Florida Cabinet Meeting Report: May 13

On Tuesday, May 13, 2008, the Florida Cabinet (Governor, Attorney General, Chief Financial Officer and Agriculture Commissioner) met in Tallahassee, Florida. To view the complete meeting agenda, click here.

During the meeting, the Cabinet, acting as the Florida Financial Services Commission (“FSC”), considered several insurance-related matters. Below is a brief summary of the discussions and activities regarding those matters that occurred during the meeting.

Office of Financial Regulation (“OFR”)

During the OFR presentation, there was some discussion regarding money laundering and money service businesses. The OFR acknowledged problems that it has experienced regulating the money service industry. These issues, which were outlined in a grand jury report, included lack of communications with law enforcement agencies and lack of referrals.

During the 2008 Regular Session, legislation was passed that is intended to improve the OFR’s regulation of money service businesses and combat the abuses of certain bad actors. During this discussion, Florida Chief Financial Officer Alex Sink noted that her office will be working to help prevent insurance fraud and mentioned that it would pursue legislation on the matter during the next Session.

Office of Insurance Regulation (“OIR”)

Kevin McCarty, Florida’s Insurance Commissioner, briefly reviewed the OIR agenda items, all of which were approved without discussion. They included:

• Approval for Publication: Amendments to Rule 69O-149.041: Small Group Underwriting

Under Florida law, a small group is defined as 1-50 employees. These amendments change the current practice of small group health carriers using two different underwriting application approaches, based on the size of a small group. Pursuant to Section 626.9611 F.S., this Rule makes it an unfair trade practice for an insurer to treat certain sized small groups differently than it treats other small groups. Under the Rule, all small groups must be treated the same, unless otherwise provided in Section 627.6699.

• Approval for Publication: Amendments to Rule 69O-149.205,-.207, F.A.C.: Standard Risk Rates

The OIR is required by Section 627.6675(3)(c), F.S., to conduct an annual survey of the individual market and determine “standard risk rates,” which are the average rates charged in the individual market for health insurance. The standard risk rates are used by the health insurers in setting their conversion rates pursuant to Section 627.6675(3)(a), F.S., which sets forth that the maximum a health insurer may charge for a conversion policy is 200 percent of the standard risk rate.

• Approval for Publication: Repeal of Rule 69O-220.001,.051,.201: Adjusters

When the Florida Department of Insurance was reorganized into the Florida Department of Financial Services, comprising the OIR and the OFR, the DFS was charged with the regulation of insurance adjusters under Chapter 626, Part VI. Pursuant to that law, only DFS has regulatory authority over adjusters, whereas OIR has no authority. Consequently, reason exists for this OIR Rule Chapter to be repealed.

• Approval for Publication: Repeal to Rule 69N-121.066: Informal Conferences

This Rule outlines the process that the OIR must follow after performing an insurer examination and the OIR’s provision to the insurer of an examination report draft. According to the OIR, this Rule should be repealed because it is unnecessary.

State Board of Administration (“SBA”)

General Bob Milligan, Interim SBA Executive Director, provided a presentation on Selection of the Florida Hurricane Catastrophe Fund (“FHCF”) Financial Services Team (“Team”). The Team will provide the following services to the FHCF:

• Investment banking services
• Bank liquidity/credit support services
• Reinsurance intermediary services
• Bond/tax and disclosure counsel services

General Milligan noted that selection of the Team is on a fast track and he anticipates presenting a proposal to the Cabinet by June 10, 2008. Governor Crist noted concerns with two candidates, JP Morgan and Lehman Brothers, because they had previously provided services to the Local Government Investment Pool (“LGIP”). Companies involved in the LGIP investment strategy have been under significant scrutiny because of their potential involvement in recommending risky investment options. The Governor made a motion to remove these companies from consideration. However, since there was no second, the motion failed.

Following the SBA report, the Cabinet meeting concluded.

Should you have any questions regarding the above matters, please feel free to contact this office.

 

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