The purpose of this rule is to implement recent statutory requirements, update and clarify the rules and to adopt and incorporate forms by reference used in connection with holding companies, acquisitions and transactions between affiliates.

 

DEPARTMENT OF FINANCIAL SERVICES

OIR – Insurance Regulation

RULE NOS.:RULE TITLES:

69O-143.046Registration of Insurers

69O-143.047Standards

69O-143.056Acquisition of Controlling Stock

PURPOSE AND EFFECT: The purpose of this rule is to implement recent statutory requirements, update and clarify the rules and to adopt and incorporate forms by reference used in connection with holding companies, acquisitions and transactions between affiliates.

SUMMARY: The revisions improve the Office’s ability to regulate and monitor the financial solvency of insurance holding companies.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION: The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: Agency personnel familiar with the subject matter of the rule amendment have performed an economic analysis of the rule amendment that shows that the rule amendment is unlikely to have an adverse impact on the State economy in excess of the criteria established in Section 120.541(2)(a), Florida Statutes.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 624.308, 628.461(13) FS.

LAW IMPLEMENTED: 624.307(1), 624.317, 624.321, 624.34, 624.404, 624.413, 624.424(6), 624.501, 625.5091, 628.051, 628.061, 628.251, 628.461, 628.801, 628.371, 628.381, 628.803 FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE HELD AT THE DATE, TIME AND PLACE SHOWN BELOW (IF NOT REQUESTED, THIS HEARING WILL NOT BE HELD):

DATE AND TIME: Wednesday, January 20, 2016, 9:30 a.m.

PLACE: 116 Larson Building, 200 East Gaines Street, Tallahassee, Florida

Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 hours before the workshop/meeting by contacting: Brenda Eatman, Office of Insurance Regulation, E-mail: [e-mail]. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Brenda Eatman, Office of Insurance Regulation, E-mail [e-mail]

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

69O-143.046 Registration of Insurers.

(1) Every insurer which is authorized to do business in this state and which is a member of an insurance holding company system shall register with the Office Director , except a foreign insurer subject to disclosure requirements and standards adopted by statute or regulation in the jurisdiction of its domicile which are substantially similar to those contained in this rule and Rule 69O-143.047, F.A.C. Any insurer which is subject to registration under this rule shall register within sixty days after the effective date of this rule or fifteen days after it becomes subject to registration, whichever is later, unless the Office Director  for good cause shown extends the time for registration, and then within such extended time. The Office Director may require any authorized insurer which is a member of a holding company system which is not subject to registration under this rule to furnish a copy of the registration statement or other information filed by such insurance company with the insurance regulatory authority of domiciliary jurisdiction.

(2) All filings required by this rule shall be submitted electronically to the Office via the Regulatory Electronic Filing System, “REFS”.

(3)(2) Every insurer subject to registration shall file a registration statement on a Form OIR-D0-516, “Form B – Insurance Company Holding System Registration Statement,” rev. 12/14 11-90, which is hereby adopted and incorporated by reference. Life and health iInsurers may obtain the form from the Office’s website, located at http://www.floir.com. and shall submit it to the Bureau of Life and Health Insurer Solvency, Division of Insurer Services, Office of Insurance Regulation, 200 East Gaines Street, Tallahassee, FL 32399-0300. Property and casualty insurers may obtain the form from and shall submit it to the Bureau of Property and Casualty Insurer Solvency, Division of Insurer Services, Department of Insurance, 200 East Gaines Street, Tallahassee, FL 32399-0300. The form shall provide current information about:

(a) The capital structure, general financial condition, ownership and management of the insurer and any person controlling the insurer;

(b) The identity and relationship of every member of the insurance holding company system;

(c) The following agreements in force , relationships subsisting and transactions currently outstanding or which have occurred during the last calendar year between such the insurer and its affiliates:

1. Loans, other investments, or purchases, sales or exchanges of securities of the affiliates by the insurer or of the insurer by its affiliates;

2. Purchases, sales, or exchanges of assets;

3. Transactions not in the ordinary course of business;

4. Guarantees or undertakings for the benefit of an affiliate which result in an actual contingent exposure of the insurer’s assets to liability, other than insurance contracts entered into in the ordinary course of the insurer’s business;

5. All management and service contracts and all cost-sharing arrangements, other than cost allocation arrangements based upon generally accepted accounting principles;

6. Reinsurance agreements covering all or substantially all of one or more lines of insurance of the ceding company;

7. Dividends and other distributions to shareholders; and

8. Consolidated tax allocation agreements.

(d) Any pledge of the insurer’s stock, including stock of any subsidiary or controlling affiliate, for a loan made to any member of the insurance holding company system;

(e) If requested by the Office, the insurer shall include financial statements of or within an insurance holding company system, including all affiliates. Financial statements may include but are not limited to annual audited financial statements filed with the U.S. Securities and Exchange Commission (SEC) pursuant to the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended. An insurer required to file financial statements pursuant to this paragraph may satisfy the request by providing the Office with the most recently filed parent corporation financial statements that have been filed with the SEC;

(f)(e) Other matters concerning transactions between registered insurers and any affiliates as may be included from time to time in any registration forms adopted or approved by the Office Director; and

(g) Statements that the insurer’s board of directors oversees corporate governance and internal controls and that the insurer’s officers or senior management have approved, implemented, and continue to maintain and monitor corporate governance and internal control procedures.

(4) All registration statements shall contain a summary outlining all items in the current registration statement representing changes from the prior registration statement filed on a Form OIR-A1-2116, “Form C – Summary of Changes to Registration Statement”, rev. 12-14.

(5)(3) No information need be disclosed on the registration statement filed pursuant to subsection (3) (2) of this rule if such information is not material for the purposes of this rule and Rule 69O-143.047, F.A.C. Unless the Office Director by rule, regulation or order provides otherwise, sales, purchases, exchanges, loans, or extensions of credit, or investments, involving one-half of 1% or less of an insurer’s admitted assets as of the prior year end 31st day of December next preceding shall not be deemed material for purposes of this section.

(6)(4) Each registered insurer shall keep current the information required to be disclosed in its registration statement by reporting all material changes or additions on an amended amendment Form OIR-D0-516 forms provided by the Director within fifteen calendar days after the end of the month in which it learns of each such change or addition. The amended Form OIR-D0-516 should only address those items which are being amended, and should include at the top of the cover page “Amendment No. [insert number] to Form B for [insert year].” Notwithstanding the provisions of this paragraph, dividends and other distributions to shareholders are to be reported to the Office pursuant to Section 628.371, Florida Statutes. , provided, however, that each registered insurer shall so report all dividends and other distributions to shareholders by letter mailed to Director within two business days following the declaration thereof.

(7) In addition to the registration statement required in subsection (3), each registered insurer shall also provide on Form OIR-A1-2118, “Form F – Enterprise Risk Report”, rev. 12/14, the information required under Section 628.801(2), F.S.

(8)(5) The Office Director shall terminate the registration of any insurer which demonstrates that it no longer is a member of an insurance holding company system.

(9)(6) The Office Director may require or allow two or more affiliated insurers subject to registration hereunder to file a consolidated registration statement or consolidated reports amending their consolidated registration statement or their individual registration statement.

(10)(7) The Office Director may allow an insurer which is authorized to do business in this state and which is part of an insurance holding company system to register on behalf of any affiliated insurer which is required to register under subsection (1) of this rule and to file all information and material required to be filed under this rule.

(11)(8) The provisions of this rule shall not apply to any insurer, information or transaction if and to the extent that the Office Director by rule, regulation, or order shall exempt the same from the provisions of this rule.

(12)(9) Any person may file with the Office Director a disclaimer of affiliation with any authorized insurer or such a disclaimer may be filed by such insurer or any member of an insurance holding company system. The disclaimer shall fully disclose all material relationships and bases for affiliation between such person and such insurer as well as the basis for disclaiming such affiliation. After a disclaimer has been filed, the insurer shall be relieved of any duty to register or report under this rule which may arise out of the insurer’s relationship with such person unless and until the Office Director disallows such a disclaimer. A disclaimer of affiliation shall be deemed to have been granted unless the Office, within thirty (30) calendar days following the receipt of a complete disclaimer, notifies the filing party that it is disallowed. The Director shall disallow such a disclaimer only after furnishing all parties in interest with notice and opportunity to be heard and after making specific findings of fact to support such disallowance.

(13)(10) Any person within an insurance holding company system subject to registration shall be required to provide complete and accurate information to an insurer, where such information is reasonably necessary to enable the insurer to comply with the provisions of this rule chapter.

(14)(11) The failure to file a registration statement or any amendment thereto required by this rule within the time specified for such filing shall be a violation of this rule.

(15) The following forms are hereby adopted and incorporated by reference:

(a) Form OIR-D0-516, “Form B - Insurance Company Holding System Registration Statement,” rev. 12-14;

(b) Form OIR-A1-2116, “Form C - Summary of Changes to Registration Statement,” rev. 12-14; and

(c) Form OIR-A1-2118, “Form F - Enterprise Risk Report”, rev. 12-14.

Rulemaking Specific Authority 624.308 FS. Law Implemented 624.307(1), 624.317, 628.251, 628.461, 628.801 FS. History–New 12-16-70, Formerly 4-26.02, Amended 6-7-90, 1-30-91, Formerly 4-26.002, 4-143.046, Amended___________.

 

69O-143.047 Standards.

(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; and

(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;

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 a seizure by the commissioner, and will make them available to the receiver, for so long as the affiliate continues to receive timely payment for 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 Director may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in his 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 Director has received notice of the declaration thereof and has not within such period disapproved such payment, or

(b) The Office Director shall have approved such payment within such 30 calendar day period.

A notice to the Office Director 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 Director 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 Director Section 628.371, F.S., but shall not include prorata 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 Director approval thereof, and such a declaration shall confer no rights upon shareholders until the Office Director 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”, rev. 10/14, which is hereby adopted and incorporated by reference, in writing 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. 31st day of December next preceding.

(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. 31st day of December next preceding.

(c) Reinsurance agreements or modifications thereto, including:

(i) All reinsurance pooling agreements;

(ii) 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, 31st day of December next preceding, 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 insurer;

(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)(5) 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)(6) 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)(7) 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)(8) 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.

Rulemaking Specific Authority 624.308 FS. Law Implemented 624.317, 628.251, 628.371, 628.381, 628.461, 628.801, 628.803, 624.307(1) FS. History–New 12-16-70, Formerly 4-26.03, Amended 1-30-91, Formerly 4-26.003, 4-143.047, Amended________.

 

69O-143.056 Acquisition of Controlling Stock.

(1) Any person, individually or in conjunction with any affiliated person acquiring, directly or indirectly, or who concludes a tender offer or exchange offer for, enters into any agreement to exchange securities for, or acquires 10% 5% or more of the outstanding voting capital stock of a Florida domestic insurer shall comply with the provisions of Section 628.461, F.S., and this rule.

(2) A retaliatory application fee shall be submitted pursuant to Section 624.5091, F.S. The retaliatory fee is the greater of:

(a) The amount that the applicant’s domiciliary state or country would charge a Florida domestic insurer making application in the applicant’s state or country of domicile, or

(b) The Florida application fee pursuant to Section 624.501(1)(a), F.S.

(3) Officers and directors of the acquiring person shall submit the required background information and fingerprint cards unless the Office department determines that the character, background, and managerial experience of those officers or directors is such that the acquisition is not likely to be hazardous or prejudicial to the insureds of the insurer or to the public. In making such a determination, the Office department shall consider whether those officers or directors have previously been investigated or had their fingerprints processed within the year immediately preceding the date of the application; whether the acquiring company is a subsidiary or an affiliate of a large, publicly-held corporation; and the number of subsidiaries and affiliates in the corporate group.

(4) The acquiring person shall comply with the instructions contained on Form OIR-C1 D0-918, “Acquisition of Controlling Interest of a Domestic Insurer,” rev. 8/92, and submit the following applicable forms. Forms relating to specific kinds types of insurance are to be submitted only by companies issuing policies relating to the kind type of insurance specified on the form:

(a) Form OIR-D0-841, “Invoice, Request For Payment of Application Fees,” rev. 8/91;

(b) Form OIR-D0-903, “Invoice, Request For Payment of Fingerprint Charges,” rev. 1/94;

(a)(c) Form OIR-C1D0-922, “Waiver of Hearing,” rev. 9/91;

(b)(d) Form OIR-C1-1524 “Uniform Consent to Service of Process” rev. ____8/14  Form OIR-D0-144, “Consent and Agreement in Re Service of Process,” rev. 11/90;

(c)(e) Form OIR-D0-516, “Insurance Company System Registration Statement,” rev. 11/90;

(d)(f) Form OIR-D0-904, “Proformas, Life Companies, pages 1-4,” rev. 5/91 http://www.naic.org/documents/industry_ucaa_form13L.xls ;

(e)(g) Form OIR-D0-896, “Proformas, Property and Casualty Companies, pages 1-18,” rev. 5/91 http://www.naic.org/documents/industry_ucaa_form13P.xlsm ;

(f)(h) Form OIR-D0-2119 “Proformas, Title Companies (rev        ) http://www.naic.org/documents/industry_ucaa_form13T.xls Form OIR-D0-901, “Classification and Code Numbers, Life, Accident and Health Insurers,” rev. 5/91;

(g)(i) OIR-D0-2165 Proformas, Health Companies (rev          ) http://www.naic.org/documents/industry_ucaa_form13H.xls

(h)(j) Form OIR-C1-1416 “Uniform Certificate of Authority Application (UCAA)- Lines of Insurance (rev 9/15)  Form OIR-D0-877, “Lines of Business by Company Code, Property and Casualty Insurers,” rev. 5/91;

(i)(k) Form OIR-C1-1298 “Uniform Certificate of Authority Application (UCAA)- Management Information Form  rev.                  Form OIR-D0-921, “Management Information,” rev. 9/91;

(j)(l) Form OIR-C1D0-938, “Fingerprint Card Instructions,” rev.______ 4/91;

(k)(m) Form OIR-C1-1423 D0-422, “Biographical Statement and Affidavit,” rev.(8/14) 11/90;

(n) Form OIR-D0-514, “Resolution Form,” rev. 11/90;

(l)(o) The material required by Form OIR-C1D0-905, “Instructions for Furnishing Background Investigative Reports,” rev.(10/05) 8/93;

(p) Form OIR-D0-450, “Authority for Release of Information,” rev. 8/91; and

(m)(p) In addition, prior to a final decision on whether to approve the proposed acquisition, the Office shall request such other information as is necessary, depending on the facts and circumstances of the specific persons and entities involved, pursuant to Section 628.461(3), F.S., to determine the character, experience, ability, and other qualifications required by statute, of the person or affiliated person of such person for the protection of the policyholders and shareholders of the insurer and the public. The Office shall make no final decision on any proposed acquisition without complete information, as required by Section 628.461, F.S.

(5) All the forms listed in subsection (4), above, are hereby adopted and incorporated by reference. All the forms (also referred to as the “Acquisition of Controlling Interest of a Domestic Insurer Application Package”) may be obtained from the Office’s website at http://www.floir.com, and shall be submitted to the Applications Coordination Section, Division of Insurer Services, Office of Insurance Regulation, Larson Building, 200 East Gaines Street, Tallahassee, FL 32399-0300 electronically via the Office’s iApply system.

Rulemaking Specific Authority 624.308, 628.461(13) FS. Law Implemented 624.307(1), 624.307(3), 624.317, 624.321, 624.34, 624.404, 624.413, 624.424(6), 624.501, 624.5091, 628.051, 628.061, 628.461 FS. History–New 6-7-90, Formerly 4-109.002, Amended 5-12-94, 11-7-00, Formerly 4-143.056, Amended_____________.

 

NAME OF PERSON ORIGINATING PROPOSED RULE: David Altmaier, Office of Insurance Regulation.

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: THE FINANCIAL SERVICES COMMISSION

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: December 8, 2015

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: October 6, 2015