Current through Reg. 50, No. 187; September 24, 2024
(1) The trustees of a fund are authorized to
invest the assets of the fund only in the manner prescribed by these
rules.
(2) Monies allocated to
claims reserves net of excess recoveries for all policy years prior to the
current year, the current year loss fund, all security deposits, and encumbered
miscellaneous income shall be invested only in the following manner:
(a) Bankers acceptances from Prime Money
Center Banks located within the United States and purchased through authorized
financial institutions as defined in this rule.
(b) Savings accounts, checking accounts,
money market accounts, certificates of deposit and fully collateralized
repurchase agreements in financial institutions authorized pursuant to this
rule.
(c) U.S. Treasury notes,
bonds, and bills.
(d) Any security
issued by the U.S. government or government agency and backed by the full faith
and credit of the U.S. government.
(e) Any security which is a general
obligation of the U.S. government or U.S. government agency.
(f) Securities issued by the State of
Florida, or any agency or political subdivision which are backed by the full
faith and credit of the State of Florida.
(g) Mutual funds which invest 100% in U.S.
government or U.S. governments agency securities and whose published management
policy limits the risk to principal amount invested. Funds must maintain
current prospectuses on all mutual funds in which they invest.
(h) Annuities issued by insurers licensed by
the State of Florida and whose policies are subject to the protection of the
Florida Life and Health Insurance Guaranty Association. Investments in
annuities are subject to the following limitations:
1. At least 30 days prior to the fund
purchasing its first annuity, and annually thereafter, a fund shall submit an
actuarial review by a qualified actuary examining the impact on the fund's
present and future financial condition of purchasing annuities and foregoing
the earning of investment income on the amounts invested in the annuities. The
actuarial review shall take into account all aggregate reserve requirements and
shall estimate the percent of the fund's reserves which may safely be invested
in annuities. This percentage shall be the maximum amount allowable for
investment in annuities subject to subsequent annual reviews by the fund's
actuary. For purposes of this paragraph only, the actuary may be a member of
the Society of Actuaries, American Academy of Actuaries or Casualty Actuarial
Society.
2. Annuities shall be
single premium annuities and shall be purchased only for the purpose of
providing a payment stream for a given claim. Claims eligible for annuity
funding shall be those claims with specific periodic benefit payments and with
payments expected to continue for at least 61 months.
3. All annuities purchased shall have the
fund as beneficiary. The fund may instruct the insurer to pay benefits directly
to the claimant. The policy shall provide that the sum of the periodic benefit
payments paid plus the cash value of the policy shall be greater than or equal
to the amount of premium paid.
4.
All annuities shall be tied to the claimant's life span.
5. If the cash value of the annuity exceeds
$100,000 or the estimated benefits payable under the terms of the annuity,
including cash value, exceeds $300,000, then the annuity shall be purchased
only from a licensed insurer with a rating from the most recent edition of the
A. M. BEST INSURANCE REPORTS, LIFE-HEALTH, of at least "A." The annuity policy
shall also be subject to the protection of the Florida Life and Health
Insurance Guaranty Association.
6.
The rules contained in paragraph (f) relating to the purchase of annuities
shall not apply to annuities purchased for a claim settlement pursuant to an
order of a Deputy Commissioner.
(i) Land and existing buildings used or
acquired for use as its principal home office and for use by its service
company, if any, when conducting business involving the fund. Prior to
investing in land and buildings, the fund shall submit to the Office the
following items:
1. An appraisal of the
building and land showing that the market value of the building and land is
greater than or equal to the principal amount of the investment. The appraisal
shall be prepared in accordance with the Uniform Standards of Professional
Appraisal Practice. The Uniform Standards of Professional Appraisal Practice of
the Society of Real Estate Appraisers (effective July 1, 1987) are hereby
adopted by reference and made a part of this rule by reference.
2. An analysis by the fund's actuary on the
impact of the investment on the liquidity of the fund for claims payment
purposes.
3. A financial analysis
using generally accepted accounting principles showing that the proposed
investment will decrease the expense overhead of the fund compared to acquiring
office space through renting commercial property.
4. A certified resolution of the board of
trustees stating that the investment is intended solely for reducing the
overhead expense of the fund and that the investment is not for purposes of
speculation or resale.
(j) If the building or land purchased
requires modification or renovation in order to make it suitable for the fund's
use, then the total cost of purchase of the building and land plus the cost of
renovation or modification shall not exceed the 5 percent limit imposed by
paragraph (n).
(k) If, instead of
buying an existing building, a fund wishes to purchase land and construct a
building on the land, then the following conditions shall be met in addition to
those imposed by paragraph (i):
1. Land
acquired for use in the construction of a building may be held for no longer
than 18 months before construction shall begin. If construction is not begun
within 18 months, then the fund may request a one time extension period to
begin construction. An extension shall be granted upon submission of evidence
that the fund has made a reasonable effort to begin construction within the
time prescribed and that construction will begin before the end of the
extension. If no extension is granted or if construction does not begin by the
end of the extension then the land shall be sold.
2. All contracts awarded to the prime
contractor shall contain a maximum fixed cost. The fund shall secure a
performance bond in the amount of the contract from the prime
contractor.
3. The total cost of
acquiring the land, improving the land and construction of the building shall
not exceed the 5 percent limit imposed by paragraph (n).
(l) The fund shall be the sole owner or
mortgagee of the land and building, and no sale of real property for a price
less than the original cost of the land and building shall take place without
the written consent of the Office. The Office shall approve the sale unless the
sale impairs the ability of the fund to meet its financial
obligations.
(m) Investment in land
or building pursuant to paragraphs (i) and (k), shall be subject to the
approval of the Office. In approving this investment, the Office shall consider
the impact of the investment on fund liquidity and solvency, the percent of net
claims reserves invested and the amount of fund overhead expenses reduced by
the investment. All books and records of the fund relating to acquiring land
and acquiring or constructing a building shall be open to inspection by the
Office.
(n) In no event shall the
amount invested in land or building exceed 5 percent of the fund's claims
reserves, net of excess recoveries.
1. If the
cost of purchasing land, purchasing or constructing a building, renovating a
building or improving the land exceeds the 5 percent limit imposed by paragraph
(n), then the fund shall allocate all its unencumbered surplus until an amount
equal to the portion of the cost in excess of 5 percent is transferred to
claims reserves.
2. If the Office
subsequently determines that the investment endangers fund solvency or
liquidity, or if the original cost of purchasing land, purchasing or
constructing a building, renovating a building or improving the land ever
exceeds 10 percent of loss reserves as defined by subsection
69O-190.059(3),
F.A.C., the fund shall sell the land or building, obtain a mortgage on the
property or allocate unappropriated surplus in order to provide sufficient
liquidity to meet its obligations.
3. The fund shall allocate an amount each
year to claims reserves equal to the amount of depreciation taken on the land
and building.
(3) Investments pursuant to subsection (2)
paragraphs (a) through (f), shall have maturity dates of not more than 10 years
from the date of purchase. Furthermore, all investments shall be made in such a
manner that dates of maturity of investments shall coincide with the claim
payment needs of the fund. The Commission shall adopt as a rule a schedule
which may be amended from time to time and which is based on the analysis of
the payment patterns of all active self-insurers funds. Such schedule shall be
used by all funds to determine the maturity dates for investments so that the
claim payment needs of each fund are satisfied. If a fund submits to the Office
an analysis by a qualified actuary which demonstrates the fund's payment
pattern is substantially different from the schedule published by the Office,
the Office shall authorize the fund to purchase its investments based on the
payment pattern of the fund rather than on the published schedule.
(4) No fund shall invest so that more than 10
percent of the fund's assets are invested in a single financial institution
unless such investment is fully insured by an agency of the United States
government or satisfactorily collateralized pursuant to the conditions
contained in subsection (7).
(5)
All monies, other than those specified in subsection (2), held by a fund shall
be invested in any manner authorized in subsection (2) and for any period of
maturity.
(6) Investments pursuant
to subsection (4) may be purchased with maturity dates subject to the
discretion of the trustees. All such investments shall be purchased through
financial institutions within the State of Florida.
(7) The trustees, upon approval by the
Office, are authorized to enter into repurchase agreements subject to the
following conditions:
(a) The agreement is
with a financial institution within the State of Florida.
(b) The fund secures collateral for the
agreement in the form of specific securities pledged to the fund whose market
value is no less than the amount of the agreement.
(c) All securities pledged as collateral
shall be acceptable pursuant to the restrictions imposed by subsections (2),
(3) and (4). Upon receipt of proof of compliance with these conditions the
Office shall approve the repurchase agreements.
(8) Authorized securities may be purchased
through authorized financial institutions. For the purposes of this section,
authorized financial institutions shall mean:
(a) Banks, savings and loan associations, and
credit unions operating within the State of Florida and licensed by the State
of Florida, the U.S. government or authorized under the Reciprocal Regional
Banking Act of 1984 and whose accounts are insured by an agency of the U.S.
government; and,
(b) Investment
brokerage firms licensed by the Securities and Exchange Commission and insured
by an agency of the U.S. government and operating within the State of
Florida.
(9) The Office
shall prohibit a fund from investing in, or order the liquidation of, an
otherwise authorized investment upon a finding, based on reasonable cause, that
a specific investment has become unsafe or that a specific financial
institution is or may become insolvent.
Rulemaking Authority 624.4621 FS. Law Implemented 624.4621
FS.
New 12-25-84, Amended 12-17-85, Formerly 38F-5.71, Amended
12-3-87, 7-20-88, 12-19-93, Formerly 38F-5.071,
4-190.071.
