Florida Enacts ORSA, Corporate Governance Insurer Regulatory Reporting
Apr 11, 2016
Effective October 1, 2016, certain insurers and insurance groups will be subject to the requirements of SB 1422 relating to Insurer Regulatory Reporting, which was signed into law by Florida Governor Rick Scott this past Friday, April 8.
Originally sponsored by Senator David Simmons, the legislation revises Florida’s Insurance Code relating to solvency requirements and regulatory oversight of insurers by the Florida Office of Insurance Regulation (“OIR”). Specifically, the bill implements the Risk Management and Own Risk and Solvency Assessment (“ORSA”) Model Act and the Corporate Governance Annual Disclosure Model Act, both of which originated from the National Association of Insurance Commissioners’ Solvency Modernization Initiative.
SB 1422 creates s. 628.8015, F.S., which requires insurers or insurance groups to file an ORSA and Corporate Governance information with their domestic regulator or lead state beginning in 2017.
The ORSA Model Act requires insurers to analyze all reasonable foreseeable and relevant material risks potentially affecting their ability to meet policyholder obligations. Florida’s adoption of the Model is intended to provide the OIR with an effective “early warning” mechanism against insurer financial instability, as well as provide a group-level perspective on risk and capital.
Adoption of the Corporate Governance Model Act is designed to provide the OIR with a detailed narrative describing a corporation’s governance practices to promote market stability and deter unethical behavior.
Specifically, SB 1422:
- Provides criteria for the OIR to exempt certain insurers and insurance groups and provide waivers of ORSA requirements;
- Provides that the ORSA and Corporate Governance filings (and related documents) are privileged and not subject to subpoena or discovery directed to the OIR; and, if obtained from the OIR, are not admissible in evidence in any private civil action;
- Authorizes the OIR to retain third-party consultants to assist in its administration of SB 1422 and specifies requirements for such third-party consultants;
- Authorizes Florida’s Financial Services Commission to adopt rules to implement the ORSA and Corporate Governance requirements; and
- Authorizes the OIR to impose sanctions for failure to submit ORSA summary reports or Corporate Governance reports.
In addition to defining terms such as “corporate governance annual disclosure,” “ORSA,” “ORSA guidance manual,” and “ORSA summary report,” the bill defines “Insurer” as having the same meaning as in s. 624.03, F.S., but excludes state and federal agencies, authorities, instrumentalities, possessions, territories, or political subdivisions of a state. “Insurance group” is defined by the new law to mean insurers and affiliates included within an insurance holding company system.
Public Records Exemption
Linked to SB 1422 and enacted concurrently is SB 1416, which creates a public records exemption to address confidentiality provisions of the ORSA and Corporate Governance Model Act, the latter which requires insurers to disclose their corporate governance structure, procedures and practices to the OIR on an annual basis.
SB 1416 provides that, except for information obtained by the OIR that would otherwise be available for public inspection, the following information held by the OIR is confidential and exempt from s. 119.07(1) and s. 24(a), Art. I of the State Constitution:
- An ORSA summary report, a substantially similar ORSA report, and supporting documents submitted pursuant to s. 628.8015, F.S.
- A corporate governance annual disclosure and supporting documents submitted pursuant to s. 628.8015, F.S.
The legislation states that it is a public necessity to protect such information because it contains sensitive and strategic financial information and internal practices about an insurer or insurer group.
SB 1416 also provides for repeal of its exemptions on October 2, 2021, unless reviewed and saved from repeal by the Legislature pursuant to the Open Government Sunset Review Act.
For complete information on SB 1416, click here.
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