Florida Regulations 69O-143.047: Standards
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(1) Material transactions by registered insurers with their affiliates shall be subject to the following standards:
(a) The terms shall be fair and reasonable;
(b) Charges or fees for services performed shall be reasonable;
(c) Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;
(d) The books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the precise nature and details of the transactions including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties;
(e) The insurer’s surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs; and,
(f) For cost sharing services and management services, such agreements shall, as applicable:
1. Identify the person providing services and the nature of such services;
2. Set forth the methods to allocate costs;
3. Require timely settlement, not less frequently than on a quarterly basis, and compliance with the requirements in the National Association of Insurance Commissioner’s Accounting Practices and Procedures Manual as adopted in subsection 69O-137.001(4), F.A.C.;
4. Prohibit advancement of funds by the insurer to the affiliate except to pay for services defined in the agreement;
5. State that the insurer will maintain oversight for functions provided to the insurer by the affiliate and that the insurer will monitor services annually for quality assurance;
6. Define books and records of the insurer to include all books and records developed or maintained under or related to the agreement;
7. Specify that all books and records of the insurer are and remain the property of the insurer and are subject to control of the insurer;
8. State that all funds and invested assets of the insurer are the exclusive property of the insurer, held for the benefit of the insurer and are subject to the control of the insurer;
9. Include standards for termination of the agreement with and without cause;
10. Include provisions for indemnification of the insurer in the event of gross negligence or willful misconduct on the part of the affiliate providing services;
11. Specify that, if the insurer is placed in receivership or seized by the commissioner:
a. All of the rights of the insurer under the agreement extend to the receiver or commissioner; and,
b. All books and records will immediately be made available to the receiver or the commissioner, and shall be turned over to the receiver or commissioner immediately upon the receiver or the commissioner’s request;
12. Specify that the affiliate has no automatic right to terminate the agreement if the insurer is placed in receivership; and,
13. Specify that the affiliate will continue to maintain any systems, programs, or other infrastructure notwithstanding the initiation of receivership proceedings pursuant to chapter 631, F.S., and will make them available to the receiver, for so long as the affiliate continues to be contractually and legally obligated to receive timely payment for the cost of services rendered.
(2) For the purposes of this rule in determining whether an insurer’s surplus as regards policyholders is reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered:
(a) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria;
(b) The extent to which the insurer’s business is diversified among the several lines of insurance;
(c) The number and size of risks insured in each line of business;
(d) The extent of the geographical dispersion of the insurer’s insured risks;
(e) The nature and extent of the insurer’s reinsurance program;
(f) The quality, diversification, and liquidity of the insurer’s investment portfolio;
(g) The recent past and projected future trend in the size of the insurer’s surplus as regards policyholders;
(h) The surplus as regards policyholders maintained by other comparable insurers;
(i) The adequacy of the insurer’s reserves; and,
(j) The quality and liquidity of investments in subsidiaries made pursuant to Florida Statutes § 625.325
The Office may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in its judgment such investment so warrants.
(3) No domestic stock insurer shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until:
(a) 30 calendar days after the Office has received notice of the declaration thereof and has not within such period disapproved such payment; or
(b) The Office shall have approved such payment within such 30 calendar day period.
A notice to the Office shall commence to run from the date of receipt as may be evidence by transmitting electronically to the Office via, Regulatory Electronic Filing System, “”REFS,”” return receipt if sent certified or registered mail, return receipt requested or signed receipt by Office if otherwise delivered.
For purposes of this rule, an extraordinary dividend or distribution includes any dividend or distribution that is in excess of that permitted without the approval of the Office pursuant to Florida Statutes § 628.371, but shall not include pro rata distributions of any class of the insurer’s own securities.
Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the Office’s approval thereof, and such a declaration shall confer no rights upon shareholders until the Office has approved the payment of such dividend or distribution.
(4) The following transactions involving a domestic insurer and any person in its holding company system may not be entered into unless the insurer has notified the Office, via Form OIR-A1-2117, “”Form D – Prior Notice of a Transaction,”” new 5/16, http://www.flrules.org/Gateway/reference.asp?No=Ref-06551, which is hereby adopted and incorporated by reference, and is available at www.floir.com/iportal, of its intention to enter into such a transaction at least thirty (30) calendar days prior thereto, or such shorter period as the Office in its discretion may permit, and the Office has not disapproved it within such period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the insurer.
(a) Sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments provided such transactions are equal to or exceed:
1. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders; and,
2. With respect to life insurers, three percent of the insurer’s admitted assets; each as of the prior year end.
(b) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit provided such transactions are equal to or exceed:
1. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders; and,
2. With respect to life insurers, three percent of the insurer’s admitted assets; each as of the prior year end.
(c) Reinsurance agreements or modifications thereto, including:
1. All reinsurance pooling agreementss
2. Agreements in which the reinsurance premium or a change in the insurer’s liabilities equals or exceeds five percent of the insurer’s surplus as regards policyholders, as of the prior year end, including those agreements which may require as consideration the transfer of assets from an insurer to a non-affiliate, if an agreement or understanding exists between the insurer and non-affiliate that any portion of such assets will be transferred to one or more affiliates of the insurers
(d) All management agreements, service contracts, tax allocation agreements and all cost-sharing arrangements; and,
(e) Any material transactions which the Office determines may adversely affect the interests of the insurer’s policyholders.
(5) The filing required in subsection (4), above, shall be filed with the Office electronically via the Regulatory Electronic Filing System (“”REFS””).
(6) Nothing in subsection (4), above, shall be deemed to authorize or permit any transactions which, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to Florida statute or rule.
(7) A domestic insurer shall not enter into transactions which are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review which would otherwise occur. If the Office determines that such separate transactions were entered into over any twelve month period for such purpose, the insurer may be subject to the provisions of Florida Statutes § 628.803
(8) The Office, in reviewing transactions pursuant to subsection (4), above, shall consider whether the transactions comply with the standards set forth in subsection (1), above, and whether they may adversely affect the interests of policyholders.
(9) The Office shall be notified within thirty (30) calendar days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds ten percent of such corporation’s voting securities.
(10) All filings shall be submitted electronically to http://www.floir.com/iportal.
Rulemaking Authority 624.308, 628.801 FS. Law Implemented 624.317, 624.424, 628.251, 628.371, 628.381, 628.461, 628.801, 628.803, 624.307(1) FS. History-New 12-16-70, Formerly 4-26.03, Amended 1-30-91, Formerly 4-26.003, 4-143.047, Amended 5-31-16, 7-30-17.
Terms Used In Florida Regulations 69O-143.047
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Oversight: Committee review of the activities of a Federal agency or program.
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
- Statute: A law passed by a legislature.
(b) Charges or fees for services performed shall be reasonable;
(c) Expenses incurred and payment received shall be allocated to the insurer in conformity with customary insurance accounting practices consistently applied;
(d) The books, accounts and records of each party to all such transactions shall be so maintained as to clearly and accurately disclose the precise nature and details of the transactions including such accounting information as is necessary to support the reasonableness of the charges or fees to the respective parties;
(e) The insurer’s surplus as regards policyholders following any dividends or distributions to shareholder affiliates shall be reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs; and,
(f) For cost sharing services and management services, such agreements shall, as applicable:
1. Identify the person providing services and the nature of such services;
2. Set forth the methods to allocate costs;
3. Require timely settlement, not less frequently than on a quarterly basis, and compliance with the requirements in the National Association of Insurance Commissioner’s Accounting Practices and Procedures Manual as adopted in subsection 69O-137.001(4), F.A.C.;
4. Prohibit advancement of funds by the insurer to the affiliate except to pay for services defined in the agreement;
5. State that the insurer will maintain oversight for functions provided to the insurer by the affiliate and that the insurer will monitor services annually for quality assurance;
6. Define books and records of the insurer to include all books and records developed or maintained under or related to the agreement;
7. Specify that all books and records of the insurer are and remain the property of the insurer and are subject to control of the insurer;
8. State that all funds and invested assets of the insurer are the exclusive property of the insurer, held for the benefit of the insurer and are subject to the control of the insurer;
9. Include standards for termination of the agreement with and without cause;
10. Include provisions for indemnification of the insurer in the event of gross negligence or willful misconduct on the part of the affiliate providing services;
11. Specify that, if the insurer is placed in receivership or seized by the commissioner:
a. All of the rights of the insurer under the agreement extend to the receiver or commissioner; and,
b. All books and records will immediately be made available to the receiver or the commissioner, and shall be turned over to the receiver or commissioner immediately upon the receiver or the commissioner’s request;
12. Specify that the affiliate has no automatic right to terminate the agreement if the insurer is placed in receivership; and,
13. Specify that the affiliate will continue to maintain any systems, programs, or other infrastructure notwithstanding the initiation of receivership proceedings pursuant to chapter 631, F.S., and will make them available to the receiver, for so long as the affiliate continues to be contractually and legally obligated to receive timely payment for the cost of services rendered.
(2) For the purposes of this rule in determining whether an insurer’s surplus as regards policyholders is reasonable in relation to the insurer’s outstanding liabilities and adequate to its financial needs, the following factors, among others, shall be considered:
(a) The size of the insurer as measured by its assets, capital and surplus, reserves, premium writings, insurance in force and other appropriate criteria;
(b) The extent to which the insurer’s business is diversified among the several lines of insurance;
(c) The number and size of risks insured in each line of business;
(d) The extent of the geographical dispersion of the insurer’s insured risks;
(e) The nature and extent of the insurer’s reinsurance program;
(f) The quality, diversification, and liquidity of the insurer’s investment portfolio;
(g) The recent past and projected future trend in the size of the insurer’s surplus as regards policyholders;
(h) The surplus as regards policyholders maintained by other comparable insurers;
(i) The adequacy of the insurer’s reserves; and,
(j) The quality and liquidity of investments in subsidiaries made pursuant to Florida Statutes § 625.325
The Office may treat any such investment as a disallowed asset for purposes of determining the adequacy of surplus as regards policyholders whenever in its judgment such investment so warrants.
(3) No domestic stock insurer shall pay any extraordinary dividend or make any other extraordinary distribution to its shareholders until:
(a) 30 calendar days after the Office has received notice of the declaration thereof and has not within such period disapproved such payment; or
(b) The Office shall have approved such payment within such 30 calendar day period.
A notice to the Office shall commence to run from the date of receipt as may be evidence by transmitting electronically to the Office via, Regulatory Electronic Filing System, “”REFS,”” return receipt if sent certified or registered mail, return receipt requested or signed receipt by Office if otherwise delivered.
For purposes of this rule, an extraordinary dividend or distribution includes any dividend or distribution that is in excess of that permitted without the approval of the Office pursuant to Florida Statutes § 628.371, but shall not include pro rata distributions of any class of the insurer’s own securities.
Notwithstanding any other provision of law, an insurer may declare an extraordinary dividend or distribution which is conditional upon the Office’s approval thereof, and such a declaration shall confer no rights upon shareholders until the Office has approved the payment of such dividend or distribution.
(4) The following transactions involving a domestic insurer and any person in its holding company system may not be entered into unless the insurer has notified the Office, via Form OIR-A1-2117, “”Form D – Prior Notice of a Transaction,”” new 5/16, http://www.flrules.org/Gateway/reference.asp?No=Ref-06551, which is hereby adopted and incorporated by reference, and is available at www.floir.com/iportal, of its intention to enter into such a transaction at least thirty (30) calendar days prior thereto, or such shorter period as the Office in its discretion may permit, and the Office has not disapproved it within such period. The notice for amendments or modifications shall include the reasons for the change and the financial impact on the insurer.
(a) Sales, purchases, exchanges, loans or extensions of credit, guarantees, or investments provided such transactions are equal to or exceed:
1. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders; and,
2. With respect to life insurers, three percent of the insurer’s admitted assets; each as of the prior year end.
(b) Loans or extensions of credit to any person who is not an affiliate, where the insurer makes such loans or extensions of credit with the agreement or understanding that the proceeds of such transactions, in whole or in substantial part, are to be used to make loans or extensions of credit to, to purchase assets of, or to make investments in, any affiliate of the insurer making such loans or extensions of credit provided such transactions are equal to or exceed:
1. With respect to nonlife insurers, the lesser of three percent of the insurer’s admitted assets or 25 percent of surplus as regards policyholders; and,
2. With respect to life insurers, three percent of the insurer’s admitted assets; each as of the prior year end.
(c) Reinsurance agreements or modifications thereto, including:
1. All reinsurance pooling agreementss
2. Agreements in which the reinsurance premium or a change in the insurer’s liabilities equals or exceeds five percent of the insurer’s surplus as regards policyholders, as of the prior year end, including those agreements which may require as consideration the transfer of assets from an insurer to a non-affiliate, if an agreement or understanding exists between the insurer and non-affiliate that any portion of such assets will be transferred to one or more affiliates of the insurers
(d) All management agreements, service contracts, tax allocation agreements and all cost-sharing arrangements; and,
(e) Any material transactions which the Office determines may adversely affect the interests of the insurer’s policyholders.
(5) The filing required in subsection (4), above, shall be filed with the Office electronically via the Regulatory Electronic Filing System (“”REFS””).
(6) Nothing in subsection (4), above, shall be deemed to authorize or permit any transactions which, in the case of an insurer not a member of the same holding company system, would be otherwise contrary to Florida statute or rule.
(7) A domestic insurer shall not enter into transactions which are part of a plan or series of like transactions with persons within the holding company system if the purpose of those separate transactions is to avoid the statutory threshold amount and thus avoid the review which would otherwise occur. If the Office determines that such separate transactions were entered into over any twelve month period for such purpose, the insurer may be subject to the provisions of Florida Statutes § 628.803
(8) The Office, in reviewing transactions pursuant to subsection (4), above, shall consider whether the transactions comply with the standards set forth in subsection (1), above, and whether they may adversely affect the interests of policyholders.
(9) The Office shall be notified within thirty (30) calendar days of any investment of the domestic insurer in any one corporation if the total investment in such corporation by the insurance holding company system exceeds ten percent of such corporation’s voting securities.
(10) All filings shall be submitted electronically to http://www.floir.com/iportal.
Rulemaking Authority 624.308, 628.801 FS. Law Implemented 624.317, 624.424, 628.251, 628.371, 628.381, 628.461, 628.801, 628.803, 624.307(1) FS. History-New 12-16-70, Formerly 4-26.03, Amended 1-30-91, Formerly 4-26.003, 4-143.047, Amended 5-31-16, 7-30-17.