HB 1235

1	A bill to be entitled
2	An act relating to captive insurance; amending s. 628.901,
3	F.S.; providing definitions; amending s. 628.905, F.S.;
4	expanding the kinds of insurance for which a captive
5	insurer may seek licensure; limiting the risks that
6	certain captive insurers may insure; specifying
7	requirements and conditions relating to a captive
8	insurer's authority to conduct business; requiring that
9	before licensure certain captive insurers must file or
10	submit to the Commissioner of Insurance Regulation
11	specified information, documents, and statements;
12	requiring a captive insurance company to file specific
13	evidence with the commissioner relating to the financial
14	condition and quality of management and operations of the
15	company; requiring an applicant-sponsored captive insurer
16	to file with the commissioner a business plan, certain
17	statements, sample contracts, and certain evidence
18	relating to expenses; requiring a captive insurance
19	company to pay certain fees and costs relating to an
20	application for licensure and renewal; authorizing initial
21	licensure until a date certain and requiring annual
22	renewal thereafter on such date; authorizing a foreign or
23	alien captive insurance company to become a domestic
24	captive insurance company by complying with specified
25	requirements; authorizing the commissioner to waive any
26	requirements for public hearings relating to the
27	redomestication of an alien captive insurance company;
28	amending s. 628.907, F.S.; revising capitalization and
29	security requirements for specified captive insurance
30	companies; requiring capital of specified captive
31	insurance companies to be held in certain forms; requiring
32	contributions to captive insurance companies that are
33	nonprofit corporations to be in a certain form;
34	authorizing the commission to issue a captive insurance
35	company license conditioned upon certain evidence relating
36	to possession of specified capital; authorizing revocation
37	of a conditional license under certain circumstances;
38	authorizing the commissioner to prescribe certain
39	additional capital and net asset requirements; requiring
40	such additional requirements relating to capital and net
41	assets to be held in specified forms; requiring certain
42	security of a branch captive insurance company to be trust
43	funded by specified types of assets made payable to
44	certain policyholders and insurers; providing limitations
45	on the payment of dividends by a captive insurance
46	company; prohibiting distributions by a captive insurance
47	company that is a nonprofit corporation without
48	commissioner approval; requiring certain irrevocable
49	letters of credit to meet certain standards; creating s.
50	628.908, F.S.; prohibiting the issuance of a license to
51	specified captive insurance companies unless such
52	companies possess and maintain certain levels of
53	unimpaired surplus; requiring unimpaired surplus to be in
54	specified forms; authorizing a sponsored captive insurance
55	company that does not assume risk to maintain unimpaired
56	surplus in certain securities approved by the
57	commissioner; requiring a captive insurance company that
58	is organized as a reciprocal insurer to maintain a
59	specified amount of unimpaired surplus; authorizing the
60	commissioner to condition issuance of a captive insurance
61	company license upon the provision of certain evidence
62	relating to the possession of a minimum amount of
63	unimpaired surplus; authorizing revocation of a
64	conditional license under certain circumstances;
65	authorizing the commissioner to require additional surplus
66	in specified forms; requiring dividends or distributions
67	of capital or surplus to meet certain conditions and be
68	approved by the commissioner; requiring certain letters of
69	credit to meet certain standards; amending s. 628.909,
70	F.S.; providing for applicability of certain statutory
71	provisions to specified captive insurers; creating s.
72	628.910, F.S.; providing requirements, options, and
73	conditions relating to how a pure captive insurance
74	company or a sponsored captive insurance company may be
75	incorporated or organized as a business; amending s.
76	628.911, F.S.; providing reporting requirements for
77	specified captive insurance companies and captive
78	reinsurance companies; creating s. 628.912, F.S.;
79	authorizing a sponsored captive insurance company and a
80	captive reinsurance company to discount specified losses
81	subject to certain conditions; amending s. 628.913, F.S.;
82	authorizing a captive reinsurance company to apply to the
83	commission for licensure to write reinsurance covering
84	property and casualty insurance or reinsurance contracts;
85	authorizing the commissioner to allow a captive
86	reinsurance company to write reinsurance contracts
87	covering risks in any state; specifying that a captive
88	reinsurance company is subject to specified requirements
89	and must meet specified conditions to conduct business in
90	this state; creating s. 628.914, F.S.; specifying
91	requirements and conditions relating to the capitalization
92	or maintenance of reserves by a captive reinsurance
93	company; creating s. 628.9141, F.S.; specifying
94	requirements and conditions relating to the incorporation
95	of a captive reinsurance company; creating s. 628.9142,
96	F.S.; providing for the effect on reserves of certain
97	actions taken by a captive insurance company relating to
98	providing reinsurance for specified risks; creating s.
99	628.9143, F.S.; requiring a captive reinsurance company to
100	annually pay a specified tax amount; prohibiting any other
101	taxation of a captive reinsurance company other than an
102	occupation tax and certain ad valorem taxes; subjecting a
103	captive reinsurance company to sanctions for failures
104	relating to the payment of taxes; creating s. 628.918,
105	F.S.; requiring a specified percentage of a captive
106	reinsurance company's assets to be managed by an asset
107	manager domiciled in this state; creating s. 628.919,
108	F.S.; authorizing the Financial Services Commission to
109	adopt rules establishing certain standards for control of
110	an unaffiliated business by a parent or affiliated company
111	relating to coverage by a pure captive insurance company;
112	creating s. 628.920, F.S.; providing for the conversion of
113	certain stock, mutual corporations, or limited liability
114	companies into reciprocal insurers; requiring a specified
115	plan for such conversions or mergers; specifying
116	requirements and conditions for the approval of a
117	conversion or merger plan by the commissioner; creating s.
118	628.921, F.S.; providing requirements and conditions
119	relating to the formation of a sponsored captive insurance
120	company and the establishment of protected cells; creating
121	s. 628.922, F.S.; providing requirements and conditions
122	applicable to a sponsor of a sponsored captive insurance
123	company; creating s. 628.923, F.S.; authorizing specified
124	entities to be participants in sponsored captive insurance
125	companies under certain circumstances; creating s.
126	628.924, F.S.; requiring that a licensed captive insurance
127	company must be considered for issuance of a certificate
128	of authority as an insurer under certain circumstances;
129	providing an effective date.
130
131	Be It Enacted by the Legislature of the State of Florida:
132
133	Section 1.  Section 628.901, Florida Statutes, is amended
134	to read:
135	628.901  Definitions "Captive insurer" defined.-As used in
136	For the purposes of this part, unless the context requires
137	otherwise: except as provided in s. 628.903, a "captive insurer"
138	is a domestic insurer established under part I to insure the
139	risks of a specific corporation or group of corporations under
140	common ownership owned by the corporation or corporations from
141	which it accepts risk under a contract of insurance.
142	(1)  "Affiliated company" means a company in the same
143	corporate system as a parent, an industrial insured, or a member
144	organization by virtue of common ownership, control, operation,
145	or management.
146	(2)  "Alien captive insurance company" means an insurance
147	company formed to write insurance business for its parents and
148	affiliates and licensed under the laws of an alien jurisdiction
149	which imposes statutory or regulatory standards in a form
150	acceptable to the commissioner on companies transacting the
151	business of insurance in the alien jurisdiction.
152	(3)  "Association" means a legal association of
153	individuals, corporations, limited liability companies,
154	partnerships, political subdivisions, or associations that has
155	been in continuous existence for at least 1 year:
156	(a)  The member organizations of which collectively, or
157	which does itself:
158	1.  Own, control, or hold with power to vote all of the
159	outstanding voting securities of an association captive
160	insurance company incorporated as a stock insurer or organized
161	as a limited liability company; or
162	2.  Have complete voting control over an association
163	captive insurance company organized as a mutual insurer; or
164	(b)  The member organizations of which collectively
165	constitute all of the subscribers of an association captive
166	insurance company formed as a reciprocal insurer.
167	(4)  "Association captive insurance company" means a
168	company that insures risks of the member organizations of the
169	association and their affiliated companies.
170	(5)  "Branch business" means any insurance business
171	transacted by a branch captive insurance company in this state.
172	(6)  "Branch captive insurance company" means an alien
173	captive insurance company licensed by the commissioner to
174	transact the business of insurance in this state through a
175	business unit with a principal place of business in this state.
176	(7)  "Branch operations" means any business operations of a
177	branch captive insurance company in this state.
178	(8)  "Captive insurance company" means a pure captive
179	insurance company, association captive insurance company,
180	captive reinsurance company, sponsored captive insurance
181	company, special purpose captive insurance company, or
182	industrial insured captive insurance company formed or licensed
183	under this chapter. For purposes of this chapter, a branch
184	captive insurance company must be a pure captive insurance
185	company with respect to operations in this state, unless
186	otherwise permitted by the commissioner.
187	(9)  "Captive reinsurance company" means a reinsurance
188	company that is formed or licensed under this chapter and is
189	wholly owned by a qualifying reinsurance parent company. A
190	captive reinsurance company is a stock corporation.
191	(10)  "Commissioner" means the Commissioner of the Office
192	of Insurance Regulation or the commissioner's designee.
193	(11)  "Consolidated debt to total capital ratio" means the
194	ratio of the sum of all debts and hybrid capital instruments as
195	described in paragraph (a) to total capital as described in
196	paragraph (b).
197	(a)  Debts and hybrid capital instruments include, but are
198	not limited to, all borrowings from banks, all senior debt, all
199	subordinated debts, all trust preferred shares, and all other
200	hybrid capital instruments that are not included in the
201	determination of consolidated GAAP net worth issued and
202	outstanding.
203	(b)  Total capital consists of all debts and hybrid capital
204	instruments as described in paragraph (a) plus owners' equity
205	determined in accordance with GAAP for reporting to the United
206	States Securities and Exchange Commission.
207	(12)  "Consolidated GAAP net worth" means the consolidated
208	owners' equity determined in accordance with generally accepted
209	accounting principles for reporting to the United States
210	Securities and Exchange Commission.
211	(13)  "Controlled unaffiliated business" means a company:
212	(a)  That is not in the corporate system of a parent and
213	affiliated companies;
214	(b)  That has an existing contractual relationship with a
215	parent or affiliated company; and
216	(c)  Whose risks are managed by a captive insurance company
217	in accordance with s. 628.919.
218	(14)  "GAAP" means generally accepted accounting
219	principles.
220	(15)  "Industrial insured" means an insured as defined in
221	s. 628.903(1).
222	(16)  "Industrial insured captive insurance company" means
223	a company that insures risks of the industrial insureds that
224	comprise the industrial insured group and their affiliated
225	companies.
226	(17)  "Industrial insured group" means a group that meets
227	either of the following criteria:
228	(a)  A group of industrial insureds that collectively:
229	1.  Own, control, or hold with power to vote all of the
230	outstanding voting securities of an industrial insured captive
231	insurance company incorporated as a stock insurer or limited
232	liability company; or
233	2.  Have complete voting control over an industrial insured
234	captive insurance company incorporated as a mutual insurer; or
235	(b)  A group which is created under the Liability Risk
236	Retention Act of 1986, 15 U.S.C. s. 3901, et seq., as amended,
237	and a corporation or other limited liability association taxable
238	as a stock insurance company or a mutual insurer under the
239	insurance code.
240	(18)  "Member organization" means any individual,
241	corporation, limited liability company, partnership, or
242	association that belongs to an association.
243	(19)  "Office" means the Office of Insurance Regulation.
244	(20)  "Parent" means any corporation, limited liability
245	company, partnership, or individual that directly or indirectly
246	owns, controls, or holds with power to vote more than 50 percent
247	of the outstanding voting interests of a captive insurance
248	company.
249	(21)  "Participant" means an entity as defined in s.
250	628.923, and any affiliates of that entity, that are insured by
251	a sponsored captive insurance company, where the losses of the
252	participant are limited through a participant contract to the
253	assets of a protected cell.
254	(22)  "Participant contract" means a contract by which a
255	sponsored captive insurance company insures the risks of a
256	participant and limits the losses of the participant to the
257	assets of a protected cell.
258	(23)  "Protected cell" means a separate account established
259	and maintained by a sponsored captive insurance company for one
260	participant.
261	(24)  "Pure captive insurance company" means a company that
262	insures risks of its parent, affiliated companies, controlled
263	unaffiliated business, or a combination thereof.
264	(25)  "Qualifying reinsurer parent company" means a
265	reinsurer authorized to write reinsurance by this state and that
266	has a consolidated GAAP net worth of not less than $500 million
267	and a consolidated debt to total capital ratio of not greater
268	than 0.50.
269	(26)  "Special purpose captive insurance company" means a
270	captive insurance company that is formed or licensed under this
271	chapter that does not meet the definition of any other type of
272	captive insurance company defined in this section.
273	(27)  "Sponsor" means an entity that meets the requirements
274	of s. 628.922, and is approved by the commissioner to provide
275	all or part of the capital and surplus required by applicable
276	law and to organize and operate a sponsored captive insurance
277	company.
278	(28)  "Sponsored captive insurance company" means a captive
279	insurance company:
280	(a)  In which the minimum capital and surplus required by
281	applicable law is provided by one or more sponsors;
282	(b)  That is formed or licensed under this chapter;
283	(c)  That insures the risks of separate participants
284	through the contract; and
285	(d)  That segregates each participant's liability through
286	one or more protected cells.
287	(29)  "Treasury rates" means the United States Treasury
288	strips asked yield as published in the Wall Street Journal as of
289	a balance sheet date.
290	Section 2.  Section 628.905, Florida Statutes, is amended
291	to read:
292	628.905  Licensing; authority.-
293	(1)  Any captive insurer, when permitted by its charter or
294	articles of incorporation, may apply to the commissioner office
295	for a license to do any and all insurance authorized under the
296	insurance code, provide commercial property, commercial
297	casualty, and commercial marine insurance coverage other than
298	workers' compensation and employer's liability insurance, except
299	that: coverage, except that an industrial insured captive
300	insurer may apply for a license to provide workers' compensation
301	and employer's liability insurance as set forth in subsection
302	(6).
303	(a)  A pure captive insurance company may not insure any
304	risks other than those of its parent, affiliated companies,
305	controlled unaffiliated businesses, or a combination thereof.
306	(b)  An association captive insurance company may not
307	insure any risks other than those of the member organizations of
308	its association and their affiliated companies.
309	(c)  An industrial insured captive insurance company may
310	not insure any risks other than those of the industrial insureds
311	that comprise the industrial insured group and their affiliated
312	companies.
313	(d)  In general, a special purpose captive insurance
314	company may only insure the risks of its parent. Notwithstanding
315	any other provisions of this chapter, a special purpose captive
316	insurance company may provide insurance or reinsurance, or both,
317	for risks as approved by the commissioner.
318	(e)  A captive insurance company may not provide personal
319	motor vehicle or homeowners' insurance coverage or any component
320	of such coverages.
321	(f)  A captive insurance company may not accept or cede
322	reinsurance except as provided in this part.
323	(2)  To conduct insurance business in this state, a No
324	captive insurer, other than an industrial insured captive
325	insurer, shall: insure or accept reinsurance on any risks other
326	than those of its parent and affiliated companies.
327	(a)  Obtain from the commissioner a license authorizing it
328	to conduct insurance business in this state;
329	(b)  Hold at least one board of directors' meeting or, in
330	the case of a reciprocal insurer, a subscriber's advisory
331	committee meeting or, in the case of a limited liability
332	company, a meeting of the managing board each year in this
333	state;
334	(c)  Maintain its principal place of business in this state
335	or, in the case of a branch captive insurance company, maintain
336	the principal place of business for its branch operations in
337	this state; and
338	(d)  Appoint a resident registered agent to accept service
339	of process and to otherwise act on its behalf in this state. In
340	the case of a captive insurance company:
341	1.  Formed as a corporation, a nonprofit corporation, or a
342	limited liability company, whenever the registered agent cannot
343	with reasonable diligence be found at the registered office of
344	the captive insurance company, the Chief Financial Officer of
345	this state must be an agent of the captive insurance company
346	upon whom any process, notice, or demand may be served.
347	2.  Formed as a reciprocal insurer, whenever the registered
348	agent cannot with reasonable diligence be found at the
349	registered office of the captive insurance company, the Chief
350	Financial Officer of this state must be an agent of the captive
351	insurance company upon whom any process, notice, or demand may
352	be served.
353	(3)(a)  Before receiving a license, a captive insurance
354	company:
355	1.  Formed as a corporation or a nonprofit corporation must
356	file with the commissioner a certified copy of its articles of
357	incorporation and bylaws, a statement under oath of its
358	president and secretary showing its financial condition, and any
359	other statements or documents required by the commissioner.
360	2.  Formed as a limited liability company must file with
361	the commissioner a certified copy of its articles of
362	organization and operating agreement, a statement under oath by
363	its managers showing its financial condition, and any other
364	statements or documents required by the commissioner.
365	3.  Formed as a reciprocal must:
366	a.  File with the commissioner a certified copy of the
367	power of attorney of its attorney-in-fact, a certified copy of
368	its subscribers' agreement, a statement under oath of its
369	attorney-in-fact showing its financial condition, and any other
370	statements or documents required by the commissioner; and
371	b.  Submit to the commissioner for approval a description
372	of the coverages, deductibles, coverage limits, and rates and
373	any other information the commissioner may reasonably require.
374	If there is a subsequent material change in an item in the
375	description, the reciprocal captive insurance company must
376	submit to the commissioner for approval an appropriate revision
377	and may not offer any additional kinds of insurance until a
378	revision of the description is approved by the commissioner. The
379	reciprocal captive insurance company must inform the
380	commissioner of any material change in rates within 30 days
381	after the adoption of the change.
382	(b)  In addition to the information required by paragraph
383	(a), an applicant captive insurance company must file with the
384	commissioner evidence of:
385	1.  The amount and liquidity of the proposed captive
386	insurance company's assets relative to the risks to be assumed;
387	2.  The adequacy of the expertise, experience, and
388	character of the person or persons who will manage the company;
389	3.  The overall soundness of the company's plan of
390	operation;
391	4.  The adequacy of the loss prevention programs of the
392	company's parent, member organizations, or industrial insureds,
393	as applicable; and
394	5.  Any other factors considered relevant by the
395	commissioner in ascertaining whether the company will be able to
396	meet its policy obligations.
397	(c)  In addition to the information required by paragraphs
398	(a) and (b), an applicant-sponsored captive insurance company
399	must file with the commissioner:
400	1.  A business plan demonstrating how the applicant will
401	account for the loss and expense experience of each protected
402	cell at a level of detail found to be sufficient by the
403	commissioner and how the applicant will report the experience to
404	the commissioner;
405	2.  A statement acknowledging that all financial records of
406	the sponsored captive insurance company, including records
407	pertaining to any protected cells, must be made available for
408	inspection or examination by the commissioner;
409	3.  All contracts or sample contracts between the sponsored
410	captive insurance company and any participants; and
411	4.  Evidence that expenses will be allocated to each
412	protected cell in an equitable manner In addition to information
413	otherwise required by this code, each applicant captive insurer
414	shall file with the office evidence of the adequacy of the loss
415	prevention program of its insureds.
416	(4)(a)  A captive insurance company must pay to the office
417	a nonrefundable fee of $200 for processing its application for
418	license. In addition, the commissioner may retain legal,
419	financial, and examination services from outside the office to
420	examine and investigate the application, the reasonable cost of
421	which may be charged against the applicant, or the commissioner
422	may use internal resources to examine and investigate the
423	application for a fee of $2,400.
424	(b)  In addition, a captive insurance company must pay a
425	license fee of $300 for 1 year of registration and an annual
426	renewal fee of $500.
427	(c)  The office may charge a fee of $15 for any document
428	requiring certification of authenticity or the signature of the
429	commissioner or his or her designee An industrial insured
430	captive insurer need not be incorporated in this state if it has
431	been validly incorporated under the laws of another
432	jurisdiction.
433	(5)  If the commissioner is satisfied that the documents
434	and statements filed by the captive insurance company comply
435	with the provisions of this chapter, the commissioner may grant
436	a license authorizing the company to conduct insurance business
437	in this state until the next succeeding March 1, at which time
438	the license may be renewed An industrial insured captive insurer
439	is subject to all provisions of this part except as otherwise
440	indicated.
441	(6)  Upon approval of the commissioner or his or her
442	designee, a foreign or alien captive insurance company may
443	become a domestic captive insurance company by complying with
444	all of the requirements of law relative to the organization and
445	licensing of a domestic captive insurance company of the same or
446	equivalent type in this state and by filing with the Secretary
447	of State its articles of association, charter, or other
448	organizational documents, together with any appropriate
449	amendments that have been adopted in accordance with the laws of
450	this state to bring those articles of association, charter, or
451	other organizational documents into compliance with the laws of
452	this state, along with a certificate of good standing issued by
453	the commissioner. After this is accomplished, the captive
454	insurance company is entitled to the necessary or appropriate
455	certificates and licenses to continue transacting business in
456	this state and is subject to the authority and jurisdiction of
457	this state. In connection with this redomestication, the
458	commissioner may waive any requirements for public hearings. It
459	is not necessary for a company redomesticating into this state
460	to merge, consolidate, transfer assets, or otherwise engage in
461	any other reorganization, other than as specified in this
462	section An industrial insured captive insurer may not provide
463	workers' compensation and employer's liability insurance except
464	in excess of at least $25 million in the annual aggregate.
465	Section 3.  Section 628.907, Florida Statutes, is amended
466	to read:
467	628.907  Capitalization requirements; security requirements
468	for branch captive insurance companies; restriction on payment
469	of dividends Minimum capital and surplus.-
470	(1)  A No captive insurer may not shall be issued a license
471	unless it possesses and thereafter maintains unimpaired paid-in
472	capital of:
473	(a)(1)  In the case of a pure captive insurance company,
474	not less than $100,000. Unimpaired paid-in capital of at least
475	$500,000; and
476	(b)(2)  In the case of an association captive insurance
477	company incorporated as a stock insurer or organized as a
478	limited liability company, not less than $400,000. Unimpaired
479	surplus of at least $250,000.
480	(c)  In the case of an industrial insured captive insurance
481	company incorporated as a stock insurer or organized as a
482	limited liability company, not less than $200,000.
483	(d)  In the case of a sponsored captive insurance company,
484	not less than $500,000. However, if the sponsored captive
485	insurance company does not assume any risk, the risks insured by
486	the protected cells are homogeneous, and there are no more than
487	10 cells, the commissioner may reduce this amount to an amount
488	not less than $150,000.
489	(e)  In the case of a special purpose captive insurance
490	company, an amount determined by the commissioner after giving
491	due consideration to the company's business plan, feasibility
492	study, and pro forma financial statements and projections,
493	including the nature of the risks to be insured.
494	(2)(a)  Except for a sponsored captive insurance company
495	that does not assume any risk, the capital must be in the form
496	of cash, cash equivalent, or an irrevocable letter of credit
497	issued by a bank chartered by this state or a member bank of the
498	Federal Reserve System with a branch office in this state, or as
499	approved by the commissioner.
500	(b)  For a sponsored captive insurance company that does
501	not assume any risk, the capital may also be in the form of
502	other high-quality securities as approved by the commissioner.
503	(3)  The commissioner may not issue a license to a captive
504	insurance company incorporated as a nonprofit corporation unless
505	the company possesses and maintains unrestricted net assets of:
506	(a)  In the case of a pure captive insurance company, not
507	less than $250,000.
508	(b)  In the case of a special purpose captive insurance
509	company, an amount determined by the commissioner after giving
510	due consideration to the company's business plan, feasibility
511	study, and pro forma financial statements and projections,
512	including the nature of the risks to be insured.
513	(4)  Contributions to a captive insurance company
514	incorporated as a nonprofit corporation must be in the form of
515	cash, cash equivalent, or an irrevocable letter of credit issued
516	by a bank chartered by this state or a member bank of the
517	Federal Reserve System with a branch office in this state, or as
518	approved by the commissioner.
519	(5)  For purposes of this section, the commissioner may
520	issue a license expressly conditioned upon the captive insurance
521	company providing to the commissioner satisfactory evidence of
522	possession of the minimum required unimpaired paid-in capital.
523	Until this evidence is provided, the captive insurance company
524	may not issue any policy, assume any liability, or otherwise
525	provide coverage. The commissioner may revoke the conditional
526	license without legal recourse by the company if satisfactory
527	evidence of the required capital is not provided within a
528	maximum period of time, not to exceed 1 year, to be established
529	by the commissioner at the time the conditional license is
530	issued.
531	(6)  The commissioner may prescribe additional capital or
532	net assets based upon the type, volume, and nature of insurance
533	business transacted. Contributions in connection with these
534	prescribed additional net assets or capital must be in the form
535	of:
536	(a)  Cash;
537	(b)  Cash equivalent;
538	(c)  An irrevocable letter of credit issued by a bank
539	chartered by this state or a member bank of the Federal Reserve
540	System with a branch office in this state, or as approved by the
541	commissioner; or
542	(d)  Securities invested as provided in part II of chapter
543	625.
544	(7)  In the case of a branch captive insurance company, as
545	security for the payment of liabilities attributable to branch
546	operations, the commissioner must require that a trust fund,
547	funded by an irrevocable letter of credit or other acceptable
548	asset, be established and maintained in the United States for
549	the benefit of United States policyholders and United States
550	ceding insurers under insurance policies issued or reinsurance
551	contracts issued or assumed, by the branch captive insurance
552	company through its branch operations. The amount of the
553	security may be no less than the capital and surplus required by
554	this chapter and the reserves on these insurance policies or
555	reinsurance contracts, including reserves for losses, allocated
556	loss adjustment expenses, incurred but not reported losses, and
557	unearned premiums with regard to business written through branch
558	operations. However, the commissioner may permit a branch
559	captive insurance company that is required to post security for
560	loss reserves on branch business by its reinsurer to reduce the
561	funds in the trust account required by this section by the same
562	amount as long as the security remains posted with the
563	reinsurer. If the form of security selected is a letter of
564	credit, the letter of credit must be established by, or issued
565	or confirmed by, a bank chartered in this state or a member bank
566	of the Federal Reserve System.
567	(8)(a)  A captive insurance company may not pay a dividend
568	out of, or other distribution with respect to, capital or
569	surplus in excess of the limitations set forth in this chapter
570	without the prior approval of the commissioner. Approval of an
571	ongoing plan for the payment of dividends or other distributions
572	must be conditioned upon the retention, at the time of each
573	payment, of capital or surplus in excess of amounts specified
574	by, or determined in accordance with formulas approved by, the
575	commissioner.
576	(b)  A captive insurance company incorporated as a
577	nonprofit corporation may not make any distributions without the
578	prior approval of the commissioner.
579	(9)  An irrevocable letter of credit, which is issued by a
580	financial institution other than a bank chartered by this state
581	or a member bank of the Federal Reserve System, must meet the
582	same standards as an irrevocable letter of credit which has been
583	issued by a bank chartered by this state or a member bank of the
584	Federal Reserve System.
585	Section 4.  Section 628.908, Florida Statutes, is created
586	to read:
587	628.908  Surplus requirements; restriction on payment of
588	dividends.-
589	(1)  The commissioner may not issue a license to a captive
590	insurance company unless the company possesses and maintains
591	unimpaired surplus of:
592	(a)  In the case of a pure captive insurance company, not
593	less than $150,000.
594	(b)  In the case of an association captive insurance
595	company incorporated as a stock insurer or organized as a
596	limited liability company, not less than $350,000.
597	(c)  In the case of an industrial insured captive insurance
598	company incorporated as a stock insurer or organized as a
599	limited liability company, not less than $300,000.
600	(d)  In the case of an association captive insurance
601	company incorporated as a mutual insurer, not less than
602	$750,000.
603	(e)  In the case of an industrial insured captive insurance
604	company incorporated as a mutual insurer, not less than
605	$500,000.
606	(f)  In the case of a sponsored captive insurance company,
607	not less than $500,000. However, if the sponsored captive
608	insurance company does not assume any risk, the risks insured by
609	the protected cells are homogeneous, and there are no more than
610	10 cells, the commissioner may reduce this amount to an amount
611	not less than $150,000.
612	(g)  In the case of a special purpose captive insurance
613	company, an amount determined by the commissioner after giving
614	due consideration to the company's business plan, feasibility
615	study, and pro forma financial statements and projections,
616	including the nature of the risks to be insured.
617	(2)(a)  Except for a sponsored captive insurance company
618	that does not assume any risk, the surplus must be in the form
619	of cash, cash equivalent, or an irrevocable letter of credit
620	issued by a bank chartered by this state or a member bank of the
621	Federal Reserve System with the branch office in this state and
622	approved by the commissioner.
623	(b)  For a sponsored captive insurance company that does
624	not assume any risk, the surplus may also be in the form of
625	other high-quality securities, as approved by the commissioner.
626	(3)  Notwithstanding the requirements of this section, a
627	captive insurance company organized as a reciprocal insurer
628	under this chapter may not be issued a license unless it
629	possesses and thereafter maintains unimpaired surplus of $1
630	million.
631	(4)  For purposes of subsections (1) and (2), the
632	commissioner may issue a license expressly conditioned upon the
633	captive insurance company providing to the commissioner
634	satisfactory evidence of possession of the minimum required
635	unimpaired surplus. Until this evidence is provided, the captive
636	insurance company may not issue any policy, assume any
637	liability, or otherwise provide coverage. The commissioner may
638	revoke the conditional license without legal recourse by the
639	company if satisfactory evidence of the required capital is not
640	provided within a maximum period of time, not to exceed 1 year,
641	to be established by the commissioner at the time the
642	conditional license is issued.
643	(5)  A captive insurance company may not pay a dividend out
644	of, or other distribution with respect to, capital or surplus in
645	excess of the limitations set forth in this chapter without the
646	prior approval of the commissioner. Approval of an ongoing plan
647	for the payment of dividends or other distribution must be
648	conditioned upon the retention, at the time of each payment, of
649	capital or surplus in excess of amounts specified by, or
650	determined in accordance with formulas approved by, the
651	commissioner.
652	(6)  An irrevocable letter of credit, which is issued by a
653	financial institution other than a bank chartered by this state
654	or a member bank of the Federal Reserve System, must meet the
655	same standards as an irrevocable letter of credit which has been
656	issued by a bank chartered by this state or a member bank of the
657	Federal Reserve System.
658	Section 5.  Section 628.909, Florida Statutes, is amended
659	to read:
660	628.909  Applicability of other laws.-
661	(1)  The Florida Insurance Code shall not apply to captive
662	insurers or industrial insured captive insurers except as
663	provided in this part and subsections (2) and (3).
664	(2)  The following provisions of the Florida Insurance Code
665	shall apply to captive insurers who are not industrial insured
666	captive insurers to the extent that such provisions are not
667	inconsistent with this part:
668	(a)  Chapter 624, except for ss. 624.407, 624.408,
669	624.4085, 624.40851, 624.4095, 624.425, and 624.426.
670	(b)  Chapter 625, part II.
671	(c)  Chapter 626, part IX.
672	(d)  Sections 627.730-627.7405, when no-fault coverage is
673	provided.
674	(e)  Chapter 628.
675	(3)  The following provisions of the Florida Insurance Code
676	shall apply to industrial insured captive insurers to the extent
677	that such provisions are not inconsistent with this part:
678	(a)  Chapter 624, except for ss. 624.407, 624.408,
679	624.4085, 624.40851, 624.4095, 624.425, 624.426, and 624.609(1).
680	(b)  Chapter 625, part II, if the industrial insured
681	captive insurer is incorporated in this state.
682	(c)  Chapter 626, part IX.
683	(d)  Sections 627.730-627.7405 when no-fault coverage is
684	provided.
685	(e)  Chapter 628, except for ss. 628.341, 628.351, and
686	628.6018.
687	Section 6.  Section 628.910, Florida Statutes, is created
688	to read:
689	628.910  Incorporation options and requirements.-
690	(1)  A pure captive insurance company or a sponsored
691	captive insurance company may be:
692	(a)  Incorporated as a stock insurer with its capital
693	divided into shares and held by the stockholders;
694	(b)  Incorporated as a public benefit, mutual benefit, or
695	religious nonprofit corporation with members in accordance with
696	the Florida Not For Profit Corporation Act; or
697	(c)  Organized as a limited liability company with its
698	capital divided into capital accounts and held by its members.
699	(2)  An association captive insurance company or an
700	industrial insured captive insurance company may be:
701	(a)  Incorporated as a stock insurer with its capital
702	divided into shares and held by the stockholders;
703	(b)  Organized as a limited liability company with its
704	capital divided into capital accounts and held by its members;
705	(c)  Incorporated as a mutual insurer without capital
706	stock, the governing body of which is elected by the member
707	organizations of its association; or
708	(d)  Organized as a reciprocal insurer in accordance with
709	chapter 629.
710	(3)  A captive insurance company may not have fewer than
711	three incorporators or organizers of whom not fewer than two
712	must be residents of this state.
713	(4)  In the case of a captive insurance company formed as a
714	corporation, a nonprofit corporation, or a limited liability
715	company, before the articles of incorporation or articles of
716	organization are transmitted to the Secretary of State, the
717	incorporators or organizers shall petition the commissioner to
718	issue a certificate setting forth a finding that the
719	establishment and maintenance of the proposed entity will
720	promote the general good of the state. In arriving at this
721	finding, the commissioner must consider:
722	(a)  The character, reputation, financial standing, and
723	purposes of the incorporators or organizers;
724	(b)  The character, reputation, financial responsibility,
725	insurance experience, and business qualifications of the
726	officers and directors or managers; and
727	(c)  Other aspects as the commissioner considers advisable.
728	(5)  The articles of incorporation or articles of
729	organization, the certificate issued pursuant to this section,
730	and the organization fees required by the Florida Business
731	Corporation Act or the Florida Not For Profit Corporation Act,
732	as applicable, must be transmitted to the Secretary of State,
733	who must record both the articles of incorporation or articles
734	of organization and the certificate.
735	(6)  In the case of a captive insurance company formed as a
736	reciprocal insurer, the organizers must petition the
737	commissioner to issue a certificate setting forth the
738	commissioner's finding that the establishment and maintenance of
739	the proposed association will promote the general good of the
740	state. In arriving at this finding, the commissioner must
741	consider:
742	(a)  The character, reputation, financial standing, and
743	purposes of the incorporators or organizers;
744	(b)  The character, reputation, financial responsibility,
745	insurance experience, and business qualifications of the
746	officers and directors or managers; and
747	(c)  Other aspects the commissioner considers advisable.
748	(7)  In the case of a captive insurance company licensed as
749	a branch captive insurance company, the alien captive insurance
750	company must petition the commissioner to issue a certificate
751	setting forth the commissioner's finding that, after considering
752	the character, reputation, financial responsibility, insurance
753	experience, and business qualifications of the officers and
754	directors or managers of the alien captive insurance company,
755	the licensing and maintenance of the branch operations will
756	promote the general good of the state. The alien captive
757	insurance company may register to do business in this state
758	after the commissioner's certificate has been issued.
759	(8)  The capital stock or membership interests of a captive
760	insurance company incorporated as a stock insurer or limited
761	liability company must be issued at not less than par value.
762	(9)  In the case of a captive insurance company formed as a
763	corporation or a nonprofit corporation, at least one of the
764	members of the board of directors of a captive insurance company
765	incorporated in this state must be a resident of this state.
766	(10)  In the case of a captive insurance company formed as
767	a limited liability company, at least one of the managers of the
768	captive insurance company must be a resident of this state.
769	(11)  In the case of a captive insurance company formed as
770	a reciprocal insurer, at least one of the members of the
771	subscribers' advisory committee must be a resident of this
772	state.
773	(12)  A captive insurance company formed as a corporation,
774	a nonprofit corporation, or a limited liability company,
775	pursuant to the provisions of this chapter, has the privileges
776	and is subject to the provisions of the general corporation law,
777	including the Florida Not For Profit Corporation Act for
778	nonprofit corporations and the Florida Limited Liability Company
779	Act for limited liability companies, as applicable, as well as
780	the applicable provisions contained in this chapter. If a
781	conflict occurs between a provision of the general corporation
782	law, including the Florida Not For Profit Corporation Act for
783	nonprofit corporations and the Florida Limited Liability Company
784	Act for limited liability companies, as applicable, and a
785	provision of this chapter, the latter controls. The provisions
786	of this title pertaining to mergers, consolidations,
787	conversions, mutualizations, and redomestications apply in
788	determining the procedures to be followed by a captive insurance
789	company in carrying out any of the transactions described in
790	such provisions, except the commissioner may waive or modify the
791	requirements for public notice and hearing in accordance with
792	regulations which the commissioner may adopt addressing
793	categories of transactions. If a notice of public hearing is
794	required, but no one requests a hearing, the commissioner may
795	cancel the hearing.
796	(13)  A captive insurance company formed as a reciprocal
797	insurer pursuant to the provisions of this chapter has the
798	privileges and is subject to chapter 629 in addition to the
799	applicable provisions of this part. If a conflict occurs between
800	the provisions of chapter 629 and the provisions of this part,
801	the latter controls. To the extent a reciprocal insurer is made
802	subject to other provisions of this title pursuant to chapter
803	629, the provisions are not applicable to a reciprocal insurer
804	formed pursuant to the provisions of this chapter unless the
805	provisions are expressly made applicable to a captive insurance
806	company pursuant to the provisions of this chapter.
807	(14)  The articles of incorporation or bylaws of a captive
808	insurance company may authorize a quorum of a board of directors
809	to consist of no fewer than one-third of the fixed or prescribed
810	number of directors as provided for by the Florida Business
811	Corporation Act or the Florida Not For Profit Corporation Act.
812	In the case of a limited liability company, the articles of
813	organization or operating agreement of a captive insurance
814	company may authorize a quorum to consist of no fewer than one-
815	third of the managers required by the articles of organization
816	or the operating agreement.
817	Section 7.  Section 628.911, Florida Statutes, is amended
818	to read:
819	628.911  Reports and statements.-
820	(1)  A captive insurance company may insurer shall not be
821	required to make any annual report except as provided in this
822	part section.
823	(2)  Annually before March 1, a captive insurance company
824	or a captive reinsurance company insurer shall, within 60 days
825	after the end of its fiscal year and as often as the office may
826	deem necessary, submit to the commissioner office a report of
827	its financial condition verified by oath of two of its executive
828	officers. Except as provided in this part, a captive insurance
829	company or a captive reinsurance company must report using
830	generally accepted accounting principles, unless the
831	commissioner approves the use of statutory accounting
832	principles, with useful or necessary modifications or
833	adaptations required or approved or accepted by the commissioner
834	for the type of insurance and kinds of insurers to be reported
835	upon, and as supplemented by additional information required by
836	the commissioner. The Financial Services Commission may adopt by
837	rule the form in which captive insurance companies insurers
838	shall report.
839	(3)(a)  A pure captive insurance company may make written
840	application for filing the required report on a fiscal year-end
841	that is consistent with the parent company's fiscal year. If an
842	alternative reporting date is granted, the annual report is due
843	60 days after the fiscal year-end.
844	(b)  In order to provide sufficient detail to support the
845	premium tax return, the pure captive insurance company must file
846	before March 1 of each year for each calendar year-end pages 1-7
847	of the NAIC Annual Statement, verified by oath of two of its
848	executive officers.
849	(4)  Sixty days after the fiscal year end, a branch captive
850	insurance company must file with the commissioner a copy of all
851	reports and statements required to be filed under the laws of
852	the jurisdiction in which the alien captive insurance company is
853	formed, verified by oath by two of its executive officers. If
854	the commissioner is satisfied that the annual report filed by
855	the alien captive insurance company in its domiciliary
856	jurisdiction provides adequate information concerning the
857	financial condition of the alien captive insurance company, the
858	commissioner may waive the requirement for completion of the
859	captive annual statement for business written in the alien
860	jurisdiction. Such waiver must be in writing and subject to
861	public inspection.
862	Section 8.  Section 628.912, Florida Statutes, is created
863	to read:
864	628.912  Discounting of loss and loss adjustment expense
865	reserves.-
866	(1)  A sponsored captive insurance company and a captive
867	reinsurance company may discount its loss and loss adjustment
868	expense reserves at treasury rates applied to the applicable
869	payments projected through the use of the expected payment
870	pattern associated with the reserves.
871	(2)  A sponsored captive insurance company and a captive
872	reinsurance company must file annually an actuarial opinion on
873	loss and loss adjustment expense reserves provided by an
874	independent actuary. The actuary may not be an employee of the
875	captive company or its affiliates.
876	(3)  The commissioner may disallow the discounting of
877	reserves if a sponsored captive insurance company or a captive
878	reinsurance company violates a provision of this part.
879	Section 9.  Section 628.913, Florida Statutes, is amended
880	to read:
881	(Substantial rewording of section. See
882	s. 628.913, F.S., for present text.)
883	628.913  Captive reinsurance companies.-
884	(1)  A captive reinsurance company, if permitted by its
885	articles of incorporation or charter, may apply to the
886	commissioner for a license to write reinsurance covering
887	property and casualty insurance or reinsurance contracts. A
888	captive reinsurance company authorized by the commissioner may
889	write reinsurance contracts covering risks in any state.
890	(2)  To conduct business in this state, a captive
891	reinsurance company must:
892	(a)  Obtain from the commissioner a license authorizing it
893	to conduct business as a captive reinsurance company in this
894	state;
895	(b)  Hold at least one board of directors' meeting each
896	year in this state;
897	(c)  Maintain its principal place of business in this
898	state; and
899	(d)  Appoint a registered agent to accept service of
900	process and act otherwise on its behalf in this state.
901	(3)  Before receiving a license, a captive reinsurance
902	company must file with the commissioner:
903	(a)  A certified copy of its charter and bylaws;
904	(b)  A statement under oath of its president and secretary
905	showing its financial condition; and
906	(c)  Other documents required by the commissioner.
907	(4)  In addition to the information required by this
908	section, the captive reinsurance company must file with the
909	commissioner evidence of:
910	(a)  The amount and liquidity of the captive reinsurance
911	company's assets relative to the risks to be assumed;
912	(b)  The adequacy of the expertise, experience, and
913	character of the person who manages the company;
914	(c)  The overall soundness of the company's plan of
915	operation; and
916	(d)  Other overall factors considered relevant by the
917	commissioner in ascertaining if the company would be able to
918	meet its policy obligations.
919	Section 10.  Section 628.914, Florida Statutes, is created
920	to read:
921	628.914  Minimum capitalization or reserves for captive
922	reinsurance companies.-
923	(1)  The commissioner may not issue a license to a captive
924	reinsurance company unless the company possesses and maintains
925	capital or unimpaired surplus of not less than the greater of
926	$300 million or 10 percent of reserves. The surplus may be in
927	the form of cash or securities.
928	(2)  The commissioner may prescribe additional capital or
929	surplus based upon the type, volume, and nature of the insurance
930	business transacted.
931	(3)  A captive reinsurance company may not pay a dividend
932	out of, or other distribution with respect to, capital or
933	surplus in excess of the limitations without the prior approval
934	of the commissioner. Approval of an ongoing plan for the payment
935	of dividends or other distributions must be conditioned upon the
936	retention, at the time of each payment, of capital or surplus in
937	excess of amounts specified by, or determined in accordance with
938	formulas approved by, the commissioner.
939	Section 11.  Section 628.9141, Florida Statutes, is created
940	to read:
941	628.9141  Incorporation of a captive reinsurance company.-
942	(1)  A captive reinsurance company must be incorporated as
943	a stock insurer with its capital divided into shares and held by
944	its shareholders.
945	(2)  A captive reinsurance company may not have fewer than
946	three incorporators of whom at least two must be residents of
947	this state.
948	(3)  Before the articles of incorporation are transmitted
949	to the Secretary of State, the incorporators shall petition the
950	commissioner to issue a certificate finding that the
951	establishment and maintenance of the proposed corporation
952	promotes the general good of this state. In arriving at this
953	finding, the commissioner must consider:
954	(a)  The character, reputation, financial standing, and
955	purposes of the incorporators;
956	(b)  The character, reputation, financial responsibility,
957	insurance experience, and business qualifications of the
958	officers and directors; and
959	(c)  Other factors the commissioner considers advisable.
960	(4)  The capital stock of a captive reinsurance company
961	must be issued at par value or greater.
962	(5)  At least one of the members of the board of directors
963	of a captive reinsurance company incorporated in this state must
964	be a resident of this state.
965	Section 12.  Section 628.9142, Florida Statutes, is created
966	to read:
967	628.9142  Reinsurance; effect on reserves.-
968	(1)  A captive insurance company may provide reinsurance,
969	as authorized in this part, on risks ceded by any other insurer.
970	(2)  A captive insurance company may take credit for
971	reserves on risks or portions of risks ceded to authorized
972	insurers or reinsurers and unauthorized insurers or reinsurers
973	complying with the provisions of s. 624.610. A captive insurer
974	may not take credit for reserves on risks or portions of risks
975	ceded to an unauthorized insurer or reinsurer if the insurer or
976	reinsurer is not in compliance with s. 624.610.
977	Section 13.  Section 628.9143, Florida Statutes, is created
978	to read:
979	628.9143  Annual captive reinsurance tax.-
980	(1)  A captive reinsurance company must pay to the office
981	by March 1 of each year a captive reinsurance tax of $5,000.
982	(2)  The tax provided in this section is the only tax
983	collectible under the laws of this state from a captive
984	reinsurance company, and no tax on reinsurance premiums, other
985	than occupation tax, nor any other taxes, except ad valorem
986	taxes on real and personal property used in the production of
987	income, may be levied or collected from a captive reinsurance
988	company by the state or a county, city, or municipality within
989	this state.
990	(3)  A captive reinsurance company failing to make returns
991	or to pay all taxes required by this section is subject to
992	sanctions provided in this part.
993	Section 14.  Section 628.918, Florida Statutes, is created
994	to read:
995	628.918  Management of assets of captive reinsurance
996	company.-At least 35 percent of the assets of a captive
997	reinsurance company must be managed by an asset manager
998	domiciled in this state.
999	Section 15.  Section 628.919, Florida Statutes, is created
1000	to read:
1001	628.919  Regulations establishing standards to ensure risk
1002	management control by parent company.-The Financial Services
1003	Commission shall adopt rules establishing standards to ensure
1004	that a parent or affiliated company is able to exercise control
1005	of the risk management function of any controlled unaffiliated
1006	business to be insured by the pure captive insurance company.
1007	Section 16.  Section 628.920, Florida Statutes, is created
1008	to read:
1009	628.920  Conversion of certain stock, mutual corporations,
1010	or limited liability companies into reciprocal insurers; plan
1011	for conversion.-
1012	(1)  An association captive insurance company or industrial
1013	insured group formed as a stock or mutual corporation or a
1014	limited liability company may be converted to or merged with and
1015	into a reciprocal insurer in accordance with a plan and the
1016	provisions of this section.
1017	(2)  A plan for this conversion or merger:
1018	(a)  Must be fair and equitable to the:
1019	1.  Shareholders, in the case of a stock insurer;
1020	2.  Members, in the case of a limited liability company; or
1021	3.  Policyholders, in the case of a mutual insurer; and
1022	(b)  Must provide for the purchase of the shares of any
1023	nonconsenting shareholder of a stock insurer, of the member
1024	interest of any nonconsenting member of a limited liability
1025	company, of the policyholder interest of any nonconsenting
1026	policyholder of a mutual insurer in substantially the same
1027	manner and subject to the same rights and conditions as are
1028	accorded a dissenting shareholder, dissenting member, or a
1029	dissenting policyholder pursuant to the provisions of this
1030	chapter, provided the merger of a limited liability company
1031	requires the consent of all members unless waived in an
1032	operating agreement signed by all of the members of the limited
1033	liability company.
1034	(3)  In the case of a conversion authorized under this
1035	section:
1036	(a)  The conversion must be accomplished under a reasonable
1037	plan and procedure as may be approved by the commissioner.
1038	However, the commissioner may not approve the plan of conversion
1039	unless the plan:
1040	1.  Satisfies the provisions of this section;
1041	2.  Provides for a hearing, of which notice has been given
1042	to the insurer, its directors, officers, and stockholders, in
1043	the case of a stock insurer; members and managers, in the case
1044	of a limited liability company; or policyholders, in the case of
1045	a mutual insurer, all of whom have the right to appear at the
1046	hearing, except that the director may waive or modify the
1047	requirements for the hearing. However, if a notice of hearing is
1048	required, but no hearing is requested, the commissioner may
1049	cancel the hearing;
1050	3.  Provides for the conversion of existing stockholder,
1051	member, or policyholder interests into subscriber interests in
1052	the resulting reciprocal insurer, proportionate to stockholder,
1053	member, or policyholder interests in the stock or mutual insurer
1054	or limited liability company; and
1055	4.  Is approved:
1056	a.  In the case of a stock insurer or limited liability
1057	company, by a majority of the shares or interests entitled to
1058	vote represented in person or by proxy at a duly called regular
1059	or special meeting at which a quorum is present;
1060	b.  In the case of a mutual insurer, by a majority of the
1061	voting interests of policyholders represented in person or by
1062	proxy at a duly called regular or special meeting at which a
1063	quorum is present;
1064	(b)  The commissioner shall approve the plan of conversion
1065	if the commissioner finds that the conversion will promote the
1066	general good of the state in conformity with those standards
1067	provided in this part;
1068	(c)  If the commissioner approves the plan, the
1069	commissioner must amend the converting insurer's certificate of
1070	authority to reflect conversion to a reciprocal insurer and
1071	issue the amended certificate of authority to the company's
1072	attorney-in-fact;
1073	(d)  Upon issuance of an amended certificate of authority
1074	of a reciprocal insurer by the commissioner, the conversion is
1075	effective; and
1076	(e)  Upon the effectiveness of the conversion, the
1077	corporate existence of the converting insurer must cease and the
1078	resulting reciprocal insurer must notify the Secretary of State
1079	of the conversion.
1080	(4)  A merger authorized pursuant to the provisions of this
1081	section must be accomplished substantially in accordance with
1082	the procedures provided in this part, except that, only for
1083	purposes of the merger:
1084	(a)  The plan or merger must satisfy the requirements of
1085	subsection (2);
1086	(b)  The subscribers' advisory committee of a reciprocal
1087	insurer must be equivalent to the board of directors of a stock
1088	or mutual insurance company or the managers of a limited
1089	liability company;
1090	(c)  The subscribers of a reciprocal insurer must be the
1091	equivalent of the policyholders of a mutual insurance company;
1092	(d)  If a subscribers' advisory committee does not have a
1093	president or secretary, the officers of the committee having
1094	substantially equivalent duties are considered the president and
1095	secretary of the committee;
1096	(e)  The commissioner must approve the articles of merger
1097	if the commissioner finds that the merger will promote the
1098	general good of the state in conformity with those standards
1099	provided in this part. If the commissioner approves the articles
1100	of merger, the commissioner must endorse his or her approval on
1101	the articles and the surviving insurer must present the
1102	endorsement of the commissioner to the Secretary of State at the
1103	Secretary of State's office;
1104	(f)  Notwithstanding the provisions of this part, the
1105	commissioner may permit the formation, without surplus, of a
1106	captive insurance company organized as a reciprocal insurer,
1107	into which an existing captive insurance company may be merged
1108	for the purpose of facilitating a transaction provided for in
1109	this section. However, there may be no more than one authorized
1110	insurance company surviving the merger; and
1111	(g)  An alien insurer may be a party to a merger authorized
1112	pursuant to the provisions of subsection (1) if the requirements
1113	for the merger between a domestic and a foreign insurer pursuant
1114	to the provisions of this chapter apply to a merger between a
1115	domestic and an alien insurer provided by this subsection. The
1116	alien insurer must be treated as a foreign insurer pursuant to
1117	the provisions of this chapter and other jurisdictions must be
1118	the equivalent of a state.
1119	Section 17.  Section 628.921, Florida Statutes, is created
1120	to read:
1121	628.921  Formation of sponsored captive insurance company;
1122	establishing protected cells.-
1123	(1)  One or more sponsors may form a sponsored captive
1124	insurance company under this part.
1125	(2)  A sponsored captive insurance company formed or
1126	licensed under this part may establish and maintain one or more
1127	protected cells to insure risks of one or more participants,
1128	subject to the following conditions:
1129	(a)  The shareholders of a sponsored captive insurance
1130	company must be limited to its participants and sponsors;
1131	(b)  Each protected cell must be accounted for separately
1132	on the books and records of the sponsored captive insurance
1133	company to reflect the financial condition and results of
1134	operations of the protected cell, net income or loss, dividends
1135	or other distributions to participants, and other factors that
1136	may be provided in the participant contract or required by the
1137	commissioner;
1138	(c)  The assets of a protected cell must not be chargeable
1139	with liabilities arising out of any other insurance business the
1140	sponsored captive insurance company may conduct;
1141	(d)  Sale, exchange, or other transfer of assets may not be
1142	made by the sponsored captive insurance company between or among
1143	any of its protected cells without the consent of the protected
1144	cells;
1145	(e)  Sale, exchange, transfer of assets, dividend, or
1146	distribution may not be made from a protected cell to a sponsor
1147	or participant without the commissioner's approval, nor may the
1148	approval be given if the sale, exchange, transfer, dividend, or
1149	distribution would result in insolvency or impairment with
1150	respect to a protected cell;
1151	(f)  A sponsored captive insurance company must annually
1152	file with the commissioner financial reports the commissioner
1153	requires, which must include, but are not limited to, accounting
1154	statements detailing the financial experience of each protected
1155	cell;
1156	(g)  A sponsored captive insurance company must notify the
1157	commissioner in writing within 10 business days after a
1158	protected cell becomes insolvent or otherwise unable to meet its
1159	claim or expense obligations; and
1160	(h)  A participant contract may not take effect without the
1161	commissioner's prior written approval, and the addition of each
1162	new protected cell and withdrawal of any participant of any
1163	existing protected cell constitutes a change in the business
1164	plan, which requires the commissioner's prior written approval.
1165	Section 18.  Section 628.922, Florida Statutes, is created
1166	to read:
1167	628.922  Requirements applicable to sponsors.-A sponsor of
1168	a sponsored captive insurance company must be an insurer
1169	licensed pursuant to the laws of a state, an insurance holding
1170	company that controls an insurer licensed under the laws of any
1171	state and subject to registration under the insurance holding
1172	company system laws of the state of domicile of the insurer, a
1173	reinsurer authorized or approved under the laws of a state, or a
1174	captive insurance company formed or licensed under this chapter.
1175	A risk retention group may not be either a sponsor or a
1176	participant of a sponsored captive insurance company. The
1177	business written by a sponsored captive insurance company with
1178	respect to each protected cell must be:
1179	(1)  Fronted by an insurance company licensed under the
1180	laws of:
1181	(a)  Any state; or
1182	(b)  Any jurisdiction if the insurance company is a wholly
1183	owned subsidiary of an insurance company licensed under the laws
1184	of any state;
1185	(2)  Reinsured by a reinsurer authorized or approved by
1186	this state; or
1187	(3)  Secured by a trust fund in the United States for the
1188	benefit of policyholders and claimants funded by an irrevocable
1189	letter of credit or other asset acceptable to the commissioner.
1190	The amount of security provided by the trust fund may not be
1191	less than the reserves associated with those liabilities,
1192	including reserves for losses, allocated loss adjustment
1193	expenses, incurred but unreported losses, and unearned premiums
1194	for business written through the participant's protected cell.
1195	The commissioner may require the sponsored captive to increase
1196	the funding of a trust established under this subsection. If the
1197	form of security in the trust is a letter of credit, the letter
1198	of credit must be established, issued, or confirmed by a bank
1199	chartered in this state, a member of the Federal Reserve System,
1200	or a bank chartered by another state if that state-chartered
1201	bank is acceptable to the commissioner. A trust and trust
1202	instrument maintained under this subsection must be in a form
1203	and upon terms approved by the commissioner.
1204	Section 19.  Section 628.923, Florida Statutes, is created
1205	to read:
1206	628.923  Participants in sponsored captive insurance
1207	companies.-
1208	(1)  An association, a corporation, a limited liability
1209	company, a partnership, a trust, or another business entity may
1210	be a participant in a sponsored captive insurance company formed
1211	or licensed under this part.
1212	(2)  A sponsor may be a participant in a sponsored captive
1213	insurance company.
1214	(3)  A participant need not be a shareholder of the
1215	sponsored captive insurance company or an affiliate of the
1216	company.
1217	(4)  A participant may insure only its own risks through a
1218	sponsored captive insurance company, unless otherwise approved
1219	by the commissioner.
1220	Section 20.  Section 628.924, Florida Statutes, is created
1221	to read:
1222	628.924  Eligibility of licensed captive insurance company
1223	for certificate of authority to act as insurer.-A licensed
1224	captive insurance company that meets the necessary requirements
1225	of this part imposed upon an insurer must be considered for
1226	issuance of a certificate of authority to act as an insurer in
1227	this state.
1228	Section 21.  This act shall take effect July 1, 2011.

CODING: Words stricken are deletions; words underlined are additions.