THE BILL ITSELF
HB 1399
Property Insurance Affiliates
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A bill to be entitled
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An act relating to property insurance affiliates;
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creating s. 624.44101, F.S.; providing applicability;
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defining the term "affiliate"; requiring certain
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property insurers to provide to the Office of
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Insurance Regulation documentation demonstrating that
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financial considerations and payments to affiliates
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are fair and reasonable; requiring the office to
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consider certain factors to determine whether such
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considerations and payments are fair and reasonable;
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requiring property insurers to submit, and the office
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to review, audited financial statements; requiring
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contracts between property insurers and affiliates to
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contain certain provisions; authorizing the office to
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issue orders restricting fund transfers from property
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insurers to affiliates under specified circumstances;
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providing penalties; requiring affiliates to make
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certain refunds under certain circumstances; requiring
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the office to adopt forms, processes, and rules;
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creating s. 624.44102, F.S.; providing applicability;
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providing a definition; providing authority of the
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office over affiliate dividends; providing
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restrictions on and prohibitions against dividends
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paid by property insurers to affiliates under certain
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circumstances; requiring property insurers to provide
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notice before pledges of capital and assets to
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affiliates for loans and financial obligations;
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providing penalties; requiring affiliates to make
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certain refunds under certain circumstances; requiring
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the office to adopt forms, processes, and rules;
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creating s. 624.44103, F.S.; providing applicability;
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providing a definition; requiring affiliates to
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register with the office; specifying requirements to
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obtain registration; requiring annual renewal;
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providing administrative penalties; providing criminal
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penalties; requiring the office to adopt forms,
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processes, and rules; amending s. 627.062, F.S.;
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revising factors and standards for the office
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determination whether a property insurance rate filing
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is excessive; providing effective dates.
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Be It Enacted by the Legislature of the State of Florida:
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Section 1. Section 624.44101, Florida Statutes, is created
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to read:
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624.44101 Oversight of affiliate transactions.—
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(1) This section applies to insurers that issue property
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insurance policies and their affiliates.
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(2)(a) As used in this section, the term "affiliate" means
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an entity that engages in the business of insurance and that
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exercises control over or is directly or indirectly controlled
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by the insurer through:
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1. Equity ownership of voting securities;
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2. Common managerial control as defined in s. 624.10; or
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3. Participation by the management of the insurer and the
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affiliate in the management of the insurer or the affiliate.
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(b) The term also includes an attorney in fact as defined
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in s. 629.011 and a managing general agent as defined in s.
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626.015.
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(3)(a) Each property insurer doing business in this state
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which pays, directly or indirectly, a fee, commission, or other
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financial consideration or payment to any affiliate must provide
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to the office documentation demonstrating that such fee,
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commission, or other financial consideration or payment is fair
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and reasonable. The office must determine whether the fee,
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commission, or other financial consideration or payment is fair
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and reasonable by considering the following factors:
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1. The actual cost of each service provided by the
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affiliate.
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2. The relative financial condition of the property
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insurer and the affiliate.
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3. The level of debt and how that debt is serviced.
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4. The amount of the dividends paid by the property
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insurer and the affiliates and for what purpose.
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5. Whether the terms of the written contract benefit the
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property insurer and are in the best interest of the
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policyholders or subscribers.
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6. Any other information as the office reasonably requires
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in making the determination.
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(b) For any contract with an affiliate executed on or
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after July 1, 2026, the property insurer must annually provide
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audited financial statements to the office which demonstrate any
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fee, commission, or other financial consideration or payment
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from the property insurer to the affiliate is fair and
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reasonable. The office must review audited financial statements
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to determine if the fee, commission, or other financial
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consideration or payment to the affiliate is fair and
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reasonable.
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(c) Any contract between a property insurer and an
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affiliate executed on or after July 1, 2026, must include a
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termination clause that automatically terminates the contract
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after 3 years. An agreement between a property insurer and an
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affiliate may include provisions for extension, but such
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extension must be approved by the office before becoming
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effective. Any extension may not remain in effect for longer
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than 3 years without a review pursuant to paragraph (a) and
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approval by the office. If the agreement provides for extension,
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the agreement must clearly state that the extension is subject
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to approval by the office at least every 3 years.
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(4)(a) During a state of emergency declared by the
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Governor pursuant to chapter 252, the office may issue orders
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restricting fund transfers from a property insurer to an
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affiliate.
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(b) Orders under paragraph (a) may apply to all or
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specified property insurers and may not exceed 60 days unless
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extended by the office.
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(5) The office may impose penalties on a property insurer
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for violations of this section, including administrative fines
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of up to $10,000 for each violation, as well as suspension or
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revocation of the property insurer's license or authority to do
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business in this state.
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(6) In addition to any penalties imposed by the office
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under subsection (5), the affiliate must refund the property
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insurer any fee, commission, or other financial consideration or
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payment that is determined by the office not to be fair and
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reasonable.
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(7) The office shall adopt forms, processes, and rules
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necessary to implement this section.
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Section 2. Section 624.44102, Florida Statutes, is created
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to read:
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624.44102 Authority over affiliate dividends and loans.—
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(1) This section applies to insurers that issue property
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insurance policies and their affiliates.
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(2) As used in this section, the term "affiliate" has the
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same meaning as in s. 624.44101(2).
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(3) The office has oversight and regulatory authority over
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the issuance of dividends paid to an affiliate.
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(4) There may be no declaration or distribution of
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dividends paid to an affiliate without prior approval of the
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office. The office shall make a determination within 7 days
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after a property insurer submits all documents required by the
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office.
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(5) Dividends may not be made for the purpose of
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manipulating the property insurer's financial position, and they
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may be made only if the property insurer is solvent.
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(6) Dividends must be fair and reasonable as determined by
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the office in accordance with s. 624.44101(3)(a).
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(7) A property insurer must provide notice to the office
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at least 30 days before a pledge of capital or assets to any
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affiliate for a loan or financial obligation. Such notice must
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include a description of the collateral, the nature of the
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obligation, and the parties involved. The office may reject and
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prohibit the pledge if the office determines that such financial
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arrangement is not in the best interest of the financial
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condition of the property insurer.
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(8) The office may impose penalties on a property insurer
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for any unauthorized dividend, distribution, or pledge of
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capital or assets, including administrative fines of up to
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$10,000 for each violation, as well as suspension or revocation
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of the property insurer's license or authority to do business in
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this state.
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(9) In addition to any penalties imposed by the office
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under subsection (8), the affiliate must refund the property
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insurer any payment that is determined by the office to violate
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this section.
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(10) The office shall adopt forms, processes, and rules
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necessary to approve dividends and pledges of capital or assets
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from property insurers to affiliates.
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Section 3. Effective January 1, 2027, section 624.44103,
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Florida Statutes, is created to read:
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624.44103 Affiliate registration.—
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(1) This section applies to insurers that issue property
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insurance policies and their affiliates.
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(2) As used in this section, the term "affiliate" has the
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same meaning as in s. 624.44101(2).
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(3) Before doing business in this state, an affiliate must
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obtain registration from the office.
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(4) To obtain registration, the affiliate must file with
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the office an application for registration upon a form to be
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adopted by the commission and furnished by the office. The
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office may not require an applicant to pay a fee for the
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registration or for filing an application for such registration.
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The application must include the following information and
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documents:
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(a) A statement of duties the applicant is expected to
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perform on behalf of the property insurer, and the lines of
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insurance for which the applicant is to be authorized to act.
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(b) All basic organizational documents of the affiliate,
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such as the articles of incorporation, articles of association,
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partnership agreement, trade name certificate, trust agreement,
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shareholder agreement, or other applicable documents, and all
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amendments to those documents.
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(c) The names, addresses, official positions, and
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professional qualifications of the individuals employed or
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retained by the affiliate who are responsible for the conduct of
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the affairs of the affiliate, including all members of the board
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of directors, board of trustees, executive committee, or other
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governing board or committee, and the principal officers in the
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case of a corporation or the partners or members in the case of
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a partnership or association of the affiliate.
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(d) An independent background report as prescribed by the
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office detailing the involvement of the individuals employed or
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retained by the affiliate who are responsible for the conduct of
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the affairs of the affiliate, including all members of the board
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of directors, board of trustees, executive committee, or other
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governing board or committee, and the principal officers in the
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case of a corporation or the partners or members in the case of
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a partnership or association of the affiliate.
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(e) A self-disclosure of any administrative, civil, or
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criminal complaints, settlements, or discipline of the affiliate
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which relate to a violation of the insurance code or the
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insurance laws of any other state.
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(5) Affiliate registrations must be renewed annually. The
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office may not require an affiliate to pay a fee for the renewal
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or pay a fee to file an application for such renewal.
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(6) The office may, in its discretion, deny an application
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for, suspend, revoke, or refuse to renew an affiliate's
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registration; impose an administrative fine of up to $10,000
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against an affiliate; and suspend or revoke the eligibility of
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an affiliate for registration, if the office finds any of the
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following applicable grounds:
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(a) Any cause for which issuance of the registration could
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have been refused had it then existed and been known to the
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office.
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(b) Violation of any provision of the insurance code or
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any other law applicable to the business of insurance in the
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course of doing business as an affiliate in this state.
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(c) The registration is used, or to be used, to circumvent
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any of the requirements or prohibitions of the insurance code.
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(d) Any of the individuals employed or retained by the
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affiliate who are responsible for the conduct of the affairs of
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the affiliate have been found guilty of, or having pleaded
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guilty or nolo contendere to, a felony in this state or any
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other state relating to the business of insurance or an
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insurance agency, without regard to whether a judgment of
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conviction has been entered by the court having jurisdiction of
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such cases.
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(e) Knowingly employing any individual in a managerial
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capacity or in a capacity dealing with the public who is under
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an order of revocation by the office or the department.
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(f) In the conduct of business under the registration,
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engaging in unfair methods of competition or in unfair or
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deceptive acts or practices, prohibited under part IX of chapter
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626.
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(g) Knowingly aiding, assisting, procuring, advising, or
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abetting any person in the violation of or in the attempt to
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violate a provision of the insurance code or any other order or
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rule of the department, commission, or office.
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(h) Receiving a fee, commission, or other financial
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consideration or payment that violates the requirements of s.
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624.44101 or s. 624.44102.
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(i) Receiving any dividend or pledges of capital assets
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for a loan or financial obligation in violation of s. 624.44101
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or s. 624.44102.
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(j) Failing to annually renew a registration.
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(k) Failing to refund a fee, commission, or other
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financial consideration or payment to a property insurer under
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s. 624.44101(6) or s. 624.44102(9).
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(7) A person who does business as an affiliate in this
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state without a current registration from the office commits a
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misdemeanor of the first degree, punishable as provided in s.
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775.082 or s. 775.083, for the first offense, and, for a second
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or subsequent offense, commits a felony of the third degree,
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punishable as provided in s. 775.082 or s. 775.083.
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(8) The office shall adopt forms, processes, and rules
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necessary for affiliates to obtain and renew their registration
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and for the regulation, investigation, and discipline of
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affiliates.
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Section 4. Paragraphs (b) and (e) of subsection (2) of
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section 627.062, Florida Statutes, are amended to read:
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627.062 Rate standards.—
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(2) As to all such classes of insurance:
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(b) Upon receiving a rate filing, the office shall review
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the filing to determine if a rate is excessive, inadequate, or
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unfairly discriminatory. In making that determination, the
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office shall, in accordance with generally accepted and
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reasonable actuarial techniques, consider the following factors:
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1. Past and prospective loss experience within and without
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this state.
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2. Past and prospective expenses.
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3. The degree of competition among insurers for the risk
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insured.
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4. Investment income reasonably expected by the insurer,
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consistent with the insurer's investment practices, from
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investable premiums anticipated in the filing, plus any other
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expected income from currently invested assets representing the
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amount expected on unearned premium reserves and loss reserves.
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The commission may adopt rules using reasonable techniques of
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actuarial science and economics to specify the manner in which
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insurers calculate investment income attributable to classes of
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insurance written in this state and the manner in which
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investment income is used to calculate insurance rates. Such
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manner must contemplate allowances for an underwriting profit
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factor and full consideration of investment income that produces
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a reasonable rate of return; however, investment income from
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invested surplus may not be considered.
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5. The reasonableness of the judgment reflected in the
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filing.
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6. Dividends, savings, or unabsorbed premium deposits
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allowed or returned to policyholders, members, or subscribers in
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this state.
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7. The adequacy of loss reserves.
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8. The cost of reinsurance. The office may not disapprove
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a rate as excessive solely due to the insurer having obtained
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catastrophic reinsurance to cover the insurer's estimated 250-
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year probable maximum loss or any lower level of loss.
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9. Trend factors, including trends in actual losses per
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insured unit for the insurer making the filing.
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10. Conflagration and catastrophe hazards, if applicable.
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11. Projected hurricane losses, if applicable, which must
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be estimated using a model or method found to be acceptable or
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reliable by the Florida Commission on Hurricane Loss Projection
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Methodology, and as further provided in s. 627.0628.
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12. Projected flood losses for personal residential
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property insurance, if applicable, which may be estimated using
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a model or method, or a straight average of model results or
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output ranges, independently found to be acceptable or reliable
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by the Florida Commission on Hurricane Loss Projection
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Methodology and as further provided in s. 627.0628.
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13. A reasonable margin for underwriting profit and
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contingencies.
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14. The cost of medical services, if applicable.
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15. For property insurance filings, the profits, revenues,
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and investment income of any affiliate, as defined in s.
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624.44101(2), which are attributable or materially related to
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the insurer's business in this state.
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16.15. Other relevant factors that affect the frequency or
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severity of claims or expenses.
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(e) After consideration of the rate factors provided in
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paragraphs (b), (c), and (d), the office may find a rate to be
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excessive, inadequate, or unfairly discriminatory based upon the
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following standards:
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1. Rates shall be deemed excessive if they are likely to
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produce a profit from Florida business which is unreasonably
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high in relation to the risk involved in the class of business
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or if expenses are unreasonably high in relation to services
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rendered.
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2. Rates shall be deemed excessive if, among other things,
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the rate structure established by a stock insurance company
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provides for replenishment of surpluses from premiums, if the
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replenishment is attributable to investment losses.
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3. For property insurance filings, rates may be deemed
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excessive if they do not reflect the profits, revenues, and
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investment income of any affiliate, as defined in s.
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624.44101(2), which are attributable or materially related to
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the insurer's business in this state.
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4.3. Rates shall be deemed inadequate if they are clearly
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insufficient, together with the investment income attributable
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to them, to sustain projected losses and expenses in the class
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of business to which they apply.
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5.4. A rating plan, including discounts, credits, or
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surcharges, shall be deemed unfairly discriminatory if it fails
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to clearly and equitably reflect consideration of the
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policyholder's participation in a risk management program
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adopted pursuant to s. 627.0625.
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6.5. A rate shall be deemed inadequate as to the premium
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charged to a risk or group of risks if discounts or credits are
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allowed which exceed a reasonable reflection of expense savings
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and reasonably expected loss experience from the risk or group
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of risks.
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7.6. A rate shall be deemed unfairly discriminatory as to
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a risk or group of risks if the application of premium
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discounts, credits, or surcharges among such risks does not bear
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a reasonable relationship to the expected loss and expense
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experience among the various risks.
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The provisions of this subsection do not apply to workers'
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compensation, employer's liability insurance, and motor vehicle
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insurance.
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Section 5. Except as otherwise expressly provided in this
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act, this act shall take effect July 1, 2026.