Florida Regulations 69O-170.030: Loss Reserve Discounts
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(1) No insurer shall apply a discount to its loss reserves other than tabular workers’ compensation loss reserves without special permission from the Office. An insurer shall request such special permission in writing, stating the line of insurance to be discounted and the rate of discount to be applied. Any insurer wishing to discount its December 31 reserves shall apply to the Office for special permission no later than December 1.
In evaluating the request to discount loss reserves, at a minimum, the Office shall consider the following:
(a) The risk-based capital;
(b) The ratio of loss and LAE reserves to surplus;
(c) For insurers selling multi-year contracts, the ratio of the unearned premium reserve to surplus;
(d) The ratio of ceded loss and loss adjustment expense reserves to surplus;
(e) The quality of the reinsurance supporting the ceded loss adjustment expense reserves to surplus;
(f) The one-year and two-year reserve development as a precentage of surplus over the last five years;
(g) Gross and Net Writing Ratio to Surplus;
(h) Whether the opining actuary of the insurer has been the opinion actuary of an insurance company that dropped to the company action level, mandatory control level, or receivership within five years of the date of the opinion.
All filings shall be submitted electronically to http://www.floir.com/iportal.
(2) For workers’ compensation, an insurer may discount only its tabular loss reserves and the interest rate used to calculate the reserve discount shall be no more than 4%, unless the Office grants special permission for a higher discount rate.
(3) Any reserve discounting shall be shown in Schedule P of the insurer’s annual statement. The insurer shall also show both discounted and undiscounted reserves.
(4) If the Office grants special permission to discount reserves, an actuarial report supporting the amount of discount shall be maintained by the insurer and shall be available to the Office on request. The report shall show the calculation of the discount and the payment patterns used to support the discount. The payment patterns supporting the discount shall be derived from appropriate company data, or, if company data is not credible, from appropriate industry data (for example, industry Schedule P data), and the report shall provide appropriate explanations and support with the selected payment patterns.
(5) Allocated and unallocated loss expense reserves are not to be discounted without special permission from the Office.
(6) Upon receipt of permission to discount its reserves, the insurer shall compute the excess of the statutory minimum reserves over statement reserves using the discounted loss and loss expense reserves rather than the undiscounted reserves.
Rulemaking Authority Florida Statutes § 624.308(1). Law Implemented 624.307(1), 624.424, 625.091 FS. History-New 1-27-92, Formerly 4-170.030, Amended 7-30-17.
In evaluating the request to discount loss reserves, at a minimum, the Office shall consider the following:
Terms Used In Florida Regulations 69O-170.030
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
(b) The ratio of loss and LAE reserves to surplus;
(c) For insurers selling multi-year contracts, the ratio of the unearned premium reserve to surplus;
(d) The ratio of ceded loss and loss adjustment expense reserves to surplus;
(e) The quality of the reinsurance supporting the ceded loss adjustment expense reserves to surplus;
(f) The one-year and two-year reserve development as a precentage of surplus over the last five years;
(g) Gross and Net Writing Ratio to Surplus;
(h) Whether the opining actuary of the insurer has been the opinion actuary of an insurance company that dropped to the company action level, mandatory control level, or receivership within five years of the date of the opinion.
All filings shall be submitted electronically to http://www.floir.com/iportal.
(2) For workers’ compensation, an insurer may discount only its tabular loss reserves and the interest rate used to calculate the reserve discount shall be no more than 4%, unless the Office grants special permission for a higher discount rate.
(3) Any reserve discounting shall be shown in Schedule P of the insurer’s annual statement. The insurer shall also show both discounted and undiscounted reserves.
(4) If the Office grants special permission to discount reserves, an actuarial report supporting the amount of discount shall be maintained by the insurer and shall be available to the Office on request. The report shall show the calculation of the discount and the payment patterns used to support the discount. The payment patterns supporting the discount shall be derived from appropriate company data, or, if company data is not credible, from appropriate industry data (for example, industry Schedule P data), and the report shall provide appropriate explanations and support with the selected payment patterns.
(5) Allocated and unallocated loss expense reserves are not to be discounted without special permission from the Office.
(6) Upon receipt of permission to discount its reserves, the insurer shall compute the excess of the statutory minimum reserves over statement reserves using the discounted loss and loss expense reserves rather than the undiscounted reserves.
Rulemaking Authority Florida Statutes § 624.308(1). Law Implemented 624.307(1), 624.424, 625.091 FS. History-New 1-27-92, Formerly 4-170.030, Amended 7-30-17.