Florida Senate - 2012                              CS for SB 610
       
       
       
       By the Committee on Banking and Insurance; and Senator Diaz de
       la Portilla
       
       
       
       597-01562-12                                           2012610c1
    1                        A bill to be entitled                      
    2         An act relating to captive insurance; amending s.
    3         628.901, F.S.; providing definitions; amending s.
    4         628.905, F.S.; expanding the kinds of insurance for
    5         which a captive insurer may seek licensure; limiting
    6         the risks that certain captive insurers may insure;
    7         specifying requirements and conditions relating to a
    8         captive insurer’s authority to conduct business;
    9         requiring that before licensure certain captive
   10         insurers must file or submit to the Office of
   11         Insurance Regulation specified information, documents,
   12         and statements; requiring a captive insurance company
   13         to file specific evidence with the office relating to
   14         the financial condition and quality of management and
   15         operations of the company; specifying certain fees to
   16         be paid by captive insurance companies; authorizing a
   17         foreign or alien captive insurance company to become a
   18         domestic captive insurance company by complying with
   19         specified requirements; authorizing the office to
   20         waive any requirements for public hearings relating to
   21         the redomestication of an alien captive insurance
   22         company; creating s. 628.906, F.S.; requiring
   23         biographical affidavits and background investigations
   24         for all officers and directors; providing restrictions
   25         on officers and directors involved with insolvent
   26         insurers under certain conditions; providing
   27         restrictions on officers and directors found guilty
   28         of, or that have pleaded guilty or nolo contendere to,
   29         any felony or crime involving moral turpitude,
   30         including a crime of dishonesty or breach of trust;
   31         amending s. 628.907, F.S.; revising capitalization
   32         requirements for specified captive insurance
   33         companies; requiring capital of specified captive
   34         insurance companies to be held in certain forms;
   35         requiring contributions to captive insurance companies
   36         that are stock insurer corporations to be in a certain
   37         form; authorizing the office to issue a captive
   38         insurance company license conditioned upon certain
   39         evidence relating to possession of specified capital;
   40         authorizing revocation of a conditional license under
   41         certain circumstances; authorizing the office to
   42         prescribe certain additional capital and net asset
   43         requirements; requiring such additional requirements
   44         relating to capital and net assets to be held in
   45         specified forms; requiring dividends or distributions
   46         of capital or surplus to meet certain conditions and
   47         be approved by the office; requiring certain
   48         irrevocable letters of credit to meet certain
   49         standards; creating s. 628.908, F.S.; prohibiting the
   50         issuance of a license to specified captive insurance
   51         companies unless such companies possess and maintain
   52         certain levels of unimpaired surplus; authorizing the
   53         office to condition issuance of a captive insurance
   54         company license upon the provision of certain evidence
   55         relating to the possession of a minimum amount of
   56         unimpaired surplus; authorizing revocation of a
   57         conditional license under certain circumstances;
   58         requiring dividends or distributions of capital or
   59         surplus to meet certain conditions and be approved by
   60         the office; requiring certain irrevocable letters of
   61         credit to meet certain standards; amending s. 628.909,
   62         F.S.; providing for applicability of certain statutory
   63         provisions to specified captive insurers; creating s.
   64         628.910, F.S.; providing requirements, options, and
   65         conditions relating to how a captive insurance company
   66         may be incorporated or organized as a business;
   67         amending s. 628.911, F.S.; providing reporting
   68         requirements for specified captive insurance companies
   69         and captive reinsurance companies; creating s.
   70         628.912, F.S.; authorizing a captive reinsurance
   71         company to discount specified losses subject to
   72         certain conditions; amending s. 628.913, F.S.;
   73         authorizing a captive reinsurance company to apply to
   74         the office for licensure to write reinsurance covering
   75         property and casualty insurance or reinsurance
   76         contracts; authorizing the office to allow a captive
   77         reinsurance company to write reinsurance contracts
   78         covering risks in any state; specifying that a captive
   79         reinsurance company is subject to specified
   80         requirements and must meet specified conditions to
   81         conduct business in this state; creating s. 628.914,
   82         F.S.; specifying requirements and conditions relating
   83         to the capitalization or maintenance of reserves by a
   84         captive reinsurance company; creating s. 628.9141,
   85         F.S.; specifying requirements and conditions relating
   86         to the incorporation of a captive reinsurance company;
   87         creating s. 628.9142, F.S.; providing for the effect
   88         on reserves of certain actions taken by a captive
   89         insurance company relating to providing reinsurance
   90         for specified risks; creating s. 628.918, F.S.;
   91         requiring a specified percentage of a captive
   92         reinsurance company’s assets to be managed by an asset
   93         manager domiciled in this state; creating s. 628.919,
   94         F.S.; authorizing the Financial Services Commission to
   95         adopt rules establishing certain standards for control
   96         of an unaffiliated business by a parent or affiliated
   97         company relating to coverage by a pure captive
   98         insurance company; creating s. 628.920, F.S.;
   99         requiring that a licensed captive insurance company
  100         must be considered for issuance of a certificate of
  101         authority as an insurer under certain circumstances;
  102         amending s. 626.7491, F.S.; conforming a cross
  103         reference; repealing s. 628.903, F.S., relating to the
  104         definition of the term “industrial insured captive
  105         insurer,” to conform to changes made by the act;
  106         providing an effective date.
  107  
  108  Be It Enacted by the Legislature of the State of Florida:
  109  
  110         Section 1. Section 628.901, Florida Statutes, is amended to
  111  read:
  112         628.901 Definitions “Captive insurer” defined.—As used in
  113  For the purposes of this part, the term: except as provided in
  114  s. 628.903, a “captive insurer” is a domestic insurer
  115  established under part I to insure the risks of a specific
  116  corporation or group of corporations under common ownership
  117  owned by the corporation or corporations from which it accepts
  118  risk under a contract of insurance.
  119         (1) “Affiliated company” means a company in the same
  120  corporate system as a parent, an industrial insured, or a member
  121  organization by virtue of common ownership, control, operation,
  122  or management.
  123         (2)“Association” means a legal association of individuals,
  124  corporations, limited liability companies, partnerships,
  125  political subdivisions, or associations which has been in
  126  continuous existence for at least 1 year, the member
  127  organizations of which collectively, or which does itself:
  128         (a) Own, control, or hold with power to vote all of the
  129  outstanding voting securities of an association captive
  130  insurance company incorporated as a stock insurer; or
  131         (b) Have complete voting control over an association
  132  captive insurance company organized as a mutual insurer.
  133         (3) “Association captive insurance company” means a company
  134  that insures risks of the member organizations of the
  135  association and their affiliated companies.
  136         (4) “Captive insurance company” means a domestic insurer
  137  established under this part. A captive insurance company
  138  includes a pure captive insurance company, association captive
  139  insurance company, special purpose captive insurance company, or
  140  industrial insured captive insurance company formed and licensed
  141  under this part.
  142         (5) “Captive reinsurance company” means a reinsurance
  143  company that is formed and licensed under this part and is
  144  wholly owned by a qualifying reinsurance parent company. A
  145  captive reinsurance company is a stock corporation and may not
  146  directly insure risks. A captive reinsurance company may
  147  reinsure only risks.
  148         (6) “Consolidated debt to total capital ratio” means the
  149  ratio of the sum of all debts and hybrid capital instruments as
  150  described in paragraph (a) to total capital as described in
  151  paragraph (b).
  152         (a) Debts and hybrid capital instruments include, but are
  153  not limited to, all borrowings from banks, all senior debt, all
  154  subordinated debts, all trust preferred shares, and all other
  155  hybrid capital instruments that are not included in the
  156  determination of consolidated GAAP net worth issued and
  157  outstanding.
  158         (b) Total capital consists of all debts and hybrid capital
  159  instruments as described in paragraph (a) plus owners’ equity
  160  determined in accordance with GAAP for reporting to the United
  161  States Securities and Exchange Commission.
  162         (7) “Consolidated GAAP net worth” means the consolidated
  163  owners’ equity determined in accordance with generally accepted
  164  accounting principles for reporting to the United States
  165  Securities and Exchange Commission.
  166         (8) “Controlled unaffiliated business” means a company:
  167         (a) That is not in the corporate system of a parent and
  168  affiliated companies;
  169         (b) That has an existing contractual relationship with a
  170  parent or affiliated company; and
  171         (c) Whose risks are managed by a captive insurance company
  172  in accordance with s. 628.919.
  173         (9) “GAAP” means generally accepted accounting principles.
  174         (10) “Industrial insured” means an insured that:
  175         (a) Has gross assets in excess of $50 million;
  176         (b) Procures insurance through the use of a full-time
  177  employee of the insured who acts as an insurance manager or
  178  buyer or through the services of a person licensed as a property
  179  and casualty insurance agent, broker, or consultant in such
  180  person’s state of domicile;
  181         (c) Has at least 100 full-time employees; and
  182         (d) Pays annual premiums of at least $200,000 for each line
  183  of insurance purchased from the industrial insured captive
  184  insurer or at least $75,000 for any line of coverage in excess
  185  of at least $25 million in the annual aggregate. The purchase of
  186  umbrella or general liability coverage in excess of $25 million
  187  in the annual aggregate shall be deemed to be the purchase of a
  188  single line of insurance.
  189         (11) “Industrial insured captive insurance company” means a
  190  captive insurance company that provides insurance only to the
  191  industrial insureds that are its stockholders or members, and
  192  affiliates thereof, or to the stockholders, and affiliates
  193  thereof, of its parent corporation. An industrial insured
  194  captive insurance company can also provide reinsurance to
  195  insurers only on risks written by such insurers for the
  196  industrial insureds who are the stockholders or members, and
  197  affiliates thereof, of the industrial insured captive insurer,
  198  or the stockholders, and affiliates thereof, of the parent
  199  corporation of the industrial insured captive insurer.
  200         (12) “Member organization” means any individual,
  201  corporation, limited liability company, partnership, or
  202  association that belongs to an association.
  203         (13) “Office” means the Office of Insurance Regulation.
  204         (14) “Parent” means any corporation, limited liability
  205  company, partnership, or individual that directly or indirectly
  206  owns, controls, or holds with power to vote more than 50 percent
  207  of the outstanding voting interests of a captive insurance
  208  company.
  209         (15) “Pure captive insurance company” means a company that
  210  insures risks of its parent, affiliated companies, controlled
  211  unaffiliated businesses, or a combination thereof.
  212         (16) “Qualifying reinsurer parent company” means a
  213  reinsurer which currently holds a certificate of authority,
  214  letter of eligibility or is an accredited or a satisfactory non
  215  approved reinsurer in this state possessing a consolidated GAAP
  216  net worth of not less than $500 million and a consolidated debt
  217  to total capital ratio of not greater than 0.50.
  218         (17) “Special purpose captive insurance company” means a
  219  captive insurance company that is formed or licensed under this
  220  chapter that does not meet the definition of any other type of
  221  captive insurance company defined in this section.
  222         (18) “Treasury rates” means the United States Treasury
  223  STRIPS asked yield as published in the Wall Street Journal as of
  224  a balance sheet date.
  225         Section 2. Section 628.905, Florida Statutes, is amended to
  226  read:
  227         628.905 Licensing; authority.—
  228         (1) A Any captive insurer, if when permitted by its charter
  229  or articles of incorporation, may apply to the office for a
  230  license to do any and all insurance authorized under the
  231  insurance code, provide commercial property, commercial
  232  casualty, and commercial marine insurance coverage other than
  233  workers’ compensation, health, personal motor vehicle, and
  234  personal residential property and employer’s liability insurance
  235  coverage, except that: an industrial insured captive insurer may
  236  apply for a license to provide workers’ compensation and
  237  employer’s liability insurance as set forth in subsection (6).
  238         (a) A pure captive insurance company may not insure any
  239  risks other than those of its parent, affiliated companies,
  240  controlled unaffiliated businesses, or a combination thereof.
  241         (b) An association captive insurance company may not insure
  242  any risks other than those of the member organizations of its
  243  association and their affiliated companies. An association
  244  captive insurance company shall have stamped or written upon the
  245  first page of the policy or the certificate, cover note, or
  246  confirmation of insurance the words: THIS INSURANCE IS ISSUED
  247  PURSUANT TO THE FLORIDA CAPTIVE INSURERS LAW. PERSONS INSURED BY
  248  CAPTIVE INSURANCE COMPANIES DO NOT HAVE THE PROTECTION OF THE
  249  FLORIDA INSURANCE GUARANTY ACT TO THE EXTENT OF ANY RIGHT OF
  250  RECOVERY FOR THE OBLIGATION OF AN INSOLVENT INSURER. An
  251  association captive insurance company shall also have stamped or
  252  printed on the face of the policy in at least 14-point, boldface
  253  type, the following statement: CAPTIVE INSURANCE COMPANIES’
  254  POLICY RATES AND FORMS ARE NOT APPROVED BY ANY FLORIDA
  255  REGULATORY AGENCY.
  256         (c) An industrial insured captive insurance company may not
  257  insure any risks other than those of the industrial insureds
  258  that comprise the industrial insured group and their affiliated
  259  companies.
  260         (d) A special purpose captive insurance company may insure
  261  only the risks of its parent.
  262         (e) A captive insurance company may not accept or cede
  263  reinsurance except as provided in this part.
  264         (2) To conduct insurance business in this state, a No
  265  captive insurer, other than an industrial insured captive
  266  insurer must:, shall insure or accept reinsurance on any risks
  267  other than those of its parent and affiliated companies.
  268         (a) Obtain from the office a license authorizing it to
  269  conduct insurance business in this state;
  270         (b) Hold at least one board of directors’ meeting each year
  271  in this state;
  272         (c) Maintain its principal place of business in this state;
  273  and
  274         (d) Appoint a resident registered agent to accept service
  275  of process and to otherwise act on its behalf in this state. In
  276  the case of a captive insurance company formed as a corporation
  277  or a nonprofit corporation, if the registered agent cannot with
  278  reasonable diligence be found at the registered office of the
  279  captive insurance company, the Chief Financial Officer of this
  280  state must be an agent of the captive insurance company upon
  281  whom any process, notice, or demand may be served.
  282         (3)(a) Before receiving a license, a captive insurance
  283  company formed as a corporation or a nonprofit corporation must
  284  file with the office a certified copy of its articles of
  285  incorporation and bylaws, a statement under oath of its
  286  president and secretary showing its financial condition, and any
  287  other statements or documents required by the office.
  288         (b) In addition to the information required by paragraph
  289  (a), an applicant captive insurance company must file with the
  290  office evidence of:
  291         1. The amount and liquidity of the proposed captive
  292  insurance company’s assets relative to the risks to be assumed;
  293         2. The adequacy of the expertise, experience, and character
  294  of the person or persons who will manage the company;
  295         3. The overall soundness of the company’s plan of
  296  operation;
  297         4. The adequacy of the loss prevention programs of the
  298  company’s parent, member organizations, or industrial insureds,
  299  as applicable; and
  300         5. Any other factors considered relevant by the office in
  301  ascertaining whether the company will be able to meet its policy
  302  obligations. In addition to information otherwise required by
  303  this code, each applicant captive insurer shall file with the
  304  office evidence of the adequacy of the loss prevention program
  305  of its insureds.
  306         (4) A captive insurance company or captive reinsurance
  307  company must pay to the office a nonrefundable fee of $1,500 for
  308  processing its application for license.
  309         (a) A captive insurance company or captive reinsurance
  310  company must also pay an annual renewal fee of $1,000.
  311         (b) The office may charge a fee of $5 for any document
  312  requiring certification of authenticity or the signature of the
  313  commissioner or his or her designee. An industrial insured
  314  captive insurer need not be incorporated in this state if it has
  315  been validly incorporated under the laws of another
  316  jurisdiction.
  317         (5) If the commissioner is satisfied that the documents and
  318  statements filed by the captive insurance company comply with
  319  this chapter, the commissioner may grant a license authorizing
  320  the company to conduct insurance business in this state until
  321  the next succeeding March 1, at which time the license may be
  322  renewed. An industrial insured captive insurer is subject to all
  323  provisions of this part except as otherwise indicated.
  324         (6) Upon approval of the office, a foreign or alien captive
  325  insurance company may become a domestic captive insurance
  326  company by complying with all of the requirements of law
  327  relative to the organization and licensing of a domestic captive
  328  insurance company of the same or equivalent type in this state
  329  and by filing with the Secretary of State its articles of
  330  association, charter, or other organizational documents,
  331  together with any appropriate amendments that have been adopted
  332  in accordance with the laws of this state to bring the articles
  333  of association, charter, or other organizational documents into
  334  compliance with the laws of this state, along with a certificate
  335  of good standing issued by the office. The captive insurance
  336  company is then entitled to the necessary or appropriate
  337  certificates and licenses to continue transacting business in
  338  this state and is subject to the authority and jurisdiction of
  339  this state. In connection with this redomestication, the office
  340  may waive any requirements for public hearings. It is not
  341  necessary for a captive insurance company redomesticating into
  342  this state to merge, consolidate, transfer assets, or otherwise
  343  engage in any other reorganization, other than as specified in
  344  this section. An industrial insured captive insurer may not
  345  provide workers’ compensation and employer’s liability insurance
  346  except in excess of at least $25 million in the annual
  347  aggregate.
  348         (7) An industrial insured captive insurance company need
  349  not be incorporated in this state if it has been validly
  350  incorporated under the laws of another jurisdiction.
  351         Section 3. Section 628.906, Florida Statutes, is created to
  352  read:
  353         628.906 Application requirements; restrictions on
  354  eligibility of officers and directors.—
  355         (1) To evidence competence and trustworthiness of its
  356  officers and directors, the application for a license to act as
  357  a captive insurance company or captive reinsurance company shall
  358  include, but not be limited to, background investigations,
  359  biographical affidavits, and fingerprint cards for all officers
  360  and directors.
  361         (2) The office may deny, suspend, or revoke the license to
  362  transact captive insurance or captive reinsurance in this state
  363  if any person who was an officer or director of an insurer,
  364  reinsurer, captive insurance company, captive reinsurance
  365  company, financial institution, or financial services business
  366  doing business in the United States, any state, or under the law
  367  of any other country and who served in that capacity within the
  368  2-year period prior to the date the insurer, reinsurer, captive
  369  insurance company, captive reinsurance company, financial
  370  institution, or financial services business became insolvent,
  371  serves as an officer or director of a captive insurance company
  372  or officer or director of a captive reinsurance company licensed
  373  in this state unless the officer or director demonstrates that
  374  his or her personal actions or omissions were not a contributing
  375  cause to the insolvency or unless the officer or director is
  376  immediately removed from the captive insurance company or
  377  captive reinsurance company.
  378         (3) The office may deny, suspend, or revoke the license to
  379  transact insurance or reinsurance in this state of a captive
  380  insurance company or captive reinsurance company if any officer
  381  or director, any stockholder that owns 10 percent or more of the
  382  outstanding voting securities of the captive insurance company
  383  or captive reinsurance company, or incorporator has been found
  384  guilty of, or has pleaded guilty or nolo contendere to, any
  385  felony or crime involving moral turpitude, including a crime of
  386  dishonesty or breach of trust, punishable by imprisonment of 1
  387  year or more under the law of the United States or any state
  388  thereof or under the law of any other country without regard to
  389  whether a judgment of conviction has been entered by the court
  390  having jurisdiction in such case. However, in the case of a
  391  captive insurance company or captive reinsurance company
  392  operating under a subsisting license, the captive insurance
  393  company or captive reinsurance company shall remove any such
  394  person immediately upon discovery of the conditions set forth in
  395  this subsection when applicable to such person or upon the order
  396  of the office, and the failure to so act shall be grounds for
  397  revocation or suspension of the captive insurance company’s or
  398  captive reinsurance company’s license.
  399         Section 4. Section 628.907, Florida Statutes, is amended to
  400  read:
  401         628.907 Minimum capital and net assets requirements;
  402  restriction on payment of dividends surplus.—
  403         (1)A No captive insurer may not shall be issued a license
  404  unless it possesses and thereafter maintains unimpaired paid-in
  405  capital of:
  406         (a)(1)In the case of a pure captive insurance company, not
  407  less than $100,000. Unimpaired paid-in capital of at least
  408  $500,000; and
  409         (b)(2)In the case of an association captive insurance
  410  company incorporated as a stock insurer, not less than $400,000.
  411  Unimpaired surplus of at least $250,000.
  412         (c) In the case of an industrial insured captive insurance
  413  company incorporated as a stock insurer, not less than $200,000.
  414         (d) In the case of a special purpose captive insurance
  415  company, an amount determined by the office after giving due
  416  consideration to the company’s business plan, feasibility study,
  417  and pro forma financial statements and projections, including
  418  the nature of the risks to be insured.
  419         (2) The office may not issue a license to a captive
  420  insurance company incorporated as a nonprofit corporation unless
  421  the company possesses and maintains unrestricted net assets of:
  422         (a) In the case of a pure captive insurance company, not
  423  less than $250,000.
  424         (b) In the case of a special purpose captive insurance
  425  company, an amount determined by the office after giving due
  426  consideration to the company’s business plan, feasibility study,
  427  and pro forma financial statements and projections, including
  428  the nature of the risks to be insured.
  429         (3) Contributions to a captive insurance company
  430  incorporated as a nonprofit corporation must be in the form of
  431  cash, cash equivalent, or an irrevocable letter of credit issued
  432  by a bank chartered by this state or a member bank of the
  433  Federal Reserve System with a branch office in this state, or as
  434  approved by the office.
  435         (4) For purposes of this section, the office may issue a
  436  license expressly conditioned upon the captive insurance company
  437  providing to the office satisfactory evidence of possession of
  438  the minimum required unimpaired paid-in capital. Until this
  439  evidence is provided, the captive insurance company may not
  440  issue any policy, assume any liability, or otherwise provide
  441  coverage. The office may revoke the conditional license if
  442  satisfactory evidence of the required capital is not provided
  443  within a maximum period of time, not to exceed 1 year, to be
  444  established by the office at the time the conditional license is
  445  issued.
  446         (5) The office may prescribe additional capital or net
  447  assets based upon the type, volume, and nature of insurance
  448  business transacted. Contributions in connection with these
  449  prescribed additional net assets or capital must be in the form
  450  of:
  451         (a) Cash;
  452         (b) Cash equivalent;
  453         (c) An irrevocable letter of credit issued by a bank
  454  chartered by this state or a member bank of the Federal Reserve
  455  System with a branch office in this state, or as approved by the
  456  office; or
  457         (d) Securities invested as provided in part II of chapter
  458  625.
  459         (6) A captive insurance company may not pay a dividend out
  460  of, or other distribution with respect to, capital or surplus in
  461  excess of the limitations set forth in this chapter without the
  462  prior approval of the office. Approval of an ongoing plan for
  463  the payment of dividends or other distributions must be
  464  conditioned upon the retention, at the time of each payment, of
  465  capital or surplus in excess of amounts specified by, or
  466  determined in accordance with formulas approved by, the office.
  467         (7) An irrevocable letter of credit that is issued by a
  468  financial institution other than a bank chartered by this state
  469  or a member bank of the Federal Reserve System must meet the
  470  same standards as an irrevocable letter of credit that has been
  471  issued by a bank chartered by this state or a member bank of the
  472  Federal Reserve System.
  473         Section 5. Section 628.908, Florida Statutes, is created to
  474  read:
  475         628.908 Surplus requirements; restriction on payment of
  476  dividends.—
  477         (1) The office may not issue a license to a captive
  478  insurance company unless the company possesses and maintains
  479  unimpaired surplus of:
  480         (a) In the case of a pure captive insurance company, not
  481  less than $150,000.
  482         (b) In the case of an association captive insurance company
  483  incorporated as a stock insurer, not less than $350,000.
  484         (c) In the case of an industrial insured captive insurance
  485  company incorporated as a stock insurer, not less than $300,000.
  486         (d) In the case of an association captive insurance company
  487  incorporated as a mutual insurer, not less than $750,000.
  488         (e) In the case of an industrial insured captive insurance
  489  company incorporated as a mutual insurer, not less than
  490  $500,000.
  491         (f) In the case of a special purpose captive insurance
  492  company, an amount determined by the office after giving due
  493  consideration to the company’s business plan, feasibility study,
  494  and pro forma financial statements and projections, including
  495  the nature of the risks to be insured.
  496         (2) For purposes of this section, the office may issue a
  497  license expressly conditioned upon the captive insurance company
  498  providing to the office satisfactory evidence of possession of
  499  the minimum required unimpaired surplus. Until this evidence is
  500  provided, the captive insurance company may not issue any
  501  policy, assume any liability, or otherwise provide coverage. The
  502  office may revoke the conditional license if satisfactory
  503  evidence of the required surplus is not provided within a
  504  maximum period of time, not to exceed 1 year, to be established
  505  by the office at the time the conditional license is issued.
  506         (3) A captive insurance company may not pay a dividend out
  507  of, or other distribution with respect to, capital or surplus in
  508  excess of the limitations set forth in this chapter without the
  509  prior approval of the office. Approval of an ongoing plan for
  510  the payment of dividends or other distribution must be
  511  conditioned upon the retention, at the time of each payment, of
  512  capital or surplus in excess of amounts specified by, or
  513  determined in accordance with formulas approved by, the office.
  514         (4) An irrevocable letter of credit that is issued by a
  515  financial institution other than a bank chartered by this state
  516  or a member bank of the Federal Reserve System must meet the
  517  same standards as an irrevocable letter of credit that has been
  518  issued by a bank chartered by this state or a member bank of the
  519  Federal Reserve System.
  520         Section 6. Section 628.909, Florida Statutes, is amended to
  521  read:
  522         628.909 Applicability of other laws.—
  523         (1) The Florida Insurance Code does shall not apply to
  524  captive insurers or industrial insured captive insurers except
  525  as provided in this part and subsections (2) and (3).
  526         (2) The following provisions of the Florida Insurance Code
  527  shall apply to captive insurers who are not industrial insured
  528  captive insurers to the extent that such provisions are not
  529  inconsistent with this part:
  530         (a) Chapter 624, except for ss. 624.407, 624.408, 624.4085,
  531  624.40851, 624.4095, 624.425, and 624.426.
  532         (b) Chapter 625, part II.
  533         (c) Chapter 626, part IX.
  534         (d) Sections 627.730-627.7405, when no-fault coverage is
  535  provided.
  536         (e) Chapter 628.
  537         (3) The following provisions of the Florida Insurance Code
  538  shall apply to industrial insured captive insurers to the extent
  539  that such provisions are not inconsistent with this part:
  540         (a) Chapter 624, except for ss. 624.407, 624.408, 624.4085,
  541  624.40851, 624.4095, 624.425, 624.426, and 624.609(1).
  542         (b) Chapter 625, part II, if the industrial insured captive
  543  insurer is incorporated in this state.
  544         (c) Chapter 626, part IX.
  545         (d) Sections 627.730-627.7405 when no-fault coverage is
  546  provided.
  547         (e) Chapter 628, except for ss. 628.341, 628.351, and
  548  628.6018.
  549         Section 7. Section 628.910, Florida Statutes, is created to
  550  read:
  551         628.910 Incorporation options and requirements.—
  552         (1) A pure captive insurance company may be:
  553         (a) Incorporated as a stock insurer with its capital
  554  divided into shares and held by the stockholders; or
  555         (b) Incorporated as a public benefit, mutual benefit, or
  556  religious nonprofit corporation with members in accordance with
  557  the Florida Not For Profit Corporation Act.
  558         (2) An association captive insurance company or an
  559  industrial insured captive insurance company may be:
  560         (a) Incorporated as a stock insurer with its capital
  561  divided into shares and held by the stockholders; or
  562         (b) Incorporated as a mutual insurer without capital stock,
  563  the governing body of which is elected by the member
  564  organizations of its association.
  565         (3) A captive insurance company may not have fewer than
  566  three incorporators of whom not fewer than two must be residents
  567  of this state.
  568         (4) In the case of a captive insurance company formed as a
  569  corporation or a nonprofit corporation, before the articles of
  570  incorporation are transmitted to the Secretary of State, the
  571  incorporators shall file the articles of incorporation in
  572  triplicate with the office. The office shall promptly examine
  573  the articles of incorporation. If it finds that the articles of
  574  incorporation conform to law, it shall endorse its approval on
  575  each of the triplicate originals of the articles of
  576  incorporation, retain one copy for its files, and return the
  577  remaining copies to the incorporators for filing with the
  578  Department of State.
  579         (5) The articles of incorporation, the certificate issued
  580  pursuant to this section, and the organization fees required by
  581  the Florida Business Corporation Act or the Florida Not For
  582  Profit Corporation Act, as applicable, must be transmitted to
  583  the Secretary of State, who must record the articles of
  584  incorporation and the certificate.
  585         (6) The capital stock of a captive insurance company
  586  incorporated as a stock insurer must be issued at par value of
  587  not less than $1 or more than $100 per share.
  588         (7) In the case of a captive insurance company formed as a
  589  corporation or a nonprofit corporation, at least one of the
  590  members of the board of directors of a captive insurance company
  591  incorporated in this state must be a resident of this state.
  592         (8) A captive insurance company formed as a corporation or
  593  a nonprofit corporation, pursuant to the provisions of this
  594  chapter, has the privileges and is subject to the provisions of
  595  the general corporation law, including the Florida Not For
  596  Profit Corporation Act for nonprofit corporations, as
  597  applicable, as well as the applicable provisions contained in
  598  this chapter. If a conflict occurs between a provision of the
  599  general corporation law, including the Florida Not For Profit
  600  Corporation Act for nonprofit corporations, as applicable, and a
  601  provision of this chapter, the latter controls. The provisions
  602  of this title pertaining to mergers, consolidations,
  603  conversions, mutualizations, and redomestications apply in
  604  determining the procedures to be followed by a captive insurance
  605  company in carrying out any of the transactions described in
  606  such provisions, except that the office may waive or modify the
  607  requirements for public notice and hearing in accordance with
  608  rules the office may adopt addressing categories of
  609  transactions. If a notice of public hearing is required, but no
  610  one requests a hearing, the office may cancel the hearing.
  611         (9) The articles of incorporation or bylaws of a captive
  612  insurance company may authorize a quorum of a board of directors
  613  to consist of no fewer than one-third of the fixed or prescribed
  614  number of directors as provided for by the Florida Business
  615  Corporation Act or the Florida Not For Profit Corporation Act.
  616         Section 8. Section 628.911, Florida Statutes, is amended to
  617  read:
  618         628.911 Reports and statements.—
  619         (1) A captive insurance company may insurer shall not be
  620  required to make any annual report except as provided in this
  621  part section.
  622         (2) Annually no later than March 1, a captive insurance
  623  company or a captive reinsurance company insurer shall, within
  624  60 days after the end of its fiscal year and as often as the
  625  office may deem necessary, submit to the office a report of its
  626  financial condition verified by oath of two of its executive
  627  officers. Except as provided in this part, a captive insurance
  628  company or a captive reinsurance company must report using
  629  generally accepted accounting principles, unless the office
  630  approves the use of statutory accounting principles, with useful
  631  or necessary modifications or adaptations required or approved
  632  or accepted by the office for the type of insurance and kinds of
  633  insurers to be reported upon, and as supplemented by additional
  634  information required by the office. The Financial Services
  635  Commission may adopt by rule the form in which captive insurance
  636  companies insurers shall report.
  637         (3) A captive insurance company may make written
  638  application for filing the required report on a fiscal year end
  639  that is consistent with the parent company’s fiscal year. If an
  640  alternative reporting date is granted, the annual report is due
  641  60 days after the fiscal year end.
  642         Section 9. Section 628.912, Florida Statutes, is created to
  643  read:
  644         628.912 Discounting of loss and loss adjustment expense
  645  reserves.—
  646         (1) A captive reinsurance company may discount its loss and
  647  loss adjustment expense reserves at treasury rates applied to
  648  the applicable payments projected through the use of the
  649  expected payment pattern associated with the reserves.
  650         (2) A captive reinsurance company must file annually an
  651  actuarial opinion on loss and loss adjustment expense reserves
  652  provided by an independent actuary. The actuary may not be an
  653  employee of the captive reinsurance company or its affiliates.
  654         (3) The office may disallow the discounting of reserves if
  655  a captive reinsurance company violates a provision of this part.
  656         Section 10. Section 628.913, Florida Statutes, is amended
  657  to read:
  658         (Substantial rewording of section. See
  659         s. 628.913, F.S., for present text.)
  660         628.913 Captive reinsurance companies.—
  661         (1) A captive reinsurance company, if permitted by its
  662  articles of incorporation or charter, may apply to the office
  663  for a license to write reinsurance covering property and
  664  casualty insurance or reinsurance contracts. A captive
  665  reinsurance company authorized by the office may write
  666  reinsurance contracts covering risks in any state; however, a
  667  captive reinsurance company authorized by the office may not
  668  directly insure risks.
  669         (2) To conduct business in this state, a captive
  670  reinsurance company must:
  671         (a) Obtain from the office a license authorizing it to
  672  conduct business as a captive reinsurance company in this state;
  673         (b) Hold at least one board of directors’ meeting each year
  674  in this state;
  675         (c) Maintain its principal place of business in this state;
  676  and
  677         (d) Appoint a registered agent to accept service of process
  678  and act otherwise on its behalf in this state.
  679         (3) Before receiving a license, a captive reinsurance
  680  company must file with the office:
  681         (a) A certified copy of its charter and bylaws;
  682         (b) A statement under oath of its president and secretary
  683  showing its financial condition; and
  684         (c) Other documents required by the office.
  685         (4) In addition to the information required by this
  686  section, the captive reinsurance company must file with the
  687  office evidence of:
  688         (a) The amount and liquidity of the captive reinsurance
  689  company’s assets relative to the risks to be assumed;
  690         (b) The adequacy of the expertise, experience, and
  691  character of the person who manages the company;
  692         (c) The overall soundness of the company’s plan of
  693  operation; and
  694         (d) Other overall factors considered relevant by the office
  695  in ascertaining if the company would be able to meet its policy
  696  obligations.
  697         Section 11. Section 628.914, Florida Statutes, is created
  698  to read:
  699         628.914 Minimum capitalization or reserves for captive
  700  reinsurance companies.—
  701         (1) The office may not issue a license to a captive
  702  reinsurance company unless the company possesses and maintains
  703  capital or unimpaired surplus of not less than the greater of
  704  $300 million or 10 percent of reserves. The surplus may be in
  705  the form of cash or securities as permitted by part II of
  706  chapter 625.
  707         (2) The office may prescribe additional capital or surplus
  708  based upon the type, volume, and nature of the insurance
  709  business transacted.
  710         (3) A captive reinsurance company may not pay a dividend
  711  out of, or other distribution with respect to, capital or
  712  surplus in excess of the limitations without the prior approval
  713  of the office. Approval of an ongoing plan for the payment of
  714  dividends or other distributions must be conditioned upon the
  715  retention, at the time of each payment, of capital or surplus in
  716  excess of amounts specified by, or determined in accordance with
  717  formulas approved by, the office.
  718         Section 12. Section 628.9141, Florida Statutes, is created
  719  to read:
  720         628.9141 Incorporation of a captive reinsurance company.—
  721         (1) A captive reinsurance company must be incorporated as a
  722  stock insurer with its capital divided into shares and held by
  723  its shareholders.
  724         (2) A captive reinsurance company may not have fewer than
  725  three incorporators of whom at least two must be residents of
  726  this state.
  727         (3) Before the articles of incorporation are transmitted to
  728  the Secretary of State, the incorporators shall comply with all
  729  the requirements of s. 628.091.
  730         (4) The capital stock of a captive reinsurance company must
  731  be issued at par value of not less than $1 or more than $100 per
  732  share.
  733         (5) At least one of the members of the board of directors
  734  of a captive reinsurance company incorporated in this state must
  735  be a resident of this state.
  736         Section 13. Section 628.9142, Florida Statutes, is created
  737  to read:
  738         628.9142 Reinsurance; effect on reserves.—
  739         (1) A captive insurance company may provide reinsurance, as
  740  authorized in this part, on risks ceded by any other insurer.
  741         (2) A captive insurance company may take credit for
  742  reserves on risks or portions of risks ceded to authorized
  743  insurers or reinsurers and unauthorized insurers or reinsurers
  744  complying with the provisions of s. 624.610. A captive insurer
  745  may not take credit for reserves on risks or portions of risks
  746  ceded to an unauthorized insurer or reinsurer if the insurer or
  747  reinsurer is not in compliance with s. 624.610.
  748         Section 14. Section 628.918, Florida Statutes, is created
  749  to read:
  750         628.918 Management of assets of captive reinsurance
  751  company.—At least 35 percent of the assets of a captive
  752  reinsurance company must be managed by an asset manager
  753  domiciled in this state.
  754         Section 15. Section 628.919, Florida Statutes, is created
  755  to read:
  756         628.919 Standards to ensure risk management control by
  757  parent company.—The Financial Services Commission shall adopt
  758  rules establishing standards to ensure that a parent or
  759  affiliated company is able to exercise control of the risk
  760  management function of any controlled unaffiliated business to
  761  be insured by the pure captive insurance company.
  762         Section 16. Section 628.920, Florida Statutes, is created
  763  to read:
  764         628.920 Eligibility of licensed captive insurance company
  765  for certificate of authority to act as insurer.—A licensed
  766  captive insurance company that meets the necessary requirements
  767  of this part imposed upon an insurer must be considered for
  768  issuance of a certificate of authority to act as an insurer in
  769  this state.
  770         Section 17. Paragraph (e) of subsection (2) of section
  771  626.7491, Florida Statutes, is amended to read:
  772         626.7491 Business transacted with producer controlled
  773  property and casualty insurer.—
  774         (2) DEFINITIONS.—As used in this section:
  775         (e) “Licensed insurer” or “insurer” means any person, firm,
  776  association, or corporation licensed to transact a property or
  777  casualty insurance business in this state. The following are not
  778  licensed insurers for the purposes of this section:
  779         1. Any risk retention group as defined in:
  780         a. The Superfund Amendments Reauthorization Act of 1986,
  781  Pub. L. No. 99-499, 100 Stat. 1613 (1986);
  782         b. The Risk Retention Act, 15 U.S.C. ss. 3901 et seq. (1982
  783  and Supp. 1986); or
  784         c. Section 627.942(9).
  785         2. Any residual market pool or joint underwriting authority
  786  or association; and
  787         3. Any captive insurance company insurer as defined in s.
  788  628.901.
  789         Section 18. Section 628.903, Florida Statutes, is repealed.
  790         Section 19. This act shall take effect upon becoming a law.