Florida Senate - 2014 CS for SB 758
By the Committee on Banking and Insurance; and Senator Lee
597-02195-14 2014758c1
1 A bill to be entitled
2 An act relating to title insurer reserves; amending s.
3 625.041, F.S.; specifying that a title insurer is
4 liable for all of its unpaid losses and claims;
5 amending s. 625.111, F.S.; revising and specifying the
6 reserves certain title insurers must set aside;
7 specifying how such reserves will be released;
8 specifying which state law governs the amount of the
9 reserve when a title insurer transfers its domicile to
10 this state; defining “bulk reserve”; amending ss.
11 624.407 and 624.408, F.S.; conforming cross
12 references; providing an effective date.
13
14 Be It Enacted by the Legislature of the State of Florida:
15
16 Section 1. Section 625.041, Florida Statutes, is amended to
17 read:
18 625.041 Liabilities, in general.—In any determination of
19 the financial condition of an insurer, liabilities to be charged
20 against its assets shall include:
21 (1) The amount, estimated in accordance consistent with the
22 provisions of this code, necessary to pay all of its unpaid
23 losses and claims incurred on or prior to the date of statement,
24 whether reported or unreported, together with the expenses of
25 adjustment or settlement thereof.
26 (2) With respect to title insurance, the amount, estimated
27 in accordance with this code, necessary to pay all of its known
28 unpaid losses and claims incurred on or before the date of
29 statement, together with the expenses of adjustment or
30 settlement thereof. This requirement is in addition to the
31 reserves required under s. 625.111.
32 (3)(2) With respect reference to life and health insurance
33 and annuity contracts:
34 (a) The amount of reserves on life insurance policies and
35 annuity contracts in force, valued according to the tables of
36 mortality, rates of interest, and methods adopted pursuant to
37 this code which are applicable thereto.
38 (b) Reserves for disability benefits, for both active and
39 disabled lives.
40 (c) Reserves for accidental death benefits.
41 (d) Any additional reserves that may be required by the
42 office in accordance consistent with practice formulated or
43 approved by the National Association of Insurance Commissioners
44 or its successor organization, on account of such insurance,
45 including contract and premium deficiency reserves.
46 (4)(3) With respect reference to insurance other than that
47 specified in subsections (2) and (3) subsection (2), and other
48 than title insurance, the amount of reserves equal to the
49 unearned portions of the gross premiums charged on policies in
50 force, computed in accordance with this part.
51 (5)(4) Taxes, expenses, and other obligations due or
52 accrued at the date of the statement.
53 (6)(5) An Any insurer in this state that writes workers’
54 compensation insurance shall accrue a liability on its financial
55 statements for all Special Disability Trust Fund assessments
56 that are due within the current calendar year. In addition,
57 Those insurers shall also disclose in the notes to the financial
58 statements required to be filed pursuant to s. 624.424 an
59 estimate of future Special Disability Trust Fund assessments, if
60 the assessments are likely to occur and can be estimated with
61 reasonable certainty.
62 Section 2. Section 625.111, Florida Statutes, is amended to
63 read:
64 625.111 Title insurance reserve.—In addition to an adequate
65 reserve as to outstanding losses relating to known claims, as
66 required under s. 625.041, a domestic title insurer shall
67 establish, segregate, and maintain a guaranty fund or unearned
68 premium reserve as provided in this section. The sums required
69 under this section to be reserved for unearned premiums on title
70 guarantees and policies at all times and for all purposes shall
71 be considered and constitute unearned portions of the original
72 premiums and shall be charged as a reserve liability of the such
73 insurer in determining its financial condition. While Such sums
74 are so reserved funds, they shall be withdrawn from the use of
75 the insurer for its general purposes, impressed with a trust in
76 favor of the holders of title guarantees and policies, and held
77 available for reinsurance of the title guarantees and policies
78 in the event of the insolvency of the insurer. Nothing contained
79 in This section does not shall preclude the such insurer from
80 investing such reserve in investments authorized by law, for
81 such an insurer and the income from such investments invested
82 reserve shall be included in the general income of the insurer
83 and may to be used by such insurer for any lawful purpose.
84 (1) For an unearned premium reserve reserves established on
85 or after July 1, 1999, such unearned premium reserve must be in
86 shall consist of not less than an amount at least equal to the
87 sum of the amounts specified in paragraphs (a), (b), and (d) for
88 title insurers holding less than $50 million in surplus as to
89 policyholders as of the previous year end, and the sum of the
90 amounts specified in paragraphs (c) and (d) for title insurers
91 holding $50 million or more in surplus as to policyholders as of
92 the previous year end:
93 (a) A reserve with respect to unearned premiums for
94 policies written or title liability assumed in reinsurance
95 before July 1, 1999, equal to the reserve established on June
96 30, 1999, for those unearned premiums with such reserve being
97 subsequently released as provided in subsection (2). For
98 domestic title insurers subject to this section, such amounts
99 shall be calculated in accordance with provisions of law of this
100 state law in effect at the time the associated premiums were
101 written or assumed and as amended before prior to July 1, 1999.
102 (b) A total amount equal to 30 cents for each $1,000 of net
103 retained liability for policies written or title liability
104 assumed in reinsurance on or after July 1, 1999, with such
105 reserve being subsequently released as provided in subsection
106 (2). For the purpose of calculating this reserve, the total of
107 the net retained liability for all simultaneous issue policies
108 covering a single risk shall be equal to the liability for the
109 policy with the highest limit covering that single risk, net of
110 any liability ceded in reinsurance.
111 (c) On or after January 1, 2014, for title insurers holding
112 $50 million or more in surplus as to policyholders as of the
113 previous year-end, a minimum of 6.5 percent of the total of the
114 following:
115 1. Direct premiums written; and
116 2. Premiums for reinsurance assumed, plus other income,
117 less premiums for reinsurance ceded as displayed in Schedule P
118 of the title insurer’s most recent annual statement filed with
119 the office with such reserve being subsequently released as
120 provided in subsection (2). Title insurers with less than $50
121 million in surplus as to policyholders must continue to record
122 unearned premium reserve in accordance with paragraph (b).
123 (d)(c) An additional amount, if deemed necessary by a
124 qualified actuary, to which shall be subsequently released as
125 provided in subsection (2). Using financial results as of
126 December 31 of each year, all domestic title insurers shall
127 obtain a Statement of Actuarial Opinion from a qualified actuary
128 regarding the insurer’s loss and loss adjustment expense
129 reserves, including reserves for known claims, adverse
130 development on known claims, incurred but not reported claims,
131 and unallocated loss adjustment expenses. The actuarial opinion
132 must shall conform to the annual statement instructions for
133 title insurers adopted by the National Association of Insurance
134 Commissioners and shall include the actuary’s professional
135 opinion of the insurer’s reserves as of the date of the annual
136 statement. If the amount of the reserve stated in the opinion
137 and displayed in Schedule P of the annual statement for that
138 reporting date is greater than the sum of the known claim
139 reserve and unearned premium reserve as calculated under this
140 section, as of the same reporting date and including any
141 previous actuarial provisions added at earlier dates, the
142 insurer shall add to the insurer’s unearned premium reserve an
143 actuarial amount equal to the reserve shown in the actuarial
144 opinion, minus the known claim reserve and the unearned premium
145 reserve, as of the current reporting date and calculated in
146 accordance with this section, but not in no event calculated as
147 of any date before prior to December 31, 1999. The comparison
148 shall be made using that line on Schedule P displaying the Total
149 Net Loss and Loss Adjustment Expense which is comprised of the
150 Known Claim Reserve, and any associated Adverse Development
151 Reserve, the reserve for Incurred But Not Reported Losses, and
152 Unallocated Loss Adjustment Expenses.
153 (2)(a) With respect to reserves the reserve established in
154 accordance with:
155 (a) Paragraph (1)(a), the domestic title insurer shall
156 release the reserve over the subsequent a period of 20
157 subsequent years as provided in this paragraph. The insurer
158 shall release 30 percent of the initial aggregate sum during
159 1999, with one quarter of that amount being released on March
160 31, June 30, September 30, and December 31, 1999, with the March
161 31 and June 30 releases to be retroactive and reflected on the
162 September 30 financial statements. Thereafter, the insurer shall
163 release, on the same quarterly basis as specified for reserves
164 released during 1999, a percentage of the initial aggregate sum
165 as follows: 15 percent during calendar year 2000, 10 percent
166 during each of calendar years 2001 and 2002, 5 percent during
167 each of calendar years 2003 and 2004, 3 percent during each of
168 calendar years 2005 and 2006, 2 percent during each of calendar
169 years 2007-2013, and 1 percent during each of calendar years
170 2014-2018.
171 (b) With respect to reserves established in accordance with
172 Paragraph (1)(b), the unearned premium for policies written or
173 title liability assumed during a particular calendar year shall
174 be earned, and released from reserve, over the subsequent a
175 period of 20 subsequent years as provided in this paragraph. The
176 insurer shall release 30 percent of the initial sum during the
177 year following next succeeding the year the premium was written
178 or assumed, with one quarter of that amount being released on
179 March 31, June 30, September 30, and December 31 of such year.
180 Thereafter, the insurer shall release, on the same quarterly
181 basis as specified for reserves released during the year
182 following first succeeding the year the premium was written or
183 assumed, a percentage of the initial sum as follows: 15 percent
184 during the next succeeding year, 10 percent during each of the
185 next succeeding 2 years, 5 percent during each of the next
186 succeeding 2 years, 3 percent during each of the next succeeding
187 2 years, 2 percent during each of the next succeeding 7 years,
188 and 1 percent during each of the next succeeding 5 years.
189 (c) With respect to reserves established in accordance with
190 Paragraph (1)(c), the unearned premium for policies written or
191 title liability assumed during a particular calendar year shall
192 be earned, and released from reserve, over the subsequent 20
193 years at an amortization rate not to exceed the formula in this
194 paragraph. The insurer shall release 35 percent of the initial
195 sum during the year following the year the premium was written
196 or assumed, with one quarter of that amount being released on
197 March 31, June 30, September 30, and December 31 of such year.
198 Thereafter, the insurer shall release, on the same quarterly
199 basis as specified for reserve released during the year
200 following the year the premium was written or assumed, a
201 percentage of the initial sum as follows: 15 percent during each
202 year of the next succeeding 2 years, 10 percent during the next
203 succeeding year, 3 percent during each of the next succeeding 3
204 years, 2 percent during each of the next succeeding 3 years, and
205 1 percent during each of the next succeeding 10 years.
206 (d) Paragraph (1)(d), any additional amount established in
207 any calendar year shall be released in the years subsequent to
208 its establishment as provided in paragraph (c) (b), with the
209 timing and percentage of releases being in all respects
210 identical to those of unearned premium reserves that are
211 calculated as provided in paragraph (c) (b) and established with
212 regard to premiums written or liability assumed in reinsurance
213 in the same year as the year in which any additional amount was
214 originally established.
215 (3) If a title insurer that is organized under the laws of
216 another state transfers its domicile to this state, the
217 statutory or unearned premium reserve shall be the amount
218 required by the laws of the title insurer’s former state of
219 domicile as of the date of transfer of domicile and shall be
220 released from reserve according to the requirements of law in
221 effect in the former state at the time of domicile. On or after
222 January 1, 2014, for new business written after the effective
223 date of the transfer of domicile to this state, the domestic
224 title insurer shall add to and set aside in the statutory or
225 unearned premium reserve such amount as provided in paragraph
226 (1)(c).
227 (4)(3) At any reporting date, the amount of the required
228 releases of existing unearned premium reserves under subsection
229 (2) shall be calculated and deducted from the total unearned
230 premium reserve before any additional amount is established for
231 the current calendar year in accordance with the provisions of
232 paragraph (1)(d) (1)(c).
233 (5) A domestic title insurer is not required to record a
234 separate bulk reserve. However, if a separate bulk reserve is
235 recorded, the statutory premium reserve must be reduced by the
236 amount recorded for such bulk reserve.
237 (6)(4) As used in this section, the term:
238 (a) “Bulk reserve” means provision for subsequent
239 development on known claims.
240 (b)(a) “Net retained liability” means the total liability
241 retained by a title insurer for a single risk, after taking into
242 account the deduction for ceded liability, if any.
243 (c)(b) “Qualified actuary” means a person who is, as
244 detailed in the National Association of Insurance Commissioners’
245 Annual Statement Instructions:
246 1. A member in good standing of the Casualty Actuarial
247 Society;
248 2. A member in good standing of the American Academy of
249 Actuaries who has been approved as qualified for signing
250 casualty loss reserve opinions by the Casualty Practice Council
251 of the American Academy of Actuaries; or
252 3. A person who otherwise has competency in loss reserve
253 evaluation as demonstrated to the satisfaction of the insurance
254 regulatory official of the domiciliary state. In such case, at
255 least 90 days before prior to the filing of its annual
256 statement, the insurer must request approval that the person be
257 deemed qualified and that request must be approved or denied.
258 The request must include the National Association of Insurance
259 Commissioners’ Biographical Form and a list of all loss reserve
260 opinions issued in the last 3 years by this person.
261 (d)(c) “Single risk” means the insured amount of a any
262 title insurance policy, except that where two or more title
263 insurance policies are issued simultaneously covering different
264 estates in the same real property, “single risk” means the sum
265 of the insured amounts of all such title insurance policies. A
266 Any title insurance policy insuring a mortgage interest, a claim
267 payment under which reduces the insured amount of a fee or
268 leasehold title insurance policy, shall be excluded in computing
269 the amount of a single risk to the extent that the insured
270 amount of the mortgage title insurance policy does not exceed
271 the insured amount of the fee or leasehold title insurance
272 policy.
273 Section 3. Subsection (5) of section 624.407, Florida
274 Statutes, is amended to read:
275 624.407 Surplus required; new insurers.—
276 (5) For the purposes of this section, liabilities do not
277 include liabilities required under s. 625.041(5) s. 625.041(4).
278 For purposes of computing minimum surplus as to policyholders
279 pursuant to s. 625.305(1), liabilities include liabilities
280 required under s. 625.041(5) s. 625.041(4).
281 Section 4. Subsection (2) of section 624.408, Florida
282 Statutes, is amended to read:
283 624.408 Surplus required; current insurers.—
284 (2) For purposes of this section, liabilities do not
285 include liabilities required under s. 625.041(5) s. 625.041(4).
286 For purposes of computing minimum surplus as to policyholders
287 pursuant to s. 625.305(1), liabilities include liabilities
288 required under s. 625.041(5) s. 625.041(4).
289 Section 5. This act shall take effect upon becoming a law.