F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 733 2021
1 A bill to be entitled
2 An act relating to credit for reinsurance; amending s.
3 624.610, F.S.; making a technical change; adding
4 conditions under which a ceding insurer must be
5 allowed credit for reinsurance; transferring specified
6 authority and duties relating to credit for
7 reinsurance from the Commissioner of Insurance to the
8 Office of Insurance Regulation; revising the attorney
9 designation requirement in reinsurance agreements with
10 certain assuming insurers under certain circumstances;
11 defining the terms "reciprocal jurisdiction" and
12 "covered agreement"; requiring the office to publish a
13 list of reciprocal jurisdictions on its website;
14 authorizing the office to remove reciprocal
15 jurisdictions under a specified circumstance;
16 specifying requirements for assuming insurers and
17 reinsurance agreements; specifying documentation
18 requirements; authorizing a ceding insurer or its
19 representative that is subject to rehabilitation,
20 liquidation, or conservation to seek a certain court
21 order; providing construction; specifying a limitation
22 on credit taken by a ceding insurer; requiring the
23 office to publish on its website a list of certain
24 assuming insurers; authorizing the office to revoke or
25 suspend an assuming insurer's eligibility under
Page 1 of 20
CODING: Words stricken are deletions; words underlined are additions.
hb0733-00
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 733 2021
26 certain circumstances; prohibiting credit for
27 reinsurance under certain circumstances; providing
28 exceptions; making technical changes; conforming
29 provisions to changes made by the act; providing an
30 effective date.
31
32 Be It Enacted by the Legislature of the State of Florida:
33
34 Section 1. Subsections (4) through (15) of section
35 624.610, Florida Statutes, are renumbered as subsections (5)
36 through (16), respectively, subsection (2), paragraphs (c), (e),
37 and (f) of subsection (3), present subsection (4), paragraph (a)
38 of present subsection (5), and paragraph (b) of present
39 subsection (11) are amended, and a new subsection (4) is added
40 to that section, to read:
41 624.610 Reinsurance.—
42 (2) Credit for reinsurance must be allowed a ceding
43 insurer as either an asset or a reduction deduction from
44 liability on account of reinsurance ceded only when the
45 reinsurer meets the requirements of paragraph (3)(a), paragraph
46 (3)(b), or paragraph (3)(c), or subsection (4). Credit must be
47 allowed under paragraph (3)(a) or paragraph (3)(b) only for
48 cessions of those kinds or lines of business that the assuming
49 insurer is licensed, authorized, or otherwise permitted to write
50 or assume in its state of domicile or, in the case of a United
Page 2 of 20
CODING: Words stricken are deletions; words underlined are additions.
hb0733-00
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 733 2021
51 States branch of an alien assuming insurer, in the state through
52 which it is entered and licensed or authorized to transact
53 insurance or reinsurance.
54 (3)
55 (c)1. Credit must be allowed when the reinsurance is ceded
56 to an assuming insurer that maintains a trust fund in a
57 qualified United States financial institution, as defined in
58 paragraph (6)(b) (5)(b), for the payment of the valid claims of
59 its United States ceding insurers and their assigns and
60 successors in interest. To enable the office to determine the
61 sufficiency of the trust fund, the assuming insurer shall report
62 annually to the office information substantially the same as
63 that required to be reported on the NAIC Annual Statement form
64 by authorized insurers. The assuming insurer shall submit to
65 examination of its books and records by the office and bear the
66 expense of examination.
67 2.a. Credit for reinsurance must not be granted under this
68 subsection unless the form of the trust and any amendments to
69 the trust have been approved by:
70 (I) The insurance regulator of the state in which the
71 trust is domiciled; or
72 (II) The insurance regulator of another state who,
73 pursuant to the terms of the trust instrument, has accepted
74 principal regulatory oversight of the trust.
75 b. The form of the trust and any trust amendments must be
Page 3 of 20
CODING: Words stricken are deletions; words underlined are additions.
hb0733-00
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 733 2021
76 filed with the insurance regulator of every state in which the
77 ceding insurer beneficiaries of the trust are domiciled. The
78 trust instrument must provide that contested claims are valid
79 and enforceable upon the final order of any court of competent
80 jurisdiction in the United States. The trust must vest legal
81 title to its assets in its trustees for the benefit of the
82 assuming insurer's United States ceding insurers and their
83 assigns and successors in interest. The trust and the assuming
84 insurer are subject to examination as determined by the
85 insurance regulator.
86 c. The trust remains in effect for as long as the assuming
87 insurer has outstanding obligations due under the reinsurance
88 agreements subject to the trust. No later than February 28 of
89 each year, the trustee of the trust shall report to the
90 insurance regulator in writing the balance of the trust and list
91 the trust's investments at the preceding year end, and shall
92 certify that the trust will not expire prior to the following
93 December 31.
94 3. The following requirements apply to the following
95 categories of assuming insurer:
96 a. The trust fund for a single assuming insurer consists
97 of funds in trust in an amount not less than the assuming
98 insurer's liabilities attributable to reinsurance ceded by
99 United States ceding insurers, and, in addition, the assuming
100 insurer shall maintain a trusteed surplus of not less than $20
Page 4 of 20
CODING: Words stricken are deletions; words underlined are additions.
hb0733-00
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 733 2021
101 million. Not less than 50 percent of the funds in the trust
102 covering the assuming insurer's liabilities attributable to
103 reinsurance ceded by United States ceding insurers and trusteed
104 surplus shall consist of assets of a quality substantially
105 similar to that required in part II of chapter 625. Clean,
106 irrevocable, unconditional, and evergreen letters of credit,
107 issued or confirmed by a qualified United States financial
108 institution, as defined in paragraph (6)(a) (5)(a), effective no
109 later than December 31 of the year for which the filing is made
110 and in the possession of the trust on or before the filing date
111 of its annual statement, may be used to fund the remainder of
112 the trust and trusteed surplus.
113 b.(I) In the case of a group including incorporated and
114 individual unincorporated underwriters:
115 (A) For reinsurance ceded under reinsurance agreements
116 with an inception, amendment, or renewal date on or after August
117 1, 1995, the trust consists of a trusteed account in an amount
118 not less than the group's several liabilities attributable to
119 business ceded by United States domiciled ceding insurers to any
120 member of the group;
121 (B) For reinsurance ceded under reinsurance agreements
122 with an inception date on or before July 31, 1995, and not
123 amended or renewed after that date, notwithstanding the other
124 provisions of this section, the trust consists of a trusteed
125 account in an amount not less than the group's several insurance
Page 5 of 20
CODING: Words stricken are deletions; words underlined are additions.
hb0733-00
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 733 2021
126 and reinsurance liabilities attributable to business written in
127 the United States; and
128 (C) In addition to these trusts, the group shall maintain
129 in trust a trusteed surplus of which $100 million must be held
130 jointly for the benefit of the United States domiciled ceding
131 insurers of any member of the group for all years of account.
132 (II) The incorporated members of the group must not be
133 engaged in any business other than underwriting of a member of
134 the group, and are subject to the same level of regulation and
135 solvency control by the group's domiciliary regulator as the
136 unincorporated members.
137 (III) Within 90 days after its financial statements are
138 due to be filed with the group's domiciliary regulator, the
139 group shall provide to the insurance regulator an annual
140 certification by the group's domiciliary regulator of the
141 solvency of each underwriter member or, if a certification is
142 unavailable, financial statements, prepared by independent
143 public accountants, of each underwriter member of the group.
144 (e) If the reinsurance is ceded to an assuming insurer not
145 meeting the requirements of paragraph (a), paragraph (b),
146 paragraph (c), or paragraph (d), the office commissioner may
147 allow credit, but only if the assuming insurer holds surplus in
148 excess of $250 million and has a secure financial strength
149 rating from at least two statistical rating organizations deemed
150 acceptable by the office commissioner as having experience and
Page 6 of 20
CODING: Words stricken are deletions; words underlined are additions.
hb0733-00
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 733 2021
151 expertise in rating insurers doing business in Florida,
152 including, but not limited to, Standard & Poor's, Moody's
153 Investors Service, Fitch Ratings, A.M. Best Company, and
154 Demotech. In determining whether credit should be allowed, the
155 office commissioner shall consider the following:
156 1. The domiciliary regulatory jurisdiction of the assuming
157 insurer.
158 2. The structure and authority of the domiciliary
159 regulator with regard to solvency regulation requirements and
160 the financial surveillance of the reinsurer.
161 3. The substance of financial and operating standards for
162 reinsurers in the domiciliary jurisdiction.
163 4. The form and substance of financial reports required to
164 be filed by the reinsurers in the domiciliary jurisdiction or
165 other public financial statements filed in accordance with
166 generally accepted accounting principles.
167 5. The domiciliary regulator's willingness to cooperate
168 with United States regulators in general and the office in
169 particular.
170 6. The history of performance by reinsurers in the
171 domiciliary jurisdiction.
172 7. Any documented evidence of substantial problems with
173 the enforcement of valid United States judgments in the
174 domiciliary jurisdiction.
175 8. Any other matters deemed relevant by the office
Page 7 of 20
CODING: Words stricken are deletions; words underlined are additions.
hb0733-00
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 733 2021
176 commissioner. The office commissioner shall give appropriate
177 consideration to insurer group ratings that may have been
178 issued. The office commissioner may, in lieu of granting full
179 credit under this subsection, reduce the amount required to be
180 held in trust under paragraph (c).
181 (f) If the assuming insurer is not authorized or
182 accredited to transact insurance or reinsurance in this state
183 pursuant to paragraph (a) or paragraph (b), the credit permitted
184 by paragraph (c) or paragraph (d) must not be allowed unless the
185 assuming insurer agrees in the reinsurance agreements:
186 1.a. That in the event of the failure of the assuming
187 insurer to perform its obligations under the terms of the
188 reinsurance agreement, the assuming insurer, at the request of
189 the ceding insurer, shall submit to the jurisdiction of any
190 court of competent jurisdiction in any state of the United
191 States, will comply with all requirements necessary to give the
192 court jurisdiction, and will abide by the final decision of the
193 court or of any appellate court in the event of an appeal; and
194 b. To designate the Chief Financial Officer, pursuant to
195 s. 48.151, or a designated attorney as its true and lawful
196 attorney upon whom may be served any lawful process in any
197 action, suit, or proceeding instituted by or on behalf of the
198 ceding company.
199 2. This paragraph is not intended to conflict with or
200 override the obligation of the parties to a reinsurance
Page 8 of 20
CODING: Words stricken are deletions; words underlined are additions.
hb0733-00
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB 733 2021
201 agreement to arbitrate their disputes, if this obligation is
202 created in the agreement.
203 (4) Credit must be allowed when the reinsurance is ceded
204 to an assuming insurer meeting the requirements of this
205 subsection.
206 (a) The assuming insurer must be licensed in, and have its
207 head office in or be domiciled in, as applicable, a reciprocal
208 jurisdiction. As used in this subsection, the term "reciprocal
209 jurisdiction" means a jurisdiction that is any of the following:
210 1. A non-United States jurisdiction that is subject to an
211 in-force covered agreement with the United States, each within
212 its legal authority; or, in the case of a covered agreement
213 between the United States and the European Union, a jurisdiction
214 that is a member state of the European Union. As used in this
215 subsection, the ter