Florida legislators have advanced a bill that would regulate insurance company affiliates.

If passed, Senate Bill 1399 bill will require insurers to provide the Office of Insurance Regulation with documentation showing their considerations and payments to affiliates are fair and reasonable. The bill's text explains that the OIR will determine from this documentation whether affiliates' compensation is fair and reasonable using the following considerations:

  1. The actual cost of each service provided by the affiliate;
  2. The relative financial condition of the property insurer and the affiliate;
  3. The level of debt and how that debt is serviced;
  4. The amount of dividends paid by the property insurer and the affiliates, and for that purpose.;
  5. Whether the terms of the written contract benefit the property insurer and are in the best interest of the policyholders or subscribers; and
  6. Any other information the office reasonably requires in making the determination.

SB 1399 would also give the OIR oversight and regulatory authority over dividends paid to affiliates.

Under the bill, affiliates would be required to obtain registration from the Florida OIR before being allowed to do business in the state. This registration would require affiliates to provide information including the expected duties of the applicant; basic organizational documents; the names, addresses, official positions and professional qualifications of individuals employed or retained by the affiliate who conduct affairs for the affiliate; and an independent background check. These registrations must be renewed each year.

The bill also addresses insurer rate setting, making amendments to section 627.062 of Florida's statutes that establish appropriate rate determinations using criteria including:

  • Past and prospective loss experience within and without the state;
  • Past and prospective expenses;
  • The degree of competition among insurers for the risk insured;
  • Investment income reasonably expected by the insurer, consistent with their investment practices, from any investable premiums anticipated in the filing, plus any other income from currently invested assets representing the amount expected on unearned premium and loss reserves;
  • The reasonableness of the judgment reflected in the filing;
  • Dividends, savings, or unabsorbed premium deposits allowed or returned to policyholders, members, or subscribers in the state;
  • The adequacy of loss reserves;
  • The cost of reinsurance;
  • Trend factors;
  • Conflagration and catastrophe hazards; and
  • Projected hurricane losses, if applicable.

The bill unanimously passed the House Commerce Committee on January 27, and will now head to the state House of Representatives for consideration.

The full text of Florida Senate Bill 1399 can be found here.

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