Florida SB836 and HB821 – What Do They Do?

The Florida House and Senate will soon consider bills to enact portions of the NAIC Model Holding Company Act: Senate Bill 836 (SB836) and House Bill 821 (HB821).  Both bills contain almost identical language and provide the Office of Insurance Regulation (OIR) with new tools in monitoring the solvency of insurers and performing financial examinations of these entities.  

One of the main tools being added is that the OIR would be able to examine any insurer and its affiliates to ascertain the financial condition of the insurer.  This authority also allows the OIR to examine the enterprise risk of a group of affiliated companies or an insurance holding company and how that risk might affect the financial condition of the insurer.

The bills also include additional calculations and tests, for both property & casualty and life & health, to determine a company action level event, as well as revisions to the provisions for companies at the mandatory control level. They also change annual statement requirements by necessitating the actuarial opinion summary (AOS) be included in the annual statement (624.424(1)(a)2, F.S.).

Some specifics relevant to the P&C industry are:

  • Establishes a new additional trigger for a company action level event, as follows: (Three times the Authorized Control Level Risk-Based Capital) > (Total Adjusted Capital) >= (Company Action Level Risk-Based Capital) AND The “Trend Test” is triggered.
  • After the mandatory control level is passed, the OIR now can forego taking action if the company MAY (not “will”) eliminate the control event within 90 days.
  • The AOS must be completed in accordance with the NAIC P&C annual statement instructions.
  • Every insurer must file an enterprise-risk report by April 1st.  Exceptions may be granted by the OIR for domestic subsidiary insurers of compliant insurers or domestic insurers writing only in Florida with less than $300 million premium that can demonstrate that there’s no substantial regulatory or consumer benefit. Note that a waiver is valid for two years.
  • Supervisory colleges may now be formed to assess a company under ss. 608.801 and 624.316.  The OIR can decide its powers and the company is billed for its expenses.

HB821 bill is set to take effect 10/1/2013 if it passes and SB836 is set to take effect on 1/15/2015.  The text of HB821 can be found here and the text of SB836 can be found here.

What effects would these law changes have on your insurance company and its interactions with the OIR?  What would be your most pressing questions for regulators if these changes are made?  What are the hurdles you might face if these changes are effective by the end of the year?  Let us know.