CS/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; specifying certain fees to
16be paid by captive insurance companies; authorizing
17the Commissioner of Insurance Regulation to grant a
18captive insurance company a license to conduct
19insurance business until a specified date under
20certain circumstances; authorizing a foreign or alien
21captive insurance company to become a domestic captive
22insurance company by complying with specified
23requirements; authorizing the office to waive any
24requirements for public hearings relating to the
25redomestication of an alien captive insurance company;
26creating s. 628.906, F.S.; requiring biographical
27affidavits and background investigations for all
28officers and directors; providing restrictions on
29officers and directors involved with insolvent
30insurers under certain conditions; providing
31restrictions on officers and directors that have been
32found guilty of, or that have pleaded guilty or nolo
33contendere to, any felony or crime involving moral
34turpitude, including a crime of dishonesty or breach
35of trust; amending s. 628.907, F.S.; revising
36capitalization requirements for specified captive
37insurance companies; requiring capital of specified
38captive insurance companies to be held in certain
39forms; requiring contributions to captive insurance
40companies that are nonprofit corporations to be in a
41certain form; authorizing the office to issue a
42captive insurance company license conditioned upon
43certain evidence relating to possession of specified
44capital; authorizing revocation of a conditional
45license under certain circumstances; authorizing the
46office to prescribe certain additional capital and net
47asset requirements; requiring such additional
48requirements relating to capital and net assets to be
49held in specified forms; requiring dividends or
50distributions of capital or surplus to meet certain
51conditions and be approved by the office; requiring
52certain irrevocable letters of credit to meet certain
53standards; creating s. 628.908, F.S.; prohibiting the
54issuance of a license to specified captive insurance
55companies unless such companies possess and maintain
56certain levels of unimpaired surplus; authorizing the
57office to condition issuance of a captive insurance
58company license upon the provision of certain evidence
59relating to the possession of a minimum amount of
60unimpaired surplus; authorizing revocation of a
61conditional license under certain circumstances;
62requiring dividends or distributions of capital or
63surplus to meet certain conditions and be approved by
64the office; requiring certain irrevocable letters of
65credit to meet certain standards; amending s. 628.909,
66F.S.; providing for applicability of certain statutory
67provisions to specified captive insurers; creating s.
68628.910, F.S.; providing requirements, options, and
69conditions relating to how a captive insurance company
70may be incorporated or organized as a business;
71amending s. 628.911, F.S.; providing reporting
72requirements for captive insurance companies and
73captive reinsurance companies; creating s. 628.912,
74F.S.; authorizing a captive reinsurance company to
75discount specified losses subject to certain
76conditions; amending s. 628.913, F.S.; authorizing a
77captive reinsurance company to apply to the office for
78licensure to write reinsurance covering property and
79casualty insurance or reinsurance contracts;
80authorizing the office to allow a captive reinsurance
81company to write reinsurance contracts covering risks
82in any state; prohibiting such captive reinsurance
83company from directly insuring risks; specifying that
84a captive reinsurance company is subject to specified
85requirements and must meet specified conditions to
86conduct business in this state; creating s. 628.914,
87F.S.; specifying requirements and conditions relating
88to the capitalization or maintenance of reserves by a
89captive reinsurance company; creating s. 628.9141,
90F.S.; specifying requirements and conditions relating
91to the incorporation of a captive reinsurance company;
92creating s. 628.9142, F.S.; providing for the effect
93on reserves of certain actions taken by a captive
94insurance company relating to providing reinsurance
95for specified risks; creating s. 628.918, F.S.;
96requiring a specified percentage of a captive
97reinsurance company's assets to be managed by an asset
98manager domiciled in this state; creating s. 628.919,
99F.S.; authorizing the Financial Services Commission to
100adopt rules establishing certain standards for control
101of an unaffiliated business by a parent or affiliated
102company relating to coverage by a pure captive
103insurance company; creating s. 628.920, F.S.;
104requiring that a licensed captive insurance company
105must be considered for issuance of a certificate of
106authority as an insurer under certain circumstances;
107amending s. 626.7491, F.S.; conforming a cross-
108reference; repealing s. 628.903, F.S., relating to
109"industrial insured captive insurer" defined, to
110conform to changes made by this act; providing an
111effective date.
112
113Be It Enacted by the Legislature of the State of Florida:
114
115     Section 1.  Section 628.901, Florida Statutes, is amended
116to read:
117     628.901  Definitions "Captive insurer" defined.-As used in
118For the purposes of this part, unless the context requires
119otherwise, the term: except as provided in s. 628.903, a
120"captive insurer" is a domestic insurer established under part I
121to insure the risks of a specific corporation or group of
122corporations under common ownership owned by the corporation or
123corporations from which it accepts risk under a contract of
124insurance.
125     (1)  "Affiliated company" means a company in the same
126corporate system as a parent, an industrial insured, or a member
127organization by virtue of common ownership, control, operation,
128or management.
129     (2)  "Association" means a legal association of
130individuals, corporations, limited liability companies,
131partnerships, political subdivisions, or associations that has
132been in continuous existence for at least 1 year, the member
133organizations of which collectively, or which does itself:
134     (a)  Own, control, or hold with power to vote all of the
135outstanding voting securities of an association captive
136insurance company incorporated as a stock insurer; or
137     (b)  Have complete voting control over an association
138captive insurance company organized as a mutual insurer.
139     (3)  "Association captive insurance company" means a
140company that insures risks of the member organizations of the
141association and their affiliated companies.
142     (4)  "Captive insurance company" means a domestic insurer
143established under this part. A captive insurance company
144includes a pure captive insurance company, association captive
145insurance company, special purpose captive insurance company, or
146industrial insured captive insurance company formed and licensed
147under this part.
148     (5)  "Captive reinsurance company" means a reinsurance
149company that is formed and licensed under this part and is
150wholly owned by a qualifying reinsurance parent company. A
151captive reinsurance company is a stock corporation and may only
152reinsure risks. A captive reinsurance company may not directly
153insure risks.
154     (6)  "Consolidated debt to total capital ratio" means the
155ratio of the sum of all debts and hybrid capital instruments as
156described in paragraph (a) to total capital as described in
157paragraph (b).
158     (a)  Debts and hybrid capital instruments include, but are
159not limited to, all borrowings from banks, all senior debt, all
160subordinated debts, all trust preferred shares, and all other
161hybrid capital instruments that are not included in the
162determination of consolidated GAAP net worth issued and
163outstanding.
164     (b)  Total capital consists of all debts and hybrid capital
165instruments as described in paragraph (a) plus owners' equity
166determined in accordance with GAAP for reporting to the United
167States Securities and Exchange Commission.
168     (7)  "Consolidated GAAP net worth" means the consolidated
169owners' equity determined in accordance with generally accepted
170accounting principles for reporting to the United States
171Securities and Exchange Commission.
172     (8)  "Controlled unaffiliated business" means a company:
173     (a)  That is not in the corporate system of a parent and
174affiliated companies;
175     (b)  That has an existing contractual relationship with a
176parent or affiliated company; and
177     (c)  Whose risks are managed by a captive insurance company
178in accordance with s. 628.919.
179     (9)  "GAAP" means generally accepted accounting principles.
180     (10)  "Industrial insured" means an insured that:
181     (a)  Has gross assets in excess of $50 million;
182     (b)  Procures insurance through the use of a full-time
183employee of the insured who acts as an insurance manager or
184buyer or through the services of a person licensed as a property
185and casualty insurance agent, broker, or consultant in such
186person's state of domicile;
187     (c)  Has at least 100 full-time employees; and
188     (d)  Pays annual premiums of at least $200,000 for each
189line of insurance purchased from the industrial insured captive
190insurer or at least $75,000 for any line of coverage in excess
191of at least $25 million in the annual aggregate. The purchase of
192umbrella or general liability coverage in excess of $25 million
193in the annual aggregate shall be deemed to be the purchase of a
194single line of insurance.
195     (11)  "Industrial insured captive insurance company" means
196a captive insurance company that provides insurance only to the
197industrial insureds that are its stockholders or members, and
198affiliates thereof, or to the stockholders, and affiliates
199thereof, of its parent corporation. An industrial insured
200captive insurance company may also provide reinsurance to
201insurers only on risks written by such insurers for the
202industrial insureds who are the stockholders or members, and
203affiliates thereof, of the industrial insured captive insurance
204company, or the stockholders, and affiliates thereof, of the
205parent corporation of the industrial insured captive insurance
206company.
207     (12)  "Member organization" means any individual,
208corporation, limited liability company, partnership, or
209association that belongs to an association.
210     (13)  "Office" means the Office of Insurance Regulation.
211     (14)  "Parent" means any corporation, limited liability
212company, partnership, or individual that directly or indirectly
213owns, controls, or holds with power to vote more than 50 percent
214of the outstanding voting interests of a captive insurance
215company.
216     (15)  "Pure captive insurance company" means a company that
217insures risks of its parent, affiliated companies, controlled
218unaffiliated businesses, or a combination thereof.
219     (16)  "Qualifying reinsurer parent company" means a
220reinsurer that currently holds a certificate of authority or
221letter of eligibility or is an accredited or a satisfactory
222nonapproved reinsurer in this state possessing a consolidated
223GAAP net worth of not less than $500 million and a consolidated
224debt to total capital ratio of not greater than 0.50.
225     (17)  "Special purpose captive insurance company" means a
226captive insurance company that is formed or licensed under this
227chapter that does not meet the definition of any other type of
228captive insurance company defined in this section.
229     (18)  "Treasury rates" means the United States Treasury
230STRIPS asked yield as published in the Wall Street Journal as of
231a balance sheet date.
232     Section 2.  Section 628.905, Florida Statutes, is amended
233to read:
234     628.905  Licensing; authority.-
235     (1)  Any captive insurer, when permitted by its charter or
236articles of incorporation, may apply to the office for a license
237to do any and all insurance authorized under the insurance code,
238provide commercial property, commercial casualty, and commercial
239marine insurance coverage other than workers' compensation,
240health, personal motor vehicle, and personal residential
241property and employer's liability insurance coverage, except
242that: an industrial insured captive insurer may apply for a
243license to provide workers' compensation and employer's
244liability insurance as set forth in subsection (6).
245     (a)  A pure captive insurance company may not insure any
246risks other than those of its parent, affiliated companies,
247controlled unaffiliated businesses, or a combination thereof.
248     (b)  An association captive insurance company may not
249insure any risks other than those of the member organizations of
250its association and their affiliated companies. An association
251captive insurance company shall have stamped or written upon the
252first page of the policy or the certificate, cover note, or
253confirmation of insurance the words: "THIS INSURANCE IS ISSUED
254PURSUANT TO THE FLORIDA CAPTIVE INSURERS LAW. PERSONS INSURED BY
255CAPTIVE INSURANCE COMPANIES DO NOT HAVE THE PROTECTION OF THE
256FLORIDA INSURANCE GUARANTY ACT TO THE EXTENT OF ANY RIGHT OF
257RECOVERY FOR THE OBLIGATION OF AN INSOLVENT INSURER." An
258association captive insurance company shall also have stamped or
259printed on the face of the policy in at least 14-point, boldface
260type the following statement: "CAPTIVE INSURANCE COMPANIES'
261POLICY RATES AND FORMS ARE NOT APPROVED BY ANY FLORIDA
262REGULATORY AGENCY."
263     (c)  An industrial insured captive insurance company may
264not insure any risks other than those of the industrial insureds
265that comprise the industrial insured group and their affiliated
266companies.
267     (d)  A special purpose captive insurance company may only
268insure the risks of its parent.
269     (e)  A captive insurance company may not accept or cede
270reinsurance except as provided in this part.
271     (2)  To conduct insurance business in this state, a No
272captive insurer, other than an industrial insured captive
273insurer, shall: insure or accept reinsurance on any risks other
274than those of its parent and affiliated companies.
275     (a)  Obtain from the office a license authorizing it to
276conduct insurance business in this state;
277     (b)  Hold at least one board of directors' meeting each
278year in this state;
279     (c)  Maintain its principal place of business in this
280state; and
281     (d)  Appoint a resident registered agent to accept service
282of process and to otherwise act on its behalf in this state. In
283the case of a captive insurance company formed as a corporation
284or a nonprofit corporation, whenever the registered agent cannot
285with reasonable diligence be found at the registered office of
286the captive insurance company, the Chief Financial Officer of
287this state must be an agent of the captive insurance company
288upon whom any process, notice, or demand may be served.
289     (3)(a)  Before receiving a license, a captive insurance
290company formed as a corporation or a nonprofit corporation must
291file with the office a certified copy of its articles of
292incorporation and bylaws, a statement under oath of its
293president and secretary showing its financial condition, and any
294other statements or documents required by the office.
295     (b)  In addition to the information required by paragraph
296(a), an applicant captive insurance company must file with the
297office evidence of:
298     1.  The amount and liquidity of the proposed captive
299insurance company's assets relative to the risks to be assumed;
300     2.  The adequacy of the expertise, experience, and
301character of the person or persons who will manage the company;
302     3.  The overall soundness of the company's plan of
303operation;
304     4.  The adequacy of the loss prevention programs of the
305company's parent, member organizations, or industrial insureds,
306as applicable; and
307     5.  Any other factors considered relevant by the office in
308ascertaining whether the company will be able to meet its policy
309obligations In addition to information otherwise required by
310this code, each applicant captive insurer shall file with the
311office evidence of the adequacy of the loss prevention program
312of its insureds.
313     (4)(a)  A captive insurance company must pay to the office
314a nonrefundable fee of $1,500 for processing its application for
315licensure.
316     (b)  In addition, a captive insurance company must pay an
317annual renewal fee of $1,000.
318     (c)  The office may charge a fee of $5 for any document
319requiring certification of authenticity or the signature of the
320commissioner or his or her designee. An industrial insured
321captive insurer need not be incorporated in this state if it has
322been validly incorporated under the laws of another jurisdiction
323An industrial insured captive insurer need not be incorporated
324in this state if it has been validly incorporated under the laws
325of another jurisdiction.
326     (5)  If the commissioner is satisfied that the documents
327and statements filed by the captive insurance company comply
328with this chapter, the commissioner may grant a license
329authorizing the company to conduct insurance business in this
330state until the next succeeding March 1, at which time the
331license may be renewed An industrial insured captive insurer is
332subject to all provisions of this part except as otherwise
333indicated.
334     (6)  Upon approval of the office, a foreign or alien
335captive insurance company may become a domestic captive
336insurance company by complying with all of the requirements of
337law relative to the organization and licensing of a domestic
338captive insurance company of the same or equivalent type in this
339state and by filing with the Secretary of State its articles of
340association, charter, or other organizational documents,
341together with any appropriate amendments that have been adopted
342in accordance with the laws of this state to bring the articles
343of association, charter, or other organizational documents into
344compliance with the laws of this state, along with a certificate
345of good standing issued by the office. After this is
346accomplished, the captive insurance company is entitled to the
347necessary or appropriate certificates and licenses to continue
348transacting business in this state and is subject to the
349authority and jurisdiction of this state. In connection with
350this redomestication, the office may waive any requirements for
351public hearings. It is not necessary for a captive insurance
352company redomesticating into this state to merge, consolidate,
353transfer assets, or otherwise engage in any other
354reorganization, other than as specified in this section An
355industrial insured captive insurer may not provide workers'
356compensation and employer's liability insurance except in excess
357of at least $25 million in the annual aggregate.
358     Section 3.  Section 628.906, Florida Statutes, is created
359to read:
360     628.906  Application requirements; restrictions on
361eligibility of officers and directors.-
362     (1)  To evidence competence and trustworthiness of its
363officers and directors, the application for authority to act as
364a captive insurance company or captive reinsurance company shall
365include, but not be limited to, background investigations,
366biographical affidavits, and fingerprint cards for all officers
367and directors.
368     (2)  The office may deny, suspend, or revoke the authority
369to transact captive insurance or captive reinsurance in this
370state if any person who was an officer or director of an
371insurer, reinsurer, captive insurance company, captive
372reinsurance company, financial institution, or financial
373services business doing business in the United States, any
374state, or under the law of any other country and who served in
375that capacity within the 2-year period before the date the
376insurer, reinsurer, captive insurance company, captive
377reinsurance company, financial institution, or financial
378services business became insolvent serves as an officer or
379director of a captive insurance company or officer or director
380of a captive reinsurance company authorized in this state,
381unless the officer or director demonstrates that his or her
382personal actions or omissions were not a contributing cause to
383the insolvency.
384     (3)  The office may deny, suspend, or revoke the authority
385to transact insurance or reinsurance in this state of any
386captive insurance company or captive reinsurance company if any
387person, including any stockholder or incorporator, who exercises
388or has the ability to exercise effective control of the captive
389insurance company or captive reinsurance company, or who
390influences or has the ability to influence the transaction of
391the business of the captive insurance company or captive
392reinsurance company, has been found guilty of, or has pleaded
393guilty or nolo contendere to, any felony or crime involving
394moral turpitude, including a crime of dishonesty or breach of
395trust, punishable by imprisonment of 1 year or more under the
396laws of the United States or any state thereof or under the laws
397of any other country without regard to whether a judgment of
398conviction has been entered by the court having jurisdiction in
399such case. However, in the case of a captive insurance company
400or captive reinsurance company operating under a subsisting
401certificate of authority or license, the captive insurance
402company or captive reinsurance company shall remove any such
403person immediately upon discovery of the conditions set forth in
404this subsection when applicable to such person or upon the order
405of the office, and the failure to so act shall be grounds for
406revocation or suspension of the captive insurance company's or
407captive reinsurance company's license.
408     Section 4.  Section 628.907, Florida Statutes, is amended
409to read:
410     628.907  Minimum capital and net assets requirements;
411restriction on payment of dividends surplus.-
412     (1)  A No captive insurer may not shall be issued a license
413unless it possesses and thereafter maintains unimpaired paid-in
414capital of:
415     (a)(1)  In the case of a pure captive insurance company,
416not less than $100,000. Unimpaired paid-in capital of at least
417$500,000; and
418     (b)(2)  In the case of an association captive insurance
419company incorporated as a stock insurer, not less than $400,000
420Unimpaired surplus of at least $250,000.
421     (c)  In the case of an industrial insured captive insurance
422company incorporated as a stock insurer, not less than $200,000.
423     (d)  In the case of a special purpose captive insurance
424company, an amount determined by the office after giving due
425consideration to the company's business plan, feasibility study,
426and pro forma financial statements and projections, including
427the nature of the risks to be insured.
428     (2)  The office may not issue a license to a captive
429insurance company incorporated as a nonprofit corporation unless
430the company possesses and maintains unrestricted net assets of:
431     (a)  In the case of a pure captive insurance company, not
432less than $250,000.
433     (b)  In the case of a special purpose captive insurance
434company, an amount determined by the office after giving due
435consideration to the company's business plan, feasibility study,
436and pro forma financial statements and projections, including
437the nature of the risks to be insured.
438     (3)  Contributions to a captive insurance company
439incorporated as a nonprofit corporation must be in the form of
440cash, cash equivalent, or an irrevocable letter of credit issued
441by a bank chartered by this state or a member bank of the
442Federal Reserve System with a branch office in this state, or as
443approved by the office.
444     (4)  For purposes of this section, the office may issue a
445license expressly conditioned upon the captive insurance company
446providing to the office satisfactory evidence of possession of
447the minimum required unimpaired paid-in capital. Until this
448evidence is provided, the captive insurance company may not
449issue any policy, assume any liability, or otherwise provide
450coverage. The office may revoke the conditional license if
451satisfactory evidence of the required capital is not provided
452within a maximum period of time, not to exceed 1 year, to be
453established by the office at the time the conditional license is
454issued.
455     (5)  The office may prescribe additional capital or net
456assets based upon the type, volume, and nature of insurance
457business transacted. Contributions in connection with these
458prescribed additional net assets or capital must be in the form
459of:
460     (a)  Cash;
461     (b)  Cash equivalent;
462     (c)  An irrevocable letter of credit issued by a bank
463chartered by this state or a member bank of the Federal Reserve
464System with a branch office in this state, or as approved by the
465office; or
466     (d)  Securities invested as provided in part II of chapter
467625.
468     (6)  A captive insurance company may not pay a dividend out
469of, or other distribution with respect to, capital or surplus in
470excess of the limitations set forth in this chapter without the
471prior approval of the office. Approval of an ongoing plan for
472the payment of dividends or other distributions must be
473conditioned upon the retention, at the time of each payment, of
474capital or surplus in excess of amounts specified by, or
475determined in accordance with formulas approved by, the office.
476     (7)  An irrevocable letter of credit that is issued by a
477financial institution other than a bank chartered by this state
478or a member bank of the Federal Reserve System must meet the
479same standards as an irrevocable letter of credit that has been
480issued by a bank chartered by this state or a member bank of the
481Federal Reserve System.
482     Section 5.  Section 628.908, Florida Statutes, is created
483to read:
484     628.908  Surplus requirements; restriction on payment of
485dividends.-
486     (1)  The office may not issue a license to a captive
487insurance company unless the company possesses and maintains
488unimpaired surplus of:
489     (a)  In the case of a pure captive insurance company, not
490less than $150,000.
491     (b)  In the case of an association captive insurance
492company incorporated as a stock insurer, not less than $350,000.
493     (c)  In the case of an industrial insured captive insurance
494company incorporated as a stock insurer, not less than $300,000.
495     (d)  In the case of an association captive insurance
496company incorporated as a mutual insurer, not less than
497$750,000.
498     (e)  In the case of an industrial insured captive insurance
499company incorporated as a mutual insurer, not less than
500$500,000.
501     (f)  In the case of a special purpose captive insurance
502company, an amount determined by the office after giving due
503consideration to the company's business plan, feasibility study,
504and pro forma financial statements and projections, including
505the nature of the risks to be insured.
506     (2)  For purposes of this section, the office may issue a
507license expressly conditioned upon the captive insurance company
508providing to the office satisfactory evidence of possession of
509the minimum required unimpaired surplus. Until this evidence is
510provided, the captive insurance company may not issue any
511policy, assume any liability, or otherwise provide coverage. The
512office may revoke the conditional license if satisfactory
513evidence of the required surplus is not provided within a
514maximum period of time, not to exceed 1 year, to be established
515by the office at the time the conditional license is issued.
516     (3)  A captive insurance company may not pay a dividend out
517of, or other distribution with respect to, capital or surplus in
518excess of the limitations set forth in this chapter without the
519prior approval of the office. Approval of an ongoing plan for
520the payment of dividends or other distribution must be
521conditioned upon the retention, at the time of each payment, of
522capital or surplus in excess of amounts specified by, or
523determined in accordance with formulas approved by, the office.
524     (4)  An irrevocable letter of credit that is issued by a
525financial institution other than a bank chartered by this state
526or a member bank of the Federal Reserve System must meet the
527same standards as an irrevocable letter of credit that has been
528issued by a bank chartered by this state or a member bank of the
529Federal Reserve System.
530     Section 6.  Section 628.909, Florida Statutes, is amended
531to read:
532     628.909  Applicability of other laws.-
533     (1)  The Florida Insurance Code does shall not apply to
534captive insurers or industrial insured captive insurers except
535as provided in this part and subsections (2) and (3).
536     (2)  The following provisions of the Florida Insurance Code
537shall apply to captive insurers who are not industrial insured
538captive insurers to the extent that such provisions are not
539inconsistent with this part:
540     (a)  Chapter 624, except for ss. 624.407, 624.408,
541624.4085, 624.40851, 624.4095, 624.425, and 624.426.
542     (b)  Chapter 625, part II.
543     (c)  Chapter 626, part IX.
544     (d)  Sections 627.730-627.7405, when no-fault coverage is
545provided.
546     (e)  Chapter 628.
547     (3)  The following provisions of the Florida Insurance Code
548shall apply to industrial insured captive insurers to the extent
549that such provisions are not inconsistent with this part:
550     (a)  Chapter 624, except for ss. 624.407, 624.408,
551624.4085, 624.40851, 624.4095, 624.425, 624.426, and 624.609(1).
552     (b)  Chapter 625, part II, if the industrial insured
553captive insurer is incorporated in this state.
554     (c)  Chapter 626, part IX.
555     (d)  Sections 627.730-627.7405 when no-fault coverage is
556provided.
557     (e)  Chapter 628, except for ss. 628.341, 628.351, and
558628.6018.
559     Section 7.  Section 628.910, Florida Statutes, is created
560to read:
561     628.910  Incorporation options and requirements.-
562     (1)  A pure captive insurance company may be:
563     (a)  Incorporated as a stock insurer with its capital
564divided into shares and held by the stockholders; or
565     (b)  Incorporated as a public benefit, mutual benefit, or
566religious nonprofit corporation with members in accordance with
567the Florida Not For Profit Corporation Act.
568     (2)  An association captive insurance company or an
569industrial insured captive insurance company may be:
570     (a)  Incorporated as a stock insurer with its capital
571divided into shares and held by the stockholders; or
572     (b)  Incorporated as a mutual insurer without capital
573stock, the governing body of which is elected by the member
574organizations of its association.
575     (3)  A captive insurance company may not have fewer than
576three incorporators of whom not fewer than two must be residents
577of this state.
578     (4)  In the case of a captive insurance company formed as a
579corporation or a nonprofit corporation, before the articles of
580incorporation are transmitted to the Secretary of State, the
581incorporators shall file the articles of incorporation in
582triplicate with the office. The office shall promptly examine
583the articles of incorporation. If the office finds that the
584articles of incorporation conform to law, it shall endorse its
585approval on each of the triplicate originals of the articles of
586incorporation, retain one copy for its files, and return the
587remaining copies to the incorporators for filing with the
588Department of State.
589     (5)  The articles of incorporation, the certificate issued
590pursuant to this section, and the organization fees required by
591the Florida Business Corporation Act or the Florida Not For
592Profit Corporation Act, as applicable, must be transmitted to
593the Secretary of State, who must record the articles of
594incorporation and the certificate.
595     (6)  The capital stock of a captive insurance company
596incorporated as a stock insurer must be issued at par value of
597not less than $1 or more than $100 per share.
598     (7)  In the case of a captive insurance company formed as a
599corporation or a nonprofit corporation, at least one of the
600members of the board of directors of a captive insurance company
601incorporated in this state must be a resident of this state.
602     (8)  A captive insurance company formed as a corporation or
603a nonprofit corporation, pursuant to the provisions of this
604chapter, has the privileges and is subject to the provisions of
605the general corporation law, including the Florida Not For
606Profit Corporation Act for nonprofit corporations, as
607applicable, as well as the applicable provisions contained in
608this chapter. If a conflict occurs between a provision of the
609general corporation law, including the Florida Not For Profit
610Corporation Act for nonprofit corporations, as applicable, and a
611provision of this chapter, the latter controls. The provisions
612of this title pertaining to mergers, consolidations,
613conversions, mutualizations, and redomestications apply in
614determining the procedures to be followed by a captive insurance
615company in carrying out any of the transactions described in
616such provisions, except that the office may waive or modify the
617requirements for public notice and hearing in accordance with
618rules the office may adopt addressing categories of
619transactions. If a notice of public hearing is required, but no
620one requests a hearing, the office may cancel the hearing.
621     (9)  The articles of incorporation or bylaws of a captive
622insurance company may authorize a quorum of a board of directors
623to consist of no fewer than one-third of the fixed or prescribed
624number of directors as provided for by the Florida Business
625Corporation Act or the Florida Not For Profit Corporation Act.
626     Section 8.  Section 628.911, Florida Statutes, is amended
627to read:
628     628.911  Reports and statements.-
629     (1)  A captive insurance company may insurer shall not be
630required to make any annual report except as provided in this
631part section.
632     (2)  Annually no later than March 1, a captive insurance
633company or a captive reinsurance company insurer shall, within
63460 days after the end of its fiscal year and as often as the
635office may deem necessary, submit to the office a report of its
636financial condition verified by oath of two of its executive
637officers. Except as provided in this part, a captive insurance
638company or a captive reinsurance company must report using
639generally accepted accounting principles, unless the office
640approves the use of statutory accounting principles, with useful
641or necessary modifications or adaptations required or approved
642or accepted by the office for the type of insurance and kinds of
643insurers to be reported upon, and as supplemented by additional
644information required by the office. The Financial Services
645Commission may adopt by rule the form in which captive insurance
646companies insurers shall report.
647     (3)  A captive insurance company may make written
648application for filing the required report on a fiscal year end
649that is consistent with the parent company's fiscal year. If an
650alternative reporting date is granted, the annual report is due
65160 days after the fiscal year end.
652     Section 9.  Section 628.912, Florida Statutes, is created
653to read:
654     628.912  Discounting of loss and loss adjustment expense
655reserves.-
656     (1)  A captive reinsurance company may discount its loss
657and loss adjustment expense reserves at treasury rates applied
658to the applicable payments projected through the use of the
659expected payment pattern associated with the reserves.
660     (2)  A captive reinsurance company must file annually an
661actuarial opinion on loss and loss adjustment expense reserves
662provided by an independent actuary. The actuary may not be an
663employee of the captive reinsurance company or its affiliates.
664     (3)  The office may disallow the discounting of reserves if
665a captive reinsurance company violates a provision of this part.
666     Section 10.  Section 628.913, Florida Statutes, is amended
667to read:
668(Substantial rewording of section. See
669s. 628.913, F.S., for present text.)
670     628.913  Captive reinsurance companies.-
671     (1)  A captive reinsurance company, if permitted by its
672articles of incorporation or charter, may apply to the office
673for a license to write reinsurance covering property and
674casualty insurance or reinsurance contracts. A captive
675reinsurance company authorized by the office may write
676reinsurance contracts covering risks in any state. However, a
677captive reinsurance company authorized by the office may not
678directly insure risks.
679     (2)  To conduct business in this state, a captive
680reinsurance company must:
681     (a)  Obtain from the office a license authorizing it to
682conduct business as a captive reinsurance company in this state;
683     (b)  Hold at least one board of directors' meeting each
684year in this state;
685     (c)  Maintain its principal place of business in this
686state; and
687     (d)  Appoint a registered agent to accept service of
688process and act otherwise on its behalf in this state.
689     (3)  Before receiving a license, a captive reinsurance
690company must file with the office:
691     (a)  A certified copy of its charter and bylaws;
692     (b)  A statement under oath of its president and secretary
693showing its financial condition; and
694     (c)  Other documents required by the office.
695     (4)  In addition to the information required by this
696section, the captive reinsurance company must file with the
697office evidence of:
698     (a)  The amount and liquidity of the captive reinsurance
699company's assets relative to the risks to be assumed;
700     (b)  The adequacy of the expertise, experience, and
701character of the person who manages the company;
702     (c)  The overall soundness of the company's plan of
703operation; and
704     (d)  Other overall factors considered relevant by the
705office in ascertaining if the company would be able to meet its
706policy obligations.
707     Section 11.  Section 628.914, Florida Statutes, is created
708to read:
709     628.914  Minimum capitalization or reserves for captive
710reinsurance companies.-
711     (1)  The office may not issue a license to a captive
712reinsurance company unless the company possesses and maintains
713capital or unimpaired surplus of not less than the greater of
714$300 million or 10 percent of reserves. The surplus may be in
715the form of cash or securities as permitted by part II of
716chapter 625.
717     (2)  The office may prescribe additional capital or surplus
718based upon the type, volume, and nature of the insurance
719business transacted.
720     (3)  A captive reinsurance company may not pay a dividend
721out of, or other distribution with respect to, capital or
722surplus in excess of the limitations without the prior approval
723of the office. Approval of an ongoing plan for the payment of
724dividends or other distributions must be conditioned upon the
725retention, at the time of each payment, of capital or surplus in
726excess of amounts specified by, or determined in accordance with
727formulas approved by, the office.
728     Section 12.  Section 628.9141, Florida Statutes, is created
729to read:
730     628.9141  Incorporation of a captive reinsurance company.-
731     (1)  A captive reinsurance company must be incorporated as
732a stock insurer with its capital divided into shares and held by
733its shareholders.
734     (2)  A captive reinsurance company may not have fewer than
735three incorporators of whom at least two must be residents of
736this state.
737     (3)  Before the articles of incorporation are transmitted
738to the Secretary of State, the incorporators shall comply with
739all the requirements of s. 628.091.
740     (4)  The capital stock of a captive reinsurance company
741must be issued at par value of not less than $1 or more than
742$100 per share.
743     (5)  At least one of the members of the board of directors
744of a captive reinsurance company incorporated in this state must
745be a resident of this state.
746     Section 13.  Section 628.9142, Florida Statutes, is created
747to read:
748     628.9142  Reinsurance; effect on reserves.-
749     (1)  A captive insurance company may provide reinsurance,
750as authorized in this part, on risks ceded by any other insurer.
751     (2)  A captive insurance company may take credit for
752reserves on risks or portions of risks ceded to authorized
753insurers or reinsurers and unauthorized insurers or reinsurers
754complying with the provisions of s. 624.610. A captive insurer
755may not take credit for reserves on risks or portions of risks
756ceded to an unauthorized insurer or reinsurer if the insurer or
757reinsurer is not in compliance with s. 624.610.
758     Section 14.  Section 628.918, Florida Statutes, is created
759to read:
760     628.918  Management of assets of captive reinsurance
761company.-At least 35 percent of the assets of a captive
762reinsurance company must be managed by an asset manager
763domiciled in this state.
764     Section 15.  Section 628.919, Florida Statutes, is created
765to read:
766     628.919  Standards to ensure risk management control by
767parent company.-The Financial Services Commission shall adopt
768rules establishing standards to ensure that a parent or
769affiliated company is able to exercise control of the risk
770management function of any controlled unaffiliated business to
771be insured by the pure captive insurance company.
772     Section 16.  Section 628.920, Florida Statutes, is created
773to read:
774     628.920  Eligibility of licensed captive insurance company
775for certificate of authority to act as insurer.-A licensed
776captive insurance company that meets the necessary requirements
777of this part imposed upon an insurer must be considered for
778issuance of a certificate of authority to act as an insurer in
779this state.
780     Section 17.  Paragraph (e) of subsection (2) of section
781626.7491, Florida Statutes, is amended to read:
782     626.7491  Business transacted with producer controlled
783property and casualty insurer.-
784     (2)  DEFINITIONS.-As used in this section:
785     (e)  "Licensed insurer" or "insurer" means any person,
786firm, association, or corporation licensed to transact a
787property or casualty insurance business in this state. The
788following are not licensed insurers for the purposes of this
789section:
790     1.  Any risk retention group as defined in:
791     a.  The Superfund Amendments Reauthorization Act of 1986,
792Pub. L. No. 99-499, 100 Stat. 1613 (1986);
793     b.  The Risk Retention Act, 15 U.S.C. ss. 3901 et seq.
794(1982 and Supp. 1986); or
795     c.  Section 627.942(9).
796     2.  Any residual market pool or joint underwriting
797authority or association; and
798     3.  Any captive insurance company insurer as defined in s.
799628.901.
800     Section 18.  Section 628.903, Florida Statutes, is
801repealed.
802     Section 19.  This act shall take effect upon becoming a
803law.


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