Phase 3;
o Investigation and Incorporation of WOW testing outputs in the Florida Public Hurricane Loss
Model; and
o Education and Outreach Programs to Convey the Benefits of Various Hurricane Loss
Mitigation Devices and Techniques.29
The remaining 50 percent ($3.5 million) is used to fund the Hurricane Loss Mitigation Program
Retrofit Grant (Grant) for the purpose of improving community resiliency. 30 Funded activities include
inspections, retrofits, and construction or modification of building components designed to increase
a structure’s ability to withstand hurricane conditions.31
Under this Grant, eligible applicants are nonprofit organizations, qualified for-profit organizations,
and governmental entities.32 Homeowners are not eligible, but may partner with an eligible local
government.33 In FY2020, sixteen recipients received the grant to conduct wind mitigation retrofits
to homes. These recipients included:
o City of North Lauderdale;
o City of Bradenton;
o City of Deerfield Beach;
o Rebuild Northwest Florida;
o St. Lucie County;
o Centro-Campesino;
o Crisis Housing Solutions;
o Flagler County;
o Lake and Sumter County Emergency Response;
o City of Lauderdale Lakes;
24 Department of Financial Services, Original Contract - D9042 (executed Aug. 7, 2018),
https://facts.fldfs.com/Search/ContractDetail.aspx?AgencyId=310000&ContractId=D9042 (last visited Feb. 12, 2021).
25 Tallahassee Community College, Mobile Home Tie-Down Program, https://www.tcc.fl.edu/about/college/administrative-
services/sponsored-programs/mobile-home-tie-down-program/ (last visited Feb. 12, 2021).
26 Florida Division of Emergency Management, supra note 19.
27 Tallahassee Community College, Mobile Home Tie-Down Program, https://www.tcc.fl.edu/about/college/administrative-
services/sponsored-programs/mobile-home-tie-down-program/ (last visited Feb. 12, 2021).
28 S. 215.559(3), F.S.
29 Florida Division of Emergency Management, supra note 19.
30 Florida Division of Emergency Management, Hurricane Loss Mitigation Program,
https://www.floridadisaster.org/dem/mitigation/hurricane-loss-mitigation-program/ (last visited Feb. 12, 2021).
31 Id.
32 Id.
33 Id.
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o Broward County;
o Miami-Dade County;
o City of Pompano;
o City of Carrabelle;
o Franklin County; and
o Emerald Coast Regional Planning Council.34
Seven additional projects were funded that did not involve residential wind retrofitting.35 These projects
comprised the following: Vizcaya Museum (flood mitigation), City of Plantation (public wind retrofit),
ARC Tampa Bay (group home wind mitigation) , Eckerd College (public wind retrofit), City of Sunrise
(public wind retrofit), Town of Southwest Ranches (stormwater drainage), and Coral Springs
Improvement (water-pump station hardening).36
Current law requires the Division, with the exception of the hurricane research program conducted by
FIU, to develop these programs in consultation with an advisory council (Council).37 The Council also
reviews and approves FIU’s hurricane research work plan.38 The Council must consist of:
A representative designated by the Chief Financial Officer;
A representative designated by the Florida Homebuilders Association;
A representative designated by the Florida Insurance Council;
A representative designated by the Federation of Manufactured Home Owners;
A representative designated by the Florida Association of Counties; and
A representative designated by the Florida Manufactured Housing Association.39
The Division is required to submit a full report and evaluation of these activities on January 1st each
year.40 The report must be submitted to the Speaker of the House of Representatives, the President of
the Senate, and the Majority and Minority Leaders of the House of Representatives and the Senate.41
The Office of Insurance Regulation (OIR) must review the report and make recommendations to the
insurance industry as deemed appropriate by the OIR.42 The recommendations may be used by
insurers for potential discounts or rebates.43
Below are the Hurricane Loss Mitigation Program Activities for FY 2019-20:
Hurricane Loss Mitigation Program Activities for Fiscal Year 2019-2044
Shelter Retrofit Program $3,000,000
HLMP Retrofit Grant $3,500,000
Manufactured Homes $2,800,000
Hurricane Mitigation Research $700,000
TOTAL $10,000,000
The Hurricane Loss Mitigation Program expires on June 30, 2021.45
34 Id.
35 Id.
36 Id.
37 S. 215.559(4), F.S.
38 S. 215.559(3), F.S.
39 S. 215.559(4), F.S.
40 S. 215.559(6), F.S.
41 Id.
42 Id.
43 Id.
44 Florida Division of Emergency Management, supra note 19.
45 S. 215.559(7), F.S.
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Effect of Proposed Changes
The bill extends the Hurricane Loss Mitigation Program repeal date to June 30, 2031.
B. SECTION DIRECTORY:
Section 1: Amends s. 215.559, F.S., relating to Hurricane Loss Mitigation Program.
Section 2: Provides this act shall take effect upon becoming a law.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
Annually, $10 million is appropriated from the Florida Hurricane Catastrophe Fund to the Hurricane
Loss Mitigation Program. Should this bill become law, these funds would continue to be
appropriated until June 30, 2031.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
To the extent that research and program activities conducted through the Hurricane Loss Mitigation
Program strengthen structures, educate the public, and reduce property losses, the public and private
sector will benefit. However, the impact on the private sector is indeterminate.
D. FISCAL COMMENTS:
Should the mitigation program and funding for mitigation purposes be repealed, the tax-exempt status
of the FHCF could be in jeopardy.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not applicable. This bill does not appear to: require counties or municipalities to spend funds or to
take an action requiring the expenditure of funds; reduce the authority that counties or municipalities
have to raise revenues in the aggregate; or reduce the percentage of a state tax shared with
counties or municipalities.
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DATE: 3/2/2021
2. Other:
None
B. RULE-MAKING AUTHORITY:
None.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/ COMMITTEE SUBSTITUTE CHANGES
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DATE: 3/2/2021
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 423 2021
1 A bill to be entitled
2 An act relating to the Hurricane Loss Mitigation
3 Program; amending s. 215.559, F.S.; delaying the
4 future repeal of the Hurricane Loss Mitigation
5 Program; providing an effective date.
6
7 Be It Enacted by the Legislature of the State of Florida:
8
9 Section 1. Subsection (7) of section 215.559, Florida
10 Statutes, is amended to read:
11 215.559 Hurricane Loss Mitigation Program.—A Hurricane
12 Loss Mitigation Program is established in the Division of
13 Emergency Management.
14 (7) This section is repealed June 30, 2031 2021.
15 Section 2. This act shall take effect upon becoming a law.
Page 1 of 1
CODING: Words stricken are deletions; words underlined are additions.
hb0423-00
INSURANCE & BANKING SUBCOMMITTEE
HB 423 by Rep. Tuck
Hurricane Loss Mitigation Program
AMENDMENT SUMMARY
March 4, 2021
Amendment 1 by Rep. Tuck (between lines 13 and 14): The amendment removes an
obsolete rate standard for mobile home insurance policies issued by Citizens Property
Insurance Corporation.
COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 423 (2021)
Amendment No. 1
COMMITTEE/SUBCOMMITTEE ACTION
ADOPTED (Y/N)
ADOPTED AS AMENDED (Y/N)
ADOPTED W/O OBJECTION (Y/N)
FAILED TO ADOPT (Y/N)
WITHDRAWN (Y/N)
OTHER
1 Committee/Subcommittee hearing bill: Insurance & Banking
2 Subcommittee
3 Representative Tuck offered the following:
4
5 Amendment (with directory and title amendments)
6 Between lines 13 and 14, insert:
7 (2)
8 (b)1. The Manufactured Housing and Mobile Home Mitigation
9 and Enhancement Program is established. The program shall
10 require the mitigation of damage to or the enhancement of homes
11 for the areas of concern raised by the Department of Highway
12 Safety and Motor Vehicles in the 2004-2005 Hurricane Reports on
13 the effects of the 2004 and 2005 hurricanes on manufactured and
14 mobile homes in this state. The mitigation or enhancement must
15 include, but need not be limited to, problems associated with
16 weakened trusses, studs, and other structural components caused
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Page 1 of 4
COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 423 (2021)
Amendment No. 1
17 by wood rot or termite damage; site-built additions; or tie-down
18 systems and may also address any other issues deemed appropriate
19 by Tallahassee Community College, the Federation of Manufactured
20 Home Owners of Florida, Inc., the Florida Manufactured Housing
21 Association, and the Department of Highway Safety and Motor
22 Vehicles. The program shall include an education and outreach
23 component to ensure that owners of manufactured and mobile homes
24 are aware of the benefits of participation.
25 2. The program shall be a grant program that ensures that
26 entire manufactured home communities and mobile home parks may
27 be improved wherever practicable. The moneys appropriated for
28 this program shall be distributed directly to Tallahassee
29 Community College for the uses set forth under this subsection.
30 3. Upon evidence of completion of the program, the
31 Citizens Property Insurance Corporation shall grant, on a pro
32 rata basis, actuarially reasonable discounts, credits, or other
33 rate differentials or appropriate reductions in deductibles for
34 the properties of owners of manufactured homes or mobile homes
35 on which fixtures or construction techniques that have been
36 demonstrated to reduce the amount of loss in a windstorm have
37 been installed or implemented. The discount on the premium must
38 be applied to subsequent renewal premium amounts. Premiums of
39 the Citizens Property Insurance Corporation must reflect the
40 location of the home and the fact that the home has been
41 installed in compliance with building codes adopted after
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Page 2 of 4
COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 423 (2021)
Amendment No. 1
42 Hurricane Andrew. Rates resulting from the completion of the
43 Manufactured Housing and Mobile Home Mitigation and Enhancement
44 Program are not considered competitive rates for the purposes of
45 s. 627.351(6)(d)1. and 2.
46 4. On or before January 1 of each year, Tallahassee
47 Community College shall provide a report of activities under
48 this subsection to the Governor, the President of the Senate,
49 and the Speaker of the House of Representatives. The report must
50 set forth the number of homes that have taken advantage of the
51 program, the types of enhancements and improvements made to the
52 manufactured or mobile homes and attachments to such homes, and
53 whether there has been an increase in availability of insurance
54 products to owners of manufactured or mobile homes.
55
56 Tallahassee Community College shall develop the programs set
57 forth in this subsection in consultation with the Federation of
58 Manufactured Home Owners of Florida, Inc., the Florida
59 Manufactured Housing Association, and the Department of Highway
60 Safety and Motor Vehicles. The moneys appropriated for the
61 programs set forth in this subsection shall be distributed
62 directly to Tallahassee Community College to be used as set
63 forth in this subsection.
64
65 -----------------------------------------------------
66 D I R E C T O R Y A M E N D M E N T
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Page 3 of 4
COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 423 (2021)
Amendment No. 1
67 Remove lines 9-10 and insert:
68 Section 1. Paragraph (b) of subsection (2) and subsection
69 (7) of section 215.559, Florida Statutes, are amended to read:
70
71 -----------------------------------------------------
72 T I T L E A M E N D M E N T
73 Remove line 3 and insert:
74 Program; amending s. 215.559, F.S.; deleting
75 construction relating to Citizens Property Insurance
76 Corporation coverage rates; delaying the
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Page 4 of 4
HB 619
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 619 Pub. Rec./Application for a De Novo Banking Charter
SPONSOR(S): Barnaby
TIED BILLS: IDEN./SIM. BILLS:
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Insurance & Banking Subcommittee Hinshelwood Luczynski
2) Government Operations Subcommittee
3) Commerce Committee
SUMMARY ANALYSIS
The Office of Financial Regulation (OFR) regulates banks, credit unions, other financial institutions, finance
companies, and the securities industry. In order to apply for authority to organize a new state-chartered bank,
the proposed directors must file a written application with the OFR. The application includes such information
as the name, residence, and occupation of each proposed director; the proposed corporate name; the
community, including the street and number, if available, where the principal office of the proposed bank is to
be located; the total initial capital; the proposed business plan; and pro forma financial statements. Additionally,
each proposed executive officer, director, and major shareholder must complete and submit detailed
biographical and financial information, including but not limited to names, home addresses, current and past
employment, and statements of assets, liabilities, and total net worth. The OFR utilizes this information to
ascertain whether the proposed directors and executives have the kind of experience, ability, standing, and
reputation that indicates a reasonable promise of successful bank operation.
While some existing public record exemptions may apply to certain records received by the OFR pursuant to
an application to organize a new bank, current statutes do not provide a public record exemption specifically
directed at such applications. Presently, with the exception of some material for which the applicant may claim
trade secret status, the majority of information on an application is subject to public inspection and copying.
The bill creates a public record exemption for certain information received by the OFR pursuant to an
application for a de novo (new) banking charter and makes such information confidential and exempt.
However, existing statutory provisions would permit the release of the information for certain purposes and to
certain persons, such as furnishing information to other agencies responsible for the regulation or supervision
of financial institutions, reporting suspected criminal activity to law enforcement and prosecutorial agencies,
and providing information pursuant to an order of a court or an administrative law judge or pursuant to a
legislative subpoena.
The bill provides for repeal of the exemption on October 2, 2026, unless reviewed and saved from repeal by
the Legislature. It also provides a public necessity statement as required by the Florida Constitution.
The bill may have a minimal negative fiscal impact on state government. The bill has an indeterminate but
likely positive impact on the private sector.
Article I, s. 24(c) of the Florida Constitution requires a two-thirds vote of the members present and
voting for final passage of a newly created public record or public meeting exemption. The bill creates
a public record exemption; thus, it requires a two-thirds vote for final passage.
This document does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0619.IBS
DATE: 3/2/2021
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Public Records
Article I, s. 24(a) of the Florida Constitution sets forth the state’s public policy regarding access to
government records. This section guarantees every person a right to inspect or copy any public record
of the legislative, executive, and judicial branches of government. The Legislature, however, may
provide by general law for the exemption of records from the requirements of Article I, section 24(a).1
The general law must state with specificity the public necessity justifying the exemption and must be no
more broad than necessary to accomplish its purpose.2
Public policy regarding access to government records is addressed further in the Florida Statutes.
Section 119.07(1), F.S., guarantees every person a right to inspect and copy any state, county, or
municipal record. Furthermore, the Open Government Sunset Review Act3 provides that a public record
or public meeting exemption may be created or maintained only if it serves an identifiable public
purpose. In addition, it may be no broader than is necessary to meet one of the following purposes:
Allow the state or its political subdivisions to effectively and efficiently administer a
governmental program, which administration would be significantly impaired without the
exemption.
Protect sensitive personal information that, if released, would be defamatory or would
jeopardize an individual’s safety; however, only the identity of an individual may be exempted
under this provision.
Protect trade or business secrets.4
The Open Government Sunset Review Act requires the automatic repeal of a newly created exemption
on October 2nd of the fifth year after creation or substantial amendment, unless the Legislature
reenacts the exemption.5
Office of Financial Regulation (OFR)
The OFR regulates banks, credit unions, other financial institutions, finance companies, and the
securities industry.6 The OFR’s Division of Financial Institutions charters, licenses, and regulates
various entities that engage in financial institution business in Florida, in accordance with the financial
institutions codes (Codes) and the rules promulgated thereunder.7 The specific chapters under the
Codes are:
Chapter 655, F.S. – Financial Institutions Generally
Chapter 657, F.S. – Credit Unions
Chapter 658, F.S. – Banks and Trust Companies
Chapter 660, F.S. – Trust Business
Chapter 662, F.S. – Family Trust Companies
Chapter 663, F.S. – International Banking
Chapter 665, F.S. – Capital Stock Associations
Chapter 667, F.S. – Savings Banks
1 Art. I, s. 24(c), Fla. Const.
2 Art. I, s. 24(c), Fla. Const.
3 S. 119.15, F.S.
4 S. 119.15(6)(b), F.S.
5 S. 119.15(3), F.S.
6 S. 20.121(3)(a)2., F.S.
7 Chs. 655, 657, 658, 660, 662, 663, 665, and 667, F.S.; chs. 69U-100 through 69U-162, F.A.C.
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As of June 30, 2020, the Division of Financial Institutions regulates 197 financial institutions:8
69 banks
66 credit unions
21 international bank offices
15 trust companies
16 family trust companies
10 qualified limited service affiliates
Regulation of Banks
Under the dual banking system in the United States, banks may be chartered under either state or
federal law:
State-chartered banks are chartered under the laws of the state in which the bank is
headquartered. State-chartered banks have both a state regulator, which for banks chartered by
the state of Florida is the OFR, and a federal regulator. The primary federal regulator for state
banks that are members of the Federal Reserve System is the Board of Governors of the
Federal Reserve System (FRB), and the primary federal regulator for non-member state banks
is the Federal Deposit Insurance Corporation (FDIC).9
National banks are chartered by the Office of the Comptroller of the Currency (OCC) under the
National Bank Act.10 As such, the OCC is the primary federal regulator for national banks.11
Formation of a De Novo (New) State-Chartered Bank
In order to apply for authority to organize a new state-chartered bank, the proposed directors must file a
written application with the OFR on form OFR-U-1.12 The application includes such information as the
name, residence, and occupation of each proposed director; the proposed corporate name; the
community, including the street and number, if available, where the principal office of the proposed
bank is to be located; the total initial capital; the proposed business plan; and pro forma financial
statements.13 Additionally, each proposed executive officer, director, and major shareholder must
complete and submit an Interagency Biographical and Financial Report, Form OFR-U-10.14 This form
requires extensive personal identification information and personal financial information, including but
not limited to names, home addresses, current and past employment, and statements of assets,
liabilities, and total net worth.
The OFR utilizes this information in order to make an investigation of:15
1) The character, reputation, financial standing, business experience, and business qualifications
of the proposed officers and directors.
2) The need for bank facilities or additional bank facilities, as the case may be, in the primary
service area where the proposed bank is to be located.
3) The ability of the primary service area to support the proposed bank and all other existing bank
facilities in the primary service area.
After making such investigation, the OFR must approve an application if it finds the following:16
1) Local conditions indicate reasonable promise of successful operation for the proposed state
bank.
2) The proposed capitalization is adequate, but at least $8 million.
8 Office of Financial Regulation, Fast Facts (2021 ed.), https://www.flofr.com/sitePages/documents/FastFacts.pdf.
9 12 U.S.C. § 1813(q).
10 12 U.S.C. § 38.
11 12 U.S.C. § 1813(q).
12 S. 658.19(1), F.S.; rule 69U-105.202(1), F.A.C. The form is available at
https://www.flofr.com/sitePages/CommercialBanks.htm.
13 Id.
14 Id.
15 S. 658.20(1), F.S.
16 s. 658.21, F.S.
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DATE: 3/2/2021
3) The proposed capital structure is in such form as the OFR may require, subject to certain
minimum requirements.
4) Regarding officers and directors:
a. The proposed officers have sufficient financial institution experience, ability, standing,
and reputation and the proposed directors have sufficient business experience, ability,
standing, and reputation to indicate reasonable promise of successful operation.
b. None of the proposed officers or directors has been convicted of, or pled guilty or nolo
contendere to, any violation of s. 655.50, F.S., relating to the control of money
laundering and terrorist financing; ch. 896, F.S., relating to offenses related to financial
institutions; or similar state or federal law.
c. At least two of the proposed directors who are not also proposed officers have had at
least one year of direct experience as an executive officer, regulator, or director of a
financial institution within the five years before the date of the application. However, if
the applicant demonstrates that at least one of the proposed directors has very
substantial experience as an executive officer, director, or regulator of a financial
institution more than five years before the date of the application, the OFR may allow the
applicant to have only one director who has direct financial institution experience within
the last five years.
d. The proposed president or chief executive officer must have had at least one year of
direct experience as an executive officer, director, or regulator of a financial institution
within the last five years.
5) The corporate name of the proposed state bank is approved by the OFR.
6) Provision has been made for suitable quarters at the location in the application.
In 2018, the OFR received its first two banking applications since 2009. Three applications were
received annually in 2019 and 2020.17 Based on data provided by the OFR, the chart below depicts the
new bank application activity since 2001 for Florida.
Number of New Banking Number of New Banks
Year Applications Opened
2001 8 11
2002 11 8
2003 13 10
2004 19 16
2005 25 18
2006 21 18
2007 12 18
2008 6 7
2009 2 2
2010 0 0
2011 0 0
2012 0 0
2013 0 0
2014 0 0
2015 0 0
2016 0 0
2017 0 0
2018 2 1
2019 3 0
2020 3 1
Current Public Record Exemptions Related to Financial Institutions
17 Id.
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Presently, s. 655.057, F.S., contains a number of public record exemptions for certain records relating
to OFR’s regulation of financial institutions:
Subsection 655.057(1), F.S., makes confidential and exempt records and information relating to
active investigations. The records remain confidential and exempt after the investigation is
completed or ceases to be active to the extent disclosure would jeopardize the integrity of
another active investigation, impair the safety and soundness of the financial institution, reveal
personal financial information, reveal the identity of a confidential source, defame or cause
unwarranted damage to the good name or reputation of an individual or jeopardize the safety of
an individual, or reveal investigative techniques or procedures.
Subsection 655.057(2), F.S., makes confidential and exempt reports of examinations,
operations, or condition, including working papers, or portions thereof, prepared by, or for the
use of, the OFR or any other state agency or federal agency responsible for the regulation or
supervision of financial institutions. However, this exemption provides for the following release
of such reports:
o The reports may be released to specified persons such as the financial institution under
examination (or its holding company) and certain proposed acquirers of a financial
institution.
o The reports must be released within one year after the appointment of a liquidator,
receiver, or conservator to the financial institution, except that portions of the reports
which identify specified individuals such as depositors and stockholders remain
confidential and exempt.
Subsection 655.057(3), F.S., makes confidential and exempt the OFR’s informal enforcement
actions to the extent that disclosure would jeopardize the integrity of another active
investigation, impair the safety and soundness of the financial institution, reveal personal
financial information, reveal the identity of a confidential source, defame or cause unwarranted
damage to the good name or reputation of an individual or jeopardize the safety of an individual,
or reveal investigative techniques or procedures.
Subsection 655.057(4), F.S., makes confidential and exempt trade secrets, as defined in s.
688.002, F.S., which comply with s. 655.0591, F.S., and are held by the OFR in accordance
with its statutory duties.
Subsections 655.057(7) and (8), F.S., make confidential and exempt a list of stockholders or
members of a financial institution.
Subsections 655.057(5) and (6), F.S., permit the following release of records or information which
otherwise fall under exemptions provided in the statute:
Publishing specified reports that are required to be submitted to the OFR or that are required by
applicable federal statutes or regulations to be published.
Furnishing records or information to any other state, federal, or foreign agency responsible for
the regulation or supervision of financial institutions.
Disclosing or publishing summaries of the condition of financial institutions and general
economic and similar statistics and data, provided that the identity of a particular financial
institution is not disclosed.
Reporting any suspected criminal activity, with supporting documents and information, to
appropriate law enforcement and prosecutorial agencies.
Furnishing information upon request to the Chief Financial Officer or the Division of Treasury of
the Department of Financial Services regarding the financial condition of any financial institution
that is, or has applied to be, designated as a qualified public depository pursuant to ch. 280,
F.S.
Furnishing information to Federal Home Loan Banks regarding its member institutions pursuant
to an information sharing agreement between the Federal Home Loan Banks and the OFR.
Providing records or information pursuant to an order of a court or an administrative law judge
or pursuant to a legislative subpoena, according to specified procedures and restrictions.
While some of the above public record exemptions, or other public record exemptions provided in ch.
119, F.S., may apply to certain records received by the OFR pursuant to an application to organize a
new bank, current statutes do not provide a public record exemption specifically directed at such
applications. Presently, with the exception of some material for which the applicant may claim trade
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secret status pursuant to s. 655.0591, F.S., all of the information received by the OFR on form OFR-U-
1 is subject to public inspection and copying. Additionally, significant portions of the information
received by the OFR on form OFR-U-10 is subject to public inspection and copying, with only certain
information, such as social security numbers, passport numbers, home county identification numbers,
immigration file numbers, and certain financial disclosures being exempted from public records
requirements.
Effect of the Bill
The bill creates a public record exemption within s. 655.057, F.S., for certain information received by
the OFR pursuant to an application for a new banking charter. Specifically, the bill provides that
information received by the OFR pursuant to an application for a new banking charter is confidential
and exempt18 from public record requirements to the extent that disclosure would:
Reveal personal financial information.
Reveal a driver license or identification card number, a passport number, a military identification
number, or any other similar number issued on a government document used to verify identity.
Reveal the home address of any individual.
Reveal the identity of a minority shareholder or subscriber.
Reveal the name of a proposed officer or director, to the extent that doing so would jeopardize
the proposed officer's or director's current employment with or participation in the affairs of
another financial institution.
Defame or cause unwarranted damage to the good name or reputation of an individual or
jeopardize the safety of an individual.
Reveal books and records of a financial institution or registrant.
Reveal an applicant's business plan and any attached supporting documentation.
Section 655.057(12)(c), F.S., currently defines “personal financial information” to mean:
Information relating to the existence, nature, source, or amount of a person’s personal income,
expenses, or debt.
Information relating to a person’s financial transactions of any kind.
Information relating to the existence, identification, nature, or value of a person’s assets,
liabilities, or net worth.
Although the information covered by this new public record exemption is confidential and exempt,
existing provisions of s. 655.057, F.S., permit the following release of records or information which
otherwise fall under exemptions provided in the statute:
Publishing specified reports that are required to be submitted to the OFR or that are required by
applicable federal statutes or regulations to be published.
Furnishing records or information to any other state, federal, or foreign agency responsible for
the regulation or supervision of financial institutions.
Disclosing or publishing summaries of the condition of financial institutions and general
economic and similar statistics and data, provided that the identity of a particular financial
institution is not disclosed.
Reporting any suspected criminal activity, with supporting documents and information, to
appropriate law enforcement and prosecutorial agencies.
Furnishing information upon request to the Chief Financial Officer or the Division of Treasury of
the Department of Financial Services regarding the financial condition of any financial institution
that is, or has applied to be, designated as a qualified public depository pursuant to ch. 280,
F.S.
18 There is a difference between records the Legislature designates exempt from public record requirements and those
the Legislature deems confidential and exempt. A record classified as exempt from public disclosure may be disclosed
under certain circumstances. See WFTV, Inc. v. Sch. Bd. of Seminole, 874 So.2d 48, 53 (Fla. 5th DCA 2004), review
denied 892 So.2d 1015 (Fla. 2004); City of Rivera Beach v. Barfield, 642 So.2d 1135 (Fla. 4th DCA 1994); Williams v. City
of Minneola, 575 So.2d 683, 687 (Fla. 5th DCA 1991). If the Legislature designates a record as confidential and exempt
from public disclosure, such record may not be released by the custodian of public records, to anyone other than the
persons or entities specifically designated in statute. See Op. Att’y Gen. Fla. 85-62 (1985).
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Furnishing information to Federal Home Loan Banks regarding its member institutions pursuant
to an information sharing agreement between the Federal Home Loan Banks and the OFR.
Providing records or information pursuant to an order of a court or an administrative law judge
or pursuant to a legislative subpoena, according to specified procedures and restrictions.
The bill provides for the repeal of the exemption on October 2, 2026, unless reviewed and saved from
repeal by the Legislature. It also provides a statement of public necessity as required by the Florida
Constitution.
B. SECTION DIRECTORY:
Section 1. Amends s. 655.057, F.S., relating to records; limited restrictions upon public access.
Section 2. Provides a statement of public necessity.
Section 3. Provides an effective date of July 1, 2021.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
See Fiscal Comments.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The proposed public record exemption may encourage and attract the formation of new banks as
Florida-chartered institutions, in which case the bill would have a positive impact on investment,
employment, economic growth, and consumer access to financial services. However, the impact to the
private sector is indeterminate.
D. FISCAL COMMENTS:
The bill may have a minimal fiscal impact on agencies because agency staff responsible for complying
with public records requests may require training related to the creation of the public record exemption.
Agencies could incur costs associated with redacting the confidential and exempt information prior to
releasing a record. The costs, however, would be absorbed by existing resources, as they are part of
the day-to-day responsibilities of agencies.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not Applicable. This bill does not appear to affect county or municipal governments.
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2. Other:
Vote Requirement
Article I, s. 24(c) of the Florida Constitution requires a two-thirds vote of the members present and
voting for final passage of a newly created or expanded public record exemption. The bill creates a
public record exemption; thus, it requires a two-thirds vote for final passage.
Public Necessity Statement
Article I, s. 24(c) of the Florida Constitution requires a public necessity statement for a newly created
or expanded public record exemption. The bill creates a public record exemption; therefore, it
includes a public necessity statement.
Breadth of Exemption
Article I, s. 24(c) of the Florida Constitution requires a newly created public record or public meeting
exemption to be no broader than necessary to accomplish the stated purpose of the law. This bill
creates a public record exemption for certain information received by the OFR pursuant to an
application for a new banking charter. The purpose of the exemption is to protect sensitive personal,
financial, and business information that the OFR receives in conjunction with its duties related to the
review of applications for the organization or establishment of state financial institutions. As such, the
bill appears to be no broader than necessary to accomplish its purpose. However, see Drafting
Issues below.
B. RULE-MAKING AUTHORITY:
The bill does not confer rulemaking authority nor require the promulgation of rules.
C. DRAFTING ISSUES OR OTHER COMMENTS:
As currently drafted, the public record exemption may not be feasible for the OFR to determine
precisely which records and information are covered. Additionally, the exemption does not clearly cover
all sensitive personal, financial, and business information contained in the application. The sponsor has
indicated an intent to address these issues.
IV. AMENDMENTS/ COMMITTEE SUBSTITUTE CHANGES
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 619 2021
1 A bill to be entitled
2 An act relating to public records; amending s.
3 655.057, F.S.; providing an exemption from public
4 records requirements for certain information received
5 by the Office of Financial Regulation pursuant to an
6 application for a de novo banking charter; providing
7 for future legislative review and repeal of the
8 exemption; providing a statement of public necessity;
9 providing an effective date.
10
11 Be It Enacted by the Legislature of the State of Florida:
12
13 Section 1. Present subsections (5) through (14) of section
14 655.057, Florida Statutes, are redesignated as subsections (6)
15 through (15), respectively, a new subsection (5) is added to
16 that section, and present subsection (14) of that section is
17 amended, to read:
18 655.057 Records; limited restrictions upon public access.—
19 (5)(a) Except as otherwise provided in this section and
20 except for such portions thereof which are public records,
21 information received by the office pursuant to an application
22 for a de novo banking charter is confidential and exempt from s.
23 119.07(1) and s. 24(a), Art. I of the State Constitution to the
24 extent that disclosure would:
25 1. Reveal personal financial information.
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HB 619 2021
26 2. Reveal a driver license or identification card number,
27 a passport number, a military identification number, or any
28 other similar number issued on a government document used to
29 verify identity.
30 3. Reveal the home address of any individual.
31 4. Reveal the identity of a minority shareholder or
32 subscriber.
33 5. Reveal the name of a proposed officer or director, to
34 the extent that doing so would jeopardize the proposed officer's
35 or director's current employment with or participation in the
36 affairs of another financial institution.
37 6. Defame or cause unwarranted damage to the good name or
38 reputation of an individual or jeopardize the safety of an
39 individual.
40 7. Reveal books and records of a financial institution or
41 registrant.
42 8. Reveal an applicant's business plan and any attached
43 supporting documentation.
44 (b) This subsection is subject to the Open Government
45 Sunset Review Act in accordance with s. 119.15 and is repealed
46 on October 2, 2026, unless reviewed and saved from repeal
47 through reenactment by the Legislature.
48 (15)(14) Subsections (1), (2), (6), and (10) (5), and (9)
49 are subject to the Open Government Sunset Review Act in
50 accordance with s. 119.15 and are repealed on October 2, 2022,
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HB 619 2021
51 unless reviewed and saved from repeal through reenactment by the
52 Legislature.
53 Section 2. The Legislature finds that it is a public
54 necessity that information received by the Office of Financial
55 Regulation pursuant to an application for a de novo banking
56 charter be made confidential and exempt from s. 119.07(1),
57 Florida Statutes, and s. 24(a), Article I of the State
58 Constitution to the extent that disclosure would reveal personal
59 financial information; reveal a driver license or identification
60 card number, passport number, military identification number, or
61 other similar number issued on a government document used to
62 verify identity; reveal the home address of any individual;
63 reveal the identity of a minority shareholder or subscriber;
64 reveal the name of a proposed officer or director, to the extent
65 that doing so would jeopardize the proposed officer's or
66 director's current employment with or participation in the
67 affairs of another financial institution; defame or cause
68 unwarranted damage to the good name or reputation of an
69 individual or jeopardize the safety of an individual; reveal
70 books and records of a financial institution or registrant; or
71 reveal an applicant's business plan and any attached supporting
72 documentation. The office may receive sensitive personal,
73 financial, and business information in conjunction with its
74 duties related to the review of applications for the
75 organization or establishment of state financial institutions.
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76 An exemption from public records is necessary to ensure the
77 office's ability to administer its regulatory duties while
78 preventing unwarranted damage to an applicant's good name or
79 impairment of its safety and soundness, as well as the safety
80 and soundness of the financial system of this state. Release of
81 any portion of an application that reveals an individual's
82 personal financial information, government identity verification
83 documents, or home address could cause unwarranted damage to the
84 good names or reputation of those individuals or jeopardize
85 their safety.
86 Section 3. This act shall take effect July 1, 2021.
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INSURANCE & BANKING SUBCOMMITTEE
HB 619 by Rep. Barnaby
Pub. Rec./Application for a De Novo Banking Charter
AMENDMENT SUMMARY
March 4, 2021
Amendment 1 by Rep. Barnaby (Lines 19-85): The amendment:
• Aligns the House bill with the Senate bill.
• More clearly identifies the categories of records and information covered by the
exemption, which makes the exemption more feasible for the record custodian.
• More completely covers the sensitive personal, financial, and business information
contained in an application to establish a new state-chartered bank.
• Conforms the statement of public necessity to the changes made to the exemption.
COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 619 (2021)
Amendment No. 1
COMMITTEE/SUBCOMMITTEE ACTION
ADOPTED (Y/N)
ADOPTED AS AMENDED (Y/N)
ADOPTED W/O OBJECTION (Y/N)
FAILED TO ADOPT (Y/N)
WITHDRAWN (Y/N)
OTHER
1 Committee/Subcommittee hearing bill: Insurance & Banking
2 Subcommittee
3 Representative Barnaby offered the following:
4
5 Amendment (with title amendment)
6 Remove lines 19-85 and insert:
7 (5)(a) Except as otherwise provided in this section and
8 except for those portions that are otherwise public record, the
9 following information received by the office pursuant to an
10 application for authority to organize a new state bank under
11 chapter 658 is confidential and exempt from s. 119.07(1) and s.
12 24(a), Art. I of the State Constitution:
13 1. Personal financial information.
14 2. A driver license number, a passport number, a military
15 identification number, or any other similar number issued on a
16 government document used to verify identity.
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COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 619 (2021)
Amendment No. 1
17 3. Books and records of a current or proposed financial
18 institution.
19 4. The personal identifying information of a shareholder,
20 subscriber, proposed officer, or proposed director of the
21 proposed bank when such information has been marked by the
22 applicant as confidential when submitted to the office. As used
23 in this subparagraph, the term "personal identifying
24 information" means names, home addresses, e-mail addresses,
25 telephone numbers, names of relatives, work experience,
26 professional licensing and educational background, and
27 photographs.
28 5. The proposed bank's business plan and any attached
29 supporting documentation when such information has been marked
30 by the applicant as confidential when submitted to the office.
31 (b) This subsection is subject to the Open Government
32 Sunset Review Act in accordance with s. 119.15 and is repealed
33 on October 2, 2026, unless reviewed and saved from repeal
34 through reenactment by the Legislature.
35 (15)(14) Subsections (1), (2), (6), and (10) (5), and (9)
36 are subject to the Open Government Sunset Review Act in
37 accordance with s. 119.15 and are repealed on October 2, 2022,
38 unless reviewed and saved from repeal through reenactment by the
39 Legislature.
40 Section 2. The Legislature finds that it is a public
41 necessity that certain information received by the Office of
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COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 619 (2021)
Amendment No. 1
42 Financial Regulation pursuant to an application for authority to
43 organize a new state bank under chapter 658, Florida Statutes,
44 be made confidential and exempt from s. 119.07(1), Florida
45 Statutes, and s. 24(a), Article I of the State Constitution to
46 the extent that disclosure would reveal personal financial
47 information; reveal a driver license number, a passport number,
48 a military identification number, or any other similar number
49 issued on a government document used to verify identity; reveal
50 books and records of a current or proposed financial
51 institution; reveal the personal identifying information of a
52 shareholder, subscriber, proposed officer, or proposed director;
53 or reveal a proposed bank's business plan and any attached
54 supporting documentation. The office may receive sensitive
55 personal, financial, and business information in conjunction
56 with its duties related to the review of applications for the
57 organization or establishment of new state banks. An exemption
58 from public records requirements is necessary to ensure the
59 office's ability to administer its regulatory duties while
60 preventing unwarranted damage to the proposed bank or the
61 shareholders, subscribers, proposed officers, or proposed
62 directors of the proposed bank or other financial institutions
63 in this state. The release of information that could lead to the
64 identification of an individual involved in the potential
65 establishment of a new bank in this state may subject such
66 individuals to retribution and jeopardize their current
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COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 619 (2021)
Amendment No. 1
67 employment with, or participation in the affairs of, another
68 financial institution. Thus, the public availability of such
69 information has a chilling effect on the establishment of new
70 banks in this state. Further, the public availability of the
71 books and financial records of a current or proposed financial
72 institution in this state presents an unnecessary risk of harm
73 to the business operations of such institutions. Finally, the
74 public availability of a proposed bank's business plan may cause
75 competitive harm to such bank's future business operations and
76 presents an unfair competitive advantage for existing financial
77 institutions that are not required to release such information.
78
79 -----------------------------------------------------
80 T I T L E A M E N D M E N T
81 Remove line 6 and insert:
82 application for a de novo banking charter; defining
83 the term "personal identifying information"; providing
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HB 717
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 717 Consumer Protection
SPONSOR(S): Clemons and others
TIED BILLS: IDEN./SIM. BILLS: SB 1598
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Insurance & Banking Subcommittee Rowley Luczynski
2) State Administration & Technology
Appropriations Subcommittee
3) Commerce Committee
SUMMARY ANALYSIS
The bill makes the following changes to the laws governing the divisions under the Florida Department of
Financial Services (DFS):
Consumer Credit Scores and Security Freezes – The bill prohibits consumer reporting agencies
from charging a fee for reissuing a personal identification number used to remove a security freeze. It
requires that insurers notify applicants of the availability of DFS’s financial literacy resources at certain
times.
Consumer Services – The bill requires that licensees provide documents when responding to written
requests from DFS’s Division of Consumer Services.
Professions – The bill defines “claims adjusting,” establishes insurance adjusting firms’ licensure
requirements and penalties, and adds grounds upon which DFS may revoke or suspend licenses. The
bill also establishes penalties for aiding and abetting unlicensed adjusting firms and bail bond agents.
Agency Names – The bill provides the specific authority for DFS to disapprove agency names
containing the words “Medicaid” and “Medicare.”
Industrial Class Insurers – The bill amends the laws regarding industrial life insurance, small policies
written upon individual lives, so that no such policies may be sold in Florida after July 1, 2021.
Policyholder Rights – The bill extends the time that a policyholder has to cancel a contract with a
public adjuster, and amends the Homeowner Claims Bill of Rights. The bill also provides claims
handling requirements, including policyholder notification of a change in adjuster, for both admitted and
surplus lines insurers.
Export to Surplus Lines – The bill mandates that the notification regarding the export of a policy to the
surplus lines market, currently given only to commercial policyholders, be given to all policyholders.
Unfair or Deceptive Acts – The bill adds two grounds, based upon effectuating an entire insurance
policy without consent, to the list of acts that constitute sliding.
Foreign Venue Clauses Prohibited – The bill requires dispute resolution for policies sold in Florida,
and insuring property in Florida, on the admitted or surplus lines markets, occurs in Florida.
Florida Insurance Guaranty Association ( FIGA) Deductible – Currently, a policyholder whose claim
is covered by FIGA must pay a $100 deductible on that claim. The bill eliminates that deductible.
Florida Workers’ Compensation Insurance Guaranty Association (FWCIGA) – FWCIGA covers
claims for workers’ compensation policies that are in effect on the date of the final order of an insurer’s
liquidation, leaving some policyholders whose policies have lapsed prior to liquidation with unpaid
claims. The bill eliminates that disparity by removing an exception to the definition of “covered claim.”
The bill may have a positive impact on state revenues. It has no impact on state expenditures or local
government revenues or expenditures. The bill may have a positive economic benefit to consumers and a
possible indeterminate negative economic impact on insurers.
Except where otherwise provided, the bill is effective upon becoming law.
FULL ANALYSIS
This document does not reflect the intent or official position of the bill sponsor or House of Representatives.
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DATE: 3/2/2021
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
The Department of Financial Services (DFS) is composed of 13 divisions and one independent office.
They are the Divisions of:
Accounting and Auditing;
Consumer Services;
Funeral, Cemetery, and Consumer Services;
Insurance Agent and Agency Services;
Investigative and Forensic Services (DIFS);
Public Assistance Fraud (DPAF);
Rehabilitation and Liquidation;
Risk Management;
State Fire Marshal;
Treasury;
Unclaimed Property;
Workers’ Compensation;
Administration; and the
Office of Insurance Consumer Advocate.
Consumer Credit Reports and Scores and Security Freezes
Security Freezes
Section 501.005, F.S., allows a consumer to put a security freeze on his or her credit report, which
prohibits a consumer reporting agency from releasing the consumer’s credit report, credit score, or any
information contained in the consumer report without express authorization from the consumer.1 Within
10 days of placing a security freeze, a consumer reporting agency is required to provide the consumer
with a unique personal identification number (PIN) that the consumer must utilize to request removal of
the freeze.2 Current law permits a consumer reporting agency to charge up to $10 to reissue a lost or
misplaced PIN.3
Effect of the Bill
The bill removes a credit reporting agency’s ability to charge a fee to reissue a PIN.
Credit Reports and Scores
Under certain circumstances, insurers are permitted to utilize applicants’ credit reports and scores in
underwriting and rating decisions.4 The insurer must notify applicants that credit reports and scores are
being utilized for these purposes.5 DFS currently offers free financial literacy programs and maintains a
toll-free insurance consumer helpline and a website to assist consumers with insurance questions,
concerns, and complaints.6 Insurers are not required to provide applicants with information regarding
these resources when they notify them of the use of their credit reports and scores.
1 S. 501.005(1), F.S.
2 S. 501.005(4), F.S.
3 S. 501.005(5), F.S.
4 See s. 626.9741, F.S.
5 Id.
6 Florida Department of Financial Services, Agency Analysis of House Bill 717, p. 3 (Feb. 25, 2021).
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Effect of the Bill
The bill provides that, at the same time that insurers inform consumers of the use of credit reports and
scores for underwriting and rating purposes, the insurers must provide consumers with notification that
DFS offers free financial literacy programs to assist them in understanding how credit scores are
calculated and how credit works.
Companies’ Responses to Department of Financial Services Division of Consumer Services
Current law requires that licensees holding certificates of authority from DFS (agents and agencies) or
OIR (insurance companies) must respond to written requests from DFS’s Division of Consumer
Services concerning consumer complaints.7 It does not require that licensees provide documents in
response to such requests.
Effect of the Bill
The bill adds requested documents to the response that a licensee must provide to the Division of
Consumer Services when the division makes a written request to a licensee regarding a consumer
complaint, but specifies that documents need not be released if they are protected by attorney-client or
work-product privilege.
Requirements Placed on Licensees of the Department of Financial Services
Agents, Customer and Service Representatives, Adjusters, Insurance Agencies, Managing General
Agents, and Insurance Adjusting Firms
Section 626.112, F.S., sets forth various requirements that insurance agents, agencies, adjusters,
customer and service representatives, and managing general agents must meet in order to operate
within Florida. In 2017, the legislature passed a law modifying the requirements for licensure for
adjusters, including adjusting firms.8 Prior to 2017, an adjusting firm was required to be licensed only if
it failed to designate a primary adjuster within 30 days of starting the firm or changing the primary
adjuster. Current law still authorizes, but does not require, licensure of adjusting firms.
Although current law provides penalties for acting as an unlicensed insurance agent, adjuster,
customer or service representative, or managing general agent, it does not provide any penalties for
aiding or abetting an unlicensed person in transacting insurance or otherwise engaging in insurance
activities within the state. Additionally, the law does not define the practice of “claims adjusting.”
Effect of the Bill
The bill establishes that no individual or entity may act as an adjusting firm without complying with the
legal requirements for obtaining an adjusting firm license for each location where activity occurs that
only a licensed adjuster may perform. However, a licensed adjusting firm owned and operated by a
single licensed adjuster conducting business in his or her individual name and not employing or using
the services of other licensees is exempt from this requirement. The licensing requirements for an
adjusting firm are essentially notification requirements. An application for licensure as an adjusting firm
requires providing the name of each majority owner, partner, officer, and director of the firm, the home
address of each, and firm’s location. If an adjusting firm is required to be licensed, but fails to apply for
licensure, it may be assessed an administrative penalty of up to $10,000.
The bill provides that any person who knowingly aids or abets an unlicensed person in transacting
insurance or otherwise engaging in insurance activities in Florida without a license commits a third-
degree felony. The bill also defines “claims adjusting” and provides that no person, except a duly
licensed attorney, shall provide claims adjusting services unless licensed and appointed as an adjuster.
7 S. 624.307(10)(b), F.S.
8 Ch. 2017-147, Laws of Fla.
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Grounds for Refusal, Suspension, or Revocation of Agent’s, Adjuster’s, Customer or Service
Representative’s, or Managing General Agent’s License or Appointment
Section 626.621, F.S., provides grounds under which DFS may deny an application for, suspend,
revoke, or refuse to renew or continue the license or appointment of an applicant, agent, adjuster,
customer or service representative, or managing general agent. Currently, these licensees or
appointees are not required to maintain the privacy of consumers’ financial and medical information.
Additionally, Florida law does not provide for administrative action when a person violates Federal
Trade Commission laws regarding telephone solicitation.
Effect of the Bill
The bill adds the following to the grounds for which DFS can deny an application for, suspend, revoke,
or refuse to renew or continue the license or appointment of the above-listed persons:
taking action that allows a consumer’s or customer’s personal financial or medical information to
be made available or accessible to the general public; and
initiating in-person or telephone solicitation after 9 p.m. or before 8 a.m. local time of the
prospective customer unless the prospective customer requests such contact.
Bail Bond Agents
Bail bond agents and temporary bail bond agents must be licensed in order to operate within Florida.
While the law provides for penalties for operating as a bail bond agent or temporary bail bond agent
without a license, it does not currently provide any penalty for a licensee under ch. 648, F.S., who aids
or abets an unlicensed individual to violate the provisions of the chapter.9
Effect of the Bill
The bill provides that any licensee under ch. 648, F.S. who knowingly aids or abets an unlicensed
person in violating the licensure and appointment requirements of the chapter commits a third-degree
felony.
Agency Names
Existing Florida law permits DFS to disapprove insurance agency names under certain circumstances,
including when those names may mislead the public.10 DFS has concerns that the inclusion of the
words “Medicare” or “Medicaid” in the name of an insurance agency may confuse “vulnerable
consumers” about the nature of the agency, but it lacks the specific authority to disapprove an agency
name that includes those words.11
Effect of the Bill
The bill adds use of the words “Medicare” and “Medicaid” to the grounds for which DFS may
disapprove an insurance agency name. An agency licensed as of July 1, 2021, whose name contains
the word Medicare or Medicaid, may continue to use the name until June 30, 2023, as long as its
license remains valid. A license containing the word Medicare or Medicaid will automatically expire on
July 1, 2023.
9 S. 648.30, F.S.
10 S. 626.602, F.S.
11 DFS, supra note 6, at 2.
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Industrial Class Insurers
Industrial class insurers write industrial life insurance policies, which are life insurance policies written
upon individual lives in small amounts for which agents generally collect weekly or monthly premiums.12
In general, the prevalence of industrial life insurance policies has continued to decline. Based upon
data available from DFS, no new industrial life insurance has been written in the past year and few
licensed life insurers continue to maintain industrial life insurance policies.13
Effect of the Bill
The bill amends and repeals the statutes related to industrial class insurers and industrial life insurance
so that no industrial life insurance policy may be sold in Florida after July 1, 2021. The bill has no effect
on industrial life insurance policies that were sold prior to that date and have continued to remain in
force.
Policyholder Rights
Public Adjusters
Public adjusters are regulated under ch. 626, part VI, F.S. Florida law defines a public adjuster as
someone who, for something of value, directly or indirectly, prepares, completes, or files an insurance
claim for an insured or third-party claimant, or who, for something of value, acts on behalf of, or aids, an
insured or third-party claimant in settling a claim for loss or damage covered by an insurance contract,
or who advertises for employment as an adjuster of such claims.14 In general, a claimant executes a
contract for the public adjuster to provide claims adjusting services.15 At present, absent a state of
emergency, such a contract may only be canceled within three days after the latter of the date on which
the contract was executed or within three days after the date on which the claimant has notified the
insurer of the claim.16 During a state of emergency, and for one year after the date of loss, an insured
or claimant has five days after the date on which the contract was executed to cancel the contract
without penalty or obligation.
Public adjusters who have contracted with claimants must also provide to the claimant a written
estimate of loss to assist the claimant with obtaining a claim payment from the insurance company.
According to information received from DFS, following the hurricanes that have affected Florida in
recent years, consumers have complained about claims resolution delays due to the lack of
responsiveness of public adjusters they hired and the inability to cancel contracts they have executed
with these adjusters.17
Effect of the Bill
The bill changes the timeframe for an insured or claimant to cancel a contract with a public adjuster
without penalty or obligation to ten calendar days, rather than from three business days after the latter
of the date on which the contract was executed or the date on which the insured or claimant has
notified the insurer of the claim. The bill provides that the ten-day timeframe applies regardless of
whether there is a state of emergency.
Additionally, the bill provides that the written estimate that the public adjuster must provide to the
claimant must include a written itemized per unit estimate of the repairs, including itemized information
on equipment, materials, and labor and supplies. The written estimate must be provided to the insured
within 60 days after the date the contract is executed. Additionally, the bill prohibits a licensed
contractor or subcontractor from soliciting an insured to file a claim with an insurer.
12 S. 627.502, F.S.
13 DFS, supra note 6, at 5.
14 S. 626.854, F.S.
15 See id.
16 Id.
17 DFS, supra note 6, at 2-3.
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Homeowner Claims Bill of Rights
Section 627.7142, F.S., contains a Homeowner Claims Bill of Rights (Bill of Rights) that insurers
issuing personal lines residential property insurance policies in Florida must provide to policyholders
within 14 days after receiving an initial communication with respect to a claim, unless the claim follows
an event that is the subject of a declaration of a state of emergency by the Governor. While the Bill of
Rights does not contain all of the rights of a policyholder, it is designed to summarize some of the
significant rights, including rights regarding communications from insurers, payments of claims, and
resolution of disputed claims.18 At present, when timeframes are listed in the Bill of Rights, they do not
specify whether they are determined in calendar or business days.19 The Bill of Rights contains no
requirements that an insurer notify the policyholder when it assigns a different adjuster to the claim. It
does not specify that a policyholder may be entitled to receive interest from an insurer when the insurer
fails to timely fulfill claim obligations. Furthermore, the Bill of Rights does not mention that a
policyholder may take video of damage before and after repairs in addition to photographs of the
damage.
Effect of the Bill
The bill amends the Bill of Rights in the following ways:
states that a policyholder to which the Bill of Rights applies must receive the payment of interest
from the insurance company if the insurance company does not pay full settlement of a claim or
deny the claim within 90 days after the claim is filed; and
clarifies that in addition to photographs, a policyholder may take video of damage before and
after repairs.
The bill requires an insurer to provide the Bill of Rights to a policyholder within 14 days after receiving
an initial claim communication, even during a state of emergency.
Insurer’s Duties to Acknowledge and Investigate Claims
Pursuant to Florida law, residential property insurers have certain obligations regarding the handling of
claims, including responding to communications and timely payment or denial of claims.20 Policyholders
have complained to DFS that repeated changes in adjusters for insurance companies have contributed
to significant claim delays.21 In addition, policyholders have indicated that because of a lack of access
to claims information, their insurance agents are not able to respond claims-related questions in a
meaningful way.22
The applicable law neither requires that any licensed adjuster assigned by an insurer to conduct a
physical inspection of damage property provide the policyholder with his or her name, license number,
and contact information, nor requires that the insurer provide a copy of the inspection report to the
policyholder following receipt from the adjuster. There is no statutory requirement that an insurer notify
a policyholder when it has assigned a new adjuster to the policyholder’s claim. Further, the law does
not contain any mandate that the insurer inform the policyholder of the fact that an estimate may be
preliminary in nature and may be revised or the fact that when a partial payment is issued the insurer is
continuing to evaluate a claim and may issue additional payments.
Effect of the Bill
The bill makes the following changes to existing law regarding the investigation and adjusting of
residential property insurance claims:
18 S. 627.7142, F.S.
19 Id.
20 See s. 627.70131, F.S.
21 DFS, supra note 6, at 4.
22 Id.
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Changes the timeframe from 10 business days to 14 days from receipt of a proof of loss
statement for an insurer to begin the investigation of a claim.
If an investigation of a claim involves a physical inspection of property, a licensed adjuster
assigned by the insurer must provide a policyholder with his or her name and license number.
Provides that any subsequent communication with the policyholder regarding the claim must
include the name and license number of the adjuster communicating about the claim.
Requires the insurer to maintain a record or log of each adjuster who communicates with the
policyholder and to provide a list of those adjusters to the policyholder, DFS, or OIR upon
request.
When providing a preliminary or partial damage claim estimate or a preliminary or partial claim
payment, an insurer must provide a detailed disclosure as specified in the bill.
The bill provides that the above changes regarding residential property insurance claims shall be
applicable to surplus lines policies in addition to policies written on the admitted market.
Export of Policies to Surplus Lines
Notification of Export
When insurance is not available to Florida consumers from authorized insurance carriers23, it generally
becomes necessary and legally permissible to obtain a policy on the surplus lines market.24 However,
under current surplus lines law, only consumers purchasing commercial insurance policies on the
surplus lines market receive notification at the time of purchase that policies are being issued on that
market.25 Consequently, the first time that some residential policyholders are informed that their policies
have been issued by surplus lines carriers is after their policies have been issued.26 The notification
currently provided to commercial policyholders whose policies are issued on the surplus lines market
also includes the statement that “superior coverage may be available in the admitted market and at a
lesser cost.”27
Effect of the Bill
The bill amends surplus lines law to require that, at the time policies are exported to the surplus lines
market, the notification statement currently signed by consumers whose commercial insurance policies
are being exported to the surplus lines market must be signed, or otherwise acknowledged by all
consumers whose insurance policies are being exported to the surplus lines market. The bill also
replaces the statement “superior coverage may be available in the admitted market and at a lesser
cost,” with “coverage may be available in the admitted market.” Additionally, the notification statement
advises consumers whose policies are being exported that surplus lines carriers are not protected
under the Florida Insurance Guaranty Act in the event of the carrier’s insolvency.
Unfair Methods of Competition and Unfair or Deceptive Acts – Sliding
The Florida Insurance Code prohibits licensees from engaging in unfair methods of competition and
unfair or deceptive acts or practices, including sliding.28 Under Florida law, sliding currently includes:
representing to an applicant that a specific ancillary coverage or product is required by law when it is
not; representing to an applicant that a specific ancillary coverage or product is included in the policy
applied for without an additional charge where there is a charge for it; and charging an applicant for a
specific ancillary coverage or product, in addition to the cost of insurance applied for, without informing
23 Authorized insurance carriers are those who have received a certificate of authority from OIR to transact insurance
business within the state. S. 624.09, F.S.
24 See s. 626.913, F.S.
25 S. 626.916(3)(b)3, F.S.
26 DFS, supra note 6, at 3.
27 S. 626.916(3)(b)3, F.S.
28 S. 626.9541, F.S.
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the applicant.29 According to DFS, some Florida insurers have begun a practice of effectuating entire
policies without informing consumers they have done so.30
Effect of the Bill
The bill adds the following to the list of prohibited conduct that constitutes sliding:
Initiating, effectuating, binding, or otherwise issuing an insurance policy without prior informed
consent from the owner of the property being insured; and
Mailing, transmitting, or otherwise submitting a premium invoice to a mortgagee or escrow
agent in order to effectuate an insurance policy without the prior informed consent from the
owner of the property being insured. However, collateral protection insurance by a mortgagee or
escrow does not constitute sliding.
Foreign Venue Clauses in Property Insurance Policies
Currently, Florida law does not mandate that property claims dispute resolution for policies sold in
Florida, whether such resolution occurs through litigation, arbitration, or mediation, occur within Florida.
Effect of the Bill
The bill provides that no property insurance policy sold in Florida, insuring property located in Florida,
after July 1, 2021, whether issued on the admitted or surplus lines markets, may require that an insured
engage in dispute resolution, through litigation, arbitration, or mediation, outside Florida.
Florida Insurance Guaranty Association Deductible
Under federal law, insurance companies cannot file for bankruptcy.31 Instead, they are either
rehabilitated or liquidated by their state of domicile. Florida law establishes the system for the
treatment of impaired or insolvent insurers32 in Florida and sets up guaranty associations where
necessary.33 Florida operates five guaranty associations including the Florida Insurance Guaranty
Association (FIGA).34
FIGA provides a “mechanism for the payment of covered claims under certain insurance policies to
avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of
the insolvency of an insurer.”35 It issues guaranty fund payments and provides related services for all
lines of property and casualty insurance with certain exceptions.36
When a Florida property and casualty insurer becomes insolvent, FIGA takes over the claims of that
insurer and pays the claims of its policyholders, ensuring that policyholders are not left with unpaid
claims. Florida law provides that FIGA is only obligated to pay the portions of claims made to insolvent
property and casualty insurers, which are in excess of $100, and less than $300,000.37 Under current
law, therefore, there is a $100 deductible on all property and casualty claims covered by FIGA.
Effect of the Bill
29 S. 626.9541(1)(z), F.S.
30 DFS, supra note 6, at 3.
31 11 U.S.C. § 109(b)(2).
32 An “insolvent insurer” means an insurer that was authorized to transact insurance in this state, either at the time the
policy was issued or when the insured event occurred, and against which an order of liquidation with a finding of
insolvency has been entered by a court of competent jurisdiction if such order has become final by the exhaustion of
appellate review. S. 631.904(4), F.S.
33 Ch. 631, F.S.
34 Ch. 631, part II, F.S.
35 S. 631.51, F.S.
36 S. 631.52, F.S.
37 S. 631.57(1), F.S.
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The bill eliminates the $100 deductible on claims paid by FIGA so that such claims will be covered for
any amount exceeding $0 and less than $300,000.
Florida Workers’ Compensation Insurance Guaranty Association
The Florida Workers’ Compensation Insurance Guaranty Association (FWCIGA) was created in 1997
by merging the workers’ compensation account in FIGA with the Florida Self-Insurance Fund Guaranty
Association.38 FWCIGA “provides a mechanism for the payment of covered claims under chapter 440,
F.S., to avoid” delay and financial loss to claimants due to the insolvency of a workers’ compensation
insurer.39 When a workers’ compensation insurer or self-insurance fund becomes insolvent, FWCIGA
takes over the claims of that insurer and pays the claims of its policyholders, ensuring that
policyholders are not left with unpaid claims. Because FWCIGA covers claims for workers’
compensation policies that are in effect on the date of the final order of liquidation, this leaves
policyholders whose policies have lapsed prior to liquidation with unpaid claims.
Effect of the Bill
The bill removes the language “any return of premium resulting from a policy that was not in force on
the date of the final order of liquidation” from the definition of what is excluded as a “covered claim.”
B. SECTION DIRECTORY:
Section 1. Amends s. 501.0051, F.S., relating to protected consumer report security freeze.
Section 2. Amends s. 624.307, F.S., relating to general powers; duties.
Section 3. Amends s. 626.112, F.S., relating to license and appointment required; agents, customer
representatives, adjusters, insurance agencies, service representatives, managing general
agents.
Section 4. Creates s. 626.5813, F.S., relating to claims adjusting.
Section 5. Amends s. 626.602, F.S., relating to insurance agency names; disapproval.
Section 6. Amends s. 626.621, F.S., relating to grounds for discretionary refusal, suspension, or
revocation of agent’s, adjuster’s, customer representative’s, service representative’s, or
managing general agent’s license or appointment.
Section 7. Amends s. 626.782, F.S., “Industrial class insurer” defined.
Section 8. Amends s. 626.783, F.S., relating to the definition of “Ordinary-combination class insurer.”
Section 9. Repeals s. 626.796, F.S., relating to representing another insurer in same industrial debit
territory.
Section 10. Amends s. 626.854, F.S., relating to “Public adjuster” defined; prohibitions.
Section 11. Amends s. 626.916, F.S., relating to eligibility for export.
Section 12. Amends s. 626.9541, F.S., relating to unfair methods of competition and unfair or
deceptive acts or practices defined.
Section 13. Amends s. 626.9741, F.S., relating to use of credit reports and credit scores by insurers.
Section 14. Amends s. 626.9957, F.S., to conform cross-references.
38 Ch. 97-262, Laws of Fla.
39 S. 631.902, F.S.
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Section 15. Amends s. 627.062, F.S., to conform cross-references.
Section 16. Amends s. 627.502, F.S., relating to “Industrial life insurance”; defined; reporting.
Section 17. Amends s. 627.70131, F.S., relating to insurer’s duty to acknowledge communications
regarding claims; investigation.
Section 18. Creates s. 627.7031, relating to foreign venue clauses prohibited.
Section 19. Amends s. 627.7142, F.S., relating to Homeowner Claims Bill of Rights.
Section 20. Amends s. 631.57, F.S., relating to powers and duties of the association.
Section 21. Amends s. 631.904, F.S., relating to definitions.
Section 22. Amends s. 648.30, F.S., relating to licensure and appointment required.
Section 23. Provides an effective date of upon becoming law, except as otherwise provided.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
The bill has the potential to result in increased revenues in the form of administrative fines collected
for violations of s. 626.112, F.S.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The bill may have positive economic impacts for consumers. It removes fees charged for the
reissuance of PINs and eliminates the deductible FIGA charges for covered claims.
The bill has potential negative direct economic impacts on the private sector. The inability of a
consumer reporting agency to charge a fee for a PIN will result in loss of revenue for the consumer
reporting agencies. The amount of this loss is unknown.
D. FISCAL COMMENTS:
None.
III. COMMENTS
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A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not applicable. This bill does not appear to affect county or municipal governments.
2. Other:
Article VII, s. 19, Florida Constitution, may apply given the nature of the administrative penalty
created in Section 3 of the bill.
B. RULE-MAKING AUTHORITY:
None.
C. DRAFTING ISSUES OR OTHER COMMENTS:
Section 626.862, F.S., exempts licensed and appointed insurance agents (agents) from the
requirement to be licensed as an adjuster to adjust losses for an insurer. DFS has indicated that section
4 of the bill, which clarifies the meaning of claims adjusting and who may provide claims adjusting
services, should have included agents and should be amended to avoid conflict with s. 626.862, F.S.,
by exempting agents, along with attorneys, from the adjuster license requirement.
IV. AMENDMENTS/ COMMITTEE SUBSTITUTE CHANGES
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F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 717 2021
1 A bill to be entitled
2 An act relating to consumer protection; amending s.
3 501.0051, F.S.; prohibiting consumer reporting
4 agencies from charging to reissue or provide a new
5 unique personal identifier to certain consumers,
6 rather than authorizing such agencies to charge the
7 customers' representatives; amending s. 624.307, F.S.;
8 revising a requirement for persons licensed or
9 authorized by the Department of Financial Services or
10 the Office of Insurance Regulation to respond to the
11 department's Division of Consumer Services regarding
12 consumer complaints; amending s. 626.112, F.S.;
13 removing a provision requiring the department to
14 automatically convert registrations of approved
15 registered insurance agencies to insurance agency
16 licenses; prohibiting unlicensed activity by an
17 adjusting firm unless the firm complies with a
18 specified requirement; providing an exemption;
19 providing an exemption from licensure for branch firms
20 that meet certain criteria; providing an
21 administrative penalty for failing to apply for
22 certain licensure; providing a criminal penalty for
23 aiding or abetting unlicensed activity; creating s.
24 626.5813, F.S.; defining the term "claims adjusting";
25 prohibiting a person from providing claims adjusting
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26 services unless the person meets specified
27 requirements; amending s. 626.602, F.S.; authorizing
28 the department to disapprove the use of insurance
29 agency names containing the words "Medicare" or
30 "Medicaid"; providing a time-limited exception for
31 certain insurance agencies; prohibiting relicensing of
32 insurance agencies using such names; providing for
33 future expiration of such licenses; providing an
34 exception from future expiration; amending s. 626.621,
35 F.S.; adding grounds on which the department may take
36 certain actions against a license, appointment, or
37 application of certain insurance representatives;
38 amending ss. 626.782 and 626.783, F.S.; revising the
39 definitions of the terms "industrial class insurer"
40 and "ordinary-combination class insurer,"
41 respectively, to conform to changes made by the act;
42 repealing s. 626.796, F.S., relating to the
43 representation of multiple insurers in the same
44 industrial debit territory; amending s. 626.854, F.S.;
45 revising the timeframes in which an insured or
46 claimant may cancel a public adjuster's contract to
47 adjust a claim without penalty or obligation;
48 requiring that certain public adjuster's contracts
49 include a specified disclosure; specifying
50 requirements for written estimates of loss provided by
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51 public adjusters to claimants or insureds; prohibiting
52 licensed contractors and subcontractors from engaging
53 in certain activities unless licensed and compliant as
54 public adjusters; amending s. 626.916, F.S.; providing
55 a disclosure requirement that an insurance coverage
56 must meet before being eligible for export under the
57 Surplus Lines Law; amending s. 626.9541, F.S.; adding
58 certain acts or practices to the definition of the
59 term "sliding" as unfair methods of competition and
60 unfair or deceptive acts; amending s. 626.9741, F.S.;
61 requiring an insurer's notification regarding certain
62 credit report or score information to include
63 specified language under certain circumstances;
64 amending ss. 626.9957 and 627.062, F.S.; conforming
65 cross-references; amending s. 627.502, F.S.;
66 prohibiting a life insurer from writing new policies
67 of industrial life insurance beginning on a certain
68 date; amending s. 627.70131, F.S.; providing that
69 communication made to or by an insurer's
70 representative, rather than to or by an insurer's
71 agent, constitutes communication to or by the insurer;
72 replacing the defined term "agent" with the term
73 "representative"; revising the timeframe in which an
74 insurer must begin an investigation after receipt of
75 proof of loss statements; requiring an insurer-
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76 assigned licensed adjuster to provide the policyholder
77 with certain information; specifying information that
78 must be included in certain communication with the
79 policyholder regarding a claim; requiring an insurer
80 to keep records of the licensed adjusters interacting
81 with policyholders; requiring an insurer to establish
82 a process to provide the policyholder, the office, or
83 the department with a list of adjusters associated
84 with a claim; requiring an insurer to include
85 specified notices when providing preliminary or
86 partial damage estimates or claim payments; providing
87 applicability; creating s. 627.7031, F.S.; prohibiting
88 foreign venue clauses in property insurance policies;
89 providing applicability; amending s. 627.7142, F.S.;
90 revising circumstances under which an insurer must
91 provide a Homeowner Claims Bill of Rights to a
92 policyholder; revising information contained in the
93 Homeowner Claims Bill of Rights; conforming provisions
94 to changes made by the act; amending s. 631.57, F.S.;
95 deleting a deductible on the obligation of the Florida
96 Insurance Guaranty Association, Incorporated, as to
97 certain covered claims; amending s. 631.904, F.S.;
98 revising the definition of the term "covered claim" to
99 exclude certain premium returns; amending s. 648.30,
100 F.S.; providing penalties for a licensed bail bond
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101 agent or temporary bail bond agent who knowingly
102 engages in certain activities; providing effective
103 dates.
104
105 Be It Enacted by the Legislature of the State of Florida:
106
107 Section 1. Paragraph (b) of subsection (9) of section
108 501.0051, Florida Statutes, is amended to read:
109 501.0051 Protected consumer report security freeze.—
110 (9)
111 (b) A consumer reporting agency may not charge to a
112 reasonable fee, not to exceed $10, if the representative fails
113 to retain the original unique personal identifier provided by
114 the consumer reporting agency and the agency must reissue the
115 unique personal identifier or provide a new unique personal
116 identifier to the protected consumer representative.
117 Section 2. Paragraph (b) of subsection (10) of section
118 624.307, Florida Statutes, is amended to read:
119 624.307 General powers; duties.—
120 (10)
121 (b) Any person licensed or issued a certificate of
122 authority by the department or the office shall respond, in
123 writing, to the division within 20 days after receipt of a
124 written request for documents and information from the division
125 concerning a consumer complaint. The response must address the
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126 issues and allegations raised in the complaint and include any
127 requested documents concerning the consumer complaint that are
128 not subject to attorney-client or work-product privilege. The
129 division may impose an administrative penalty for failure to
130 comply with this paragraph of up to $2,500 per violation upon
131 any entity licensed by the department or the office and $250 for
132 the first violation, $500 for the second violation, and up to
133 $1,000 for the third or subsequent violation upon any individual
134 licensed by the department or the office.
135 Section 3. Subsection (9) of section 626.112, Florida
136 Statutes, is renumbered as subsection (10), paragraph (d) of
137 subsection (7) and present subsection (9) are amended, and a new
138 subsection (9) is added to that section, to read:
139 626.112 License and appointment required; agents, customer
140 representatives, adjusters, insurance agencies, service
141 representatives, managing general agents, adjusting firms.—
142 (7)
143 (d) Effective October 1, 2015, the department must
144 automatically convert the registration of an approved registered
145 insurance agency to an insurance agency license.
146 (9)(a) An individual, firm, partnership, corporation,
147 association, or other entity may not act in its own name or
148 under a trade name, directly or indirectly, as an adjusting firm
149 unless it complies with s. 626.8696 with respect to possessing
150 an adjusting firm license for each place of business at which it
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151 engages in an activity that may be performed only by a licensed
152 insurance adjuster. However, an adjusting firm that is owned and
153 operated by a single licensed adjuster conducting business in
154 his or her individual name and not employing or otherwise using
155 the services of or appointing other licensees is exempt from the
156 adjusting firm licensing requirements of this paragraph.
157 (b) A branch place of business that is established by a
158 licensed adjusting firm is considered a branch firm and is not
159 required to be licensed if:
160 1. It transacts business under the same name and federal
161 tax identification number as the licensed adjusting firm;
162 2. It has designated with the department a primary
163 adjuster operating the location as required by s. 626.8695; and
164 3. The address and telephone number of the branch location
165 have been submitted to the department for inclusion in the
166 licensing record of the licensed adjusting firm within 30 days
167 after insurance transactions begin at the branch location.
168 (c) If an adjusting firm is required to be licensed but
169 fails to file an application for licensure in accordance with
170 this section, the department shall impose on the firm an
171 administrative penalty of up to $10,000.
172 (10)(9) Any person who knowingly transacts insurance or
173 otherwise engages in insurance activities in this state without
174 a license in violation of this section or who knowingly aids or
175 abets an unlicensed person in transacting insurance or otherwise
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176 engaging in insurance activities in this state without a license
177 commits a felony of the third degree, punishable as provided in
178 s. 775.082, s. 775.083, or s. 775.084.
179 Section 4. Section 626.5813, Florida Statutes, is created
180 to read:
181 626.5813 Claims adjusting.—
182 (1)(a) As used in this section, the term "claims
183 adjusting" means directly or indirectly:
184 1. Attempting or undertaking to ascertain and determine
185 the amount of any claim, loss, or damage payable under an
186 insurance contract or undertaking to negotiate or effect
187 settlement of a claim, loss, or damage under an insurance
188 contract, if such action results in payment to or receipt of
189 money, commission, or any other thing of value by the party or
190 parties rendering such service or persons affiliated with such
191 party or parties; or
192 2. Soliciting services as described in subparagraph 1. or
193 soliciting an insured or policyholder to file an insurance
194 claim.
195 (b) The term does not include:
196 1. Paid services as a spokesperson used as part of a
197 written or an electronic advertisement.
198 2. Paid services as a photographer or videographer used to
199 capture images of damage.
200 3. Paid services to inventory personal property or
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201 business personal property.
202 4. Discussion or explanation of a bid for construction or
203 repair services by a licensed contractor under part I of chapter
204 489, or a subcontractor for a licensed contractor, with a
205 property owner or the insurer of such property.
206 (2) Except for a duly licensed attorney at law as exempted
207 under s. 626.860, a person may not provide claims adjusting
208 services unless licensed and appointed as an adjuster under this
209 part.
210 Section 5. Subsection (4) is added to section 626.602,
211 Florida Statutes, to read:
212 626.602 Insurance agency names; disapproval.—The
213 department may disapprove the use of any true or fictitious
214 name, other than the bona fide natural name of an individual, by
215 any insurance agency on any of the following grounds:
216 (4) The name contains the word "Medicare" or "Medicaid."
217 An agency whose name contains the word "Medicare" or "Medicaid"
218 but which is licensed as of July 1, 2021, may continue to use
219 that name until June 30, 2023, as long as the agency's license
220 remains valid. If the agency's license expires or is suspended
221 or revoked, the agency may not be relicensed using that name.
222 Licenses containing either of these words automatically expire
223 on July 1, 2023, unless these words are removed from the name.
224 Section 6. Subsections (16) and (17) are added to section
225 626.621, Florida Statutes, to read:
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226 626.621 Grounds for discretionary refusal, suspension, or
227 revocation of agent's, adjuster's, customer representative's,
228 service representative's, or managing general agent's license or
229 appointment.—The department may, in its discretion, deny an
230 application for, suspend, revoke, or refuse to renew or continue
231 the license or appointment of any applicant, agent, adjuster,
232 customer representative, service representative, or managing
233 general agent, and it may suspend or revoke the eligibility to
234 hold a license or appointment of any such person, if it finds
235 that as to the applicant, licensee, or appointee any one or more
236 of the following applicable grounds exist under circumstances
237 for which such denial, suspension, revocation, or refusal is not
238 mandatory under s. 626.611:
239 (16) Taking an action that allows the personal financial
240 or medical information of a consumer or customer to be made
241 available or accessible to the general public, regardless of the
242 format in which the record is stored.
243 (17) Initiating in-person or telephone solicitation after
244 9 p.m. or before 8 a.m. local time of the prospective customer
245 unless requested by the prospective customer.
246 Section 7. Section 626.782, Florida Statutes, is amended
247 to read:
248 626.782 "Industrial class insurer" defined.—An "industrial
249 class insurer" is an insurer collecting premiums on policies of
250 writing industrial life insurance, as defined in s. 627.502,
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251 written before July 1, 2021, and as to such insurance, operates
252 under a system of collecting a debit by its agent.
253 Section 8. Section 626.783, Florida Statutes, is amended
254 to read:
255 626.783 "Ordinary-combination class insurer" defined.—An
256 "ordinary-combination class insurer" is an insurer writing both
257 ordinary class insurance and collecting premiums on existing
258 industrial life class insurance under s. 626.782.
259 Section 9. Section 626.796, Florida Statutes, is repealed.
260 Section 10. Subsections (6), (11), and (15) of section
261 626.854, Florida Statutes, are amended to read:
262 626.854 "Public adjuster" defined; prohibitions.—The
263 Legislature finds that it is necessary for the protection of the
264 public to regulate public insurance adjusters and to prevent the
265 unauthorized practice of law.
266 (6) An insured or claimant may cancel a public adjuster's
267 contract to adjust a claim without penalty or obligation within
268 10 calendar 3 business days after the date on which the contract
269 is executed or within 3 business days after the date on which
270 the insured or claimant has notified the insurer of the claim,
271 whichever is later. The public adjuster's contract must contain
272 the following language in minimum 18-point bold type: "You, the
273 insured, may cancel this contract for any reason without penalty
274 or obligation to you within 10 days after the date of this
275 contract by providing notice to (name of public adjuster) ,
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276 submitted in writing and sent by certified mail, return receipt
277 requested, or other form of mailing that provides proof thereof,
278 at the address specified in the contract." disclose to the
279 insured or claimant his or her right to cancel the contract and
280 advise the insured or claimant that notice of cancellation must
281 be submitted in writing and sent by certified mail, return
282 receipt requested, or other form of mailing that provides proof
283 thereof, to the public adjuster at the address specified in the
284 contract; provided, during any state of emergency as declared by
285 the Governor and for 1 year after the date of loss, the insured
286 or claimant has 5 business days after the date on which the
287 contract is executed to cancel a public adjuster's contract.
288 (11) Each public adjuster must provide to the claimant or
289 insured a written estimate of the loss to assist in the
290 submission of a proof of loss or any other claim for payment of
291 insurance proceeds within 60 days after the date of the public
292 adjuster's contract. The written estimate must include an
293 itemized, per-unit estimate of the repairs, including itemized
294 information on equipment, materials, labor, and supplies, in
295 accordance with accepted industry standards. The public adjuster
296 shall retain such written estimate for at least 5 years and
297 shall make the estimate available to the claimant or insured,
298 the insurer, and the department upon request.
299 (15) A licensed contractor under part I of chapter 489, or
300 a subcontractor, may not adjust a claim on behalf of an insured,
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301 or solicit an insured to file an insurance claim, unless
302 licensed and compliant as a public adjuster under this chapter.
303 However, the contractor may discuss or explain a bid for
304 construction or repair of covered property with the residential
305 property owner who has suffered loss or damage covered by a
306 property insurance policy, or the insurer of such property, if
307 the contractor is doing so for the usual and customary fees
308 applicable to the work to be performed as stated in the contract
309 between the contractor and the insured.
310 Section 11. Effective January 1, 2022, subsection (3) of
311 section 626.916, Florida Statutes, is amended, and paragraph (f)
312 is added to subsection (1) of that section, to read:
313 626.916 Eligibility for export.—
314 (1) No insurance coverage shall be eligible for export
315 unless it meets all of the following conditions:
316 (f) The insured has signed or otherwise provided
317 documented acknowledgment of a disclosure in substantially the
318 following form: "You are agreeing to place coverage in the
319 surplus lines market. Coverage may be available in the admitted
320 market. Persons insured by surplus lines carriers are not
321 protected under the Florida Insurance Guaranty Act with respect
322 to any right of recovery for the obligation of an insolvent
323 unlicensed insurer."
324 (3)(a) Subsection (1) does not apply to wet marine and
325 transportation or aviation risks that which are subject to s.
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326 626.917.
327 (b) Paragraphs (1)(a)-(d) do not apply to classes of
328 insurance which are subject to s. 627.062(3)(d)1. These classes
329 may be exportable under the following conditions:
330 1. The insurance must be placed only by or through a
331 surplus lines agent licensed in this state;
332 2. The insurer must be made eligible under s. 626.918; and
333 3. The insured has complied with paragraph (1)(f) must
334 sign a disclosure that substantially provides the following:
335 "You are agreeing to place coverage in the surplus lines market.
336 Superior coverage may be available in the admitted market and at
337 a lesser cost. Persons insured by surplus lines carriers are not
338 protected under the Florida Insurance Guaranty Act with respect
339 to any right of recovery for the obligation of an insolvent
340 unlicensed insurer." If the disclosure in paragraph (1)(f)
341 notice is signed by the insured, the insured is presumed to have
342 been informed and to know that other coverage may be available,
343 and, with respect to the diligent-effort requirement under
344 subsection (1), there is no liability on the part of, and no
345 cause of action arises against, the retail agent presenting the
346 form.
347 Section 12. Paragraph (z) of subsection (1) of section
348 626.9541, Florida Statutes, is amended to read:
349 626.9541 Unfair methods of competition and unfair or
350 deceptive acts or practices defined.—
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351 (1) UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE
352 ACTS.—The following are defined as unfair methods of competition
353 and unfair or deceptive acts or practices:
354 (z) Sliding.—Sliding is the act or practice of any of the
355 following:
356 1. Representing to the applicant that a specific ancillary
357 coverage or product is required by law in conjunction with the
358 purchase of insurance when such coverage or product is not
359 required.;
360 2. Representing to the applicant that a specific ancillary
361 coverage or product is included in the policy applied for
362 without an additional charge when such charge is required.; or
363 3. Charging an applicant for a specific ancillary coverage
364 or product, in addition to the cost of the insurance coverage
365 applied for, without the informed consent of the applicant.
366 4. Initiating, effectuating, binding, or otherwise issuing
367 a policy of insurance without the prior informed consent of the
368 owner of the property to be insured.
369 5. Mailing, transmitting, or otherwise submitting by any
370 means an invoice for premium payment to a mortgagee or escrow
371 agent for the purpose of effectuating an insurance policy,
372 without the prior informed consent of the owner of the property
373 to be insured. However, this subparagraph does not apply in
374 cases where the mortgagee or escrow agent is renewing insurance
375 or issuing collateral protection insurance, as defined in s.
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376 624.6085, pursuant to the mortgage or other pertinent loan
377 documents or communications regarding the property.
378 Section 13. Effective January 1, 2022, subsection (3) of
379 section 626.9741, Florida Statutes, is amended to read:
380 626.9741 Use of credit reports and credit scores by
381 insurers.—
382 (3) An insurer must inform an applicant or insured, in the
383 same medium as the application is taken, that a credit report or
384 score is being requested for underwriting or rating purposes.
385 The notification to the applicant or insured must include the
386 following language: "The Department of Financial Services offers
387 free financial literacy programs to assist you with insurance-
388 related questions, including how credit works and how credit
389 scores are calculated. To learn more, visit
390 www.myfloridacfo.com." An insurer that makes an adverse decision
391 based, in whole or in part, upon a credit report must provide at
392 no charge, a copy of the credit report to the applicant or
393 insured or provide the applicant or insured with the name,
394 address, and telephone number of the consumer reporting agency
395 from which the insured or applicant may obtain the credit
396 report. The insurer must provide notification to the consumer
397 explaining the reasons for the adverse decision. The reasons
398 must be provided in sufficiently clear and specific language so
399 that a person can identify the basis for the insurer's adverse
400 decision. Such notification must shall include a description of
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401 the four primary reasons, or such fewer number as existed, which
402 were the primary influences of the adverse decision. The use of
403 generalized terms such as "poor credit history," "poor credit
404 rating," or "poor insurance score" does not meet the explanation
405 requirements of this subsection. A credit score may not be used
406 in underwriting or rating insurance unless the scoring process
407 produces information in sufficient detail to permit compliance
408 with the requirements of this subsection. It is shall not be
409 deemed an adverse decision if, due to the insured's credit
410 report or credit score, the insured continues to receive a less
411 favorable rate or placement in a less favorable tier or company
412 at the time of renewal except for renewals or reunderwriting
413 required by this section.
414 Section 14. Subsection (1) of section 626.9957, Florida
415 Statutes, is amended to read:
416 626.9957 Conduct prohibited; denial, revocation, or
417 suspension of registration.—
418 (1) As provided in s. 626.112, only a person licensed as
419 an insurance agent or customer representative may engage in the
420 solicitation of insurance. A person who engages in the
421 solicitation of insurance as described in s. 626.112(1) without
422 such license is subject to the penalties provided under s.
423 626.112(10) s. 626.112(9).
424 Section 15. Subsection (10) of section 627.062, Florida
425 Statutes, is amended to read:
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426 627.062 Rate standards.—
427 (10) Any interest paid pursuant to s. 627.70131(7) s.
428 627.70131(5) may not be included in the insurer's rate base and
429 may not be used to justify a rate or rate change.
430 Section 16. Section 627.502, Florida Statutes, is amended
431 to read:
432 627.502 "Industrial life insurance" defined; reporting;
433 prohibition on new policies after a certain date.—
434 (1) For the purposes of this code, "industrial life
435 insurance" is that form of life insurance written under policies
436 under which premiums are payable monthly or more often, bearing
437 the words "industrial policy" or "weekly premium policy" or
438 words of similar import imprinted upon the policies as part of
439 the descriptive matter, and issued by an insurer that which, as
440 to such industrial life insurance, is operating under a system
441 of collecting a debit by its agent.
442 (2) Every life insurer servicing existing transacting
443 industrial life insurance shall report to the office all annual
444 statement data regarding the exhibit of life insurance,
445 including relevant information for industrial life insurance.
446 (3) Beginning July 1, 2021, a life insurer may not write a
447 new policy of industrial life insurance.
448 Section 17. Effective January 1, 2022, section 627.70131,
449 Florida Statutes, is amended to read:
450 627.70131 Insurer's duty to acknowledge communications
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451 regarding claims; investigation.—
452 (1)(a) Upon an insurer's receiving a communication with
453 respect to a claim, the insurer shall, within 14 calendar days,
454 review and acknowledge receipt of such communication unless
455 payment is made within that period of time or unless the failure
456 to acknowledge is caused by factors beyond the control of the
457 insurer which reasonably prevent such acknowledgment. If the
458 acknowledgment is not in writing, a notification indicating
459 acknowledgment shall be made in the insurer's claim file and
460 dated. A communication made to or by a representative an agent
461 of an insurer with respect to a claim shall constitute
462 communication to or by the insurer.
463 (b) As used in this subsection, the term "representative"
464 "agent" means any person to whom an insurer has granted
465 authority or responsibility to receive or make such
466 communications with respect to claims on behalf of the insurer.
467 (c) This subsection does shall not apply to claimants
468 represented by counsel beyond those communications necessary to
469 provide forms and instructions.
470 (2) Such acknowledgment shall be responsive to the
471 communication. If the communication constitutes a notification
472 of a claim, unless the acknowledgment reasonably advises the
473 claimant that the claim appears not to be covered by the
474 insurer, the acknowledgment shall provide necessary claim forms,
475 and instructions, including an appropriate telephone number.
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476 (3)(a) Unless otherwise provided by the policy of
477 insurance or by law, within 14 10 working days after an insurer
478 receives proof of loss statements, the insurer shall begin such
479 investigation as is reasonably necessary unless the failure to
480 begin such investigation is caused by factors beyond the control
481 of the insurer which reasonably prevent the commencement of such
482 investigation.
483 (b) If such investigation involves a physical inspection
484 of the property, the licensed adjuster assigned by the insurer
485 must provide the policyholder with a printed or electronic
486 document containing his or her name and license number.
487 (c) Any subsequent communication with the policyholder
488 regarding the claim must also include the name and license
489 number of the adjuster communicating about the claim.
490 Communication of the adjuster's name and license number may be
491 included along with other information already being provided to
492 the policyholder.
493 (4) An insurer shall maintain a record or log of each
494 adjuster who communicates with the policyholder as provided in
495 paragraphs (3)(b) and (3)(c), and shall provide a list of the
496 adjusters to the policyholder, the office, or the department
497 upon request.
498 (5) For purposes of this section, the term "insurer" means
499 any residential property insurer.
500 (6)(a) When providing a preliminary or partial estimate of
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501 damage regarding a claim, an insurer shall include with the
502 estimate the following statement printed in at least 12-point
503 bold, uppercase type: THIS ESTIMATE REPRESENTS OUR CURRENT
504 EVALUATION OF THE COVERED DAMAGES TO YOUR INSURED PROPERTY AND
505 MAY BE REVISED AS WE CONTINUE TO EVALUATE YOUR CLAIM. IF YOU
506 HAVE QUESTIONS, CONCERNS, OR ADDITIONAL INFORMATION REGARDING
507 YOUR CLAIM, WE ENCOURAGE YOU TO CONTACT US.
508 (b) When providing a payment on a claim which is not the
509 full and final payment for the claim, an insurer shall include
510 with the payment the following statement printed in at least 12-
511 point bold, uppercase type: WE ARE CONTINUING TO EVALUATE YOUR
512 CLAIM INVOLVING YOUR INSURED PROPERTY AND MAY ISSUE ADDITIONAL
513 PAYMENTS. IF YOU HAVE QUESTIONS, CONCERNS, OR ADDITIONAL
514 INFORMATION REGARDING YOUR CLAIM, WE ENCOURAGE YOU TO CONTACT
515 US.
516 (7)(a)(5)(a) Within 90 days after an insurer receives
517 notice of an initial, reopened, or supplemental property
518 insurance claim from a policyholder, the insurer shall pay or
519 deny such claim or a portion of the claim unless the failure to
520 pay is caused by factors beyond the control of the insurer which
521 reasonably prevent such payment. Any payment of an initial or
522 supplemental claim or portion of such claim made 90 days after
523 the insurer receives notice of the claim, or made more than 15
524 days after there are no longer factors beyond the control of the
525 insurer which reasonably prevented such payment, whichever is
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526 later, bears interest at the rate set forth in s. 55.03.
527 Interest begins to accrue from the date the insurer receives
528 notice of the claim. The provisions of this subsection may not
529 be waived, voided, or nullified by the terms of the insurance
530 policy. If there is a right to prejudgment interest, the insured
531 shall select whether to receive prejudgment interest or interest
532 under this subsection. Interest is payable when the claim or
533 portion of the claim is paid. Failure to comply with this
534 subsection constitutes a violation of this code. However,
535 failure to comply with this subsection does not form the sole
536 basis for a private cause of action.
537 (b) Notwithstanding subsection (5) (4), for purposes of
538 this subsection, the term "claim" means any of the following:
539 1. A claim under an insurance policy providing residential
540 coverage as defined in s. 627.4025(1);
541 2. A claim for structural or contents coverage under a
542 commercial property insurance policy if the insured structure is
543 10,000 square feet or less; or
544 3. A claim for contents coverage under a commercial tenant
545 policy if the insured premises is 10,000 square feet or less.
546 (c) This subsection does shall not apply to claims under
547 an insurance policy covering nonresidential commercial
548 structures or contents in more than one state.
549 (8) This section also applies to surplus lines insurers
550 and to surplus lines insurance authorized under ss. 626.913-
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551 626.937 providing residential coverage.
552 Section 18. Section 627.7031, Florida Statutes, is created
553 to read:
554 627.7031 Foreign venue clauses prohibited.—After July 1,
555 2021, a personal residential property insurance policy sold in
556 the state and insuring only real property located in the state
557 may not require an insured to pursue dispute resolution through
558 litigation, arbitration, or mediation outside the state. This
559 section also applies to surplus lines insurers and to surplus
560 lines insurance authorized under ss. 626.913-626.937.
561 Section 19. Effective January 1, 2022, section 627.7142,
562 Florida Statutes, is amended to read:
563 627.7142 Homeowner Claims Bill of Rights.—An insurer
564 issuing a personal lines residential property insurance policy
565 in this state must provide a Homeowner Claims Bill of Rights to
566 a policyholder within 14 days after receiving an initial
567 communication with respect to a claim, unless the claim follows
568 an event that is the subject of a declaration of a state of
569 emergency by the Governor. The purpose of the bill of rights is
570 to summarize, in simple, nontechnical terms, existing Florida
571 law regarding the rights of a personal lines residential
572 property insurance policyholder who files a claim of loss. The
573 Homeowner Claims Bill of Rights is specific to the claims
574 process and does not represent all of a policyholder's rights
575 under Florida law regarding the insurance policy. The Homeowner
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576 Claims Bill of Rights does not create a civil cause of action by
577 any individual policyholder or class of policyholders against an
578 insurer or insurers. The failure of an insurer to properly
579 deliver the Homeowner Claims Bill of Rights is subject to
580 administrative enforcement by the office but is not admissible
581 as evidence in a civil action against an insurer. The Homeowner
582 Claims Bill of Rights does not enlarge, modify, or contravene
583 statutory requirements, including, but not limited to, ss.
584 626.854, 626.9541, 627.70131, 627.7015, and 627.7074, and does
585 not prohibit an insurer from exercising its right to repair
586 damaged property in compliance with the terms of an applicable
587 policy or ss. 627.7011(5)(e) and 627.702(7). The Homeowner
588 Claims Bill of Rights must state:
589
590 HOMEOWNER CLAIMS
591 BILL OF RIGHTS
592 This Bill of Rights is specific to the claims process and does
593 not represent all of your rights under Florida law regarding
594 your policy. There are also exceptions to the stated timelines
595 when conditions are beyond your insurance company's control.
596 This document does not create a civil cause of action by an
597 individual policyholder, or a class of policyholders, against an
598 insurer or insurers and does not prohibit an insurer from
599 exercising its right to repair damaged property in compliance
600 with the terms of an applicable policy.
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601
602 YOU HAVE THE RIGHT TO:
603 1. Receive from your insurance company an acknowledgment
604 of your reported claim within 14 days after the time you
605 communicated the claim.
606 2. Upon written request, receive from your insurance
607 company within 30 days after you have submitted a complete
608 proof-of-loss statement to your insurance company, confirmation
609 that your claim is covered in full, partially covered, or
610 denied, or receive a written statement that your claim is being
611 investigated.
612 3. Within 90 days, subject to any dual interest noted in
613 the policy, receive full settlement payment for your claim or
614 payment of the undisputed portion of your claim, or your
615 insurance company's denial of your claim.
616 4. Receive payment of interest, as provided in section
617 627.70131, Florida Statutes, from your insurance company, which
618 begins accruing from the date your claim is filed if your
619 insurance company does not pay full settlement of your initial,
620 reopened, or supplemental claim or the undisputed portion of
621 your claim or does not deny your claim within 90 days after your
622 claim is filed. The interest, if applicable, must be paid when
623 your claim or undisputed portion of your claim is paid.
624 5.4. Have free mediation of your disputed claim by the
625 Florida Department of Financial Services, Division of Consumer
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626 Services, under most circumstances and subject to certain
627 restrictions.
628 6.5. Have neutral evaluation of your disputed claim, if
629 your claim is for damage caused by a sinkhole and is covered by
630 your policy.
631 7.6. Contact the Florida Department of Financial Services,
632 Division of Consumer Services' toll-free helpline for assistance
633 with any insurance claim or questions pertaining to the handling
634 of your claim. You can reach the Helpline by phone at...(toll-
635 free phone number)..., or you can seek assistance online at the
636 Florida Department of Financial Services, Division of Consumer
637 Services' website at...(website address)....
638
639 YOU ARE ADVISED TO:
640 1. Contact your insurance company before entering into any
641 contract for repairs to confirm any managed repair policy
642 provisions or optional preferred vendors.
643 2. Make and document emergency repairs that are necessary
644 to prevent further damage. Keep the damaged property, if
645 feasible, keep all receipts, and take photographs or video of
646 damage before and after any repairs to provide to your insurer.
647 3. Carefully read any contract that requires you to pay
648 out-of-pocket expenses or a fee that is based on a percentage of
649 the insurance proceeds that you will receive for repairing or
650 replacing your property.
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651 4. Confirm that the contractor you choose is licensed to
652 do business in Florida. You can verify a contractor's license
653 and check to see if there are any complaints against him or her
654 by calling the Florida Department of Business and Professional
655 Regulation. You should also ask the contractor for references
656 from previous work.
657 5. Require all contractors to provide proof of insurance
658 before beginning repairs.
659 6. Take precautions if the damage requires you to leave
660 your home, including securing your property and turning off your
661 gas, water, and electricity, and contacting your insurance
662 company and provide a phone number where you can be reached.
663 Section 20. Paragraph (a) of subsection (1) and subsection
664 (6) of section 631.57, Florida Statutes, are amended to read:
665 631.57 Powers and duties of the association.—
666 (1) The association shall:
667 (a)1. Be obligated to the extent of the covered claims
668 existing:
669 a. Before Prior to adjudication of insolvency and arising
670 within 30 days after the determination of insolvency;
671 b. Before the policy expiration date if less than 30 days
672 after the determination; or
673 c. Before the insured replaces the policy or causes its
674 cancellation, if she or he does so within 30 days of the
675 determination.
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676 2. The obligation under subparagraph 1. includes only the
677 amount of each covered claim which is in excess of $100 and is
678 less than $300,000, except that policies providing coverage for
679 homeowner's insurance shall provide for an additional $200,000
680 for the portion of a covered claim which relates only to the
681 damage to the structure and contents.
682 3.a. Notwithstanding subparagraph 2., the obligation under
683 subparagraph 1. for policies covering condominium associations
684 or homeowners' associations, which associations have a
685 responsibility to provide insurance coverage on residential
686 units within the association, shall include that amount of each
687 covered property insurance claim which is less than $200,000
688 multiplied by the number of condominium units or other
689 residential units; however, as to homeowners' associations, this
690 sub-subparagraph applies only to claims for damage or loss to
691 residential units and structures attached to residential units.
692 b. Notwithstanding sub-subparagraph a., the association
693 has no obligation to pay covered claims that are to be paid from
694 the proceeds of bonds issued under s. 631.695. However, the
695 association shall assign and pledge the first available moneys
696 from all or part of the assessments to be made under paragraph
697 (3)(a) to or on behalf of the issuer of such bonds for the
698 benefit of the holders of such bonds. The association shall
699 administer any such covered claims and present valid covered
700 claims for payment in accordance with the provisions of the
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701 assistance program in connection with which such bonds have been
702 issued.
703 4. In no event shall the association be obligated to a
704 policyholder or claimant in an amount in excess of the
705 obligation of the insolvent insurer under the policy from which
706 the claim arises.
707 (6) The association may extend the time limits specified
708 in paragraph (1)(a) by up to an additional 60 days or waive the
709 applicability of the $100 deductible specified in paragraph
710 (1)(a) if the board determines that either or both such actions
711 are necessary to facilitate the bulk assumption of obligations.
712 Section 21. Subsection (2) of section 631.904, Florida
713 Statutes, is amended to read:
714 631.904 Definitions.—As used in this part, the term:
715 (2) "Covered claim" means an unpaid claim, including a
716 claim for return of unearned premiums, which arises out of, is
717 within the coverage of, and is not in excess of the applicable
718 limits of, an insurance policy to which this part applies, which
719 policy was issued by an insurer and which claim is made on
720 behalf of a claimant or insured who was a resident of this state
721 at the time of the injury. The term "covered claim" includes
722 unpaid claims under any employer liability coverage of a
723 workers' compensation policy limited to the lesser of $300,000
724 or the limits of the policy. The term "covered claim" does not
725 include any amount sought as a return of premium under any
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726 retrospective rating plan; any amount due any reinsurer,
727 insurer, insurance pool, or underwriting association, as
728 subrogation recoveries or otherwise; any claim that would
729 otherwise be a covered claim that has been rejected or denied by
730 any other state guaranty fund based upon that state's statutory
731 exclusions, including, but not limited to, those based on
732 coverage, policy type, or an insured's net worth, except this
733 exclusion from the definition of covered claim does not apply to
734 employers who, before prior to April 30, 2004, entered into an
735 agreement with the corporation preserving the employer's right
736 to seek coverage of claims rejected by another state's guaranty
737 fund; or any return of premium resulting from a policy that was
738 not in force on the date of the final order of liquidation.
739 Member insurers have no right of subrogation against the insured
740 of any insolvent insurer. This provision applies retroactively
741 to cover claims of an insolvent self-insurance fund resulting
742 from accidents or losses incurred before prior to January 1,
743 1994, regardless of the date the petition in circuit court was
744 filed alleging insolvency and the date the court entered an
745 order appointing a receiver.
746 Section 22. Section 648.30, Florida Statutes, is amended
747 to read:
748 648.30 Licensure and appointment required; prohibited
749 acts; penalties.—
750 (1) A person may not act in the capacity of a bail bond
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751 agent or temporary bail bond agent or perform any of the
752 functions, duties, or powers prescribed for bail bond agents or
753 temporary bail bond agents under this chapter unless that person
754 is qualified, licensed, and appointed as provided in this
755 chapter.
756 (2) A person may not represent himself or herself to be a
757 bail enforcement agent, bounty hunter, or other similar title in
758 this state.
759 (3) A person, other than a certified law enforcement
760 officer, may not apprehend, detain, or arrest a principal on a
761 bond, wherever issued, unless that person is qualified,
762 licensed, and appointed as provided in this chapter or licensed
763 as a bail bond agent or bail bond enforcement agent, or holds an
764 equivalent license by the state where the bond was written.
765 (4) Any person who violates this section commits a felony
766 of the third degree, punishable as provided in s. 775.082, s.
767 775.083, or s. 775.084.
768 (5) Any licensee under this chapter who knowingly aids or
769 abets an unlicensed person in violating this section commits a
770 felony of the third degree, punishable as provided in s.
771 775.082, s. 775.083, or s. 775.084.
772 Section 23. Except as otherwise expressly provided in this
773 act, this act shall take effect upon becoming a law.
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hb0717-00
INSURANCE & BANKING SUBCOMMITTEE
HB 717 by Rep. Clemons
Consumer Protection
AMENDMENT SUMMARY
March 4, 2021
Amendment 1 by Rep. Clemons (Line 134): The amendment removes the $60 licensure fee
for insurance adjusting firms.
Amendment 2 by Rep. Clemons (Line 207): The amendment exempts “agents” from the
adjuster licensure requirement in the new section that clarifies what constitutes claims adjusting
for the purpose of licensure as a claims adjuster. The purpose of the amendment is to avoid
conflict and maintain consistency with existing law (section 626.862, F.S.), which exempts
licensed and appointed insurance agents from the requirement to be licensed as an adjuster to
adjust losses for an insurer.
COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 717 (2021)
Amendment No. 1
COMMITTEE/SUBCOMMITTEE ACTION
ADOPTED (Y/N)
ADOPTED AS AMENDED (Y/N)
ADOPTED W/O OBJECTION (Y/N)
FAILED TO ADOPT (Y/N)
WITHDRAWN (Y/N)
OTHER
1 Committee/Subcommittee hearing bill: Insurance & Banking
2 Subcommittee
3 Representative Clemons offered the following:
4
5 Amendment (with title amendment)
6 Between lines 134 and 135, insert:
7 Section 3. Subsection (20) of section 624.501, Florida
8 Statutes, is amended to read:
9 624.501 Filing, license, appointment, and miscellaneous
10 fees.— The department, commission, or office, as appropriate,
11 shall collect in advance, and persons so served shall pay to it
12 in advance, fees, licenses, and miscellaneous charges as
13 follows:
14 (20) Adjusting firm, original or renewal 3-year license. .
15 . . . . . . . . $ 60.00
16
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Page 1 of 2
COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 717 (2021)
Amendment No. 1
17 -----------------------------------------------------
18 T I T L E A M E N D M E N T
19 Remove line 12 and insert:
20 consumer complaints; amending s. 624.501 F.S.;
21 deleting a fee for adjusting firm licenses; amending
22 s. 626.112, F.S.;
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Page 2 of 2
COMMITTEE/SUBCOMMITTEE AMENDMENT
Bill No. HB 717 (2021)
Amendment No. 2
COMMITTEE/SUBCOMMITTEE ACTION
ADOPTED (Y/N)
ADOPTED AS AMENDED (Y/N)
ADOPTED W/O OBJECTION (Y/N)
FAILED TO ADOPT (Y/N)
WITHDRAWN (Y/N)
OTHER
1 Committee/Subcommittee hearing bill: Insurance & Banking
2 Subcommittee
3 Representative Clemons offered the following:
4
5 Amendment
6 Remove lines 207-209 and insert:
7 under s. 626.860, or an agent as exempted under s. 626.862, a
8 person may not provide claims adjusting services unless licensed
9 and appointed as an adjuster under this part.
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HB 733
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 733 Credit for Reinsurance
SPONSOR(S): Fetterhoff
TIED BILLS: IDEN./SIM. BILLS: SB 728
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Insurance & Banking Subcommittee Fortenberry Luczynski
2) State Administration & Technology
Appropriations Subcommittee
3) Commerce Committee
SUMMARY ANALYSIS
Reinsurance is a transaction between a primary insurer (ceding insurer) and a reinsurer (assuming insurer)
whereby the assuming insurer agrees to cover all or part of the ceding insurer’s losses or loss adjustment
expenses in exchange for a premium. Because of the impact of hurricanes in Florida, the catastrophe
protection provided by reinsurance is a significant reason for ceding insurers’ purchase of reinsurance within
the state. Most reinsurance that United States (U.S.) ceding insurers acquire is placed with non-U.S. assuming
insurers. Because state insurance regulators do not regulate non-U.S. insurers or assuming insurers, the
purchase of reinsurance by Florida insurers from such non-U.S. companies provides concern and challenges
for state insurance regulators. Depending on their status within Florida, assuming insurers may be authorized
or unauthorized. When an assuming insurer is an unauthorized assuming insurer within Florida, the Florida
Office of Insurance Regulation (OIR) does not have direct regulatory authority over that assuming insurer. In
order to exercise some indirect regulatory authority over these assuming insurers, OIR limits the ceding
insurer’s credit for reinsurance unless the assuming insurer meets certain criteria. Credit for reinsurance
means that a ceding insurer is permitted under statutory accounting rules to recognize the reinsurance as an
asset or as a reduction from liability for the amount of the ceded liability or risk transferred.
The bill amends the reinsurance law to add criteria that an assuming insurer must meet in order for a ceding
insurer to be given credit for reinsurance. These criteria include having its head office or its domicile, and being
licensed in, a reciprocal jurisdiction, maintaining minimum capital and surplus, meeting minimum solvency or
capital ratios, providing prompt notice to OIR if it falls below minimum requirements or has legal action taken
against it, responding to OIR’s document requests, and maintaining a practice of prompt payment of claims.
The bill also specifies certain elements that an assuming insurer must include in its reinsurance agreements in
order for the ceding insurer to take credit for reinsurance. The bill requires that an assuming insurer’s
regulatory authority confirm to OIR that the assuming insurer has complied with the capital and surplus
requirements and solvency or capital ratio requirements in the bill. It also establishes that a ceding insurer may
only take credit for reinsurance agreements entered into, amended, or renewed on or after the date at which
the assuming insurer has met the criteria in the bill. Additionally, OIR may suspend or revoke the assuming
insurer’s eligibility if the assuming insurer does not continue to meet the mandatory criteria.
If insurers are able to take credit for reinsurance for additional reinsurance transactions, they will be able to
recognize additional assets or reductions in liability. The greater an insurer’s assets or lower its liabilities, the
higher the insurer’s surplus. The insurer’s surplus provides a measure of financial stability and provides a
source of funds in the event that reserves are inadequate.
The bill has no impact on state or local government revenues or expenditures. It has no known direct economic
impact on the private sector.
The bill has an effective date of July 1, 2021.
This document does not reflect the intent or official position of the bill sponsor or House of Representatives .
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DATE: 3/2/2021
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Reinsurance
Reinsurance is a transaction between a ceding insurer1 and an assuming insurer whereby the
assuming insurer agrees to cover all or part of the ceding insurer’s losses or loss adjustment expenses
in exchange for a premium. The purposes of reinsurance include increasing capacity, stabilizing
underwriting results, financing, providing catastrophe protection, withdrawing from a line or class of
business, spreading risk, and obtaining expertise.2 Because of the impact of hurricanes in Florida, the
catastrophe protection provided by reinsurance is a significant reason for ceding insurers’ purchase of
reinsurance within the state. While the purchase of reinsurance creates a contractual relationship
between the ceding insurer and the assuming insurer, it does not modify the relationship between the
ceding insurer and its policyholders.3 Therefore, the ceding insurer remains obligated to pay
policyholder claims and only the ceding insurer may recover from the assuming insurer unless an
applicable reinsurance contract specifies otherwise.4
Most reinsurance that United States (U.S.) ceding insurers acquire is placed with non-U.S. assuming
insurers. In fact, in 2018, offshore and non-U.S.-owned5 assuming insurers assumed 88.9 percent of
insurance premiums ceded by U.S. insurers.6 The availability of non-U.S. reinsurance contributes to
global diversification of risk, provides claims relief to U.S. insurers, and mitigates the financial impact of
catastrophes.7 Even though reinsurance provides benefits, because the U.S. state insurance
regulators do not regulate non-U.S. insurers or assuming insurers, the purchase of reinsurance by U.S.
insurers from such non-U.S. companies provides concern and challenges for state insurance
regulators.
Regulation of Reinsurance
Direct Regulation of Authorized Assuming Insurers and Credit for Reinsurance
Regulations and requirements for reinsurance transactions in Florida are provided in s. 624.610, F.S.,
and ch. 69O-144, F.A.C. The Florida Office of Insurance Regulation (OIR)8, directly regulates
authorized assuming insurers9 who are domiciled and licensed in Florida and assuming insurers
licensed in Florida who are domiciled in other states.10 Under current law, if a Florida insurer cedes
reinsurance to an assuming insurer who is authorized to transact insurance or reinsurance in Florida
1 National Association of Insurance Commissioners, https://content.naic.org/consumer_glossary.htm#R (last visited Feb. 22, 2021). A
ceding insurer is an insurer that transfers risk assumed from policyholders to an assuming insurer. The ceding insurer and assuming
insurer may also be referred to as the primary insurer and the reinsurer, respectively. Reinsurance is also colloquially referred to as
“insurance for insurers” because of the risk transfer from one insurer to another.
2
National Association of Insurance Commissioners, https://content.naic.org/cipr_topics/topic_reinsurance.htm (last visited Feb. 22,
2021).
3
See IRMI, In Defense of Reinsurance, https://www.irmi.com/articles/expert-commentary/in-defense-of-reinsurance (last visited Feb.
22, 2021).
4
Id.
5
In the insurance context, a company formed under laws other than those of a U.S. jurisdiction is known as an alien insurer. See s.
624.06, F.S.
6
Reinsurance Associaton of America, Offshore Reinsurance in the US Market: 2018 Data,
https://www.reinsurance.org/RAA/Industry_Data_Center/Offshore_Report/Offshore_Report_2018_Data.html (last visited Feb. 22,
2021).
7
International Association of Insurance Supervisors, Reinsurance and Financial Stability,
https://www.iaisweb.org/file/34046/reinsurance-and-financial-stability (last visited Feb. 22, 2021).
8
Statutes also refer to OIR as the office.
9
Authorized assuming insurers are licensed or accredited to provide reinsurance in a particular state. See s. 624.610, F.S.
10
S. 624.610, F.S.
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and meets other specified requirements, the ceding insurer is permitted to take credit for that
reinsurance on its books.11
Indirect Regulation of Unauthorized Assuming insurers and Credit for Reinsurance
When an assuming insurer is not an authorized assuming insurer within Florida, OIR does not have
direct regulatory authority over that assuming insurer. Pursuant to s. 624.610, F.S., and in order to
exercise some indirect regulatory authority over these assuming insurers, OIR limits the ceding
insurer’s credit for reinsurance unless the assuming insurer posts acceptable collateral or security in
the amount of the assuming insurer’s obligations under the reinsurance agreement.12
National Association of Insurance Commissioners
National Association of Insurance Commissioners Authority, Accreditation, and Model Laws
The National Association of Insurance Commissioners (NAIC) is a “standard-setting and regulatory
support organization created and governed by the chief insurance regulators from the 50 states, the
District of Columbia, and five U.S. territories.”13 While the NAIC does not have actual regulatory
authority, it allows state regulators to establish standards and best practices, to engage in peer review,
and to coordinate regulatory oversight.
The NAIC also maintains an accreditation program that considers key financial authorities and
responsibilities of state insurance regulators that warrant national consistency among jurisdictions in
order to improve oversight of multi-state insurers and reduce the cost of inefficiencies that is passed on
to policyholders.14 As of November 2019, all 50 states, the District of Columbia and Puerto Rico were
accredited by the NAIC.15
The NAIC develops model laws and regulations to promote uniformity among jurisdictions and to
balance the needs of insurers operating in multiple jurisdiction with those of the applicable regulatory
frameworks.16 The model laws are considered best practices for insurance regulation and the
accreditation program requires compliance with certain model laws, including those that are solvency
related.17
Credit for Reinsurance Model Law and Regulation and the Covered Agreement
Among the NAIC model laws and regulations that have become part of the accreditation standards are
the Credit for Reinsurance Model Law #785 and Credit for Reinsurance Model Regulation #786
(MLMR), amendments to which are designed to modernize reinsurance regulation in the U.S..18
In 2017, the U.S. entered the Bilateral Agreement Between the United States of America and the
European Union on Prudential Measures Regarding Insurance and Reinsurance (Covered
Agreement).19 In 2019, the NAIC made revisions to MLMR in response to the Covered Agreement. In
11
Credit for reinsurance means that a ceding insurer is permitted under statutory accounting rules to recognize the reinsurance as an
asset or as a reduction from liability for the amount of the ceded liability or risk transferred. IRMI,
https://www.irmi.com/term/insurance-definitions/credit-for-reinsurance (last visited Feb. 26, 2021). See also s. 624.610(3), F.S.
12
See s. 624.610(4), F.S.
13
National Association of Insurance Commissioners, https://content.naic.org/index_about.htm (last visited Feb. 26, 2021).
14
National Association of Insurance Commissioners, State Legislative Brief The NAIC Accreditation Program,
https://www.naic.org/documents/cmte_legislative_liaison_brief_accreditation.pdf (last visited Feb. 26, 2021).
15
Id.
16
National Association of Insurance Commissioners, NAIC Model Laws,
https://content.naic.org/cipr_topics/topic_naic_model_laws.htm (last visited Feb. 26, 2021).
17
National Association of Insurance Commissioners, Accreditation, https://content.naic.org/cipr_topics/topic_accreditation.htm (last
visited Feb. 26, 2021).
18
National Association of Insurance Commissioners, Revisions to the Credit for Reinsurance Model Law,
https://www.naic.org/documents/committees_e_reinsurance_related_reinsurance_model_law_160108.pdf (last visited Feb. 26, 2021).
19
U.S. Department of the Treasury, U.S. – EU Covered Agreement, https://home.treasury.gov/policy-issues/financial-markets-
financial-institutions-and-fiscal-service/federal-insurance-office/covered-agreements/us-eu-covered-agreement (last visited Feb. 26,
2021). Covered agreements are authorized under 31 U.S.C. §§ 313–314, and are written bilateral or multilateral agreements regarding
STORAGE NAME: h0733.IBS PAGE: 3
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part, the Covered Agreement commits the U.S. to phasing-out collateral requirements for European
Union assuming insurers by 2022.20 The Covered Agreement also exempts European Union
assuming insurers from current U.S. domiciliary requirements by creating a classification known as a
reciprocal jurisdiction.21
Effect of the Bill
The changes to MLMR as a result of the Covered Agreement, necessitate that existing Florida law
regarding credit for reinsurance be amended. The bill creates a new subsections within the reinsurance
statute regarding the circumstances under which ceding insurers can take credit for reinsurance. The
bill establishes that a ceding insurer will not be permitted to take credit for reinsurance when an
assuming insurer is not authorized or accredited to transact insurance or reinsurance in Florida unless
the assuming insurer agrees to the following in its reinsurance agreements:
If the assuming insurer fails to perform its obligations under the reinsurance agreement, and at
the request of the ceding insurer, the assuming insurer shall submit to the jurisdiction of any
U.S. court of competent jurisdiction, comply with the requirements necessary to give that court
jurisdiction, and abide by the final decision of that court or any appellate court in the event of an
appeal.
Designate the Florida Chief Financial Officer as its agent to for service of process in a suit by a
ceding insurer.
The bill also provides that credit for reinsurance must be allowed when reinsurance is ceded to an
assuming insurer that meets all of the following criteria:
The assuming insurer must be licensed in, and have its head office in or be domiciled in, a
reciprocal jurisdiction.
The assuming insurer must have minimum capital and surplus as calculated by the
methodology of its domiciliary jurisdiction in the amount of $250 million or in a greater
amount specified by commission22 rule.
The assuming insurer must have a minimum solvency or capital ratio as specified by the
commission.
The assuming insurer must agree to provide prompt written notice to OIR if it falls below the
minimum requirements specified in the bill or if any regulatory action is taken against it for
serious noncompliance with applicable law.
The assuming insurer must consent in writing to:
o submit to the jurisdiction of Florida courts;
o designate the Florida Chief Financial Officer as its agent for service or process or an
attorney to accept lawful process;
o pay all final judgments declared enforceable in the jurisdiction where the judgments
were obtained;
o include a provision in each reinsurance agreement that, where necessary, the
assuming insurer will provide security in the amount equal to 100 percent of the
assuming insurer’s liabilities attributable to reinsurance ceded pursuant to the
agreement; and
insurance or reinsurance entered into between the U.S. and one or more foreign authorities to provide protections for insurance and
reinsurance consumers similar to those provided by state insurance regulators within U.S. jurisdictions.
20
U.S. Department of the Treasury, Statement of the United States on the Covered Agreement with the European Union,
https://ustr.gov/sites/default/files/files/US%20Covered%20Agreement.pdf (last visited Feb. 26, 2021).
21
Id. Model Law #785 defines a reciprocal jurisdiction as:
A non-U.S. jurisdiction that is subject to an in-force covered agreement with the U.S., each within its legal authority, or in the
case of a covered agreement between the U.S. and the European Union, is a member state of the European Union;
A U.S. jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation
program;
A qualified jurisdiction, as determined by an insurance commissioner.
National Association of Insurance Commissioners, Credit for Reinsurance Model Law-785, https://www.naic.org/store/free/MDL-
785.pdf (last visited Feb. 26, 2021).
22
The commission referred to is the Financial Services Commission. Section 20.121(3), F.S., establishes that the Financial Services
Commission consists of the Governor, the Attorney General, the Chief Financial Officer, and the Commissioner of Agriculture.
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DATE: 3/2/2021
o confirm that the assuming insurer is not presently participating in any solvent
scheme of arrangement23 that involves Florida’s ceding insurers, and should the
assuming insurer enter into such arrangement, it will notify OIR and the ceding
insurer and will provide appropriate security.
The assuming insurer must provide documentation to OIR upon request under criteria
specified by the commission.
The assuming insurer must maintain a practice of prompt payment of claims under
reinsurance agreements pursuant to criteria specified by the commission.
The bill requires that an assuming insurer’s regulatory authority24 confirm to OIR on an annual basis
that the assuming insurer has complied with the capital and surplus requirements and solvency or
capital ratio requirements set forth in the bill. It also establishes that a ceding insurer may only take
credit for reinsurance agreements entered into, amended, or renewed on or after the date at which the
assuming insurer has met the mandatory criteria set forth within the bill. Additionally, credit may only be
taken for losses incurred and reserves reported on or after the later of the date upon which the
assuming insurer has met these requirements or has entered into a new reinsurance agreement,
amendment, or renewal with the ceding insurer.
Pursuant to the bill, if the ceding insurer is subject to rehabilitation, liquidation, or conservation, the
ceding insurer may obtain a court order requiring that the assuming insurer post security for all
outstanding ceded liabilities. If OIR determines that the assuming insurer no longer meets one or more
of the requirements under the bill, OIR may revoke or suspend the assuming insurer’s eligibility under
s. 624.610, F.S. While the eligibility is suspended, any reinsurance agreement issued, amended, or
renewed after the effective date of the suspension does not qualify for credit for reinsurance. If the
eligibility is revoked, credit for reinsurance may not be granted after the effective date of the revocation
for any reinsurance agreements entered into by the assuming insurer, including those entered into
before the date of the revocation.
The bill provides that the subsection created within s. 624.610, F.S., does not:
preclude an assuming insurer from volunteering information to OIR;
limit or alter the capacity of parties to a reinsurance agreement to agree on requirements for
security or other terms of the reinsurance agreement, except where otherwise prohibited, or to
renegotiate the reinsurance agreement; or
authorize an assuming insurer to withdraw or reduce the security provided under any
reinsurance agreement, except as authorized within the agreement.
The bill makes other technical changes to s. 624.610, F.S., including the deletion of an obsolete
subsection and the replacement of the word “commissioner” with “office” in several places.
By allowing insurers to take credit for reinsurance for additional reinsurance transactions, the bill allows
insurers to recognize additional assets or reductions in liability. The greater an insurer’s assets or lower
its liabilities, the higher the insurer’s surplus. The insurer’s surplus provides a measure of financial
stability and provides a source of funds in the event that reserves are inadequate.
B. SECTION DIRECTORY:
Section 1. Amends s. 624.610, F.S., relating to reinsurance.
Section 2. Provides an effective date of July 1, 2021.
23
A solvent scheme of arrangement is an English statutory procedure that is used by a solvent company to bring finality to some or all
of their insurance business, and by insolvent companies, as an alternative to liquidation. They involve running-off business and
making distributions to creditors. Michelle Kierce, et al., Schemes of arrangement and their ongoing currency, Insurance and
Reinsurance 2010, https://www.sidley.com/~/media/files/publications/2010/01/schemes-of-arrangement-and-their-ongoing-
currency/files/view-article/fileattachment/schemes-of-arrangement-and-their-ongoing-currenc__.pdf (last visited Feb. 27, 2021).
24
The assuming insurer’s regulatory authority is the entity that regulates the conduct of insurance companies in the assuming insurer’s
country of domicile.
STORAGE NAME: h0733.IBS PAGE: 5
DATE: 3/2/2021
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
None known.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not applicable. This bill does not appear to affect county or municipal governments.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
Section 624.610(14), F.S., provides that the commission may adopt rules necessary to implement the
provisions of that section and “protect the interests of insureds, claimants, ceding insurers, assuming
insurers, and the public.” The rules must be in “substantial compliance” with the NAIC model
regulations relating to credit for reinsurance, the NAIC Accounting Practices and Procedures Manual as
of March 2002 and subsequent consistent amendments to it; and the NAIC model regulation for Credit
for Reinsurance and Life and Health Reinsurance Agreements.25 The bill requires the exercise of this
authority and the adoption of certain forms. Therefore, the bill will likely result in the changes to the
rules in ch. 69O-144, F.A.C.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
25
S. 624.610(14), F.S.
STORAGE NAME: h0733.IBS PAGE: 6
DATE: 3/2/2021
IV. AMENDMENTS/ COMMITTEE SUBSTITUTE CHANGES
STORAGE NAME: h0733.IBS PAGE: 7
DATE: 3/2/2021
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
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1 A bill to be entitled
2 An act relating to credit for reinsurance; amending s.
3 624.610, F.S.; making a technical change; adding
4 conditions under which a ceding insurer must be
5 allowed credit for reinsurance; transferring specified
6 authority and duties relating to credit for
7 reinsurance from the Commissioner of Insurance to the
8 Office of Insurance Regulation; revising the attorney
9 designation requirement in reinsurance agreements with
10 certain assuming insurers under certain circumstances;
11 defining the terms "reciprocal jurisdiction" and
12 "covered agreement"; requiring the office to publish a
13 list of reciprocal jurisdictions on its website;
14 authorizing the office to remove reciprocal
15 jurisdictions under a specified circumstance;
16 specifying requirements for assuming insurers and
17 reinsurance agreements; specifying documentation
18 requirements; authorizing a ceding insurer or its
19 representative that is subject to rehabilitation,
20 liquidation, or conservation to seek a certain court
21 order; providing construction; specifying a limitation
22 on credit taken by a ceding insurer; requiring the
23 office to publish on its website a list of certain
24 assuming insurers; authorizing the office to revoke or
25 suspend an assuming insurer's eligibility under
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26 certain circumstances; prohibiting credit for
27 reinsurance under certain circumstances; providing
28 exceptions; making technical changes; conforming
29 provisions to changes made by the act; providing an
30 effective date.
31
32 Be It Enacted by the Legislature of the State of Florida:
33
34 Section 1. Subsections (4) through (15) of section
35 624.610, Florida Statutes, are renumbered as subsections (5)
36 through (16), respectively, subsection (2), paragraphs (c), (e),
37 and (f) of subsection (3), present subsection (4), paragraph (a)
38 of present subsection (5), and paragraph (b) of present
39 subsection (11) are amended, and a new subsection (4) is added
40 to that section, to read:
41 624.610 Reinsurance.—
42 (2) Credit for reinsurance must be allowed a ceding
43 insurer as either an asset or a reduction deduction from
44 liability on account of reinsurance ceded only when the
45 reinsurer meets the requirements of paragraph (3)(a), paragraph
46 (3)(b), or paragraph (3)(c), or subsection (4). Credit must be
47 allowed under paragraph (3)(a) or paragraph (3)(b) only for
48 cessions of those kinds or lines of business that the assuming
49 insurer is licensed, authorized, or otherwise permitted to write
50 or assume in its state of domicile or, in the case of a United
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51 States branch of an alien assuming insurer, in the state through
52 which it is entered and licensed or authorized to transact
53 insurance or reinsurance.
54 (3)
55 (c)1. Credit must be allowed when the reinsurance is ceded
56 to an assuming insurer that maintains a trust fund in a
57 qualified United States financial institution, as defined in
58 paragraph (6)(b) (5)(b), for the payment of the valid claims of
59 its United States ceding insurers and their assigns and
60 successors in interest. To enable the office to determine the
61 sufficiency of the trust fund, the assuming insurer shall report
62 annually to the office information substantially the same as
63 that required to be reported on the NAIC Annual Statement form
64 by authorized insurers. The assuming insurer shall submit to
65 examination of its books and records by the office and bear the
66 expense of examination.
67 2.a. Credit for reinsurance must not be granted under this
68 subsection unless the form of the trust and any amendments to
69 the trust have been approved by:
70 (I) The insurance regulator of the state in which the
71 trust is domiciled; or
72 (II) The insurance regulator of another state who,
73 pursuant to the terms of the trust instrument, has accepted
74 principal regulatory oversight of the trust.
75 b. The form of the trust and any trust amendments must be
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76 filed with the insurance regulator of every state in which the
77 ceding insurer beneficiaries of the trust are domiciled. The
78 trust instrument must provide that contested claims are valid
79 and enforceable upon the final order of any court of competent
80 jurisdiction in the United States. The trust must vest legal
81 title to its assets in its trustees for the benefit of the
82 assuming insurer's United States ceding insurers and their
83 assigns and successors in interest. The trust and the assuming
84 insurer are subject to examination as determined by the
85 insurance regulator.
86 c. The trust remains in effect for as long as the assuming
87 insurer has outstanding obligations due under the reinsurance
88 agreements subject to the trust. No later than February 28 of
89 each year, the trustee of the trust shall report to the
90 insurance regulator in writing the balance of the trust and list
91 the trust's investments at the preceding year end, and shall
92 certify that the trust will not expire prior to the following
93 December 31.
94 3. The following requirements apply to the following
95 categories of assuming insurer:
96 a. The trust fund for a single assuming insurer consists
97 of funds in trust in an amount not less than the assuming
98 insurer's liabilities attributable to reinsurance ceded by
99 United States ceding insurers, and, in addition, the assuming
100 insurer shall maintain a trusteed surplus of not less than $20
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101 million. Not less than 50 percent of the funds in the trust
102 covering the assuming insurer's liabilities attributable to
103 reinsurance ceded by United States ceding insurers and trusteed
104 surplus shall consist of assets of a quality substantially
105 similar to that required in part II of chapter 625. Clean,
106 irrevocable, unconditional, and evergreen letters of credit,
107 issued or confirmed by a qualified United States financial
108 institution, as defined in paragraph (6)(a) (5)(a), effective no
109 later than December 31 of the year for which the filing is made
110 and in the possession of the trust on or before the filing date
111 of its annual statement, may be used to fund the remainder of
112 the trust and trusteed surplus.
113 b.(I) In the case of a group including incorporated and
114 individual unincorporated underwriters:
115 (A) For reinsurance ceded under reinsurance agreements
116 with an inception, amendment, or renewal date on or after August
117 1, 1995, the trust consists of a trusteed account in an amount
118 not less than the group's several liabilities attributable to
119 business ceded by United States domiciled ceding insurers to any
120 member of the group;
121 (B) For reinsurance ceded under reinsurance agreements
122 with an inception date on or before July 31, 1995, and not
123 amended or renewed after that date, notwithstanding the other
124 provisions of this section, the trust consists of a trusteed
125 account in an amount not less than the group's several insurance
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126 and reinsurance liabilities attributable to business written in
127 the United States; and
128 (C) In addition to these trusts, the group shall maintain
129 in trust a trusteed surplus of which $100 million must be held
130 jointly for the benefit of the United States domiciled ceding
131 insurers of any member of the group for all years of account.
132 (II) The incorporated members of the group must not be
133 engaged in any business other than underwriting of a member of
134 the group, and are subject to the same level of regulation and
135 solvency control by the group's domiciliary regulator as the
136 unincorporated members.
137 (III) Within 90 days after its financial statements are
138 due to be filed with the group's domiciliary regulator, the
139 group shall provide to the insurance regulator an annual
140 certification by the group's domiciliary regulator of the
141 solvency of each underwriter member or, if a certification is
142 unavailable, financial statements, prepared by independent
143 public accountants, of each underwriter member of the group.
144 (e) If the reinsurance is ceded to an assuming insurer not
145 meeting the requirements of paragraph (a), paragraph (b),
146 paragraph (c), or paragraph (d), the office commissioner may
147 allow credit, but only if the assuming insurer holds surplus in
148 excess of $250 million and has a secure financial strength
149 rating from at least two statistical rating organizations deemed
150 acceptable by the office commissioner as having experience and
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151 expertise in rating insurers doing business in Florida,
152 including, but not limited to, Standard & Poor's, Moody's
153 Investors Service, Fitch Ratings, A.M. Best Company, and
154 Demotech. In determining whether credit should be allowed, the
155 office commissioner shall consider the following:
156 1. The domiciliary regulatory jurisdiction of the assuming
157 insurer.
158 2. The structure and authority of the domiciliary
159 regulator with regard to solvency regulation requirements and
160 the financial surveillance of the reinsurer.
161 3. The substance of financial and operating standards for
162 reinsurers in the domiciliary jurisdiction.
163 4. The form and substance of financial reports required to
164 be filed by the reinsurers in the domiciliary jurisdiction or
165 other public financial statements filed in accordance with
166 generally accepted accounting principles.
167 5. The domiciliary regulator's willingness to cooperate
168 with United States regulators in general and the office in
169 particular.
170 6. The history of performance by reinsurers in the
171 domiciliary jurisdiction.
172 7. Any documented evidence of substantial problems with
173 the enforcement of valid United States judgments in the
174 domiciliary jurisdiction.
175 8. Any other matters deemed relevant by the office
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176 commissioner. The office commissioner shall give appropriate
177 consideration to insurer group ratings that may have been
178 issued. The office commissioner may, in lieu of granting full
179 credit under this subsection, reduce the amount required to be
180 held in trust under paragraph (c).
181 (f) If the assuming insurer is not authorized or
182 accredited to transact insurance or reinsurance in this state
183 pursuant to paragraph (a) or paragraph (b), the credit permitted
184 by paragraph (c) or paragraph (d) must not be allowed unless the
185 assuming insurer agrees in the reinsurance agreements:
186 1.a. That in the event of the failure of the assuming
187 insurer to perform its obligations under the terms of the
188 reinsurance agreement, the assuming insurer, at the request of
189 the ceding insurer, shall submit to the jurisdiction of any
190 court of competent jurisdiction in any state of the United
191 States, will comply with all requirements necessary to give the
192 court jurisdiction, and will abide by the final decision of the
193 court or of any appellate court in the event of an appeal; and
194 b. To designate the Chief Financial Officer, pursuant to
195 s. 48.151, or a designated attorney as its true and lawful
196 attorney upon whom may be served any lawful process in any
197 action, suit, or proceeding instituted by or on behalf of the
198 ceding company.
199 2. This paragraph is not intended to conflict with or
200 override the obligation of the parties to a reinsurance
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201 agreement to arbitrate their disputes, if this obligation is
202 created in the agreement.
203 (4) Credit must be allowed when the reinsurance is ceded
204 to an assuming insurer meeting the requirements of this
205 subsection.
206 (a) The assuming insurer must be licensed in, and have its
207 head office in or be domiciled in, as applicable, a reciprocal
208 jurisdiction. As used in this subsection, the term "reciprocal
209 jurisdiction" means a jurisdiction that is any of the following:
210 1. A non-United States jurisdiction that is subject to an
211 in-force covered agreement with the United States, each within
212 its legal authority; or, in the case of a covered agreement
213 between the United States and the European Union, a jurisdiction
214 that is a member state of the European Union. As used in this
215 subsection, the term "covered agreement" means an agreement
216 entered into pursuant to the Dodd-Frank Wall Street Reform and
217 Consumer Protection Act, 31 U.S.C. ss. 313 and 314, which is
218 currently in effect or in a period of provisional application
219 and which addresses the elimination, under specified conditions,
220 of collateral requirements as a condition for entering into any
221 reinsurance agreement with a ceding insurer domiciled in this
222 state or for allowing the ceding insurer to recognize credit for
223 reinsurance.
224 2. A United States jurisdiction that meets the
225 requirements for accreditation under the Financial Regulation
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226 Standards and Accreditation Program of the National Association
227 of Insurance Commissioners.
228 3. A qualified jurisdiction, as determined by the office,
229 which is not otherwise described in subparagraph 1. or
230 subparagraph 2. and which meets all of the following additional
231 requirements, consistent with the terms and conditions of in-
232 force covered agreements, as specified by commission rule:
233 a. The jurisdiction allows an insurer domiciled, or having
234 its head office, in the jurisdiction to take credit for
235 reinsurance ceded to an insurer domiciled in the United States
236 in the same manner as reinsurance ceded to insurers domiciled in
237 that jurisdiction.
238 b. The jurisdiction does not require an assuming insurer
239 domiciled in the United States to establish or maintain a local
240 presence as a condition for entering into a reinsurance
241 agreement with any ceding insurer subject to regulation by the
242 jurisdiction or as a condition for allowing the ceding insurer
243 to take credit for the ceded risk.
244 c. The jurisdiction provides written confirmation that it
245 recognizes the state regulatory approach to group supervision
246 and group capital and that insurers and insurance groups
247 domiciled, or maintaining their headquarters, in a jurisdiction
248 accredited by the National Association of Insurance
249 Commissioners are subject only to worldwide prudential insurance
250 group supervision by the domiciliary state and are not subject
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251 to group supervision at the level of the worldwide parent
252 undertaking of the insurance or reinsurance group by the
253 qualified jurisdiction.
254 d. The jurisdiction provides written confirmation that
255 information regarding insurers and their parent, subsidiary, or
256 affiliated entities shall be provided to the office in
257 accordance with a memorandum of understanding or similar
258 document between the office and such qualified jurisdiction.
259
260 The office shall timely publish on its website a list of
261 reciprocal jurisdictions. The office may remove a reciprocal
262 jurisdiction determined to no longer meet the requirements of
263 this paragraph.
264 (b)1. The assuming insurer must have and maintain on an
265 ongoing basis minimum capital and surplus, or its equivalent,
266 calculated according to the methodology of its domiciliary
267 jurisdiction, in the amount of $250,000,000 or in a greater
268 amount specified by commission rule.
269 2. If the assuming insurer is an association, including
270 incorporated and individual unincorporated underwriters, it must
271 have and maintain on an ongoing basis:
272 a. Minimum capital and surplus equivalents, or net of
273 liabilities, calculated according to the methodology applicable
274 in its domiciliary jurisdiction, in the amount of $250,000,000
275 or in a greater amount specified by commission rule.
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276 b. A central fund containing a balance of $250,000,000 or
277 a greater amount specified by commission rule.
278 (c) If credit is allowed for reinsurance ceded to the
279 assuming insurer pursuant to:
280 1. Subparagraph (a)1., the assuming insurer must maintain
281 a minimum solvency or capital ratio specified in the applicable
282 covered agreement.
283 2. Subparagraph (a)2., the assuming insurer must maintain
284 a risk-based capital ratio of 300 percent of the authorized
285 control level, calculated in accordance with s. 624.4085.
286 3. Subparagraph (a)3., the assuming insurer must maintain
287 a solvency or capital ratio determined by the office to be an
288 effective measure of solvency.
289 (d) The assuming insurer must, in a form specified by the
290 commission:
291 1. Agree to provide prompt written notice and explanation
292 to the office if the assuming insurer falls below the minimum
293 requirements set forth in paragraph (b) or paragraph (c), or if
294 any regulatory action is taken against it for serious
295 noncompliance with applicable law of any jurisdiction.
296 2. Consent in writing to the jurisdiction of the courts of
297 this state and to the designation of the Chief Financial
298 Officer, pursuant to s. 48.151, as its true and lawful attorney
299 upon whom may be served any lawful process in any action, suit,
300 or proceeding instituted by or on behalf of the ceding insurer.
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301 This subparagraph does not limit or alter in any way the
302 capacity of parties to a reinsurance agreement to agree to an
303 alternative dispute resolution mechanism, except to the extent
304 that such agreement is unenforceable under applicable insolvency
305 or delinquency laws.
306 3. Consent in writing to pay all final judgments, wherever
307 enforcement is sought, obtained by a ceding insurer or its legal
308 successor which have been declared enforceable in the
309 jurisdiction where the judgment was obtained.
310 4. Confirm in writing that it will include in each
311 reinsurance agreement a provision requiring the assuming insurer
312 to provide security in an amount equal to 100 percent of the
313 assuming insurer's liabilities attributable to reinsurance ceded
314 pursuant to that agreement, if the assuming insurer resists
315 enforcement of a final judgment that is enforceable under the
316 law of the jurisdiction in which it was obtained or enforcement
317 of a properly enforceable arbitration award, whether obtained by
318 the ceding insurer or by its legal successor on behalf of its
319 resolution estate.
320 5. Confirm in writing that it is not presently
321 participating in any solvent scheme of arrangement which
322 involves this state's ceding insurers, and agree to notify the
323 ceding insurer and the office and to provide security in an
324 amount equal to 100 percent of the assuming insurer's
325 liabilities to the ceding insurer if the assuming insurer enters
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326 into such a solvent scheme of arrangement. Such security must be
327 consistent with subsection (5) or as specified by commission
328 rule.
329 (e) If requested by the office, the assuming insurer or
330 its legal successor must provide, on behalf of itself and any
331 legal predecessors, the following additional documentation:
332 1. The assuming insurer's annual audited financial
333 statements, for the 2-year period before entering into the
334 reinsurance agreement and on an annual basis thereafter, in
335 accordance with the applicable law of the jurisdiction of its
336 head office or domiciliary jurisdiction, as applicable,
337 including the external audit report.
338 2. The solvency and financial condition report or
339 actuarial opinion, if filed with the assuming insurer's
340 supervisor, for the 2-year period before entering into the
341 reinsurance agreement.
342 3. Before entering into the reinsurance agreement and not
343 more than semiannually thereafter, an updated list of all
344 disputed and overdue reinsurance claims outstanding for 90 days
345 or more regarding reinsurance assumed from ceding insurers
346 domiciled in the United States.
347 4. Before entering into the reinsurance agreement and not
348 more than semiannually thereafter, information regarding the
349 assuming insurer's assumed reinsurance by ceding insurer, ceded
350 reinsurance by the assuming insurer, and reinsurance recoverable
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351 on paid and unpaid losses by the assuming insurer.
352 5. Additional information as reasonably required by the
353 office.
354 (f) The assuming insurer must maintain a practice of
355 prompt payment of claims under reinsurance agreements and must
356 report to the office reinsurance recoverables that are more than
357 90 days overdue or that are in dispute, as specified by
358 commission rule.
359 (g) The assuming insurer must annually provide to the
360 office confirmation from its reciprocal jurisdiction, on a form
361 adopted by the commission or as otherwise specified by
362 commission rule, that, as of the preceding December 31 or as of
363 the annual date otherwise statutorily reported to the reciprocal
364 jurisdiction, the assuming insurer complied with the
365 requirements of paragraphs (b) and (c).
366 (h) This subsection does not preclude an assuming insurer
367 from providing the office with information on a voluntary basis.
368 (i) If subject to a legal process of rehabilitation,
369 liquidation, or conservation, as applicable, the ceding insurer
370 or its representative may seek and, if determined appropriate by
371 the court in which the proceedings are pending, obtain an order
372 requiring that the assuming insurer post security for all
373 outstanding ceded liabilities.
374 (j) This subsection does not limit or alter in any way the
375 capacity of parties to a reinsurance agreement to agree on
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376 requirements for security or other terms in the reinsurance
377 agreement, except as expressly prohibited by this section or
378 other applicable law or commission rule.
379 (k)1. Credit may be taken under this subsection only for
380 reinsurance agreements entered into, amended, or renewed on or
381 after the date on which the assuming insurer has satisfied the
382 requirements to assume reinsurance under this subsection, and
383 only with respect to losses incurred and reserves reported on or
384 after the later of the date on which the assuming insurer has
385 met all eligibility requirements pursuant to this subsection or
386 the effective date of the new reinsurance agreement, amendment,
387 or renewal.
388 2. This paragraph does not alter or impair a ceding
389 insurer's right to take credit for reinsurance for which, and to
390 the extent that, credit is not available under this subsection,
391 if the reinsurance qualifies for credit under any other
392 applicable provision of law or commission rule.
393 3. This subsection does not authorize an assuming insurer
394 to withdraw or reduce the security provided under any
395 reinsurance agreement, except as authorized by the terms of the
396 agreement.
397 4. This subsection does not limit or alter in any way the
398 capacity of parties to any reinsurance agreement to renegotiate
399 the agreement.
400 (l) The office shall timely publish on its website a list
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401 of assuming insurers that meet all of the requirements of this
402 subsection.
403 (m) If the office determines that an assuming insurer no
404 longer meets one or more of the requirements of this subsection,
405 the office may revoke or suspend the eligibility of the assuming
406 insurer for recognition under this subsection.
407 1. During the suspension of an assuming insurer's
408 eligibility, a reinsurance agreement issued, amended, or renewed
409 after the effective date of the suspension does not qualify for
410 credit, except to the extent that the assuming insurer's
411 obligations under the contract are secured in accordance with
412 subsection (5).
413 2. If an assuming insurer's eligibility is revoked, a
414 credit for reinsurance may not be granted after the effective
415 date of the revocation with respect to any reinsurance agreement
416 entered into by the assuming insurer, including a reinsurance
417 agreement entered into before the date of revocation, except to
418 the extent that the assuming insurer's obligations under the
419 contract are secured in a form acceptable to the office and
420 consistent with subsection (5).
421 (5)(4) An asset allowed or a reduction deduction from
422 liability taken for the reinsurance ceded by an insurer to an
423 assuming insurer not meeting the requirements of subsections
424 (2), and (3), and (4) is allowed in an amount not exceeding the
425 liabilities carried by the ceding insurer. The reduction
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426 deduction must be in the amount of funds held by or on behalf of
427 the ceding insurer, including funds held in trust for the ceding
428 insurer, under a reinsurance contract with the assuming insurer
429 as security for the payment of obligations thereunder, if the
430 security is held in the United States subject to withdrawal
431 solely by, and under the exclusive control of, the ceding
432 insurer, or, in the case of a trust, held in a qualified United
433 States financial institution, as defined in paragraph (6)(b)
434 (5)(b). This security may be in the form of:
435 (a) Cash in United States dollars;
436 (b) Securities listed by the Securities Valuation Office
437 of the National Association of Insurance Commissioners and
438 qualifying as admitted assets pursuant to part II of chapter
439 625;
440 (c) Clean, irrevocable, unconditional letters of credit,
441 issued or confirmed by a qualified United States financial
442 institution, as defined in paragraph (6)(a) (5)(a), effective no
443 later than December 31 of the year for which the filing is made,
444 and in the possession of, or in trust for, the ceding company on
445 or before the filing date of its annual statement; or
446 (d) Any other form of security acceptable to the office.
447 (6)(a)(5)(a) For purposes of paragraph (5)(c) (4)(c)
448 regarding letters of credit, a "qualified United States
449 financial institution" means an institution that:
450 1. Is organized or, in the case of a United States office
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451 of a foreign banking organization, is licensed under the laws of
452 the United States or any state thereof;
453 2. Is regulated, supervised, and examined by United States
454 or state authorities having regulatory authority over banks and
455 trust companies; and
456 3. Has been determined by either the office or the
457 Securities Valuation Office of the National Association of
458 Insurance Commissioners to meet such standards of financial
459 condition and standing as are considered necessary and
460 appropriate to regulate the quality of financial institutions
461 whose letters of credit will be acceptable to the office.
462 (12)(11)
463 (b) The summary statement must be signed and attested to
464 by either the chief executive officer or the chief financial
465 officer of the reporting insurer. In addition to the summary
466 statement, the office may require the filing of any supporting
467 information relating to the ceding of such risks as it deems
468 necessary. If the summary statement prepared by the ceding
469 insurer discloses that the net effect of a reinsurance treaty or
470 treaties (or series of treaties with one or more affiliated
471 reinsurers entered into for the purpose of avoiding the
472 following threshold amount) at any time results in an increase
473 of more than 25 percent to the insurer's surplus as to
474 policyholders, then the insurer shall certify in writing to the
475 office that the relevant reinsurance treaty or treaties comply
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hb0733-00
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 733 2021
476 with the accounting requirements contained in any rule adopted
477 by the commission under subsection (15) (14). If such
478 certificate is filed after the summary statement of such
479 reinsurance treaty or treaties, the insurer shall refile the
480 summary statement with the certificate. In any event, the
481 certificate must state that a copy of the certificate was sent
482 to the reinsurer under the reinsurance treaty.
483 Section 2. This act shall take effect July 1, 2021.
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hb0733-00
HB 797
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 797 Florida Life and Health Insurance Guaranty Association
SPONSOR(S): Robinson, W.
TIED BILLS: IDEN./SIM. BILLS: SB 1470
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Insurance & Banking Subcommittee Hinshelwood Luczynski
2) State Administration & Technology
Appropriations Subcommittee
3) Commerce Committee
SUMMARY ANALYSIS
An insurance guaranty association ensures that policyholders’ paid insurance premiums are protected and
outstanding claims are settled, up to limits provided by law, if their insurer is liquidated. The Florida Life and
Health Insurance Guaranty Association (FLAHIGA) is the guaranty association for most insurance companies
that write life and health insurance or annuities in Florida. The bill makes the following changes to conform to
the Life and Health Insurance Guaranty Association Model Act:
Adds a definition for the term “Moody’s Corporate Bond Yield Average”.
Amends the definition of “person” to include “limited liability company” and “governmental body or
entity”.
Clarifies that, in dealing with an impaired domestic insurer, the FLAHIGA may assume or reissue
covered policies, in addition to guaranteeing and reinsuring the policies.
Expressly provides that the FLAHIGA has the right to appear or intervene before a court or agency in
another state.
Provides that, for purposes of the FLAHIGA’s standing to appear before any court in this state, the
FLAHIGA’s powers and duties include reissuing or modifying covered policies.
Provides that the FLAHIGA may recover payment of improper claims.
Clarifies that the FLAHIGA has the authority to join an organization of other state guaranty associations
to further the purposes and to carry out the powers and duties of the FLAHIGA.
As to Class A assessments, which pay the FLAHIGA’s general administrative expenses, removes the
cap of $250, permits the assessments to be made on a pro rata basis, and allows the FLAHIGA’s board
to credit the assessments against future assessments related to insurer insolvencies.
Provides that, if an insurer’s assessment is deferred because the assessment would endanger the
insurer’s financial solvency, the insurer must pay the assessment once it regains financial strength.
Removes the reduced assessment cap for nonprofit annuity insurers that issue policies to educational
groups, thus making such insurers subject to the assessment cap for all other annuity insurers.
Directs that the FLAHIGA establish a procedure for removing a board member if that member becomes
impaired or insolvent and establish a policy and procedure to address conflicts of interest.
The bill has no impact on state or local governments and an indeterminate impact on the private sector.
The bill provides an effective date of July 1, 2021.
This document does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0797.IBS
DATE: 3/2/2021
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Background
Insurer Insolvency
States primarily regulate insurance companies, and the state of domicile serves as the primary
regulator for insurers. In Florida, the Office of Insurance Regulation (OIR) licenses and regulates the
activities of insurers and other risk-bearing entities.1 The OIR monitors the solvency of insurers,
examines insurers, and takes administrative action, if necessary.
Chapter 631, F.S., relating to insurer insolvency and guaranty payments, governs the receivership
process for insurance companies in Florida. Federal law specifies that insurance companies cannot file
for bankruptcy.2 Instead, they are either “rehabilitated” or “liquidated” by the state. In Florida, the
Division of Rehabilitation and Liquidation of the Department of Financial Services (DFS) is responsible
for rehabilitating or liquidating insurance companies.3
Florida operates five insurance guaranty funds and associations4 to ensure that policyholders of
liquidated insurers are protected with respect to insurance premiums paid and settlement of
outstanding claims, up to limits provided by law.5 A guaranty association generally is a not-for-profit
corporation created by law and is directed to protect policyholders from financial losses and delays in
claims payments and settlements due to the insolvency of an insurance company. A guaranty
association accomplishes its mission by assuming responsibility for settling claims and refunding
unearned premiums6 to policyholders. Insurers are required by law to participate in guaranty
associations as a condition of transacting business in Florida.
The bill makes changes to one of the five guaranty funds and associations – the Florida Life and Health
Insurance Guaranty Association (FLAHIGA), which is the guaranty association for most health and life
insurers.
1 S. 20.121(3), F.S.
2 The Bankruptcy Code expressly provides that "a domestic insurance company" may not be the subject of a federal
bankruptcy proceeding. 11 U.S.C. s. 109(b)(2). The exclusion of insurers from the federal bankruptcy court process is
consistent with federal policy generally allowing states to regulate the business of insurance. See 15 U.S.C. ss. 1011-
1012.
3 Typically, insurers are put into liquidation when the company is insolvent whereas insurers are put into rehabilitation for
numerous reasons, one of which is an unsound financial condition. The goal of rehabilitation is to return the insurer to a
sound financial condition. The goal of liquidation, however, is to dissolve the insurer. See s. 631.051, F.S., for the grounds
for rehabilitation and s. 631.061, F.S., for the grounds for liquidation.
4 The FLAHIGA (ss. 631.711 – 631.738, F.S.) generally is responsible for claims settlement and premium refunds for
health and life insurers who are insolvent. The HMOCAP (ss. 631.811 – 631.828, F.S.) offers assistance to members of
insolvent health maintenance organizations, and the Florida Workers’ Compensation Insurance Guaranty Association (ss.
631.901 – 631.932, F.S.) is directed by law to protect policyholders of insolvent workers’ compensation insurers. The
Florida Self-Insurers Guaranty Association (ss. 440.385 – 440.386, F.S.) protects policyholders of insolvent individual self-
insured employers for workers’ compensation claims. The Florida Insurance Guaranty Association (ss. 631.50 – 631.70,
F.S.) is responsible for paying claims for insolvent insurers for most remaining lines of insurance, including residential and
commercial property, automobile insurance, and liability insurance, among others.
5 “Before the creation of guaranty associations, a typical claimant could have waited for years for payment of a claim and
then still receive only a fraction of what was due under the terms of the policy or contract. Guaranty associations, subject
to statutory limitations, were created to alleviate these problems and ensure the stability of the insurance market.
Specifically, in the event of a life/health insurer liquidation, the guaranty mechanism provides for the continuation of
eligible contracts that would otherwise terminate.” National Association of Insurance Commissioners, Guaranty
Associations/Funds, https://www.naic.org/cipr_topics/topic_guaranty_associations.htm (last visited Feb. 26, 2021).
6 The term “unearned premium” refers to that portion of a premium that is paid in advance, typically for six months or one
year, and which is still owed on the unexpired portion of the policy.
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The FLAHIGA
Statutory provisions relating to the FLAHIGA, which was created in 1979, are contained in ch. 631, part
III, F.S. The FLAHIGA is a nonprofit corporation and is governed by a board of directors composed of at
least nine but not more than 11 member insurance companies.7 All insurance companies (with limited
exceptions) licensed to write life and health insurance or annuities in Florida are required, as a
condition of doing business in Florida, to be a member of the FLAHIGA.8
Plan of Operation
The FLAHIGA’s operations are set forth in a plan of operation. Amendments to the plan of operation
must be submitted to the DFS for approval and are effective upon written approval by the DFS.9 The
plan of operation must:10
Establish procedures for handling the FLAHIGA’s assets.
Establish the amount and method of reimbursing the FLAHIGA’s board members for expenses
incurred by them as board members, though board members are not otherwise compensated by
the FLAHIGA for their services.11
Establish regular places and times for meetings of the board of directors.
Establish procedures for keeping records of all financial transactions of the FLAHIGA, its
agents, and the board of directors.
Establish procedures whereby selections for the board of directors are made and submitted to
the DFS.
Establish any additional procedures for assessments.
Contain additional provisions necessary or proper for the execution of the powers and duties of
the FLAHIGA.
Additionally, the plan of operation may delegate duties of the FLAHIGA, except the power to borrow
and to assess its members, to a corporation, association, or other organization which performs or will
perform functions similar to those of this association, or its equivalent, in two or more states.12 This
provision contemplates membership in and delegation of duties to the National Organization of Life and
Health Insurance Guaranty Associations discussed below.
Insolvency Process
In the event a member insurer is found to be insolvent and is ordered to be liquidated by a court, a
receiver takes over the insurer under court supervision and processes the assets and liabilities through
liquidation. Upon liquidation, the FLAHIGA automatically becomes liable for the policy obligations that
the liquidated insurer owed to its Florida policyholders.13 The FLAHIGA services the policies, collects
premiums, and pays valid claims under the policies. The FLAHIGA’s rights under the policies are those
that applied to the insurer prior to liquidation. The FLAHIGA may cancel the policy if the insurer could
have done so, but normally the FLAHIGA continues the policies until it can transfer to, or substitute the
policies with, a new, stable insurer with approval of the OIR.
The FLAHIGA’s aggregate liability with respect to one life may not exceed the following:
Life insurance death benefit: $300,000 per insured life.
Life insurance cash surrender: $100,000 per insured life.
Health insurance or long-term care insurance: $300,000 per insured life.
7 Ss. 631.715(1) and 631.716(1), F.S.
8 S. 631.715(1), F.S.
9 S. 631.721(1)(a), F.S.
10 S. 631.721(3), F.S.
11 S. 631.716(3), F.S.
12 S. 631.721(4), F.S.
13 Generally, the FLAHIGA covers only policyholders and certificate holders that were valid Florida residents on the date
that a member insurer is declared insolvent and liquidated. However, non-residents of Florida and beneficiaries of covered
persons are covered by the FLAHIGA under limited circumstances. s. 631.713(2), F.S.
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Annuity cash surrender: $250,000 for deferred annuity contracts per contract owner.
Annuity in benefit: $300,000 per contract owner.
Basic hospital expense, basic medical-surgical, or major medical expense health insurance
policies (other than long-term care insurance policies): $500,000 per insured life.14
Additionally, the FLAHIGA will only cover a policy or contract to the extent that:
The interest rate on which the policy or contract is based, averaged over the four-year period
immediately preceding the date on which the member insurer becomes impaired or insolvent, is
less than the Moody’s Corporate Bond Yield Average (averaged for that same four-year period)
minus two percentage points.
The interest rate on which the policy or contract is based, on and after the date on which the
member insurer becomes an impaired or insolvent, is less than the Moody’s Corporate Bond
Yield Average minus three percentage points.
The FLAHIGA statutes do not currently define the term “Moody’s Corporate Bond Yield Average”.
Powers and Duties of the FLAHIGA
The FLAHIGA carries out its duties pursuant to authority granted by and directives contained in statute.
Among the powers statutorily granted to the FLAHIGA is the authority to:
Guarantee or reinsure, or cause to be guaranteed, assumed, or reinsured, any or all of the
covered policies of an impaired domestic insurer;15 and
Take such legal action as may be necessary to avoid payment of improper claims.16
Additionally, the FLAHIGA has standing to appear before any court in this state which has jurisdiction
over an impaired or insolvent insurer to which the FLAHIGA is or may become obligated.17 Such
standing extends to all matters germane to the powers and duties of the FLAHIGA, including but not
limited to, proposals for reinsuring or guaranteeing the covered policies of the impaired or insolvent
insurer and the determination of the covered policies and contractual obligations. While the statute
expressly provides the FLAHIGA standing to appear in courts of this state, the statute does not
expressly provide the FLAHIGA the right to appear or intervene before a court or agency in another
state.
Assessment of Members
By law, the FLAHIGA is divided into three operating accounts:18
The health insurance account;
The life insurance account; and
The annuity account.
The FLAHIGA is authorized to levy two types of assessments to carry out its responsibilities:
Class A assessments may be levied for the purpose of covering the FLAHIGA’s general
administrative costs and for the cost of examining a member insurer that the FLAHIGA’s board
believes in good faith may be impaired or insolvent.19 These assessments may only be made on
a non-pro rata basis up to $250 per member per calendar year.20 Additionally, Class A
assessments may not be credited against future Class B assessments.21
14 S. 631.717(12), F.S.; FLAHIGA, Frequently Asked Questions, https://www.flahiga.org/FAQ (last visited Feb. 26, 2021).
15 S. 631.717(1)(a), F.S.
16 S. 631.717(13)(f), F.S.
17 S. 631.717(7), F.S.
18 S. 631.715(2)(a), F.S.
19 Ss. 631.718(2)(a) and 631.723(3), F.S.
20 S. 631.718(3)(a), F.S.
21 Id.
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Class B assessments are authorized to fund the FLAHIGA’s duties related to a specific
insolvency.22 Except for assessments related to long-term care insurance insolvencies, Class B
assessments are based on an insurer’s pro rata share of all premiums collected by insurers in
this state on policies covered by the account during the three years prior to the assessment.23
Except for assessments related to long-term care insurance insolvencies, an insurer’s
assessment for each account may not exceed, in any one calendar year, 1 percent of the
insurer’s average premiums written in the covered account during the three-year period
preceding the year in which the assessment is made.24 An insurer may offset any assessment
against either its premium tax or corporate income tax liability in 5 percent increments over the
20-year period following the year in which the assessment was paid.25 When assessments
related to insolvencies are imposed, the FLAHIGA must issue a certificate of contribution to
each insurer paying such assessment for the amount of the assessment paid.26 A certificate of
contribution may be shown by the insurer in its financial statement as an asset in such form and
for such amount, if any, and period of time as the OIR approves.27 However, any amount of
assessment offset against the insurer’s premium tax or corporate income tax liability may not be
shown as an asset of the insurer.28
Currently, there is a cap on assessment of any member insurer that is a nonprofit insurance company
which issues annuity contracts or group annuity contracts pursuant to s. 121.35, F.S.,29 or for the
benefit of employees of Florida educational institutions.30 Such nonprofit insurance companies may not
be assessed in any one calendar year more than the greater of:31
The amount which the company paid to this state in the previous year as premium tax and
corporate tax on the business to which the FLAHIGA statutes apply, or
0.1 percent of written premium on such business in this state.
The FLAHIGA may abate or defer, in whole or in part, the assessment of a member insurer if, in the
opinion of the board, payment of the assessment would endanger the ability of the member insurer to
fulfill its contractual obligations.32 In the event an assessment against a member insurer is abated, or
deferred in whole or in part, the amount by which such assessment is abated or deferred may be
assessed against the other member insurers.33
National Organization of Life and Health Insurance Guaranty Associations (NOLHGA)34
NOLHGA is a voluntary membership organization founded in 1983 when state life and health insurance
guaranty associations saw the need for a mechanism to help them coordinate their efforts to provide
protection to policyholders when a life or health insurance company insolvency affects people in
multiple states. Today, NOLHGA membership includes life and health insurance guaranty associations
of all 50 states and the District of Columbia.
When an insurer licensed in multiple states is declared insolvent, NOLHGA, on behalf of affected
member state guaranty associations, assembles a task force of guaranty association officials. This task
force analyzes the company’s commitments to policyholders; ensures that covered claims are paid;
22 S. 631.718(2)(b), F.S.
23 S. 631.718(3)(c), F.S.
24 S. 631.718(5)(a), F.S.
25 S. 631.72(1), F.S.
26 S. 631.718(8), F.S.
27 Id.
28 Id.
29 Section 121.35, F.S., requires the Department of Management Services to establish an optional retirement program
under which contracts providing retirement and death benefits may be purchased for eligible members of the State
University System who elect to participate in the program.
30 S. 631.718(9), F.S.
31 Id.
32 S. 631.718(4), F.S.
33 Id.
34 NOLHGA, About Us, https://www.nolhga.com/aboutnolhga/main.cfm/location/whatisnolhga (last visited Feb. 26, 2021).
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and, where appropriate, arranges for covered policies to be transferred to a healthy insurer. The task
force may also support the efforts of the receiver to dispose of the company’s assets in a way that
maximizes their value. When there is a shortfall of estate assets needed to pay the claims of covered
policyholders, guaranty associations assess the licensed insurers in their states a proportional share of
the funds needed.
NOLHGA’s coordination of the workout of a multi-state insolvency significantly reduces costs to
guaranty associations because the NOLHGA task force avoids the need for each state guaranty
association to hire its own legal and financial experts. This coordination of effort also helps reduce the
length of time a receiver may require to develop a plan of rehabilitation or otherwise resolve a multi-
state insolvency.
The National Association of Insurance Commissioners (NAIC) – Life and Health Guaranty Association
Model Act
The NAIC is the U.S. standard-setting and regulatory support organization created and governed by the
chief insurance regulators from the 50 states, the District of Columbia, and five U.S. territories.35
Through the NAIC, state insurance regulators establish standards and best practices, conduct peer
reviews, and coordinate their regulatory oversight.36 OIR Commissioner David Altmaier currently serves
as the NAIC President.37
The NAIC has promulgated and periodically updates a model act for use by states in governing their
Life and Health Insurance Guaranty Associations.38 Below are pertinent provisions in the most recent
model act. Italicized words indicate portions of the model act that the bill adds to the FLAHIGA statutes.
Definitions:
o “Moody’s Corporate Bond Yield Average” means the monthly average corporates as
published by Moody’s Investors Service, Inc., or any successor thereto.39
o “Person” means an individual, corporation, limited liability company, partnership,
association, governmental body or entity, or voluntary organization.40
Powers of the guaranty association state that the association may guarantee, assume, reissue,
or reinsure, or cause to be guaranteed, assumed, reissued, or reinsured, any or all of the
policies or contracts of the impaired insurer.41
The guaranty association’s standing to appear or intervene before a court or agency in this state
extends to all matters germane to the powers and duties of the association, including, but not
limited to, proposals for reinsuring, reissuing, modifying, or guaranteeing the policies or
contracts of the impaired or insolvent insurer and the determination of the policies or contracts
and contractual obligations.42 The guaranty association shall also have the right to appear or
intervene before a court or agency in another state with jurisdiction over an impaired or
insolvent insurer for which the association is or may become obligated or with jurisdiction over
any person or property against whom the association may have rights through subrogation or
otherwise.43 These provisions enable the guaranty association to protect its interest and the
best interests of the policyholders, contract owners, certificate holders, or enrollees in the
handling of an impairment or insolvency by providing that the association’s standing to appear in
courts with jurisdiction over an insolvent insurer will extend to any matters concerning the duties
of the association.44
35 NAIC, About the NAIC, https://www.naic.org/index_about.htm (last visited Feb. 26, 2021).
36 Id.
37 Id.
38 NAIC, Life and Health Insurance Guaranty Association Model Act, 2018, http://www.naic.org/store/free/MDL-520.pdf
(last visited Feb. 26, 2021).
39 Id. at 9 and 37.
40 Id. at 9 and 38.
41 Id. at 12.
42 Id. at 15.
43 Id.
44 Id. at 20.
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The guaranty association may take such legal action as may be necessary or appropriate to
avoid or recover payment of improper claims.45
The guaranty association may join an organization of one or more other state associations of
similar purposes, to further the purposes and administer the powers and duties of the
association.46 This provision is intended to explicitly recognizes that prompt and efficient
discharge of the guaranty association’s obligations will be greatly facilitated, especially in
multistate insolvencies, by acting in concert through NOLHGA to develop and, where
appropriate, carry out coordinated plans.47
The amount of a Class A assessment shall be determined by the board and may be authorized
and called on a pro rata or non-pro rata basis. If pro rata, the board may provide that it be
credited against future Class B assessments.48
The guaranty association may abate or defer, in whole or in part, the assessment of a member
insurer if, in the opinion of the board, payment of the assessment would endanger the ability of
the member insurer to fulfill its contractual obligations. In the event an assessment against a
member insurer is abated, or deferred in whole or in part, the amount by which the assessment
is abated or deferred may be assessed against the other member insurers in a manner
consistent with the basis for assessments set forth in this section. Once the conditions that
caused a deferral have been removed or rectified, the member insurer shall pay all
assessments that were deferred pursuant to a repayment plan approved by the Association.49
The plan of operation shall:
o Establish procedures whereby a director may be removed for cause, including in the
case where a member insurer director becomes an impaired or insolvent insurer.50
o Require the board of directors to establish a policy and procedures for addressing
conflicts of interest.51
Effect of the Bill
Definitions
In conformity with the NAIC model act, the bill:
Adds a definition for “Moody’s Corporate Bond Yield Average” and defines the term as meaning
the monthly average corporate bond yields published by Moody’s Investor Services, Inc., or
any successor thereto.52
Adds “limited liability company” and “governmental body or entity” to the definition of “person”.
Powers and Duties of the FLAHIGA
In conformity with the NAIC model act, the bill adds that:
The FLAHIGA has authority to assume or reissue, or cause to be reissued, any or all of the
covered policies of an impaired domestic insurer.
The FLAHIGA has right to appear or intervene before a court or agency in another state which
has jurisdiction over:
o An impaired or insolvent insurer for which the FLAHIGA is or may become obligated; or
o A person or property against whom the FLAHIGA may have rights through subrogation
or otherwise.
For purposes of the FLAHIGA’s standing to appear before any court in this state, the
FLAHIGA’s powers and duties include reissuing or modifying covered policies.
45 Id. at 16.
46 Id.
47 Id. at 20.
48 Id. at 21.
49 Id. at 22.
50 Id. at 24.
51 Id.
52 The term “Moody’s Corporate Bond Yield Average” is used in the context of an interest rate cap on FLAHIGA’s
coverage of policies or contracts of the impaired or insolvent insurer.
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The FLAHIGA has the power to take such legal action as may be necessary to recover
payment of improper claims.
The FLAHIGA has the power to join an organization of other state guaranty associations to
further the purposes and to carry out the powers and duties of the FLAHIGA (i.e., membership
in NOLHGA).53
Assessments
In conformity with the NAIC model act, the bill removes the cap of $250 on Class A assessments,
permits Class A assessments to be made on either a pro rata or non-pro rata basis, and allows the
FLAHIGA’s board to credit Class A assessments against future Class B assessments. The ability to
credit Class A assessments against future Class B assessments provides budget flexibility. However,
since Class A assessments are much smaller than Class B assessments, this change may not
significantly decrease liability for Class B assessments.
The bill removes the cap on assessment of any member insurer that is a nonprofit insurance company
which issues annuity contracts or group annuity contracts pursuant to s. 121.35, F.S., or for the benefit
of employees of Florida educational institutions. Such companies would still be subject to assessment
caps applicable to all member insurers, and the FLAHIGA maintains its ability to abate or defer the
assessment of a member insurer if payment of the assessment would put the member insure at risk of
becoming impaired or insolvent.
Also in conformity with the NAIC model act, the bill adds a provision that would cause a member
insurer to pay all assessments that were deferred, once the conditions that caused a deferral have
been removed or rectified.
Plan of Operation
In conformity with the NAIC model act, the bill directs that the FLAHIGA’s plan of operation must:
Establish a procedure for removing a member of the board of directors when that member
becomes an impaired or insolvent insurer.
Require the board of directors to establish a policy and procedures for addressing conflicts of
interest.
B. SECTION DIRECTORY:
Section 1. Amends s. 631.714, F.S., relating to definitions.
Section 2. Amends s. 631.717, F.S., relating to powers and duties of the association.
Section 3. Amends s. 631.718, F.S., relating to assessments.
Section 4. Amends s. 631.721, F.S., relating to plan of operation.
Section 5. Provides an effective date of July 1, 2021.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
53 The FLAHIGA is already a member of NOLHGA, and the FLAHIGA’s plan of operation is already permitted to delegate
many of the FLAHIGA’s duties to NOLHGA.
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None.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
None.
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
The impact on the private sector is indeterminate. The bill may result in increased costs to some
insurance companies because it removes the reduced assessment cap for nonprofit annuity insurers
that issue policies to educational groups, provides that a member insurer must pay all assessments
that were deferred once the insurer regains financial strength, removes the cap on Class A
assessments, and allows Class A assessments to be made on a pro rata basis. However, for these
same reasons, the bill may equally result in decreased costs to other insurance companies. Overall, the
bill may lead to better financial strength of the FLAHIGA, the safety net for insurance companies that
write life and health insurance or annuities in Florida.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
1. Not Applicable. This bill does not appear to affect county or municipal governments.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
The bill does not confer agency rulemaking authority nor require an agency to promulgate rules.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/ COMMITTEE SUBSTITUTE CHANGES
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DATE: 3/2/2021
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 797 2021
1 A bill to be entitled
2 An act relating to the Florida Life and Health
3 Insurance Guaranty Association; amending s. 631.714,
4 F.S.; defining the term "Moody's Corporate Bond Yield
5 Average" and redefining the term "person," to apply to
6 provisions relating to life and health insurance
7 guaranty of payments; amending s. 631.717, F.S.;
8 authorizing the Florida Life and Health Insurance
9 Guaranty Association to assume, reissue, and cause to
10 be reissued covered polices of impaired insurers under
11 certain circumstances; revising the association's
12 standing before a court; providing that the
13 association has the right to appear or intervene
14 before a court or agency in another state under
15 certain circumstances; authorizing the association to
16 join certain organizations for specified purposes;
17 amending s. 631.718, F.S.; authorizing the board of
18 directors of the association to credit specified
19 assessments against certain future assessments under
20 certain circumstances; deleting provisions prohibiting
21 credits against future insolvency assessments and
22 provisions limiting the amount assessed; requiring
23 member insurers to pay deferred assessments under
24 certain circumstances; deleting provisions limiting
25 the amount that may be assessed against specified
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26 member insurers; amending s. 631.721, F.S.; providing
27 additional requirements for the association's plan of
28 operation; providing an effective date.
29
30 Be It Enacted by the Legislature of the State of Florida:
31
32 Section 1. Subsections (8), (9), and (10) of section
33 631.714, Florida Statutes, are renumbered as subsections (9),
34 (10), and (11), respectively, present subsection (9) is amended,
35 and a new subsection (8) is added to that section, to read:
36 631.714 Definitions.—As used in this part, the term:
37 (8) "Moody's Corporate Bond Yield Average" means the
38 monthly average corporate bond yields published by Moody's
39 Investors Service, Inc., or any successor thereto.
40 (10)(9) "Person" means any individual, corporation,
41 limited liability company, partnership, association,
42 governmental body or entity, or voluntary organization.
43 Section 2. Paragraph (a) of subsection (1), subsection
44 (7), and paragraph (f) of subsection (13) of section 631.717,
45 Florida Statutes, are amended, and paragraph (h) is added to
46 subsection (13) of that section, to read:
47 631.717 Powers and duties of the association.—
48 (1) If a domestic insurer is an impaired insurer, the
49 association may, subject to the approval of the impaired insurer
50 and the department:
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51 (a) Guarantee, assume, reissue, or reinsure, or cause to
52 be guaranteed, assumed, reissued, or reinsured, any or all of
53 the covered policies of the impaired insurer;
54 (7) The association shall have standing to appear before
55 any court in this state which has jurisdiction over an impaired
56 or insolvent insurer to which the association is or may become
57 obligated under this part. Such standing shall extend to all
58 matters germane to the powers and duties of the association,
59 including but not limited to, proposals for reinsuring,
60 reissuing, modifying, or guaranteeing the covered policies of
61 the impaired or insolvent insurer and the determination of the
62 covered policies and contractual obligations. The association
63 also has the right to appear or intervene before a court or
64 agency in another state which has jurisdiction over:
65 (a) An impaired or insolvent insurer for which the
66 association is or may become obligated; or
67 (b) A person or property against whom the association may
68 have rights through subrogation or otherwise.
69 (13) The association may:
70 (f) Take such legal action as may be necessary to avoid or
71 recover payment of improper claims.
72 (h) Join an organization of other state guaranty
73 associations to further the purposes and to carry out the powers
74 and duties of the association.
75 Section 3. Paragraph (a) of subsection (3) and subsections
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76 (4) and (9) of section 631.718, Florida Statutes, are amended,
77 and paragraphs (b) and (c) of subsection (3) of that section are
78 republished, to read:
79 631.718 Assessments.—
80 (3)(a) The amount of any Class A assessment shall be
81 determined by the board and may be made on a pro rata or non-pro
82 rata basis. If on a pro rata basis, the board may credit the
83 assessment against future Class B assessments The assessment may
84 not be credited against future insolvency assessments and may
85 not exceed $250 per member insurer in any one calendar year.
86 (b)1. The amount of any Class B assessment, except for
87 assessments related to long-term care insurance, must be
88 allocated for assessment purposes among the accounts pursuant to
89 an allocation formula, which may be based on the premiums or
90 reserves of the impaired or insolvent insurer.
91 2. The amount of the Class B assessment for long-term care
92 insurance written by the impaired or insolvent insurer must be
93 allocated according to a methodology included in the plan of
94 operation and approved by the department. The methodology must
95 provide for 50 percent of the assessment to be allocated to
96 health member insurers and 50 percent to be allocated to life
97 and annuity member insurers.
98 3. For the purposes of the methodology outlined in
99 subparagraph 2. and included in the plan of operation, the
100 health member insurers' share of the assessment must be
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101 calculated by including the assessable premiums of member health
102 maintenance organizations of the Florida Health Maintenance
103 Organization Consumer Assistance Plan.
104 (c) Class B assessments against member insurers for each
105 account must be based upon the premiums received on business in
106 this state by each assessed member insurer on policies or
107 contracts covered by each account for the 3 most recent calendar
108 years for which information is available preceding the year of
109 the assessment in proportion to premiums received on business in
110 this state for those calendar years by all assessed member
111 insurers. If the most recent 3 years of premium information is
112 not available for each member insurer, the board of directors
113 may use the premium information that is reasonably available.
114 (4) The association may abate or defer, in whole or in
115 part, the assessment of a member insurer if, in the opinion of
116 the board, payment of the assessment would endanger the ability
117 of the member insurer to fulfill its contractual obligations. In
118 the event an assessment against a member insurer is abated, or
119 deferred in whole or in part, the amount by which such
120 assessment is abated or deferred may be assessed against the
121 other member insurers in a manner consistent with the basis for
122 assessments set forth in this section. Once the conditions that
123 caused a deferral have been removed or rectified, the member
124 insurer shall pay all assessments that were deferred pursuant to
125 a repayment plan approved by the association.
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126 (9) Notwithstanding any provision to the contrary, no
127 member insurer that is a nonprofit insurance company which
128 issues annuity contracts or group annuity contracts pursuant to
129 s. 121.35, or for the benefit of employees of educational
130 institutions situated in this state may be assessed in any one
131 calendar year an amount greater than the amount which it paid to
132 this state in the previous year as premium tax and corporate tax
133 on the business to which this part applies or 0.1 percent of
134 written premium on such business in this state, whichever is
135 greater.
136 Section 4. Paragraphs (h) and (i) are added to subsection
137 (3) of section 631.721, Florida Statutes, and subsections (1)
138 and (2) of that section are republished, to read:
139 631.721 Plan of operation.—
140 (1)(a) The association shall submit to the department a
141 proposed plan of operation and any amendments thereto necessary
142 or suitable to assure the fair, reasonable, and equitable
143 administration of the association. The proposed plan of
144 operation and any amendments thereto shall become effective upon
145 approval in writing by the department.
146 (b) If at any time the association fails to submit
147 suitable amendments to the plan, the department shall, after
148 notice and hearing, adopt such reasonable rules as are necessary
149 to effectuate the provisions of this part. Such rules shall
150 continue in force until modified by the department or superseded
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151 by a proposed plan submitted by the association and approved by
152 the department.
153 (2) All member insurers shall comply with the approved
154 plan of operation.
155 (3) The plan of operation shall, in addition to
156 requirements enumerated elsewhere in this part:
157 (h) Establish a procedure for removing a member of the
158 board of directors when that member becomes an impaired or
159 insolvent insurer.
160 (i) Require the board of directors to establish a policy
161 and procedures for addressing conflicts of interest.
162 Section 5. This act shall take effect July 1, 2021.
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