Florida Senate - 2024                                    SB 1488
       
       
        
       By Senator Davis
       
       
       
       
       
       5-01708-24                                            20241488__
    1                        A bill to be entitled                      
    2         An act relating to examinations and investigations of
    3         property insurers; amending s. 624.316, F.S.;
    4         providing requirements for examinations of property
    5         insurers by the Office of Insurance Regulation;
    6         increasing the frequency of examinations of property
    7         insurers; providing criteria for a risk-based
    8         methodology for scheduling examinations for property
    9         insurers; requiring the office to make publicly
   10         available certain data; amending s. 624.3161, F.S.;
   11         requiring the office to order property insurers to
   12         file with the office claims-handling practices and
   13         procedures under certain circumstances; requiring the
   14         office to conduct additional market conduct
   15         examinations of certain residential property insurers;
   16         revising requirements for such examinations; requiring
   17         the office to make publicly available certain findings
   18         and information; amending s. 624.318, F.S.; requiring
   19         certain entities to make certain documents and
   20         information freely available to the Department of
   21         Financial Services, the office, and their examiners
   22         for examinations and investigations of property
   23         insurers; authorizing the department, the office, and
   24         their examiners to electronically scan certain
   25         documents; amending s. 624.319, F.S.; requiring that
   26         examination reports of property insurers contain
   27         certain information; requiring the office to make
   28         publicly available certain examination reports,
   29         investigation reports, and work papers on property
   30         insurers; providing an effective date.
   31          
   32  Be It Enacted by the Legislature of the State of Florida:
   33  
   34         Section 1. Paragraph (a) of subsection (1), paragraph (a)
   35  of subsection (2), and paragraph (b) of subsection (3) of
   36  section 624.316, Florida Statutes, are amended, and subsection
   37  (5) is added to that section, to read:
   38         624.316 Examination of insurers.—
   39         (1)(a) The office shall examine the affairs, transactions,
   40  accounts, records, and assets of each authorized insurer and of
   41  the attorney in fact of a reciprocal insurer as to its
   42  transactions affecting the insurer as often as it deems
   43  advisable, except as provided in this section. The examination
   44  may include examination of the affairs, transactions, accounts,
   45  and records relating directly or indirectly to the insurer and
   46  of the assets of the insurer’s managing general agents and
   47  controlling or controlled persons person, as defined in s.
   48  625.012. For property insurers, the examination must also
   49  include examination of:
   50         1.The affairs, transactions, accounts, and records
   51  relating directly or indirectly to the insurer, the insurer’s
   52  holding company, and the insurer’s affiliate;
   53         2.The assets, executive compensations, and ownership
   54  dividends of the officers, directors, managing general agents,
   55  and controlling persons, controlled persons, and controlling or
   56  controlled persons, as those terms are defined in s.
   57  625.012(5)(b), of the insurer, the insurer’s holding company,
   58  and the insurer’s affiliate;
   59         3.The contractual agreements between the officers,
   60  directors, agents, and persons described in subparagraph 2. and
   61  the insurer, insurer’s holding company, and insurer’s affiliate;
   62  and
   63         4.The contractual agreements between the insurer’s vendors
   64  and the insurer.
   65  
   66  The examination shall be pursuant to a written order of the
   67  office. Such order shall expire upon receipt by the office of
   68  the written report of the examination.
   69         (2)(a) Except as provided in paragraph (f), the office may
   70  examine each insurer as often as may be warranted for the
   71  protection of the policyholders and in the public interest, but
   72  must, at a minimum, examine:
   73         1. High-risk insurers at least once every 3 years and high
   74  risk property insurers at least once every year.
   75         2. Average- and low-risk insurers at least once every 5
   76  years and average- and low-risk property insurers at least once
   77  every 3 years.
   78  
   79  The examination shall cover the number of fiscal years since the
   80  last examination of the insurer, except for examinations of low
   81  risk insurers, in which case the examination need only cover at
   82  least the preceding 5 fiscal years, and shall be commenced
   83  within 12 months after the end of the most recent fiscal year
   84  being covered by the examination. The examination may cover any
   85  period of the insurer’s operations since the last previous
   86  examination. The examination may include examination of events
   87  subsequent to the end of the most recent fiscal year and the
   88  events of any prior period that affect the present financial
   89  condition of the insurer.
   90         (3) The office shall create, and the commission shall adopt
   91  by rule, a risk-based selection methodology for scheduling
   92  examinations of insurers subject to this section. Except as
   93  otherwise specified in subsection (2), this requirement does not
   94  restrict the authority of the office to conduct examinations
   95  under this section as often as it deems advisable. Such
   96  methodology must include all of the following:
   97         (b) Consideration of:
   98         1. The level of capitalization and identification of
   99  unfavorable trends;
  100         2. Negative trends in profitability or cash flow from
  101  operations;
  102         3. National Association of Insurance Commissioners
  103  Insurance Regulatory Information System ratio results;
  104         4. Risk-based capital and risk-based capital trend test
  105  results;
  106         5. The structure and complexity of the insurer;
  107         6. Changes in the insurer’s officers or board of directors;
  108         7. Changes in the insurer’s business strategy or
  109  operations;
  110         8. Findings and recommendations from an examination made
  111  pursuant to this section or s. 624.3161;
  112         9. Current or pending regulatory actions by the office or
  113  the department;
  114         10. Information obtained from other regulatory agencies or
  115  independent organization ratings and reports; and
  116         11. The impact of an insurer’s insolvency on policyholders
  117  of the insurer and the public generally; and
  118         12.With respect to property insurers:
  119         a.(I)The assets, executive compensations, and ownership
  120  dividends of the officers, directors, managing general agents,
  121  and controlling persons, controlled persons, and controlling or
  122  controlled persons, as those terms are defined in s.
  123  625.012(5)(b), of the insurer, the insurer’s holding company,
  124  and the insurer’s affiliate;
  125         (II)The contractual agreements between the officers,
  126  directors, agents, and persons described in sub-sub-subparagraph
  127  (I) and the insurer, insurer’s holding company, and affiliate;
  128  and
  129         (III)The contractual agreements between the insurer’s
  130  vendors and the insurer;
  131         b.The policyholders’ complaints against the insurer and
  132  the reasons for which the complaints were confirmed or closed;
  133  and
  134         c.The fraud investigations and findings, if any, on the
  135  insurer and the insurer’s officers, board of directors, managing
  136  general agents, controlling or controlled persons, and vendors.
  137         (5)Except as otherwise provided in the Florida Insurance
  138  Code, the office shall make publicly available, with respect to
  139  each property insurer, the examination data obtained pursuant to
  140  paragraph (1)(c).
  141         Section 2. Subsections (6) and (7) of section 624.3161,
  142  Florida Statutes, are amended, and subsection (10) is added to
  143  that section, to read:
  144         624.3161 Market conduct examinations.—
  145         (6) Based on the findings of a market conduct examination
  146  that an insurer has exhibited a pattern or practice of willful
  147  violations of an unfair insurance trade practice related to
  148  claims handling which caused harm to policyholders, as
  149  prohibited by s. 626.9541(1)(i), the office may order an
  150  insurer, and shall order a property insurer, pursuant to chapter
  151  120 to file its claims-handling practices and procedures related
  152  to that line of insurance with the office for review and
  153  inspection, to be held by the office for the following 36-month
  154  period. Such claims-handling practices and procedures are public
  155  records and are not trade secrets or otherwise exempt from the
  156  provisions of s. 119.07(1). As used in this section, “claims
  157  handling practices and procedures” are any policies, guidelines,
  158  rules, protocols, standard operating procedures, instructions,
  159  or directives that govern or guide how and the manner in which
  160  an insured’s claims for benefits under any policy will be
  161  processed.
  162         (7) Notwithstanding subsection (1), any authorized insurer
  163  transacting residential property insurance business in this
  164  state:
  165         (a) Must May be subject to an additional market conduct
  166  examination after a hurricane if, at any time more than 90 days
  167  after the end of the hurricane, the insurer is among the top 20
  168  percent of insurers based upon a calculation of the ratio of
  169  hurricane-related property insurance claims filed to the number
  170  of property insurance policies in force;
  171         (b) Must be subject to a market conduct examination after a
  172  hurricane if, at any time more than 90 days after the end of the
  173  hurricane, the insurer:
  174         1. Is among the top 20 percent of insurers based upon a
  175  calculation of the ratio of hurricane claim-related consumer
  176  complaints made about that insurer to the department to the
  177  insurer’s total number of hurricane-related claims;
  178         2. Is among the top 20 percent of insurers based upon a
  179  calculation of the ratio of hurricane claims closed without
  180  payment to the insurer’s total number of hurricane claims on
  181  policies providing wind or windstorm coverage;
  182         3. Has made significant payments to its officer; director;
  183  managing general agent; controlling person, controlled person,
  184  or controlling or controlled person as those terms are defined
  185  in s. 625.012(5)(b); or vendor since the hurricane; or
  186         4. Is identified by the office as necessitating a market
  187  conduct exam for any other reason.
  188  
  189  All relevant criteria under this section and s. 624.316 shall be
  190  applied to the market conduct examination under this subsection.
  191  Such an examination must be initiated within 18 months after the
  192  landfall of a hurricane that results in an executive order or a
  193  state of emergency issued by the Governor. The requirements of
  194  this subsection do not limit the authority of the office to
  195  conduct at any time a market conduct examination of a property
  196  insurer in the aftermath of a hurricane. This subsection does
  197  not require the office to conduct multiple market conduct
  198  examinations of the same insurer when multiple hurricanes make
  199  landfall in this state in a single calendar year. An examination
  200  of an insurer under this subsection must also include an
  201  examination of its officer; director; managing general agent;
  202  and controlling person, controlled person, and controlling or
  203  controlled person, as those terms are defined in s.
  204  625.012(5)(b), as if it were the insurer.
  205         (10)Except as otherwise provided in the Florida Insurance
  206  Code, with respect to each property insurer, the office shall
  207  make publicly available:
  208         (a)The findings of the market conduct examination,
  209  including the results of the National Association of Insurance
  210  Commissioners Market Conduct Annual Statement; and
  211         (b)Detailed information on the policyholders’ complaints
  212  against the insurer received by the office or the insurer and
  213  the reasons for which the claims were confirmed or closed.
  214         Section 3. Subsection (2) and paragraph (a) of subsection
  215  (7) of section 624.318, Florida Statutes, are amended to read:
  216         624.318 Conduct of examination or investigation; access to
  217  records; correction of accounts; appraisals.—
  218         (2)(a) Every person being examined or investigated, and its
  219  officers, attorneys, employees, agents, and representatives,
  220  shall make freely available to the department or office or its
  221  examiners or investigators the accounts, records, documents,
  222  files, information, assets, and matters in their possession or
  223  control relating to the subject of the examination or
  224  investigation.
  225         (b)In addition to paragraph (a), with respect to a
  226  property insurer:
  227         1.Every insurer being examined or investigated and its
  228  vendors; and
  229         2.The officers, directors, managing general agents, and
  230  controlling persons, controlled persons, and controlling or
  231  controlled persons, as those terms are defined in s.
  232  625.012(5)(b), of the insurer, the insurer’s holding company,
  233  and the insurer’s affiliate,
  234  
  235  shall make freely available to the department or office or the
  236  examiners the accounts; records; documents; files; information,
  237  including, but not limited to, information on executive
  238  compensations, ownership dividends, and contractual
  239  arrangements; assets; and matters, as applicable, in their
  240  possession or control relating to the subject of the examination
  241  or investigation.
  242         (c) An agent who provides other products or services or
  243  maintains customer information not related to insurance must
  244  maintain records relating to insurance products and transactions
  245  separately if necessary to give the department or office access
  246  to such records. If records relating to the insurance
  247  transactions are maintained by an agent on premises owned or
  248  operated by a third party, the agent and the third party must
  249  provide access to the records by the department or office.
  250         (7)(a) The department or office or its examiners or
  251  investigators may electronically scan accounts, records,
  252  documents, files, and information, relating to the subject of
  253  the examination or investigation, in the possession or control
  254  of the person being examined or investigated. With respect to a
  255  property owner, the department or office or its examiners or
  256  investigators may also electronically scan documents relating
  257  to:
  258         1.The assets, executive compensations, and ownership
  259  dividends of the officers, directors, managing general agents,
  260  and controlling persons, controlled persons, and controlling or
  261  controlled persons, as those terms are defined in s.
  262  625.012(5)(b), of the insurer, insurer’s holding company, and
  263  insurer’s affiliate;
  264         2.The contractual agreements between the officers,
  265  directors, agents, and persons described in subparagraph 1. and
  266  the insurer, the insurer’s holding company, and the insurer’s
  267  affiliate; and
  268         3.The contractual agreements between the insurer’s vendors
  269  and the insurer.
  270         Section 4. Present subsection (6) of section 624.319,
  271  Florida Statutes, is redesignated as subsection (7), a new
  272  subsection (6) is added to that section, and subsection (1) is
  273  amended, to read:
  274         624.319 Examination and investigation reports.—
  275         (1)(a) The department or office or its examiner shall make
  276  a full and true written report of each examination. The
  277  examination report must shall contain only information obtained
  278  from examination of the records, accounts, files, and documents
  279  of or relative to the insurer examined or from testimony of
  280  individuals under oath, together with relevant conclusions and
  281  recommendations of the examiner based thereon. With respect to a
  282  property insurer, the examination report must also contain
  283  information relating to:
  284         1.The assets, executive compensations, and ownership
  285  dividends of the officers, directors, managing general agents,
  286  and controlling persons, controlled persons, and controlling or
  287  controlled persons, as those terms are defined in s.
  288  625.012(5)(b), of the insurer, insurer’s holding company, and
  289  insurer’s affiliate;
  290         2.The contractual agreements between the officers,
  291  directors, agents, and persons described in paragraph (a) and
  292  the insurer, the insurer’s holding company, and the insurer’s
  293  affiliate; and
  294         3.The contractual agreements between the insurer’s vendors
  295  and the insurer.
  296         (b) The department or office must furnish a copy of the
  297  examination report to the insurer examined at least 30 days
  298  before filing the examination report in its office. If such
  299  insurer so requests in writing within such 30-day period, the
  300  department or office must grant a hearing with respect to the
  301  examination report and may not file the examination report until
  302  after the hearing and after such modifications have been made
  303  therein as the department or office deems proper.
  304         (6)Except as otherwise provided in the Florida Insurance
  305  Code, the office shall make publicly available:
  306         (a)The examination reports that have been filed;
  307         (b)The investigation reports after the investigation is
  308  completed or ceases to be active, except for any portion of the
  309  report which remains confidential and exempt from s. 119.07(1)
  310  and s. 24(a), Art. I of the State Constitution under
  311  subparagraph (3)(a)3.; and
  312         (c)Work papers after the examination is filed or the
  313  investigation is completed or ceases to be active.
  314         Section 5. This act shall take effect July 1, 2024.