Florida Insurer Solvency, Linked Confidentiality Laws Effective October 1, 2014

Two linked Florida bills that adopt National Association of Insurance Commissioners (“NAIC”) accreditation standards for insurer solvency became effective yesterday, October 1, 2014, unless otherwise provided.

Sponsored by Senator David Simmons, CS/CS SB 1308 amends existing Florida law relating to insurer solvency requirements and regulatory oversight of insurers by the Florida Office of Insurance Regulation (“OIR”).  Also sponsored by Senator Simmons, CS/CS/SB 1300 creates a public records exemption to incorporate confidentiality elements necessary for the OIR to meet related NAIC accreditation standards. 

Many of the NAIC provisions incorporated in SB 1308 were drafted in response to the 2008 financial crisis and the resulting progression toward globalization of the insurance market.  According to analyisis by the Florida Senate, the new law is intended to enhance regulation of Florida insurers, as well as their affiliated entities, while providing more tools for evaluating solvency risks within insurance groups.

Specifically, SB 1308:

• Authorizes the OIR to implement principle-based reserving for life insurers, which allows life insurers to calculate reserves that reflect current mortality rates, the life insurer’s business model, and its particular risk profile.
• Requires persons that acquire controlling interests in an insurer to disclose enterprise risk, and requires that ultimate controlling persons file an annual enterprise risk report with the OIR that identifies material risk within the insurance company holding company system that could pose a risk or have a material adverse effect upon the insurer.
• Incorporates a risk-based capital trend test for life and health, as well as property and casualty insurers; requires health maintenance organizations and prepaid limited health service organizations to file risk-based capital reports.
• Requires insurers to file actuarial opinion summaries and supporting work papers annually; creates an evidentiary privilege for memoranda supporting actuarial opinions on reserves, actuarial opinion summaries and related information; and provides for confidentiality of enterprise risk reports, actuarial opinion summaries and other information.
• Authorizes the OIR to impose sanctions for noncompliance with the annual enterprise risk and registration statement reporting requirements.
• Allows the OIR to participate in supervisory colleges with other regulators for the regulation of any domestic insurer that is part of an insurance holding company system having international operations.

Linked to SB 1308, SB 1300 provides that proprietary business information held by the OIR in accordance with its statutory duties relating to insurer solvency is confidential and exempt from public record requirements.  “Proprietary business information” includes information contained in specified reports, such as an actuarial opinion summary, enterprise risk reports and principle-based valuation reports.  The bill specifies circumstances under which such confidential and exempt information may be disclosed.

Notably, SB 1300 provides for repeal of this exemption on October 2, 2019, unless reviewed and saved from repeal by the Florida Legislature pursuant to the state’s Open Government Sunset Review Act.

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