Florida Regulations 69O-190.071: Authorized Investments for Self-Insurers Funds
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(1) The trustees of a fund are authorized to invest the assets of the fund only in the manner prescribed by these rules.
(2) Monies allocated to claims reserves net of excess recoveries for all policy years prior to the current year, the current year loss fund, all security deposits, and encumbered miscellaneous income shall be invested only in the following manner:
(a) Bankers acceptances from Prime Money Center Banks located within the United States and purchased through authorized financial institutions as defined in this rule.
(b) Savings accounts, checking accounts, money market accounts, certificates of deposit and fully collateralized repurchase agreements in financial institutions authorized pursuant to this rule.
(c) U.S. Treasury notes, bonds, and bills.
(d) Any security issued by the U.S. government or government agency and backed by the full faith and credit of the U.S. government.
(e) Any security which is a general obligation of the U.S. government or U.S. government agency.
(f) Securities issued by the State of Florida, or any agency or political subdivision which are backed by the full faith and credit of the State of Florida.
(g) Mutual funds which invest 100% in U.S. government or U.S. governments agency securities and whose published management policy limits the risk to principal amount invested. Funds must maintain current prospectuses on all mutual funds in which they invest.
(h) Annuities issued by insurers licensed by the State of Florida and whose policies are subject to the protection of the Florida Life and Health Insurance Guaranty Association. Investments in annuities are subject to the following limitations:
1. At least 30 days prior to the fund purchasing its first annuity, and annually thereafter, a fund shall submit an actuarial review by a qualified actuary examining the impact on the fund’s present and future financial condition of purchasing annuities and foregoing the earning of investment income on the amounts invested in the annuities. The actuarial review shall take into account all aggregate reserve requirements and shall estimate the percent of the fund’s reserves which may safely be invested in annuities. This percentage shall be the maximum amount allowable for investment in annuities subject to subsequent annual reviews by the fund’s actuary. For purposes of this paragraph only, the actuary may be a member of the Society of Actuaries, American Academy of Actuaries or Casualty Actuarial Society.
2. Annuities shall be single premium annuities and shall be purchased only for the purpose of providing a payment stream for a given claim. Claims eligible for annuity funding shall be those claims with specific periodic benefit payments and with payments expected to continue for at least 61 months.
3. All annuities purchased shall have the fund as beneficiary. The fund may instruct the insurer to pay benefits directly to the claimant. The policy shall provide that the sum of the periodic benefit payments paid plus the cash value of the policy shall be greater than or equal to the amount of premium paid.
4. All annuities shall be tied to the claimant’s life span.
5. If the cash value of the annuity exceeds $100,000 or the estimated benefits payable under the terms of the annuity, including cash value, exceeds $300,000, then the annuity shall be purchased only from a licensed insurer with a rating from the most recent edition of the A. M. BEST INSURANCE REPORTS, LIFE-HEALTH, of at least “”A.”” The annuity policy shall also be subject to the protection of the Florida Life and Health Insurance Guaranty Association.
6. The rules contained in paragraph (f) relating to the purchase of annuities shall not apply to annuities purchased for a claim settlement pursuant to an order of a Deputy Commissioner.
(i) Land and existing buildings used or acquired for use as its principal home office and for use by its service company, if any, when conducting business involving the fund. Prior to investing in land and buildings, the fund shall submit to the Office the following items:
1. An appraisal of the building and land showing that the market value of the building and land is greater than or equal to the principal amount of the investment. The appraisal shall be prepared in accordance with the Uniform Standards of Professional Appraisal Practice. The Uniform Standards of Professional Appraisal Practice of the Society of Real Estate Appraisers (effective July 1, 1987) are hereby adopted by reference and made a part of this rule by reference.
2. An analysis by the fund’s actuary on the impact of the investment on the liquidity of the fund for claims payment purposes.
3. A financial analysis using generally accepted accounting principles showing that the proposed investment will decrease the expense overhead of the fund compared to acquiring office space through renting commercial property.
4. A certified resolution of the board of trustees stating that the investment is intended solely for reducing the overhead expense of the fund and that the investment is not for purposes of speculation or resale.
(j) If the building or land purchased requires modification or renovation in order to make it suitable for the fund’s use, then the total cost of purchase of the building and land plus the cost of renovation or modification shall not exceed the 5 percent limit imposed by paragraph (n).
(k) If, instead of buying an existing building, a fund wishes to purchase land and construct a building on the land, then the following conditions shall be met in addition to those imposed by paragraph (i):
1. Land acquired for use in the construction of a building may be held for no longer than 18 months before construction shall begin. If construction is not begun within 18 months, then the fund may request a one time extension period to begin construction. An extension shall be granted upon submission of evidence that the fund has made a reasonable effort to begin construction within the time prescribed and that construction will begin before the end of the extension. If no extension is granted or if construction does not begin by the end of the extension then the land shall be sold.
2. All contracts awarded to the prime contractor shall contain a maximum fixed cost. The fund shall secure a performance bond in the amount of the contract from the prime contractor.
3. The total cost of acquiring the land, improving the land and construction of the building shall not exceed the 5 percent limit imposed by paragraph (n).
(l) The fund shall be the sole owner or mortgagee of the land and building, and no sale of real property for a price less than the original cost of the land and building shall take place without the written consent of the Office. The Office shall approve the sale unless the sale impairs the ability of the fund to meet its financial obligations.
(m) Investment in land or building pursuant to paragraphs (i) and (k), shall be subject to the approval of the Office. In approving this investment, the Office shall consider the impact of the investment on fund liquidity and solvency, the percent of net claims reserves invested and the amount of fund overhead expenses reduced by the investment. All books and records of the fund relating to acquiring land and acquiring or constructing a building shall be open to inspection by the Office.
(n) In no event shall the amount invested in land or building exceed 5 percent of the fund’s claims reserves, net of excess recoveries.
1. If the cost of purchasing land, purchasing or constructing a building, renovating a building or improving the land exceeds the 5 percent limit imposed by paragraph (n), then the fund shall allocate all its unencumbered surplus until an amount equal to the portion of the cost in excess of 5 percent is transferred to claims reserves.
2. If the Office subsequently determines that the investment endangers fund solvency or liquidity, or if the original cost of purchasing land, purchasing or constructing a building, renovating a building or improving the land ever exceeds 10 percent of loss reserves as defined by subsection 69O-190.059(3), F.A.C., the fund shall sell the land or building, obtain a mortgage on the property or allocate unappropriated surplus in order to provide sufficient liquidity to meet its obligations.
3. The fund shall allocate an amount each year to claims reserves equal to the amount of depreciation taken on the land and building.
(3) Investments pursuant to subsection (2) paragraphs (a) through (f), shall have maturity dates of not more than 10 years from the date of purchase. Furthermore, all investments shall be made in such a manner that dates of maturity of investments shall coincide with the claim payment needs of the fund. The Commission shall adopt as a rule a schedule which may be amended from time to time and which is based on the analysis of the payment patterns of all active self-insurers funds. Such schedule shall be used by all funds to determine the maturity dates for investments so that the claim payment needs of each fund are satisfied. If a fund submits to the Office an analysis by a qualified actuary which demonstrates the fund’s payment pattern is substantially different from the schedule published by the Office, the Office shall authorize the fund to purchase its investments based on the payment pattern of the fund rather than on the published schedule.
(4) No fund shall invest so that more than 10 percent of the fund’s assets are invested in a single financial institution unless such investment is fully insured by an agency of the United States government or satisfactorily collateralized pursuant to the conditions contained in subsection (7).
(5) All monies, other than those specified in subsection (2), held by a fund shall be invested in any manner authorized in subsection (2) and for any period of maturity.
(6) Investments pursuant to subsection (4) may be purchased with maturity dates subject to the discretion of the trustees. All such investments shall be purchased through financial institutions within the State of Florida.
(7) The trustees, upon approval by the Office, are authorized to enter into repurchase agreements subject to the following conditions:
(a) The agreement is with a financial institution within the State of Florida.
(b) The fund secures collateral for the agreement in the form of specific securities pledged to the fund whose market value is no less than the amount of the agreement.
(c) All securities pledged as collateral shall be acceptable pursuant to the restrictions imposed by subsections (2), (3) and (4). Upon receipt of proof of compliance with these conditions the Office shall approve the repurchase agreements.
(8) Authorized securities may be purchased through authorized financial institutions. For the purposes of this section, authorized financial institutions shall mean:
(a) Banks, savings and loan associations, and credit unions operating within the State of Florida and licensed by the State of Florida, the U.S. government or authorized under the Reciprocal Regional Banking Act of 1984 and whose accounts are insured by an agency of the U.S. government; and,
(b) Investment brokerage firms licensed by the Securities and Exchange Commission and insured by an agency of the U.S. government and operating within the State of Florida.
(9) The Office shall prohibit a fund from investing in, or order the liquidation of, an otherwise authorized investment upon a finding, based on reasonable cause, that a specific investment has become unsafe or that a specific financial institution is or may become insolvent.
Rulemaking Authority 624.4621 FS. Law Implemented Florida Statutes § 624.4621. History-New 12-25-84, Amended 12-17-85, Formerly 38F-5.71, Amended 12-3-87, 7-20-88, 12-19-93, Formerly 38F-5.071, 4-190.071.
Terms Used In Florida Regulations 69O-190.071
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
- Appraisal: A determination of property value.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Contract: A legal written agreement that becomes binding when signed.
- 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.
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgagee: The person to whom property is mortgaged and who has loaned the money.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
- 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.
(a) Bankers acceptances from Prime Money Center Banks located within the United States and purchased through authorized financial institutions as defined in this rule.
(b) Savings accounts, checking accounts, money market accounts, certificates of deposit and fully collateralized repurchase agreements in financial institutions authorized pursuant to this rule.
(c) U.S. Treasury notes, bonds, and bills.
(d) Any security issued by the U.S. government or government agency and backed by the full faith and credit of the U.S. government.
(e) Any security which is a general obligation of the U.S. government or U.S. government agency.
(f) Securities issued by the State of Florida, or any agency or political subdivision which are backed by the full faith and credit of the State of Florida.
(g) Mutual funds which invest 100% in U.S. government or U.S. governments agency securities and whose published management policy limits the risk to principal amount invested. Funds must maintain current prospectuses on all mutual funds in which they invest.
(h) Annuities issued by insurers licensed by the State of Florida and whose policies are subject to the protection of the Florida Life and Health Insurance Guaranty Association. Investments in annuities are subject to the following limitations:
1. At least 30 days prior to the fund purchasing its first annuity, and annually thereafter, a fund shall submit an actuarial review by a qualified actuary examining the impact on the fund’s present and future financial condition of purchasing annuities and foregoing the earning of investment income on the amounts invested in the annuities. The actuarial review shall take into account all aggregate reserve requirements and shall estimate the percent of the fund’s reserves which may safely be invested in annuities. This percentage shall be the maximum amount allowable for investment in annuities subject to subsequent annual reviews by the fund’s actuary. For purposes of this paragraph only, the actuary may be a member of the Society of Actuaries, American Academy of Actuaries or Casualty Actuarial Society.
2. Annuities shall be single premium annuities and shall be purchased only for the purpose of providing a payment stream for a given claim. Claims eligible for annuity funding shall be those claims with specific periodic benefit payments and with payments expected to continue for at least 61 months.
3. All annuities purchased shall have the fund as beneficiary. The fund may instruct the insurer to pay benefits directly to the claimant. The policy shall provide that the sum of the periodic benefit payments paid plus the cash value of the policy shall be greater than or equal to the amount of premium paid.
4. All annuities shall be tied to the claimant’s life span.
5. If the cash value of the annuity exceeds $100,000 or the estimated benefits payable under the terms of the annuity, including cash value, exceeds $300,000, then the annuity shall be purchased only from a licensed insurer with a rating from the most recent edition of the A. M. BEST INSURANCE REPORTS, LIFE-HEALTH, of at least “”A.”” The annuity policy shall also be subject to the protection of the Florida Life and Health Insurance Guaranty Association.
6. The rules contained in paragraph (f) relating to the purchase of annuities shall not apply to annuities purchased for a claim settlement pursuant to an order of a Deputy Commissioner.
(i) Land and existing buildings used or acquired for use as its principal home office and for use by its service company, if any, when conducting business involving the fund. Prior to investing in land and buildings, the fund shall submit to the Office the following items:
1. An appraisal of the building and land showing that the market value of the building and land is greater than or equal to the principal amount of the investment. The appraisal shall be prepared in accordance with the Uniform Standards of Professional Appraisal Practice. The Uniform Standards of Professional Appraisal Practice of the Society of Real Estate Appraisers (effective July 1, 1987) are hereby adopted by reference and made a part of this rule by reference.
2. An analysis by the fund’s actuary on the impact of the investment on the liquidity of the fund for claims payment purposes.
3. A financial analysis using generally accepted accounting principles showing that the proposed investment will decrease the expense overhead of the fund compared to acquiring office space through renting commercial property.
4. A certified resolution of the board of trustees stating that the investment is intended solely for reducing the overhead expense of the fund and that the investment is not for purposes of speculation or resale.
(j) If the building or land purchased requires modification or renovation in order to make it suitable for the fund’s use, then the total cost of purchase of the building and land plus the cost of renovation or modification shall not exceed the 5 percent limit imposed by paragraph (n).
(k) If, instead of buying an existing building, a fund wishes to purchase land and construct a building on the land, then the following conditions shall be met in addition to those imposed by paragraph (i):
1. Land acquired for use in the construction of a building may be held for no longer than 18 months before construction shall begin. If construction is not begun within 18 months, then the fund may request a one time extension period to begin construction. An extension shall be granted upon submission of evidence that the fund has made a reasonable effort to begin construction within the time prescribed and that construction will begin before the end of the extension. If no extension is granted or if construction does not begin by the end of the extension then the land shall be sold.
2. All contracts awarded to the prime contractor shall contain a maximum fixed cost. The fund shall secure a performance bond in the amount of the contract from the prime contractor.
3. The total cost of acquiring the land, improving the land and construction of the building shall not exceed the 5 percent limit imposed by paragraph (n).
(l) The fund shall be the sole owner or mortgagee of the land and building, and no sale of real property for a price less than the original cost of the land and building shall take place without the written consent of the Office. The Office shall approve the sale unless the sale impairs the ability of the fund to meet its financial obligations.
(m) Investment in land or building pursuant to paragraphs (i) and (k), shall be subject to the approval of the Office. In approving this investment, the Office shall consider the impact of the investment on fund liquidity and solvency, the percent of net claims reserves invested and the amount of fund overhead expenses reduced by the investment. All books and records of the fund relating to acquiring land and acquiring or constructing a building shall be open to inspection by the Office.
(n) In no event shall the amount invested in land or building exceed 5 percent of the fund’s claims reserves, net of excess recoveries.
1. If the cost of purchasing land, purchasing or constructing a building, renovating a building or improving the land exceeds the 5 percent limit imposed by paragraph (n), then the fund shall allocate all its unencumbered surplus until an amount equal to the portion of the cost in excess of 5 percent is transferred to claims reserves.
2. If the Office subsequently determines that the investment endangers fund solvency or liquidity, or if the original cost of purchasing land, purchasing or constructing a building, renovating a building or improving the land ever exceeds 10 percent of loss reserves as defined by subsection 69O-190.059(3), F.A.C., the fund shall sell the land or building, obtain a mortgage on the property or allocate unappropriated surplus in order to provide sufficient liquidity to meet its obligations.
3. The fund shall allocate an amount each year to claims reserves equal to the amount of depreciation taken on the land and building.
(3) Investments pursuant to subsection (2) paragraphs (a) through (f), shall have maturity dates of not more than 10 years from the date of purchase. Furthermore, all investments shall be made in such a manner that dates of maturity of investments shall coincide with the claim payment needs of the fund. The Commission shall adopt as a rule a schedule which may be amended from time to time and which is based on the analysis of the payment patterns of all active self-insurers funds. Such schedule shall be used by all funds to determine the maturity dates for investments so that the claim payment needs of each fund are satisfied. If a fund submits to the Office an analysis by a qualified actuary which demonstrates the fund’s payment pattern is substantially different from the schedule published by the Office, the Office shall authorize the fund to purchase its investments based on the payment pattern of the fund rather than on the published schedule.
(4) No fund shall invest so that more than 10 percent of the fund’s assets are invested in a single financial institution unless such investment is fully insured by an agency of the United States government or satisfactorily collateralized pursuant to the conditions contained in subsection (7).
(5) All monies, other than those specified in subsection (2), held by a fund shall be invested in any manner authorized in subsection (2) and for any period of maturity.
(6) Investments pursuant to subsection (4) may be purchased with maturity dates subject to the discretion of the trustees. All such investments shall be purchased through financial institutions within the State of Florida.
(7) The trustees, upon approval by the Office, are authorized to enter into repurchase agreements subject to the following conditions:
(a) The agreement is with a financial institution within the State of Florida.
(b) The fund secures collateral for the agreement in the form of specific securities pledged to the fund whose market value is no less than the amount of the agreement.
(c) All securities pledged as collateral shall be acceptable pursuant to the restrictions imposed by subsections (2), (3) and (4). Upon receipt of proof of compliance with these conditions the Office shall approve the repurchase agreements.
(8) Authorized securities may be purchased through authorized financial institutions. For the purposes of this section, authorized financial institutions shall mean:
(a) Banks, savings and loan associations, and credit unions operating within the State of Florida and licensed by the State of Florida, the U.S. government or authorized under the Reciprocal Regional Banking Act of 1984 and whose accounts are insured by an agency of the U.S. government; and,
(b) Investment brokerage firms licensed by the Securities and Exchange Commission and insured by an agency of the U.S. government and operating within the State of Florida.
(9) The Office shall prohibit a fund from investing in, or order the liquidation of, an otherwise authorized investment upon a finding, based on reasonable cause, that a specific investment has become unsafe or that a specific financial institution is or may become insolvent.
Rulemaking Authority 624.4621 FS. Law Implemented Florida Statutes § 624.4621. History-New 12-25-84, Amended 12-17-85, Formerly 38F-5.71, Amended 12-3-87, 7-20-88, 12-19-93, Formerly 38F-5.071, 4-190.071.