69O-138.004. Risk-Based Selection Methodology for Scheduling Financial Examinations

(1) This rule established a risk-based selection methodology for scheduling examinations of insurers subject to the provisions of Section 624.316, F.S.

(2) Section 624.316, F.S. permits the Office to examine each insurer holding a certificate of authority for three years or longer as often as may be warranted for the protection of the policyholders and in the public interest, but must, at a minimum, examine:

(a) High-risk insurers at least once every 3 years.

(b) Average- and low-risk insurers at least once every 5 years.

(3) The assessment of whether an insurer is deemed a High-risk insurer will include:

(a) A risk-focused analysis that indicates a decline in the insurer’s financial condition;

(b) Prioritization of property insurers for which the office identifies significant concerns about an insurer’s solvency pursuant to Section 627.7154, F.S.; and

(c) Consideration of the following:

1.The level of capitalization.

2. Unfavorable trends related to profitability or cashflow from operations.

3. National Association of Insurance Commissioners Insurance Regulatory Information System ratio results.

4. Risk-based capital and risk-based capital trend test results.

5. The structure and complexity of the insurer.

6. Changes in the insurer’s officers or board of directors.

7. Changes in the insurer’s business strategy or operations.

8. Findings and recommendations from an examination made pursuant to this section or Section 624.3161, F.S.

9. Current or pending regulatory actions by the office or the department.

10. Other regulatory agency or rating agency information or reports.

11. The impact of an insurer’s insolvency on policyholders of the insurer and the public generally.

12. Any other matters the Office deems necessary for the protection of policyholders.

(4) The National Association of Insurance Commissioners Financial Analysis Handbook, 2023 is hereby adopted and incorporated by reference. The agency has determined that posting these incorporated materials would be a violation of federal copyright law. The materials are available for public inspection at the Office of Insurance Regulation, Larson Building, 200 East Gaines Street, Tallahassee, Florida 32399-0300, or at the Department of State, R.A. Gray Building, 500 South Bronough Street, Tallahassee, Florida 32399-0250. A copy of the handbooks may also be obtained from the National Association of Insurance Commissioners 1100 Walnut Street, Suite 1500, Kansas City, MO 64106-2197, Telephone [phone], website:  http://www.naic.org.

(5) Risk-focused analysis by the Office shall be performed in substantial conformity with the methodology outlined in the Handbook, so long as that methodology is consistent with statutory accounting principles and the Florida Insurance Code.

(6) Scheduling of insurers deemed High-risk will begin with the year-end 2023 financial exam schedule.

Rulemaking Authority 624.308(1), 624.316 FS. Law Implemented 624.316 FS. History–New 1-28-24.