HB 379

1
A bill to be entitled
2An act relating to captive insurance; amending s.
3628.901, F.S.; providing definitions; amending s.
4628.905, F.S.; expanding the kinds of insurance for
5which a captive insurer may seek licensure; limiting
6the risks that certain captive insurers may insure;
7specifying requirements and conditions relating to a
8captive insurer's authority to conduct business;
9requiring that before licensure certain captive
10insurers must file or submit to the Office of
11Insurance Regulation specified information, documents,
12and statements; requiring a captive insurance company
13to file specific evidence with the office relating to
14the financial condition and quality of management and
15operations of the company; authorizing a foreign or
16alien captive insurance company to become a domestic
17captive insurance company by complying with specified
18requirements; authorizing the office to waive any
19requirements for public hearings relating to the
20redomestication of an alien captive insurance company;
21amending s. 628.907, F.S.; revising capitalization
22requirements for specified captive insurance
23companies; requiring capital of specified captive
24insurance companies to be held in certain forms;
25requiring contributions to captive insurance companies
26that are stock insurer corporations to be in a certain
27form; authorizing the office to issue a captive
28insurance company license conditioned upon certain
29evidence relating to possession of specified capital;
30authorizing revocation of a conditional license under
31certain circumstances; authorizing the office to
32prescribe certain additional capital and net asset
33requirements; requiring such additional requirements
34relating to capital and net assets to be held in
35specified forms; requiring dividends or distributions
36of capital or surplus to meet certain conditions and
37be approved by the office; requiring certain
38irrevocable letters of credit to meet certain
39standards; creating s. 628.908, F.S.; prohibiting the
40issuance of a license to specified captive insurance
41companies unless such companies possess and maintain
42certain levels of unimpaired surplus; authorizing the
43office to condition issuance of a captive insurance
44company license upon the provision of certain evidence
45relating to the possession of a minimum amount of
46unimpaired surplus; authorizing revocation of a
47conditional license under certain circumstances;
48requiring dividends or distributions of capital or
49surplus to meet certain conditions and be approved by
50the office; requiring certain irrevocable letters of
51credit to meet certain standards; amending s. 628.909,
52F.S.; providing for applicability of certain statutory
53provisions to specified captive insurers; creating s.
54628.910, F.S.; providing requirements, options, and
55conditions relating to how a captive insurance company
56may be incorporated or organized as a business;
57amending s. 628.911, F.S.; providing reporting
58requirements for specified captive insurance companies
59and captive reinsurance companies; creating s.
60628.912, F.S.; authorizing a captive reinsurance
61company to discount specified losses subject to
62certain conditions; amending s. 628.913, F.S.;
63authorizing a captive reinsurance company to apply to
64the office for licensure to write reinsurance covering
65property and casualty insurance or reinsurance
66contracts; authorizing the office to allow a captive
67reinsurance company to write reinsurance contracts
68covering risks in any state; specifying that a captive
69reinsurance company is subject to specified
70requirements and must meet specified conditions to
71conduct business in this state; creating s. 628.914,
72F.S.; specifying requirements and conditions relating
73to the capitalization or maintenance of reserves by a
74captive reinsurance company; creating s. 628.9141,
75F.S.; specifying requirements and conditions relating
76to the incorporation of a captive reinsurance company;
77creating s. 628.9142, F.S.; providing for the effect
78on reserves of certain actions taken by a captive
79insurance company relating to providing reinsurance
80for specified risks; creating s. 628.9143, F.S.;
81requiring a captive reinsurance company to annually
82pay a specified tax amount; prohibiting any other
83taxation of a captive reinsurance company other than
84an occupation tax and certain ad valorem taxes;
85subjecting a captive reinsurance company to sanctions
86for failures relating to the payment of taxes;
87creating s. 628.918, F.S.; requiring a specified
88percentage of a captive reinsurance company's assets
89to be managed by an asset manager domiciled in this
90state; creating s. 628.919, F.S.; authorizing the
91Financial Services Commission to adopt rules
92establishing certain standards for control of an
93unaffiliated business by a parent or affiliated
94company relating to coverage by a pure captive
95insurance company; creating s. 628.920, F.S.;
96requiring that a licensed captive insurance company
97must be considered for issuance of a certificate of
98authority as an insurer under certain circumstances;
99amending s. 626.7491, F.S.; conforming a cross-
100reference; repealing s. 628.903, F.S., relating to
101"industrial insured captive insurer" defined, to
102conform to changes made by this act; providing an
103effective date.
104
105Be It Enacted by the Legislature of the State of Florida:
106
107     Section 1.  Section 628.901, Florida Statutes, is amended
108to read:
109     628.901  Definitions "Captive insurer" defined.-As used in
110For the purposes of this part, unless the context requires
111otherwise, the term: except as provided in s. 628.903, a
112"captive insurer" is a domestic insurer established under part I
113to insure the risks of a specific corporation or group of
114corporations under common ownership owned by the corporation or
115corporations from which it accepts risk under a contract of
116insurance.
117     (1)  "Affiliated company" means a company in the same
118corporate system as a parent, an industrial insured, or a member
119organization by virtue of common ownership, control, operation,
120or management.
121     (2)  "Association" means a legal association of
122individuals, corporations, limited liability companies,
123partnerships, political subdivisions, or associations that has
124been in continuous existence for at least 1 year, the member
125organizations of which collectively, or which does itself:
126     (a)  Own, control, or hold with power to vote all of the
127outstanding voting securities of an association captive
128insurance company incorporated as a stock insurer; or
129     (b)  Have complete voting control over an association
130captive insurance company organized as a mutual insurer.
131     (3)  "Association captive insurance company" means a
132company that insures risks of the member organizations of the
133association and their affiliated companies.
134     (4)  "Captive insurance company" means a pure captive
135insurance company, association captive insurance company,
136captive reinsurance company, special purpose captive insurance
137company, or industrial insured captive insurance company formed
138or licensed under this chapter.
139     (5)  "Captive reinsurance company" means a reinsurance
140company that is formed or licensed under this chapter and is
141wholly owned by a qualifying reinsurance parent company. A
142captive reinsurance company is a stock corporation.
143     (6)  "Consolidated debt to total capital ratio" means the
144ratio of the sum of all debts and hybrid capital instruments as
145described in paragraph (a) to total capital as described in
146paragraph (b).
147     (a)  Debts and hybrid capital instruments include, but are
148not limited to, all borrowings from banks, all senior debt, all
149subordinated debts, all trust preferred shares, and all other
150hybrid capital instruments that are not included in the
151determination of consolidated GAAP net worth issued and
152outstanding.
153     (b)  Total capital consists of all debts and hybrid capital
154instruments as described in paragraph (a) plus owners' equity
155determined in accordance with GAAP for reporting to the United
156States Securities and Exchange Commission.
157     (7)  "Consolidated GAAP net worth" means the consolidated
158owners' equity determined in accordance with generally accepted
159accounting principles for reporting to the United States
160Securities and Exchange Commission.
161     (8)  "Controlled unaffiliated business" means a company:
162     (a)  That is not in the corporate system of a parent and
163affiliated companies;
164     (b)  That has an existing contractual relationship with a
165parent or affiliated company; and
166     (c)  Whose risks are managed by a captive insurance company
167in accordance with s. 628.919.
168     (9)  "GAAP" means generally accepted accounting principles.
169     (10)  "Industrial insured" means an insured that:
170     (a)  Has gross assets in excess of $50 million;
171     (b)  Procures insurance through the use of a full-time
172employee of the insured who acts as an insurance manager or
173buyer or through the services of a person licensed as a property
174and casualty insurance agent, broker, or consultant in such
175person's state of domicile;
176     (c)  Has at least 100 full-time employees; and
177     (d)  Pays annual premiums of at least $200,000 for each
178line of insurance purchased from the industrial insured captive
179insurer or at least $75,000 for any line of coverage in excess
180of at least $25 million in the annual aggregate. The purchase of
181umbrella or general liability coverage in excess of $25 million
182in the annual aggregate shall be deemed to be the purchase of a
183single line of insurance.
184     (11)  "Industrial insured captive insurance company" means
185a company that insures risks of the industrial insureds that
186comprise the industrial insured group and their affiliated
187companies.
188     (12)  "Member organization" means any individual,
189corporation, limited liability company, partnership, or
190association that belongs to an association.
191     (13)  "Office" means the Office of Insurance Regulation.
192     (14)  "Parent" means any corporation, limited liability
193company, partnership, or individual that directly or indirectly
194owns, controls, or holds with power to vote more than 50 percent
195of the outstanding voting interests of a captive insurance
196company.
197     (15)  "Pure captive insurance company" means a company that
198insures risks of its parent, affiliated companies, controlled
199unaffiliated businesses, or a combination thereof.
200     (16)  "Qualifying reinsurer parent company" means a
201reinsurer authorized to write reinsurance by this state that has
202a consolidated GAAP net worth of not less than $500 million and
203a consolidated debt to total capital ratio of not greater than
2040.50.
205     (17)  "Special purpose captive insurance company" means a
206captive insurance company that is formed or licensed under this
207chapter that does not meet the definition of any other type of
208captive insurance company defined in this section.
209     (18)  "Treasury rates" means the United States Treasury
210STRIPS asked yield as published in the Wall Street Journal as of
211a balance sheet date.
212     Section 2.  Section 628.905, Florida Statutes, is amended
213to read:
214     628.905  Licensing; authority.-
215     (1)  Any captive insurer, when permitted by its charter or
216articles of incorporation, may apply to the office for a license
217to do any and all insurance authorized under the insurance code,
218provide commercial property, commercial casualty, and commercial
219marine insurance coverage other than workers' compensation and
220health employer's liability insurance coverage, except that: an
221industrial insured captive insurer may apply for a license to
222provide workers' compensation and employer's liability insurance
223as set forth in subsection (6).
224     (a)  A pure captive insurance company may not insure any
225risks other than those of its parent, affiliated companies,
226controlled unaffiliated businesses, or a combination thereof.
227     (b)  An association captive insurance company may not
228insure any risks other than those of the member organizations of
229its association and their affiliated companies.
230     (c)  An industrial insured captive insurance company may
231not insure any risks other than those of the industrial insureds
232that comprise the industrial insured group and their affiliated
233companies.
234     (d)  A special purpose captive insurance company may only
235insure the risks of its parent.
236     (e)  A captive insurance company may not provide personal
237motor vehicle or homeowners' insurance coverage or any component
238of such coverages.
239     (f)  A captive insurance company may not accept or cede
240reinsurance except as provided in this part.
241     (2)  To conduct insurance business in this state, a No
242captive insurer, other than an industrial insured captive
243insurer, shall: insure or accept reinsurance on any risks other
244than those of its parent and affiliated companies.
245     (a)  Obtain from the office a license authorizing it to
246conduct insurance business in this state;
247     (b)  Hold at least one board of directors' meeting each
248year in this state;
249     (c)  Maintain its principal place of business in this
250state; and
251     (d)  Appoint a resident registered agent to accept service
252of process and to otherwise act on its behalf in this state. In
253the case of a captive insurance company formed as a corporation
254or a nonprofit corporation, whenever the registered agent cannot
255with reasonable diligence be found at the registered office of
256the captive insurance company, the Chief Financial Officer of
257this state must be an agent of the captive insurance company
258upon whom any process, notice, or demand may be served.
259     (3)(a)  Before receiving a license, a captive insurance
260company formed as a corporation or a nonprofit corporation must
261file with the office a certified copy of its articles of
262incorporation and bylaws, a statement under oath of its
263president and secretary showing its financial condition, and any
264other statements or documents required by the office.
265     (b)  In addition to the information required by paragraph
266(a), an applicant captive insurance company must file with the
267office evidence of:
268     1.  The amount and liquidity of the proposed captive
269insurance company's assets relative to the risks to be assumed;
270     2.  The adequacy of the expertise, experience, and
271character of the person or persons who will manage the company;
272     3.  The overall soundness of the company's plan of
273operation;
274     4.  The adequacy of the loss prevention programs of the
275company's parent, member organizations, or industrial insureds,
276as applicable; and
277     5.  Any other factors considered relevant by the office in
278ascertaining whether the company will be able to meet its policy
279obligations In addition to information otherwise required by
280this code, each applicant captive insurer shall file with the
281office evidence of the adequacy of the loss prevention program
282of its insureds.
283     (4)  Upon approval of the office, a foreign or alien
284captive insurance company may become a domestic captive
285insurance company by complying with all of the requirements of
286law relative to the organization and licensing of a domestic
287captive insurance company of the same or equivalent type in this
288state and by filing with the Secretary of State its articles of
289association, charter, or other organizational documents,
290together with any appropriate amendments that have been adopted
291in accordance with the laws of this state to bring the articles
292of association, charter, or other organizational documents into
293compliance with the laws of this state, along with a certificate
294of good standing issued by the office. After this is
295accomplished, the captive insurance company is entitled to the
296necessary or appropriate certificates and licenses to continue
297transacting business in this state and is subject to the
298authority and jurisdiction of this state. In connection with
299this redomestication, the office may waive any requirements for
300public hearings. It is not necessary for a captive insurance
301company redomesticating into this state to merge, consolidate,
302transfer assets, or otherwise engage in any other
303reorganization, other than as specified in this section An
304industrial insured captive insurer need not be incorporated in
305this state if it has been validly incorporated under the laws of
306another jurisdiction.
307     (5)  An industrial insured captive insurer is subject to
308all provisions of this part except as otherwise indicated.
309     (6)  An industrial insured captive insurer may not provide
310workers' compensation and employer's liability insurance except
311in excess of at least $25 million in the annual aggregate.
312     Section 3.  Section 628.907, Florida Statutes, is amended
313to read:
314     628.907  Minimum capital and net assets requirements;
315restriction on payment of dividends surplus.-
316     (1)  A No captive insurer may not shall be issued a license
317unless it possesses and thereafter maintains unimpaired paid-in
318capital of:
319     (a)(1)  In the case of a pure captive insurance company,
320not less than $100,000. Unimpaired paid-in capital of at least
321$500,000; and
322     (b)(2)  In the case of an association captive insurance
323company incorporated as a stock insurer, not less than $400,000
324Unimpaired surplus of at least $250,000.
325     (c)  In the case of an industrial insured captive insurance
326company incorporated as a stock insurer, not less than $200,000.
327     (d)  In the case of a special purpose captive insurance
328company, an amount determined by the office after giving due
329consideration to the company's business plan, feasibility study,
330and pro forma financial statements and projections, including
331the nature of the risks to be insured.
332     (2)  The office may not issue a license to a captive
333insurance company incorporated as a stock insurer unless the
334company possesses and maintains unrestricted net assets of:
335     (a)  In the case of a pure captive insurance company, not
336less than $250,000.
337     (b)  In the case of a special purpose captive insurance
338company, an amount determined by the office after giving due
339consideration to the company's business plan, feasibility study,
340and pro forma financial statements and projections, including
341the nature of the risks to be insured.
342     (3)  Contributions to a captive insurance company
343incorporated as a stock insurer must be in the form of cash,
344cash equivalent, or an irrevocable letter of credit issued by a
345bank chartered by this state or a member bank of the Federal
346Reserve System with a branch office in this state, or as
347approved by the office.
348     (4)  For purposes of this section, the office may issue a
349license expressly conditioned upon the captive insurance company
350providing to the office satisfactory evidence of possession of
351the minimum required unimpaired paid-in capital. Until this
352evidence is provided, the captive insurance company may not
353issue any policy, assume any liability, or otherwise provide
354coverage. The office may revoke the conditional license if
355satisfactory evidence of the required capital is not provided
356within a maximum period of time, not to exceed 1 year, to be
357established by the office at the time the conditional license is
358issued.
359     (5)  The office may prescribe additional capital or net
360assets based upon the type, volume, and nature of insurance
361business transacted. Contributions in connection with these
362prescribed additional net assets or capital must be in the form
363of:
364     (a)  Cash;
365     (b)  Cash equivalent;
366     (c)  An irrevocable letter of credit issued by a bank
367chartered by this state or a member bank of the Federal Reserve
368System with a branch office in this state, or as approved by the
369office; or
370     (d)  Securities invested as provided in part II of chapter
371625.
372     (6)  A captive insurance company may not pay a dividend out
373of, or other distribution with respect to, capital or surplus in
374excess of the limitations set forth in this chapter without the
375prior approval of the office. Approval of an ongoing plan for
376the payment of dividends or other distributions must be
377conditioned upon the retention, at the time of each payment, of
378capital or surplus in excess of amounts specified by, or
379determined in accordance with formulas approved by, the office.
380     (7)  An irrevocable letter of credit that is issued by a
381financial institution other than a bank chartered by this state
382or a member bank of the Federal Reserve System must meet the
383same standards as an irrevocable letter of credit that has been
384issued by a bank chartered by this state or a member bank of the
385Federal Reserve System.
386     Section 4.  Section 628.908, Florida Statutes, is created
387to read:
388     628.908  Surplus requirements; restriction on payment of
389dividends.-
390     (1)  The office may not issue a license to a captive
391insurance company unless the company possesses and maintains
392unimpaired surplus of:
393     (a)  In the case of a pure captive insurance company, not
394less than $150,000.
395     (b)  In the case of an association captive insurance
396company incorporated as a stock insurer, not less than $350,000.
397     (c)  In the case of an industrial insured captive insurance
398company incorporated as a stock insurer, not less than $300,000.
399     (d)  In the case of an association captive insurance
400company incorporated as a mutual insurer, not less than
401$750,000.
402     (e)  In the case of an industrial insured captive insurance
403company incorporated as a mutual insurer, not less than
404$500,000.
405     (f)  In the case of a special purpose captive insurance
406company, an amount determined by the office after giving due
407consideration to the company's business plan, feasibility study,
408and pro forma financial statements and projections, including
409the nature of the risks to be insured.
410     (2)  For purposes of this section, the office may issue a
411license expressly conditioned upon the captive insurance company
412providing to the office satisfactory evidence of possession of
413the minimum required unimpaired surplus. Until this evidence is
414provided, the captive insurance company may not issue any
415policy, assume any liability, or otherwise provide coverage. The
416office may revoke the conditional license if satisfactory
417evidence of the required surplus is not provided within a
418maximum period of time, not to exceed 1 year, to be established
419by the office at the time the conditional license is issued.
420     (3)  A captive insurance company may not pay a dividend out
421of, or other distribution with respect to, capital or surplus in
422excess of the limitations set forth in this chapter without the
423prior approval of the office. Approval of an ongoing plan for
424the payment of dividends or other distribution must be
425conditioned upon the retention, at the time of each payment, of
426capital or surplus in excess of amounts specified by, or
427determined in accordance with formulas approved by, the office.
428     (4)  An irrevocable letter of credit that is issued by a
429financial institution other than a bank chartered by this state
430or a member bank of the Federal Reserve System must meet the
431same standards as an irrevocable letter of credit that has been
432issued by a bank chartered by this state or a member bank of the
433Federal Reserve System.
434     Section 5.  Section 628.909, Florida Statutes, is amended
435to read:
436     628.909  Applicability of other laws.-
437     (1)  The Florida Insurance Code does shall not apply to
438captive insurers or industrial insured captive insurers except
439as provided in this part and subsections (2) and (3).
440     (2)  The following provisions of the Florida Insurance Code
441shall apply to captive insurers who are not industrial insured
442captive insurers to the extent that such provisions are not
443inconsistent with this part:
444     (a)  Chapter 624, except for ss. 624.407, 624.408,
445624.4085, 624.40851, 624.4095, 624.425, and 624.426.
446     (b)  Chapter 625, part II.
447     (c)  Chapter 626, part IX.
448     (d)  Sections 627.730-627.7405, when no-fault coverage is
449provided.
450     (e)  Chapter 628.
451     (3)  The following provisions of the Florida Insurance Code
452shall apply to industrial insured captive insurers to the extent
453that such provisions are not inconsistent with this part:
454     (a)  Chapter 624, except for ss. 624.407, 624.408,
455624.4085, 624.40851, 624.4095, 624.425, 624.426, and 624.609(1).
456     (b)  Chapter 625, part II, if the industrial insured
457captive insurer is incorporated in this state.
458     (c)  Chapter 626, part IX.
459     (d)  Sections 627.730-627.7405 when no-fault coverage is
460provided.
461     (e)  Chapter 628, except for ss. 628.341, 628.351, and
462628.6018.
463     Section 6.  Section 628.910, Florida Statutes, is created
464to read:
465     628.910  Incorporation options and requirements.-
466     (1)  A pure captive insurance company may be:
467     (a)  Incorporated as a stock insurer with its capital
468divided into shares and held by the stockholders; or
469     (b)  Incorporated as a public benefit, mutual benefit, or
470religious nonprofit corporation with members in accordance with
471the Florida Not For Profit Corporation Act.
472     (2)  An association captive insurance company or an
473industrial insured captive insurance company may be:
474     (a)  Incorporated as a stock insurer with its capital
475divided into shares and held by the stockholders; or
476     (b)  Incorporated as a mutual insurer without capital
477stock, the governing body of which is elected by the member
478organizations of its association.
479     (3)  A captive insurance company may not have fewer than
480three incorporators of whom not fewer than two must be residents
481of this state.
482     (4)  In the case of a captive insurance company formed as a
483corporation or a nonprofit corporation, before the articles of
484incorporation are transmitted to the Secretary of State, the
485incorporators shall petition the office to issue a certificate
486setting forth a finding that the establishment and maintenance
487of the proposed entity will promote the general good of the
488state. In arriving at this finding, the office must consider:
489     (a)  The character, reputation, financial standing, and
490purposes of the incorporators;
491     (b)  The character, reputation, financial responsibility,
492insurance experience, and business qualifications of the
493officers and directors; and
494     (c)  Other aspects as the office considers advisable.
495     (5)  The articles of incorporation, the certificate issued
496pursuant to this section, and the organization fees required by
497the Florida Business Corporation Act or the Florida Not For
498Profit Corporation Act, as applicable, must be transmitted to
499the Secretary of State, who must record the articles of
500incorporation and the certificate.
501     (6)  The capital stock of a captive insurance company
502incorporated as a stock insurer must be issued at par value of
503not less than $1 or more than $100 per share.
504     (7)  In the case of a captive insurance company formed as a
505corporation or a nonprofit corporation, at least one of the
506members of the board of directors of a captive insurance company
507incorporated in this state must be a resident of this state.
508     (8)  A captive insurance company formed as a corporation or
509a nonprofit corporation, pursuant to the provisions of this
510chapter, has the privileges and is subject to the provisions of
511the general corporation law, including the Florida Not For
512Profit Corporation Act for nonprofit corporations, as
513applicable, as well as the applicable provisions contained in
514this chapter. If a conflict occurs between a provision of the
515general corporation law, including the Florida Not For Profit
516Corporation Act for nonprofit corporations, as applicable, and a
517provision of this chapter, the latter controls. The provisions
518of this title pertaining to mergers, consolidations,
519conversions, mutualizations, and redomestications apply in
520determining the procedures to be followed by a captive insurance
521company in carrying out any of the transactions described in
522such provisions, except that the office may waive or modify the
523requirements for public notice and hearing in accordance with
524rules the office may adopt addressing categories of
525transactions. If a notice of public hearing is required, but no
526one requests a hearing, the office may cancel the hearing.
527     (9)  The articles of incorporation or bylaws of a captive
528insurance company may authorize a quorum of a board of directors
529to consist of no fewer than one-third of the fixed or prescribed
530number of directors as provided for by the Florida Business
531Corporation Act or the Florida Not For Profit Corporation Act.
532     Section 7.  Section 628.911, Florida Statutes, is amended
533to read:
534     628.911  Reports and statements.-
535     (1)  A captive insurance company may insurer shall not be
536required to make any annual report except as provided in this
537part section.
538     (2)  Annually no later than March 1, a captive insurance
539company or a captive reinsurance company insurer shall, within
54060 days after the end of its fiscal year and as often as the
541office may deem necessary, submit to the office a report of its
542financial condition verified by oath of two of its executive
543officers. Except as provided in this part, a captive insurance
544company or a captive reinsurance company must report using
545generally accepted accounting principles, unless the office
546approves the use of statutory accounting principles, with useful
547or necessary modifications or adaptations required or approved
548or accepted by the office for the type of insurance and kinds of
549insurers to be reported upon, and as supplemented by additional
550information required by the office. The Financial Services
551Commission may adopt by rule the form in which captive insurance
552companies insurers shall report.
553     (3)(a)  A pure captive insurance company may make written
554application for filing the required report on a fiscal year end
555that is consistent with the parent company's fiscal year. If an
556alternative reporting date is granted, the annual report is due
55760 days after the fiscal year end.
558     (b)  In order to provide sufficient detail to support the
559premium tax return, the pure captive insurance company must file
560no later than March 1 of each year for each calendar year end
561pages 1-7 of the National Association of Insurance Commissioners
562(NAIC) Annual Statement, verified by oath of two of its
563executive officers.
564     Section 8.  Section 628.912, Florida Statutes, is created
565to read:
566     628.912  Discounting of loss and loss adjustment expense
567reserves.-
568     (1)  A captive reinsurance company may discount its loss
569and loss adjustment expense reserves at treasury rates applied
570to the applicable payments projected through the use of the
571expected payment pattern associated with the reserves.
572     (2)  A captive reinsurance company must file annually an
573actuarial opinion on loss and loss adjustment expense reserves
574provided by an independent actuary. The actuary may not be an
575employee of the captive reinsurance company or its affiliates.
576     (3)  The office may disallow the discounting of reserves if
577a captive reinsurance company violates a provision of this part.
578     Section 9.  Section 628.913, Florida Statutes, is amended
579to read:
580(Substantial rewording of section. See
581s. 628.913, F.S., for present text.)
582     628.913  Captive reinsurance companies.-
583     (1)  A captive reinsurance company, if permitted by its
584articles of incorporation or charter, may apply to the office
585for a license to write reinsurance covering property and
586casualty insurance or reinsurance contracts. A captive
587reinsurance company authorized by the office may write
588reinsurance contracts covering risks in any state.
589     (2)  To conduct business in this state, a captive
590reinsurance company must:
591     (a)  Obtain from the office a license authorizing it to
592conduct business as a captive reinsurance company in this state;
593     (b)  Hold at least one board of directors' meeting each
594year in this state;
595     (c)  Maintain its principal place of business in this
596state; and
597     (d)  Appoint a registered agent to accept service of
598process and act otherwise on its behalf in this state.
599     (3)  Before receiving a license, a captive reinsurance
600company must file with the office:
601     (a)  A certified copy of its charter and bylaws;
602     (b)  A statement under oath of its president and secretary
603showing its financial condition; and
604     (c)  Other documents required by the office.
605     (4)  In addition to the information required by this
606section, the captive reinsurance company must file with the
607office evidence of:
608     (a)  The amount and liquidity of the captive reinsurance
609company's assets relative to the risks to be assumed;
610     (b)  The adequacy of the expertise, experience, and
611character of the person who manages the company;
612     (c)  The overall soundness of the company's plan of
613operation; and
614     (d)  Other overall factors considered relevant by the
615office in ascertaining if the company would be able to meet its
616policy obligations.
617     Section 10.  Section 628.914, Florida Statutes, is created
618to read:
619     628.914  Minimum capitalization or reserves for captive
620reinsurance companies.-
621     (1)  The office may not issue a license to a captive
622reinsurance company unless the company possesses and maintains
623capital or unimpaired surplus of not less than the greater of
624$300 million or 10 percent of reserves. The surplus may be in
625the form of cash or securities as permitted by part II of
626chapter 625.
627     (2)  The office may prescribe additional capital or surplus
628based upon the type, volume, and nature of the insurance
629business transacted.
630     (3)  A captive reinsurance company may not pay a dividend
631out of, or other distribution with respect to, capital or
632surplus in excess of the limitations without the prior approval
633of the office. Approval of an ongoing plan for the payment of
634dividends or other distributions must be conditioned upon the
635retention, at the time of each payment, of capital or surplus in
636excess of amounts specified by, or determined in accordance with
637formulas approved by, the office.
638     Section 11.  Section 628.9141, Florida Statutes, is created
639to read:
640     628.9141  Incorporation of a captive reinsurance company.-
641     (1)  A captive reinsurance company must be incorporated as
642a stock insurer with its capital divided into shares and held by
643its shareholders.
644     (2)  A captive reinsurance company may not have fewer than
645three incorporators of whom at least two must be residents of
646this state.
647     (3)  Before the articles of incorporation are transmitted
648to the Secretary of State, the incorporators shall comply with
649all the requirements of s. 628.091.
650     (4)  The capital stock of a captive reinsurance company
651must be issued at par value of not less than $1 or more than
652$100 per share.
653     (5)  At least one of the members of the board of directors
654of a captive reinsurance company incorporated in this state must
655be a resident of this state.
656     Section 12.  Section 628.9142, Florida Statutes, is created
657to read:
658     628.9142  Reinsurance; effect on reserves.-
659     (1)  A captive insurance company may provide reinsurance,
660as authorized in this part, on risks ceded by any other insurer.
661     (2)  A captive insurance company may take credit for
662reserves on risks or portions of risks ceded to authorized
663insurers or reinsurers and unauthorized insurers or reinsurers
664complying with the provisions of s. 624.610. A captive insurer
665may not take credit for reserves on risks or portions of risks
666ceded to an unauthorized insurer or reinsurer if the insurer or
667reinsurer is not in compliance with s. 624.610.
668     Section 13.  Section 628.9143, Florida Statutes, is created
669to read:
670     628.9143  Annual captive reinsurance tax.-
671     (1)  A captive reinsurance company must pay to the office
672by March 1 of each year a captive reinsurance tax of $5,000.
673     (2)  The tax provided in this section is the only tax
674collectible under the laws of this state from a captive
675reinsurance company, and no tax on reinsurance premiums, other
676than occupation tax, nor any other taxes, except ad valorem
677taxes on real and personal property used in the production of
678income, may be levied or collected from a captive reinsurance
679company by this state or a county, city, or municipality within
680this state.
681     (3)  A captive reinsurance company failing to make returns
682or to pay all taxes required by this section is subject to
683sanctions provided in this part.
684     Section 14.  Section 628.918, Florida Statutes, is created
685to read:
686     628.918  Management of assets of captive reinsurance
687company.-At least 35 percent of the assets of a captive
688reinsurance company must be managed by an asset manager
689domiciled in this state.
690     Section 15.  Section 628.919, Florida Statutes, is created
691to read:
692     628.919  Standards to ensure risk management control by
693parent company.-The Financial Services Commission shall adopt
694rules establishing standards to ensure that a parent or
695affiliated company is able to exercise control of the risk
696management function of any controlled unaffiliated business to
697be insured by the pure captive insurance company.
698     Section 16.  Section 628.920, Florida Statutes, is created
699to read:
700     628.920  Eligibility of licensed captive insurance company
701for certificate of authority to act as insurer.-A licensed
702captive insurance company that meets the necessary requirements
703of this part imposed upon an insurer must be considered for
704issuance of a certificate of authority to act as an insurer in
705this state.
706     Section 17.  Paragraph (e) of subsection (2) of section
707626.7491, Florida Statutes, is amended to read:
708     626.7491  Business transacted with producer controlled
709property and casualty insurer.-
710     (2)  DEFINITIONS.-As used in this section:
711     (e)  "Licensed insurer" or "insurer" means any person,
712firm, association, or corporation licensed to transact a
713property or casualty insurance business in this state. The
714following are not licensed insurers for the purposes of this
715section:
716     1.  Any risk retention group as defined in:
717     a.  The Superfund Amendments Reauthorization Act of 1986,
718Pub. L. No. 99-499, 100 Stat. 1613 (1986);
719     b.  The Risk Retention Act, 15 U.S.C. ss. 3901 et seq.
720(1982 and Supp. 1986); or
721     c.  Section 627.942(9).
722     2.  Any residual market pool or joint underwriting
723authority or association; and
724     3.  Any captive insurance company insurer as defined in s.
725628.901.
726     Section 18.  Section 628.903, Florida Statutes, is
727repealed.
728     Section 19.  This act shall take effect upon becoming a
729law.


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