Florida Cabinet Meeting Report: October 14

On Tuesday, October 14, 2008, the Governor and Florida Cabinet held a meeting in Tallahassee, Florida and discussed several insurance, financial and other state matters. The following is a brief report on the relevant matters discussed and actions taken by the Cabinet.

Kurt Browning, Florida’s Secretary of State, provided a report on the state’s election. The Cabinet members asked a series of questions about the state’s readiness. Mr. Browning expects a record turnout in Florida for the November 4, 2008 election. He highlighted recent changes in the laws including voter rights for felons, the use of optical scan balloting and the accommodation of voters with disabilities. Mr. Browning also addressed possible fraudulent voter registration. He concluded by saying that Florida is ready for the 2008 election.

Alex Hagar was appointed Acting Commissioner of the Office of Financial Regulation. The search for a permanent replacement is ongoing. Chief Financial Officer Sink stated that she would like to have a permanent replacement in the next 90-120 days.

Division of Bond Finance (“Division”)

Ben Watson provided a brief update on credit markets. He noted that despite the recent credit problems, the Division should be able to ensure adequate funding through the current fiscal year. While the Division is hoping for improved financial conditions, they are planning worst case scenarios.

Office of Insurance Regulation (“OIR”)

The Cabinet, acting as the Financial Services Commission (“Commission”), considered and took action on the following items that were presented by Kevin McCarty, the Florida Insurance Commissioner. The items were approved with minimal discussion.

Item 2, Proposed Rule 69O-137.001: Annual and Quarterly Reporting Requirements, was approved for publication.

Section 624.424, F.S., requires every authorized insurer to file annual and quarterly statements of its financial condition with the OIR. This Rule is being amended to adopt the 2008 National Association of Insurance Commissioners (“NAIC”) manuals for annual and quarterly statements and the 2008 NAIC accounting practices and procedures manual. The 2008 version of these manuals will replace the 2007 versions adopted in the current Rule.

Item 3, Request for Approval for Publication of Proposed Rule 69O-138.001: NAIC Financial Condition Examiners Handbook Adopted, was approved for publication.

Section 624.316, F.S., requires the OIR to examine the affairs, transactions, accounts and records of authorized insurers. The law allows the Commission to adopt by rule the Financial Condition Examiners Handbook of the NAIC, in order to facilitate uniformity in examinations and reduce the frictional cost of doing business in Florida.

This Rule is being amended to adopt the 2008 NAIC Financial Condition Examiners Handbook. The current Rule adopted the 2007 version.

Item 4, Request for Approval for Publication of Proposed Rules 69O-157.302,.303,.304: Long-Term Care, Rates, were approved for publication.

Section 627.9407(7)(c), F.S., provides that rates charged to an insured for renewal of an existing long-term care insurance policy may not exceed the price the insurer charges for newly issued polices. The problem this statute addresses relates to “closed blocks” of business. A closed block of business occurs when a particular approved policy is no longer being sold to new customers. There will be a group of policyholders who continue to be renewed but no new customers will be sold that policy. This statute protects those policyholders in that closed block by precluding an insurer from having higher renewal rates than its rates for new business. These new Rules implement this statute by defining terms and explaining how calculations are to be done so the insurer can be sure they are in compliance with the statute.

Item 5, Request for Approval for Publication of Proposed Rule 69O-197.006: Insurance Administrator Annual Report Form was approved for publication.

Pursuant to Section 626.89, F.S., each insurance administrator must file annually with the OIR a full and true statement of its financial condition. Pursuant to statute, the Commission may prescribe the form by which this statement is filed. This Rule adopts the form to be used by administrators in filing these annual reports.

State Board of Administration (“SBA”)

Prior to the SBA report, General Bob Milligan, the SBA Interim Executive Director, was recognized for his public services in this role. Ash Williams is scheduled to begin as the permanent Executive Director on October 20, 2008. General Milligan provided a brief report noting that if the market does not rebound, there is a potential for assessment on the various funding obligations of the SBA. He also noted that the funds in the state retirement fund are secure.

The Cabinet meeting concluded upon completion of the SBA report. The next scheduled Cabinet meeting is October 28, 2008.

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

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