Committee Substitute for House Bill 1191 (CS/HB 1191) makes several changes to Florida’s captive insurance law to remedy unintended consequences that may have resulted from the 2012 enactment of Committee Substitute for Committee Substitute for House Bill 1101 (CS/CS/HB 1101).
CS/HB 1191 restores language that permits an industrial insured captive insurance company with unencumbered capital and surplus of at least $20 million to continue to write workers' compensation and employer's liability insurance in excess of $25 million in the annual aggregate. CS/HB 1191 corrects an inconsistency in current law by exempting captive insurance companies from deposit requirements that now exceed the surplus requirements to form a captive. Finally, CS/HB 1191 makes pure captive insurance companies responsible for adopting risk management standards for controlled unaffiliated business and requires such pure captive insurers to submit these standards to the Florida Office of Insurance Regulation (“OIR”) for approval.
CS/HB 1191 will be presented to the Governor and is subject to his veto authority. We recommend that you check the ultimate status of this bill by visiting the Florida Legislature’s website (http://www.leg.state.fl.us).
Key provisions of CS/HB 1191 are summarized below1:
- Revises the term "qualifying reinsurer parent company" to mean a reinsurer that holds a certificate of authority or qualifies for credit for reinsurance under section 624.610(3), Fla. Stat., and possesses a consolidated GAAP net worth of at least $500 million and a consolidated debt to total capital ratio of not greater than 0.50.
- Revises the term "captive insurer" to “captive insurance company," which is defined in section 628.901, Fla. Stat. The bill also revises section 629.905, Fla. Stat., to make language regarding the risks that an industrial insured captive may insure consistent with the definition of an industrial insured captive insurance company under section 628.901, Fla. Stat.
- Prohibits an industrial insured captive insurance company from insuring any risks other than those of the industrial insured’s that comprise the industrial insured group and its affiliated companies, or its stockholders or members, and affiliates thereof, of the industrial insured captive, or the stockholders or affiliates of the parent corporation of the industrial insured captive insurance company.
- Authorizes the licensure of industrial insured captive insurance companies with unencumbered capital and surplus of at least $20 million to provide workers compensation and employer's liability insurance in excess of $25 million in the annual aggregate.
- Requires an industrial insured captive insurance company to maintain unencumbered capital and surplus of at least $20 million to continue to write such excess workers' compensation insurance.
- Corrects an inconsistency in current law by exempting captive insurance companies from deposit requirements that now exceed the surplus requirements to form a captive.
- Requires a pure captive insurance company to submit risk management standards to the OIR to ensure that a parent or affiliated company is able to exercise control of the risk management function of any controlled unaffiliated business to be insured by the pure captive insurance company. This change provides pure captive insurers with more flexibility than current law, which requires the Financial Services Commission to adopt such risk management standards by rule.
- Provides an effective date of July 1, 2013.