Current through Reg. 50, No. 187; September 24, 2024
(1) Material transactions by registered
insurers with their affiliates shall be subject to the following standards:
(a) The terms shall be fair and
reasonable;
(b) Charges or fees for
services performed shall be reasonable;
(c) Expenses incurred and payment received
shall be allocated to the insurer in conformity with customary insurance
accounting practices consistently applied;
(d) The books, accounts and records of each
party to all such transactions shall be so maintained as to clearly and
accurately disclose the precise nature and details of the transactions
including such accounting information as is necessary to support the
reasonableness of the charges or fees to the respective parties;
(e) The insurer's surplus as regards
policyholders following any dividends or distributions to shareholder
affiliates shall be reasonable in relation to the insurer's outstanding
liabilities and adequate to its financial needs; and,
(f) For cost sharing services and management
services, such agreements shall, as applicable:
1. Identify the person providing services and
the nature of such services;
2. Set
forth the methods to allocate costs;
3. Require timely settlement, not less
frequently than on a quarterly basis, and compliance with the requirements in
the National Association of Insurance Commissioner's Accounting Practices and
Procedures Manual as adopted in subsection
69O-137.001(4),
F.A.C.;
4. Prohibit advancement of
funds by the insurer to the affiliate except to pay for services defined in the
agreement;
5. State that the
insurer will maintain oversight for functions provided to the insurer by the
affiliate and that the insurer will monitor services annually for quality
assurance;
6. Define books and
records of the insurer to include all books and records developed or maintained
under or related to the agreement;
7. Specify that all books and records of the
insurer are and remain the property of the insurer and are subject to control
of the insurer;
8. State that all
funds and invested assets of the insurer are the exclusive property of the
insurer, held for the benefit of the insurer and are subject to the control of
the insurer;
9. Include standards
for termination of the agreement with and without cause;
10. Include provisions for indemnification of
the insurer in the event of gross negligence or willful misconduct on the part
of the affiliate providing services;
11. Specify that, if the insurer is placed in
receivership or seized by the commissioner:
a.
All of the rights of the insurer under the agreement extend to the receiver or
commissioner; and,
b. All books and
records will immediately be made available to the receiver or the commissioner,
and shall be turned over to the receiver or commissioner immediately upon the
receiver or the commissioner's request;
12. Specify that the affiliate has no
automatic right to terminate the agreement if the insurer is placed in
receivership; and,
13. Specify that
the affiliate will continue to maintain any systems, programs, or other
infrastructure notwithstanding the initiation of receivership proceedings
pursuant to chapter 631, F.S., and will make them available to the receiver,
for so long as the affiliate continues to be contractually and legally
obligated to receive timely payment for the cost of services
rendered.
(2)
For the purposes of this rule in determining whether an insurer's surplus as
regards policyholders is reasonable in relation to the insurer's outstanding
liabilities and adequate to its financial needs, the following factors, among
others, shall be considered:
(a) The size of
the insurer as measured by its assets, capital and surplus, reserves, premium
writings, insurance in force and other appropriate criteria;
(b) The extent to which the insurer's
business is diversified among the several lines of insurance;
(c) The number and size of risks insured in
each line of business;
(d) The
extent of the geographical dispersion of the insurer's insured risks;
(e) The nature and extent of the insurer's
reinsurance program;
(f) The
quality, diversification, and liquidity of the insurer's investment
portfolio;
(g) The recent past and
projected future trend in the size of the insurer's surplus as regards
policyholders;
(h) The surplus as
regards policyholders maintained by other comparable insurers;
(i) The adequacy of the insurer's reserves;
and,
(j) The quality and liquidity
of investments in subsidiaries made pursuant to section
625.325, F.S.
The Office may treat any such investment as a disallowed
asset for purposes of determining the adequacy of surplus as regards
policyholders whenever in its judgment such investment so
warrants.
(3) No
domestic stock insurer shall pay any extraordinary dividend or make any other
extraordinary distribution to its shareholders until:
(a) 30 calendar days after the Office has
received notice of the declaration thereof and has not within such period
disapproved such payment; or
(b)
The Office shall have approved such payment within such 30 calendar day period.
A notice to the Office shall commence to run from the date of
receipt as may be evidence by transmitting electronically to the Office via,
Regulatory Electronic Filing System, "REFS," return receipt if sent certified
or registered mail, return receipt requested or signed receipt by Office if
otherwise delivered.
For purposes of this rule, an extraordinary dividend or
distribution includes any dividend or distribution that is in excess of that
permitted without the approval of the Office pursuant to section
628.371, F.S., but shall not
include pro rata distributions of any class of the insurer's own
securities.
Notwithstanding any other provision of law, an insurer may
declare an extraordinary dividend or distribution which is conditional upon the
Office's approval thereof, and such a declaration shall confer no rights upon
shareholders until the Office has approved the payment of such dividend or
distribution.
(4)
The following transactions involving a domestic insurer and any person in its
holding company system may not be entered into unless the insurer has notified
the Office, via Form OIR-A1-2117, "Form D - Prior Notice of a Transaction," new
5/16, http://www.flrules.org/Gateway/reference.asp?No=Ref-06551,
which is hereby adopted and incorporated by reference, and is available at
www.floir.com/iportal, of its
intention to enter into such a transaction at least thirty (30) calendar days
prior thereto, or such shorter period as the Office in its discretion may
permit, and the Office has not disapproved it within such period. The notice
for amendments or modifications shall include the reasons for the change and
the financial impact on the insurer.
(a)
Sales, purchases, exchanges, loans or extensions of credit, guarantees, or
investments provided such transactions are equal to or exceed:
1. With respect to nonlife insurers, the
lesser of three percent of the insurer's admitted assets or 25 percent of
surplus as regards policyholders; and,
2. With respect to life insurers, three
percent of the insurer's admitted assets; each as of the prior year
end.
(b) Loans or
extensions of credit to any person who is not an affiliate, where the insurer
makes such loans or extensions of credit with the agreement or understanding
that the proceeds of such transactions, in whole or in substantial part, are to
be used to make loans or extensions of credit to, to purchase assets of, or to
make investments in, any affiliate of the insurer making such loans or
extensions of credit provided such transactions are equal to or exceed:
1. With respect to nonlife insurers, the
lesser of three percent of the insurer's admitted assets or 25 percent of
surplus as regards policyholders; and,
2. With respect to life insurers, three
percent of the insurer's admitted assets; each as of the prior year
end.
(c) Reinsurance
agreements or modifications thereto, including:
1. All reinsurance pooling
agreementss
2. Agreements in which
the reinsurance premium or a change in the insurer's liabilities equals or
exceeds five percent of the insurer's surplus as regards policyholders, as of
the prior year end, including those agreements which may require as
consideration the transfer of assets from an insurer to a non-affiliate, if an
agreement or understanding exists between the insurer and non-affiliate that
any portion of such assets will be transferred to one or more affiliates of the
insurers
(d) All
management agreements, service contracts, tax allocation agreements and all
cost-sharing arrangements; and,
(e)
Any material transactions which the Office determines may adversely affect the
interests of the insurer's policyholders.
(5) The filing required in subsection (4),
above, shall be filed with the Office electronically via the Regulatory
Electronic Filing System ("REFS").
(6) Nothing in subsection (4), above, shall
be deemed to authorize or permit any transactions which, in the case of an
insurer not a member of the same holding company system, would be otherwise
contrary to Florida statute or rule.
(7) A domestic insurer shall not enter into
transactions which are part of a plan or series of like transactions with
persons within the holding company system if the purpose of those separate
transactions is to avoid the statutory threshold amount and thus avoid the
review which would otherwise occur. If the Office determines that such separate
transactions were entered into over any twelve month period for such purpose,
the insurer may be subject to the provisions of section
628.803, F.S.
(8) The Office, in reviewing transactions
pursuant to subsection (4), above, shall consider whether the transactions
comply with the standards set forth in subsection (1), above, and whether they
may adversely affect the interests of policyholders.
(9) The Office shall be notified within
thirty (30) calendar days of any investment of the domestic insurer in any one
corporation if the total investment in such corporation by the insurance
holding company system exceeds ten percent of such corporation's voting
securities.
(10) All filings shall
be submitted electronically to
http://www.floir.com/iportal.
Rulemaking Authority 624.308, 628.801 FS. Law Implemented
624.317, 624.424, 628.251, 628.371, 628.381, 628.461, 628.801, 628.803,
624.307(1) FS.
New 12-16-70, Formerly 4-26.03, Amended 1-30-91, Formerly
4-26.003, 4-143.047, Amended 5-31-16,
7-30-17.
