Florida Cabinet Meeting Report: May 13
May 13, 2009
Note: A press release from the Office of Florida Chief Financial Officer Alex Sink regarding today’s Cabinet meeting is reprinted at the end of this report.
The Florida Cabinet met today, May 13, 2009, and considered insurance and financial-related matters from state agencies within its purview as part of its regular agenda. Below is a brief description of the pertinent discussion and actions that took place:
Florida Office of Insurance Regulation (“OIR”)
Florida Insurance Commissioner Kevin McCarty presented two OIR agenda items to the Cabinet.
The first, a request for approval of Proposed Rule 69O-175.008; Not at Fault Accidents was not adopted. While an initial motion was made to approve the item, there was no second to the motion.
The proposed Rule provides that an insurer may not impose additional premium on a motor vehicle policy because the insured was in a collision, unless the insurer determines the insured was substantially at fault in the collision. Clarification is also made in the proposed Rule that the applicable statute applies to both existing and new insureds.
Insurance representatives testified in opposition to this proposed Rule, noting that it will negatively impact policyholders who have clean driving records, as well as serve to decrease competition and cause an increase in policies in the Florida Automobile Joint Underwriting Association.
Cabinet members expressed some concerns that drivers with proven, “clean” records could be negatively impacted by the proposed Rule.
Next on the OIR agenda was a request for the adoption of proposed Rule 690-138.005; Exams by Non-Employees, which was adopted without objection and with minimal discussion.
Section 624.316, Florida Statutes and other sections of the Florida Insurance Code require the OIR to examine licensees for compliance. These examinations can be performed by OIR employees or by outside contractors. In 2007, the Florida Legislature changed Subsection 624.316(2)(e), F.S., which concerns the examinations performed by contractors, by taking away an insurance company’s role in negotiating the examination contract with outside contractors.
Subsection 624.316(2)(e), F.S., further states that the Financial Services Commission must adopt rules providing that an examination of an insurer may be conducted by independent (non-employee) certified public accountants, actuaries, investment specialists, information technology specialists, and reinsurance specialists meeting criteria specified by Rule. The Legislature also established specific criteria for the selection of a contractor, in order to ensure that consumers are safe from potential conflicts of interest between examiners and insurance companies. The subsection also requires that the rates charged by outside contractors must be consistent with rates charged in the industry. This Rule implements this subsection by setting criteria for the specialists and establishing an application process, along with the manner by which contractors are compensated.
To view the OIR agenda, click here.
State Board of Administration (“SBA”)
SBA Executive Director Ash Williams presented two items on the agenda relating to the Florida Hurricane Catastrophe Fund (“FHCF”).
A request for the FHCF to file Emergency Rule 19ER09-1, Reimbursement Contract and the related forms should HB 1495 become law was approved by the Cabinet. The legislation, which is pending approval by Florida Governor Charlie Crist, impacts the type and level of FHCF optional coverages and changes the start of the FHCF contract year to June 1, 2009.
Mr. Williams withdrew an item that would authorize the FHCF to file a Notice of Proposed Rulemaking to amend Rule 19-8.010, Reimbursement Contract.
Following the agenda items, the Cabinet posed several questions to Mr. Williams about investments within the scope of the SBA, particularly those related to the Local Government Investment Pool (“LGIP”).
Mr. Williams noted that the LGIP has stabilized and deposits in the fund have increased. Chief Financial Officer Alex Sink also discussed several proposals regarding restructuring the SBA governance. Two motions were approved by the SBA related to these matters:
First, the SBA will hold quarterly meetings to receive reports from advisory committees, legal staff, and the inspector general, among others.
Also, a motion was approved for staff to review ideas to expand the members of the SBA Board of Trustees. Attorney General Bill McCollum noted that it would not be prudent to have non-elected SBA members.
There being no further business before the Cabinet, the meeting adjourned.
The next Cabinet meeting is scheduled for May 27, 2009.
Should you have any questions, please contact Colodny Fass.
As noted above, a press release from the Office of CFO Sink is reprinted below:
CFO Sink’s Businesslike Proposals Unanimously Approved by Florida Cabinet
TALLAHASSEE- Florida’s CFO Alex Sink saw her two motions aimed at increasing transparency and financial safeguards over the Florida State Board of Administration (SBA) pass unanimously during today’s SBA Board of Trustees meeting. Drawing upon her nearly three decades of private-sector business experience, CFO Sink passed motions based on her recommendation from over a year ago, requiring the SBA to hold quarterly board meetings and to have representatives from the trustees study expanding the structure of the board.
“As one of the SBA’s three trustees, and the only current trustee with prior business experience, I have long argued that it requires more than three elected officials meeting twice-a-month for fifteen minutes to oversee a $100-billion fund that our police officers, teachers and other state employees depend on for a secure retirement,” said CFO Sink. “We need to be doing the business of the State Board of Administration in the sunshine, and I commend my fellow SBA Trustees for joining me in pushing for these reforms I proposed more than fourteen months ago.”
In March 2008, CFO Sink released ten specific recommendations designed to toughen the SBA’s financial safeguards, increase transparency in SBA communications and strengthen board oversight over a firm responsible for so many Floridians’ retirement funds.
CFO Sink’s first passed motion enacted her recommendation that the SBA hold public quarterly board meetings, in addition to the bimonthly SBA updates currently provided during meetings of the Florida Cabinet. These in-depth meetings will bring SBA investor advisors, legal staff, audit committee members, and trustees together to better safeguard Florida retirement accounts and other investments, and do the business of the SBA in the sunshine.
CFO Sink’s second passed motion requires that each SBA trustee appoint a staff member to an ad hoc workgroup charged with researching government structure models, identifying best practices, and making recommendations to the trustees on how the governance of the SBA can best serve the people of Florida.
Appointments must be made by June 15 and a report is due by September 1, 2009. After this report, CFO Sink is hopeful that trustees’ recommendations can be made to the Legislature regarding how best to expand the SBA board.
“Given the unprecedented financial environment that we are currently in, we cannot lose sight of the need for increased accountability and transparency for the investments of Floridians’ money,” CFO Sink continued. “So many Floridians who depend on the SBA for their retirement security deserve nothing less than a more modern, businesslike approach to managing their money.”
The SBA manages the assets of the Florida Retirement System Pension Plan, the Lawton Chiles Endowment Fund, the Local Government Surplus Funds Trust Fund, the Hurricane Catastrophe Fund, and a variety of other mandates.
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