Florida Regulations 69O-138.005: Exams By Non Employees
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(1) The Office is required by Section 624.316(1)(a), F.S., to examine the affairs, transactions, accounts, records and assets of each authorized insurer and of the attorney in fact of a reciprocal insurer. The examination standards with which the Office must comply are established by statute and adopted by rule. The statutes and rules meet the requirements of the National Association of Insurance Commissioners for accreditation in the area of financial regulation. Any report received from another jurisdiction pursuant to this rule is received for purposes of assessing the financial condition of the insurer and not any other purpose. Any information contained in such a report which would be the subject of a market conduct report prepared by this Office is not relevant to this rule. The Office will be bound only by the information relevant to the financial condition of the insurer.
(2) Section 624.316(2)(b), F.S., requires the Office to examine each insurer applying for an initial Certificate of Authority to transact business in this state before granting the initial certificate. For purposes of this provision, the Office will, in the absence of a reasonable belief that the examination report is not accurate, accept the examination report of a foreign insurer as prepared by the insurance office of the insurer’s domiciliary state if the domiciliary insurance office is accredited by the National Association of Insurance Commissioners in the area of financial regulation or if the examination is performed under the supervision of or with the participation of an examiner from a state which is so accredited and who, after a review of the examination work papers and report, state under oath that the examination was performed in a manner consistent with the standards and procedures required by their Insurance Office.
(3) Section 624.316(2)(c), F.S., permits the Office, in lieu of making its own examination of a foreign insurer, to accept a full report of the most recent examination of a foreign insurer, as certified to by the insurance supervisory official of another state. For purposes of this provision, the Office will, in the absence of a reasonable belief that the examination report is not accurate, accept the examination report of a foreign insurer as prepared by the insurance office of the insurer’s domiciliary state if the domiciliary insurance office is accredited by the National Association of Insurance Commissioners in the area of financial regulation or if the examination is performed under the supervision of or with the participation of an examiner from a state which is so accredited and who, after a review of the examination work papers and report, states under oath that the examination was performed in a manner consistent with the standards and procedures required by that Insurance Office. Such reports of examination must be certified to by the insurance supervisory official of the state of domicile and mailed to the Office within 10 calendar days of receipt by the insurer, except that, if the report shows that the insurer has materially misstated its financial condition or that the insurer does not meet the minimum capital and surplus requirements of the Florida Insurance Code, the report must be sent to the Office within 5 business days of receipt using a facility that offers next day delivery service. A material misstatement is defined as a collective amount of 10% or more of total assets, total liabilities, or total capital and surplus.
(4) Section 624.316(2)(e), F.S., allows the Office to conduct examinations of an insurer by contracting for the services of an independent Certified Public Accountant, an actuary, a reinsurance specialist, an investment specialist, information technology specialist, or any combination of these individuals, as the particular circumstances of the examination require. An examination performed pursuant to this subsection must meet the requirements of subsection (1).
(a) An actuary meeting the criteria established in Rule 69O-138.043 or 69O-170.031, F.A.C., will qualify to conduct an examination under this subsection.
(b)1. A reinsurance specialist shall be qualified to conduct an examination under this subsection if that contractor can demonstrate competency by education and experience to perform such an examination. Competency by education and experience shall be demonstrated if any one of the following is true:
a. An individual qualifies as an actuary pursuant to either Rule 69O-138.043 or 69O-170.031, F.A.C., and has at least one years’ experience with the kind of reinsurance which will be the subject of the examination.
b. An individual has a bachelor’s degree from an accredited college or university and four years of professional experience in insurance/reinsurance accounting or in reinsurance transactions. A master’s degree from an accredited college or university in accounting, insurance, or risk management can substitute for one year of the required experience. Professional experience as described above can substitute on a year-for-year basis for the required education.
c. An individual is in good standing with the Society of Financial Examiners and is certified by that organization to be eligible to hold the title of Certified Financial Examiner.
2. In selecting a person as a reinsurance specialist the Office shall consider the individual’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed. This consideration shall include the individual’s experience with the kind of insurance which is the subject of the examination; knowledge of accounting principles, practices and procedures; ability to prepare financial statements to reflect the reinsurance transactions; ability to provide professional and technical assistance; understanding of risk transfer as defined in the NAIC Examiners Handbook and the NAIC Accounting Practices and Procedures and Annual Statement Instruction Manuals, as adopted in Fl. Admin. Code R. 69O-137.001; and the ability to evaluate claims experience, both reported and incurred but not reported, relevant to the type of insurance which is the subject of the examination.
(c)1. An investment specialist shall be qualified to conduct an examination under this subsection if that contractor can demonstrate competency by education and experience to perform such an examination in that capacity. Competency by education and experience shall be demonstrated if any one of the following is true:
a. An individual has a bachelor’s degree from an accredited college or university and four years of professional experience in the capacity for which the contractor is to perform. A master’s degree from an accredited college or university in accounting, or finance can substitute for one year of the required experience. Professional experience as described above can substitute on a year-for-year basis for the required education.
b. An individual is in good standing with the Society of Financial Examiners and is certified by that organization to be eligible to hold the title of Certified Financial Examiner.
2. In selecting a person as an investment specialist the Office shall consider the individual’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed.
(d)1. An information technology specialist shall be qualified to conduct an examination under this subsection if that contractor can demonstrate competency by education and experience to perform such an examination in that capacity. Competency by education and experience shall be demonstrated if the individual has a bachelor’s degree from an accredited college or university and four years of professional experience in the capacity for which the contractor is to perform. A master’s degree from an accredited college or university in information technology or a similar field can substitute for one year of the required experience. Professional experience as described above can substitute on a year-for-year basis for the required education.
2. In selecting a person as an information technology specialist the Office shall consider the individual’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed.
(e) The firm selected by the office to perform the examination shall have no conflicts of interest that might affect its ability to independently perform its responsibilities on the examination.
(f) The rates charged to the insurer being examined under the contract shall be consistent with rates charged by other firms in a similar profession and shall be comparable with the rates charged for comparable examinations. The rates and terms shall be set forth in the contract.
(g) Contractors may submit a curriculum vitae detailing their experience and qualifying credentials to the Office, as well as a proposed hourly rate for services to be performed. The acceptability of a contractor to the Office shall be determined based on consideration of the firm’s professional competence, objectivity, and that the rates charged are consistent with rates charged by other firms in a similar profession, as referenced in subsection (4), above, providing comparable services, so as to protect the examined insurer from being overcharged for the examination. Once a contractor has been accepted by the Office, they will be placed on a list of eligible examination contractors.
(h) In selecting contractors to conduct a specific examination, the Office shall consider the contractor’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed. This consideration shall include the contractor’s experience with the kind of insurance which is the subject of the examination.
(i) After a contractor has been selected for a specific examination the Office shall enter into a contract with the contractor, detailing the scope of work for the engagement. The contract shall include a provision that the contractor has no conflict of interest that might affect its ability to independently perform its responsibilities. The contractor shall submit all requests for payment to the Office in the manner prescribed by the contract.
(j) All requests for reimbursement of travel expenses are to be made on Form DFS-C1-500, http://www.flrules.org/Gateway/reference.asp?No=Ref-08299, State of Florida Voucher For Reimbursement of Travel Expenses, (Rev. 12/13). This form is incorporated by reference and adopted by this rule for this purpose. It is available at http://www.floir.com/sitedocuments/DFS-C1-500.xls.
(k) Upon receipt and review of the contractor’s request for payment, the Office will invoice the insurer being examined and the insurer shall make payment to the Office pursuant to Sections 624.316(2)(e)3. and 624.320(1), F.S.
(l) Upon receipt of the payment from the insurer being examined, the Office will make payment to the contractor in accordance with the rates and terms set out in the contract.
(5) Section 624.316(2)(f), F.S., requires the examination of a domestic insurer once each year for any domestic insurer that has continuously held a Certificate of Authority for less than 3 years. For purposes of an examination under this subsection, the 3 years shall constitute the time period from the date the Certificate of Authority is granted through the following 3 full calendar years in which the insurer has been licensed. The examination must cover the preceding fiscal year or the time period since the last examination.
Rulemaking Authority Florida Statutes § 624.308(1), 624.316(2) FS. Law Implemented 624.307(1), 624.316, 624.3161, 624.320, 624.321(1), 624.424 FS. History-New 6-9-93, Amended 11-23-94, 4-4-99, Formerly 4-138.005, Amended 7-1-09, 7-30-17.
Terms Used In Florida Regulations 69O-138.005
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Contract: A legal written agreement that becomes binding when signed.
- Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Oath: A promise to tell the truth.
- Statute: A law passed by a legislature.
(3) Section 624.316(2)(c), F.S., permits the Office, in lieu of making its own examination of a foreign insurer, to accept a full report of the most recent examination of a foreign insurer, as certified to by the insurance supervisory official of another state. For purposes of this provision, the Office will, in the absence of a reasonable belief that the examination report is not accurate, accept the examination report of a foreign insurer as prepared by the insurance office of the insurer’s domiciliary state if the domiciliary insurance office is accredited by the National Association of Insurance Commissioners in the area of financial regulation or if the examination is performed under the supervision of or with the participation of an examiner from a state which is so accredited and who, after a review of the examination work papers and report, states under oath that the examination was performed in a manner consistent with the standards and procedures required by that Insurance Office. Such reports of examination must be certified to by the insurance supervisory official of the state of domicile and mailed to the Office within 10 calendar days of receipt by the insurer, except that, if the report shows that the insurer has materially misstated its financial condition or that the insurer does not meet the minimum capital and surplus requirements of the Florida Insurance Code, the report must be sent to the Office within 5 business days of receipt using a facility that offers next day delivery service. A material misstatement is defined as a collective amount of 10% or more of total assets, total liabilities, or total capital and surplus.
(4) Section 624.316(2)(e), F.S., allows the Office to conduct examinations of an insurer by contracting for the services of an independent Certified Public Accountant, an actuary, a reinsurance specialist, an investment specialist, information technology specialist, or any combination of these individuals, as the particular circumstances of the examination require. An examination performed pursuant to this subsection must meet the requirements of subsection (1).
(a) An actuary meeting the criteria established in Rule 69O-138.043 or 69O-170.031, F.A.C., will qualify to conduct an examination under this subsection.
(b)1. A reinsurance specialist shall be qualified to conduct an examination under this subsection if that contractor can demonstrate competency by education and experience to perform such an examination. Competency by education and experience shall be demonstrated if any one of the following is true:
a. An individual qualifies as an actuary pursuant to either Rule 69O-138.043 or 69O-170.031, F.A.C., and has at least one years’ experience with the kind of reinsurance which will be the subject of the examination.
b. An individual has a bachelor’s degree from an accredited college or university and four years of professional experience in insurance/reinsurance accounting or in reinsurance transactions. A master’s degree from an accredited college or university in accounting, insurance, or risk management can substitute for one year of the required experience. Professional experience as described above can substitute on a year-for-year basis for the required education.
c. An individual is in good standing with the Society of Financial Examiners and is certified by that organization to be eligible to hold the title of Certified Financial Examiner.
2. In selecting a person as a reinsurance specialist the Office shall consider the individual’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed. This consideration shall include the individual’s experience with the kind of insurance which is the subject of the examination; knowledge of accounting principles, practices and procedures; ability to prepare financial statements to reflect the reinsurance transactions; ability to provide professional and technical assistance; understanding of risk transfer as defined in the NAIC Examiners Handbook and the NAIC Accounting Practices and Procedures and Annual Statement Instruction Manuals, as adopted in Fl. Admin. Code R. 69O-137.001; and the ability to evaluate claims experience, both reported and incurred but not reported, relevant to the type of insurance which is the subject of the examination.
(c)1. An investment specialist shall be qualified to conduct an examination under this subsection if that contractor can demonstrate competency by education and experience to perform such an examination in that capacity. Competency by education and experience shall be demonstrated if any one of the following is true:
a. An individual has a bachelor’s degree from an accredited college or university and four years of professional experience in the capacity for which the contractor is to perform. A master’s degree from an accredited college or university in accounting, or finance can substitute for one year of the required experience. Professional experience as described above can substitute on a year-for-year basis for the required education.
b. An individual is in good standing with the Society of Financial Examiners and is certified by that organization to be eligible to hold the title of Certified Financial Examiner.
2. In selecting a person as an investment specialist the Office shall consider the individual’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed.
(d)1. An information technology specialist shall be qualified to conduct an examination under this subsection if that contractor can demonstrate competency by education and experience to perform such an examination in that capacity. Competency by education and experience shall be demonstrated if the individual has a bachelor’s degree from an accredited college or university and four years of professional experience in the capacity for which the contractor is to perform. A master’s degree from an accredited college or university in information technology or a similar field can substitute for one year of the required experience. Professional experience as described above can substitute on a year-for-year basis for the required education.
2. In selecting a person as an information technology specialist the Office shall consider the individual’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed.
(e) The firm selected by the office to perform the examination shall have no conflicts of interest that might affect its ability to independently perform its responsibilities on the examination.
(f) The rates charged to the insurer being examined under the contract shall be consistent with rates charged by other firms in a similar profession and shall be comparable with the rates charged for comparable examinations. The rates and terms shall be set forth in the contract.
(g) Contractors may submit a curriculum vitae detailing their experience and qualifying credentials to the Office, as well as a proposed hourly rate for services to be performed. The acceptability of a contractor to the Office shall be determined based on consideration of the firm’s professional competence, objectivity, and that the rates charged are consistent with rates charged by other firms in a similar profession, as referenced in subsection (4), above, providing comparable services, so as to protect the examined insurer from being overcharged for the examination. Once a contractor has been accepted by the Office, they will be placed on a list of eligible examination contractors.
(h) In selecting contractors to conduct a specific examination, the Office shall consider the contractor’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed. This consideration shall include the contractor’s experience with the kind of insurance which is the subject of the examination.
(i) After a contractor has been selected for a specific examination the Office shall enter into a contract with the contractor, detailing the scope of work for the engagement. The contract shall include a provision that the contractor has no conflict of interest that might affect its ability to independently perform its responsibilities. The contractor shall submit all requests for payment to the Office in the manner prescribed by the contract.
(j) All requests for reimbursement of travel expenses are to be made on Form DFS-C1-500, http://www.flrules.org/Gateway/reference.asp?No=Ref-08299, State of Florida Voucher For Reimbursement of Travel Expenses, (Rev. 12/13). This form is incorporated by reference and adopted by this rule for this purpose. It is available at http://www.floir.com/sitedocuments/DFS-C1-500.xls.
(k) Upon receipt and review of the contractor’s request for payment, the Office will invoice the insurer being examined and the insurer shall make payment to the Office pursuant to Sections 624.316(2)(e)3. and 624.320(1), F.S.
(l) Upon receipt of the payment from the insurer being examined, the Office will make payment to the contractor in accordance with the rates and terms set out in the contract.
(5) Section 624.316(2)(f), F.S., requires the examination of a domestic insurer once each year for any domestic insurer that has continuously held a Certificate of Authority for less than 3 years. For purposes of an examination under this subsection, the 3 years shall constitute the time period from the date the Certificate of Authority is granted through the following 3 full calendar years in which the insurer has been licensed. The examination must cover the preceding fiscal year or the time period since the last examination.
Rulemaking Authority Florida Statutes § 624.308(1), 624.316(2) FS. Law Implemented 624.307(1), 624.316, 624.3161, 624.320, 624.321(1), 624.424 FS. History-New 6-9-93, Amended 11-23-94, 4-4-99, Formerly 4-138.005, Amended 7-1-09, 7-30-17.