Current through Reg. 50, No. 187; September 24, 2024
(1) Purpose. Section
624.610(3)(e),
F.S., gives the Office the option to allow credit for reinsurance without full
collateral for transactions involving assuming insurers not meeting the
requirements of section
624.610(3)(a), (b), (c), or
(d), F.S. This rule does not apply to
assuming insurers that meet the requirements of section
624.610(3)(a), (b), (c), or
(d), F.S. This rule is not an attempt to
assert extra-territorial jurisdiction. Insurers that write in states other than
Florida will need to comply with the laws of those states.
(2) Definitions. As used in this rule the
following terms have the following meanings:
(a) "Certified reinsurer" means an assuming
insurer that may not meet the requirements of section
624.610(3)(a), (b), (c), or
(d), F.S., and that has been determined by
the Office to have met the requirements set forth in subsections (7) and (8) of
this rule.
(b) "Qualified
jurisdiction" means a jurisdiction which has met the requirements set forth in
subsection (9) of this rule.
(3) Credit for reinsurance under this rule
shall apply only to reinsurance contracts entered into renewed or amended on or
after the effective date of the certification of the assuming insurer, provided
that the certified reinsurer holds surplus in excess of $250 million and
maintains a secure financial strength rating from at least two of the rating
agencies indicated in this subsection. Due consideration shall be given to the
group rating where appropriate. The credit is subject to the limitations set
forth in this rule. As provided in section
624.610(3)(e),
F.S., acceptable rating agencies are:
(a)
Standard and Poor's;
(b) Moody's
Investors Service;
(c) Fitch
Ratings;
(d) A.M. Best
Company;
(e) Demotech;
and,
(f) Any other rating agency
deemed acceptable by order of the Office. Copies of the orders issued by the
Office deeming rating agencies as having experience and expertise in rating
insurers doing business in Florida pursuant to Section
624.610(3)(e),
F.S., are located at
https://www.floir.com/resources-and-reports/certified-reinsurers.
(4) The collateral required to allow one
hundred percent (100%) credit shall be no less than the percentage specified
for the lowest rating as indicated below:
|
Rating
|
Collateral Required
|
Best
|
S&P
|
Moody's
|
Fitch
|
Demotech
|
|
Secure - 1
|
0%
|
A++
|
AAA
|
Aaa
|
AAA
|
A"
|
|
Secure - 2
|
10%
|
A+
|
AA+, AA, AA-
|
Aa1, Aa2, Aa3
|
AA+, AA, AA-
|
A'
|
|
Secure - 3
|
20%
|
A
|
A+, A
|
A1, A2
|
A+, A
|
A
|
|
Secure - 4
|
50%
|
A-
|
A-
|
A3
|
A-
|
n/a
|
|
Secure - 5
|
75%
|
B++, B+
|
BBB+, BBB, BBB-
|
Baa1, Baa2, Baa3
|
BBB+, BBB, BBB-
|
n/a
|
|
Vulnerable - 6
|
100%
|
B, B-, C++, C+, C, C-, D, E, F
|
BB+, BB, BB-, B+, B, B-, CCC, CC, C,
D, R
|
Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, C
|
BB+, BB, BB-, B+, B,
B-, CCC+, CC, CCC-, DD
|
n/a
|
For reinsurance ceded by Florida domestic property insurers
for short-tailed lines as defined below, any collateral required to be posted
may be subject to a one-year deferral from the date of the first instance of a
liability reserve entry as a result of a catastrophic loss from a named
Hurricane. For these purposes, a short-tailed line of business is defined as
any one of the following lines of business as reported on the NAIC annual
financial statement:
Line 1 Fire
Line 2 Allied Lines
Line 3 Farmowners multiple peril
Line 4 Homeowners multiple peril
Line 5 Commercial multiple peril
Line 9 Inland marine
Line 12 Earthquake
Line 21 Auto physical damage
(5) Nothing in this rule shall be construed
to deny the ceding insurer the ability to take credit for reinsurance for the
remainder of its liabilities with a certified reinsurer so long as those
amounts are secured with acceptable collateral pursuant to Section
624.610(5),
F.S., and subsection 69O-144.005(5),
F.A.C.
(6) In addition to the trust
fund required under Section
624.610(3)(c),
F.S., the Office shall permit an assuming insurer that maintains a trust fund
in a qualified U.S. financial institution, as that term is defined in Section
624.610(6)(b),
F.S., for the payment of the valid claims of its U.S. ceding insurers and their
assigns and successors in interest to also maintain in a qualified U.S.
financial institution a trust fund constituting a trusteed amount at least
equal to the collateral required in accordance with subsection (4) of this
rule, to secure the liabilities attributable to U.S. ceding insurers under
reinsurance policies (contracts) entered into or renewed by such assuming
insurer on or after the effective date of this rule or such other date as may
be established in other states for ceding insurers domiciled in such states,
but only when maintenance of such a trust fund serves to protect the interests
of the public and the interests of insurer solvency.
(7) A ceding insurer may not take credit
pursuant to this rule unless:
(a) The
assuming insurer has been determined, by order of the Office, to be a certified
reinsurer, pursuant to subsection (8) of this rule;
(b) The ceding insurer maintains satisfactory
evidence that the certified reinsurer meets the standards of solvency,
including standards for capital adequacy, established by its domestic
regulator; and,
(c) All reinsurance
contracts between the ceding insurer and the certified reinsurer provide for:
1. An insolvency clause in conformance with
Section 624.610(9),
F.S.;
2. A submission to
jurisdiction clause in conformance with Sections 624.610(3)(f)1.a. and 2.,
F.S.; and,
3. A service of process
clause in conformance with Sections 624.610(3)(f)1.b. and 2.,
F.S.
(8) Status
as certified reinsurer:
(a) An assuming
insurer seeking certified reinsurer status in this state pursuant to this rule,
shall file an application in accordance with paragraph
69O-144.002(4)(a),
F.A.C., and the requirements of this rule. The application shall include
written confirmation, in the form of a properly executed Form OIR-C1-2116,
"Certificate of Certified Reinsurer," which is incorporated by reference in
paragraph 69O-144.002(4)(a),
F.A.C., that the assuming insurer submits to the jurisdiction of the U.S.
courts, appoints the Chief Financial Officer, pursuant to Section
48.151, F.S., as its agent for
service of process in this state, and agrees to post one hundred percent (100%)
collateral for its Florida liabilities if it resists enforcement of a valid and
final judgment from a court in the United States, or if otherwise required by
the Office pursuant to this rule. If an NAIC accredited jurisdiction has
determined that a certified reinsurer has met the conditions in that
jurisdiction to become a certified reinsurer, the Office may accept
documentation filed with that NAIC accredited jurisdiction or with the NAIC to
satisfy the certified reinsurer's status in this state.
(b) Upon receipt of an application for a
determination as a certified reinsurer, the Office shall post notice on the
Office's website. Such notice shall include instructions on how members of the
public may respond to the application. The Office shall not take final action
on the application until at least thirty (30) days after posting the notice
required by this paragraph.
(c) The
determination of certified reinsurer status will be made by order issued by the
Office.
(d) To become a certified
reinsurer, the assuming insurer, at a minimum:
1. Shall hold surplus in excess of $250
million. This requirement may also be satisfied by an association including
incorporated and individual unincorporated underwriters having minimum capital
and surplus equivalents (net of liabilities) of at least $250 million and a
central fund containing a balance of at least $250 million,
2. Shall be authorized in its domiciliary
jurisdiction to assume the kind or kinds of reinsurance ceded by the ceding
insurer; and,
3. Shall be domiciled
in a qualified jurisdiction, as defined in subsection (9) of this
rule.
(e) Each certified
reinsurer shall be rated on a legal entity basis, with due consideration being
given to the group rating where appropriate, except that an association
including incorporated and individual unincorporated underwriters that has been
approved to do business as a single certified reinsurer may be evaluated on the
basis of its group rating. Factors that may be considered as part of the
evaluation process include, but are not limited to, the following:
1. The certified reinsurer's financial
strength rating from an acceptable rating agency. The maximum rating that a
certified reinsurer may be assigned will correspond to its financial strength
rating as outlined in subsection (4) of this rule. The Office shall use the
lowest financial strength rating received from a rating agency indicated in
subsection (3) of this rule, in establishing the maximum rating of a certified
reinsurer. A failure to obtain or maintain at least two financial strength
ratings from acceptable rating agencies pursuant to subsection (3), will result
in loss of eligibility for certification;
2. The business practices of the certified
reinsurer in dealing with its ceding insurers, including its record of
compliance with reinsurance contractual terms and obligations;
3. For certified reinsurers domiciled in the
U.S., a review of the most recent applicable NAIC Annual Statement Blank,
either Schedule F (for property/casualty reinsurers) or Schedule S (for life
and health reinsurers);
4. The
reputation of the certified reinsurer for prompt payment of claims under
reinsurance agreements, based on an analysis of ceding insurers' Schedule F
reporting of overdue reinsurance recoverables, including the proportion of
obligations that are more than ninety (90) days past due or are in dispute,
with specific attention given to obligations payable to companies that are in
administrative supervision or receivership;
5. Regulatory actions against the certified
reinsurer;
6. The liquidation
priority of obligations to a ceding insurer in the certified reinsurer's
domiciliary jurisdiction in the context of an insolvency proceeding;
and,
7. The certified reinsurer's
participation in any solvent schemes of arrangement, or similar procedure, that
involves U.S. ceding insurers. The certified reinsurer shall notify the Office
prior to participation in any solvent scheme of
arrangement.
(f) If the
Office determines, based upon the material submitted, and any other relevant
information, that it is in the best interests of market stability and the
solvency of ceding insurers, the Office will find, by order, that the insurer
is a certified reinsurer and will set an amount of credit allowed for the
reinsurer if lower than the amount set forth in subsection (4).
(g) The Office shall publish and maintain a
list of certified reinsurers on the Office's website. Such list shall disclose
the rating assigned to the certified reinsurer pursuant to subsection (4) of
this rule.
(h) An assuming insurer
seeking to maintain its certified reinsurer status in this state shall annually
file the information required by paragraph
69O-144.002(4)(b),
F.A.C. If an NAIC accredited jurisdiction has determined that a certified
reinsurer has met the conditions in that jurisdiction to become a certified
reinsurer, the Office may accept documentation filed with that NAIC accredited
jurisdiction or with the NAIC to satisfy the certified reinsurer's status in
this state.
(i) A certified
reinsurer must advise the Office within ten (10) days of any changes in its
ratings assigned by rating agencies, domiciliary license status, or of any
regulatory actions taken against the certified reinsurer. Such notice shall
include a statement describing such actions and the reasons
therefore.
(j) At any time, if the
Office determines that it is in the best interests of market stability and the
solvency of ceding insurers, the Office will withdraw, by order, any
determination of an insurer as a certified reinsurer or require the certified
reinsurer to post additional collateral.
(k) If the rating of a certified reinsurer
rises above that used by the Office in its determination of the credit allowed
for the reinsurer, an affected party may petition the Office for a
redetermination of the credit allowed. If it is in the best interests of market
stability and the solvency of ceding insurers, the Office will raise the credit
allowed for the certified reinsurer.
(9) Qualified Jurisdictions.
(a) The determination of a jurisdiction as a
qualified jurisdiction is to be made by the Office. No jurisdiction shall be
determined to be a qualified jurisdiction unless:
1. The insurance regulatory body of the
jurisdiction agrees that it will provide information requested by the Office
regarding its certified domestic reinsurers;
2. The Office has determined that the
jurisdiction has a satisfactory structure and authority with regard to solvency
regulation, acceptable financial and operating standards for reinsurers in the
domiciliary jurisdiction, acceptable transparent financial reports filed in
accordance with generally accepted accounting principles, and verifiable
evidence of adequate and prompt enforcement of valid U.S. judgments or
arbitration awards;
3. The Office
has determined that the history of performance by reinsurers in the
jurisdiction is such that the insuring public will be served by a finding of
qualification;
4. For non-U.S.
jurisdictions, the jurisdiction allows U.S. reinsurers access to the market of
the domiciliary jurisdiction on terms and conditions that are at least as
favorable as those provided in Florida law and regulations for unaccredited
non-U.S. assuming insurers; and,
5.
There is no other documented information that it would not serve the best
interests of the insuring public and the solvency of ceding insurers to make a
finding of qualification.
(b) If the NAIC issues findings that certain
jurisdictions should be considered qualified jurisdictions, the Office shall,
if it would serve the best interests of the insuring public and the solvency of
ceding insurers, make a determination that jurisdictions on the NAIC list are
qualified jurisdictions.
(c) A U.S.
jurisdiction that meets the requirements for accreditation under the NAIC
financial standards and accreditation program shall be recognized as a
qualified jurisdiction.
(d) The
Office shall publish a list of jurisdictions that have been determined to be
qualified on its website.
(e) If
the Office determines that it is in the best interests of market stability and
the solvency of ceding insurers, the Office shall withdraw, by order, the
determination of a jurisdiction as a qualified
jurisdiction.
(10) A
certified reinsurer shall secure obligations assumed from U.S. ceding insurers
under this rule and Section
624.610(3)(e),
F.S., at a level consistent with its rating pursuant to subsections (3) and (4)
of this rule, or by order of the Office pursuant to Section
624.610(5),
F.S.
(a) In order for a domestic ceding
insurer to qualify for full financial statement credit for reinsurance ceded to
a certified reinsurer, the certified reinsurer shall maintain security as
allowed by Section 624.610(5),
F.S., and consistent with Section
624.610(3)(e),
F.S., or in a multibeneficiary trust in accordance with Section
624.610(3)(c),
F.S., and Rule 69O-144.006, F.A.C., except as
otherwise provided in this subsection.
(b) If a certified reinsurer maintains a
trust to fully secure its obligations subject to Section
624.610(3)(c),
F.S., and Rule 69O-144.006, F.A.C., and chooses
to secure its obligations incurred as a certified reinsurer in the form of a
multibeneficiary trust, the certified reinsurer shall maintain separate trust
accounts for its obligations incurred under reinsurance agreements issued or
renewed as a certified reinsurer with reduced security as permitted by this
subsection or comparable laws of other U.S. jurisdictions and for its
obligations subject to Section
624.610(3)(c),
F.S., and Rule 69O-144.006, F.A.C. It shall be
a condition to the grant of certification under Section
624.610(3)(e),
F.S., and this rule, that the certified reinsurer shall have bound itself, by
the language of the trust and agreement with the insurance regulator with
principal regulatory oversight of each such trust account, to fund, upon
termination of any such trust account, out of the remaining surplus of such
trust any deficiency of any other such trust account.
(c) The minimum trusteed surplus requirements
provided in Section 624.610(3)(c),
F.S., and Rule 69O-144.006, F.A.C., are not
applicable with respect to a multibeneficiary trust maintained by a certified
reinsurer for the purpose of securing obligations incurred under this
subsection, except that such trust shall maintain a minimum trusteed surplus of
$10 million.
(d) With respect to
obligations incurred by a certified reinsurer under this subsection, if the
security is insufficient, the Office shall reduce the allowable credit by an
amount proportionate to the deficiency, and has the discretion to impose
further reductions in allowable credit upon finding that there is a material
risk that the certified reinsurer's obligations will not be paid in full when
due.
(e) For purposes of this
subsection, a certified reinsurer whose certification has been terminated for
any reason shall be treated as a certified reinsurer required to secure one
hundred percent (100%) of its obligations.
1.
As used in this subsection, the term "terminated" refers to revocation,
suspension, voluntary surrender and inactive status.
2. If the Office continues to assign a higher
rating as permitted by other provisions of this rule, this requirement does not
apply to a certified reinsurer in inactive status or to a reinsurer whose
certification has been suspended.
(11)
(a) If
the rating of a certified reinsurer is below or falls below that required in
subsection (4) of this rule, for the respective amount of credit, the Office
shall upon written notice assign a new rating to the certified reinsurer in
accordance with subsection (4). Notwithstanding the change or withdrawal of a
certified reinsurer's rating, the Office, upon a determination that the
interest of ensuring market stability and the solvency of the ceding insurer
requires it, shall, upon request by the ceding insurer, authorize the ceding
insurer to continue to take credit for the reinsurance recoverable, or part
thereof, relating to the rating change or withdrawal for some specified period
of time following such change or withdrawal, unless the reinsurance recoverable
is deemed uncollectible.
(b) If the
ceding insurer's experience in collecting recoverables from any certified
reinsurer indicates that the credit to the ceding insurer should be lower, the
ceding insurer shall notify the Office of this.
(c) The Office shall have the authority to
suspend, revoke, or otherwise modify a certified reinsurer's certification at
any time if the certified reinsurer fails to meet its obligations or security
requirements under this rule, or if other financial or operating results of the
certified reinsurer, or documented significant delays in payment by the
certified reinsurer, would cause the Office to determine that the certified
reinsurer is unwilling or unable to meet its contractual obligations.
(d) If the rating of a certified reinsurer is
upgraded by the Office, the certified reinsurer may meet the security
requirements applicable to its new rating on a prospective basis, but the
Office shall require the certified reinsurer to post security under the
previously applicable security requirements as to all contracts in force on or
before the effective date of the upgraded rating. If the rating of a certified
reinsurer is downgraded by the Office, the Office shall require the certified
reinsurer to meet the security requirements applicable to its new rating for
all business it has assumed as a certified reinsurer.
(e) Upon revocation of the certification of a
certified reinsurer by the Office, the assuming insurer shall be required to
post security in accordance with section
624.610, F.S., in order for the
ceding insurer to continue to take credit for reinsurance ceded to the assuming
insurer.
(12) The ceding
insurer shall give immediate notice to the Office and provide for the necessary
increased reserves with respect to any reinsurance recoverables applicable, in
the event:
(a) That obligations of a certified
reinsurer for which credit for reinsurance was taken under this rule are more
than ninety (90) days past due and not in dispute, or
(b) That there is any indication or evidence
that any certified reinsurer, with whom the ceding insurer has a contract,
fails to substantially comply with the solvency requirements under the laws of
its domiciliary jurisdiction.
(13) The Office shall disallow all or a
portion of the credit based on a review of the ceding insurer's reinsurance
program, the financial condition of the certified reinsurer, the certified
reinsurer's claim payment history, or any other relevant information when such
action is in the best interests of market stability and the solvency of the
ceding insurer. At any time, the Office may request additional information from
the certified reinsurer. The failure of a certified reinsurer to cooperate with
the Office is grounds for the Office to withdraw the status of the insurer as a
certified reinsurer or for the disallowance or reduction of the credit granted
under this rule.
(14)
(a) Upon the entry of an order of
rehabilitation, liquidation, or conservation against the ceding insurer,
pursuant to Chapter 631, Part I, F.S., or the equivalent law of another
jurisdiction, a certified reinsurer, within thirty (30) days of the order,
shall fund the entire amount that the ceding insurer has taken, as an asset or
deduction from reserves, for reinsurance recoverable from the certified
reinsurer. The insurer may request a variance and waiver from this provision as
provided by Section 120.542, F.S.
(b) If a certified reinsurer fails to comply
on a timely basis with paragraph (a) of this subsection, the Office shall
withdraw the reinsurer's certification under this rule.
(15) The Office may, by order, determine that
credit shall not be allowed to any ceding insurer for reinsured risk pursuant
to this rule if it appears to the Office that granting of the credit to the
ceding insurer would not be in the public interest or serve the best interests
of the ceding insurer's solvency.
(16) Nothing in this rule prohibits a ceding
insurer and a reinsurer from entering into agreements establishing collateral
requirements in excess of those set forth in this rule.
Rulemaking Authority 624.308, 624.610(4), (15) FS. Law
Implemented 624.307(1), 624.424, 624.610
FS.
New 10-29-08, Amended 7-28-15, 7-30-17,
9-13-22.
