Florida Cabinet Meeting Report: July 29

The Florida Cabinet met July 29, 2008 and considered the following insurance-related governmental agency agendas:

• Office of Insurance Regulation
• State Board of Administration
• Florida Hurricane Catastrophe Fund Finance Corporation

During the meeting, Florida Office of Financial Regulation (“OFR”) Commissioner Don Saxon discussed mortgage licensing issues, specifically the allegations of mortgage fraud that recently were reported by The Miami Herald. 

Mr. Saxon stated he believes there has been a “rush to judgment by the media,” and that there is not a systematic process in place for licensing felons. He assured the Cabinet that steps will be implemented to improve the system, and a seven-year moratorium for felons applying for mortgage licenses will be effected.  The OFR will review all applications for criminal histories.  The OFR also will request an audit by Florida’s Inspector General. 

Agriculture and Consumer Services Commissioner Charlie Bronson recommended withholding judgment of Mr. Saxon because current law does not provide much latitude for denying licenses.  Florida Chief Financial Officer (“CFO”) Alex Sink currently has staff reviewing the rules and statutes governing mortgage broker licensing for recommendations on how to improve the system. 

Attorney General Bill McCollum expressed concern with the mortgage fraud problem in Florida, but acknowledged that the current law does not give the OFR much discretion in approving licenses.  He encouraged an investigation by the Auditor General and the convening of a clemency board to ensure that automatic restoration of felons’ rights does not take place. 

Governor Charlie Crist stated that he would like to verify the Miami Herald reports. 

CFO Sink made a motion for the OFR to provide recommended Rule changes for the August 12, 2008 Cabinet meeting. 

Governor Crist offered a motion for proposed Rule changes and an audit review by the Florida Auditor General.  Both motions were approved unanimously.

 

Florida Office of Insurance Regulation (“OIR”)

Florida Insurance Commissioner Kevin McCarty presented the OIR agenda to the Cabinet, which, acting as the Florida Financial Services Commission (“FSC”), approved all OIR agenda items with no objection or discussion.

Item 2– Approval was requested for adoption of Proposed Rule 69O-203.070: Annual and Quarterly Reports, Forms.  Section 636.043, F.S. states that a Prepaid Limited Health Service Organization (“PLHSO”) is to file an annual report with the OIR on forms prescribed by the FSC.  Under the current Rule, which was adopted in 1994, PLHSOs file their annual statements on forms specifically created for Florida PLHSOs.  Under the proposed Rule amendment, the annual reports are to be filed on the National Association of Insurance Commissioners (“NAIC”) forms (“blanks”) that are used for this purpose by all health insurers throughout the United States. This promotes nationwide uniformity and reduces frictional costs of making these filings.

Item 3– Approval was requested for adoption of proposed Rules 69O-157.004, .104, .114, .117 regarding long-term care. HB 947, passed during the 2007 Regular Legislative Session mandating two specific changes relating to long-term care law. First, it states that after 24 months, a long-term care policy is incontestable, and secondly, it removes the clause which formerly prohibited a long-term care policy from providing for less than 24 consecutive months of nursing home care.

Item 4– Approval was requested for adoption of Proposed Rule 69O-167.004: Required Pre-insurance Inspection of Private Passenger Motor Vehicles. Section 627.744, F.S. requires auto insurers that are insuring cars that have gone two years without insurance to perform a preinsurance inspection. The statute authorizes the FSC to adopt a form, by Rule, for the purposes of this Section. This Rule amendment adopts a revision to the existing form to comply with changes in the statute.

Item 5– Approval was requested for publication of Proposed Rule Chapter 69O-170: Part IV, Repeal, Rate Filings and Arbitration Rule of Procedure.  Section 627.062, F.S. formerly provided that when the OIR disapproved a rate filing for property and casualty insurance, the insurer had the right to require its appeal of the disapproval be handled by arbitration. These Rules were promulgated to set up a procedure by which that arbitration would take place.  Subsequent to the promulgation of these rules, Section 627.062, F.S. was amended, and now provides that the right to arbitration will no longer apply to these rate filings, and will not apply to rate filings made before January 1, 2009. Consequently, the OIR recommends that these rules should be repealed.

Commissioner McCarty provided the Cabinet with an update on the upcoming Florida Farm Bureau rate hearing, scheduled for July 30, 2008, and the State Farm rate hearing, which is scheduled for August 12.

 

State Board of Administration (“SBA”)

SBA Interim Executive Director General Bob Milligan presented the agenda, all items of which were approved by the Cabinet. Agenda items 10, 11 and 12 related specifically to the Florida Hurricane Catastrophe Fund (“FHCF”).

Item 10– Authorization was requested for the FHCF to file Rule 19-8.010, F.A.C. for adoption. The changes to this Rule were necessitated by 2008 legislation extending the $10 million optional FHCF coverage for an additional contract year.  Permission was granted on May 28, 2008 to file this Rule for Notice of Proposed Rulemaking. No member of the public requested a rule hearing; thus, no rule hearing was held. This Rule, as amended, is now ready for certification. No changes have been made to this Rule or the incorporated form since the Trustees approved this Rule and the incorporated form for Notice of Proposed Rulemaking on May 28, 2008.

Item 11– Approval was requested of the Put Option Agreement between the SBA, FHCF and Berkshire Hathaway, Inc.  On July 2, 2008, the Board authorized the FHCF to develop specific proposals to secure funding for the FHCF that would permit the FHCF to secure at least $4 billion in bonds through a Put Option.

CFO Sink expressed concern that a loophole could exist in the agreement because Berkshire Hathaway could choose to opt out of the deal.  General Milligan testified that he is confident those potential loopholes have been closed, and that, in answer to CFO Sink’s further questions, negotiations between the SBA and Berkshire Hathaway have been in the best interests of Florida. 

Governor Crist asked for further review and did not want to vote without alleviation of his concerns. 

Attorney General McCollum also expressed concern regarding the $224 million pricetag on something bearing only a three or four percent chance of being needed by the State of Florida. 

CFO Sink said she would reluctantly vote in support of the deal, primarily due to the difficulty in obtaining bonds.  The Governor seconded the CFO’s motion to support.  The motion passed with Attorney General McCollum voting against the proposal.

Item 12- Approval was requested for the appointment of Randy Dumm, Ph.D. as Chair of the FHCF for the 2008-2009 year.

 

Florida Hurricane Catastrophe Fund Finance Corporation (“FHCFFC”)

Item 2-  Acceptance and acknowledgment was requested of the Put Option Agreement between the SBA and Berkshire Hathaway Inc. that would require the issuance of bonds by the FHCFFC upon the giving of Notice by the SBA to Berkshire Hathaway Inc.  This item was approved.  Attorney General McCollum again voted against the proposal.

 

Should you have any questions or comments, please do not hesitate to contact Colodny Fass.

 

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