Cabinet Okays Reinsurance Collateral Change Rule Development

On Tuesday, December 18, 2007, a member of this Firm attended a meeting of the Florida Cabinet in Tallahassee, Florida.

To view the meeting agenda, click here.

During the meeting, Cabinet members considered one agenda item presented by the Office of Insurance Regulation (“OIR”) and several items during a meeting of the State Board of Administration (“SBA”).  The SBA is comprised of the Governor, Attorney General, and Chief Financial Officer. 

Absent from today’s meeting was Alex Sink, Florida’s Chief Financial Officer.

Below is a brief explanation of those items and a summary of the discussion and activities that took place.   

 

State Board of Administration

General Bob Milligan, newly-appointed interim Executive Director of the SBA, provided a brief overview on the recent activities regarding the appointment of a permanent SBA Executive Director.

He stated that he is currently in the process of establishing a search committee and that the position will have a greater emphasis on investment management.  He also noted that the market salary for the position is $300,000 to $350,000 annually, to which Governor Crist expressed concern.  General Milligan also said that the SBA is proceeding with its search for a full-time investment firm and should have a report by the end of January. 

The SBA approved the following items:

• Approval of the previous meeting minutes of December 4, 2007
• Approval of a Fiscal Sufficiency of an amount not exceeding $250,000,000 State of Florida, Department of Transportation Turnpike Revenue Bonds, Series 2008A
• Approval of SBA Quarterly Report required by the Protecting Florida’s Investments Act

 

Office of Insurance Regulation

Florida Insurance Commissioner Kevin McCarty presented one agenda item, which was approved for publication: Proposed Rule 69O-144.007; Ratings-Based Collateral Requirements for Reinsurance, F.A.C.

During the 2007 Regular Session, the Florida Legislature passed a law (Section 624.610(3)(e) F.S.) that modifies reinsurance requirements by giving the Insurance Commissioner the ability to establish lower collateral requirements for foreign reinsurers that are highly rated (by A.M. Best or Moodys, for example) and are financially sound. 

The Proposed Rule implements this new legislation by setting up a procedure by which a reinsurer can become an “eligible reinsurer,” and receive the benefit of this new law, as well as allow a primary insurer to receive credit when it purchases reinsurance from an eligible reinsurer. 

Members of the Cabinet expressed some concern about the transparency of foreign companies coming into Florida.  Attorney General, Bill McCullum, suggested that the OIR consider requiring profit disclosures since it is receiving the benefit of this new Rule.  The Governor noted that he supported helping foreign companies, and that some U.S. companies “have not been good to the people.” 

Following the discussion, the Rule was approved.

 

The above information is a brief summary of the pertinent activities that took place during the Cabinet Meeting.  It is not intended to be a comprehensive review of the issues and items contained herein.  Should you have additional questions, please feel free to contact this office.