Senator Fasano Files MGA Regulation Amendment to Commercial Insurance Deregulation Bill; Time Constraints Preclude Committee Consideration
Mar 24, 2010
During the Senate Committee on Banking and Insurance Committee meeting today, March 24, 2010, Senator Mike Fasano was prepared to offer a late-filed amendment to Senate Bill 2176, which relates to the deregulation of commercial insurance.
The amendment, which was not considered because of Committee time constraints, would provide that companies affiliated with a domestic insurer may not issue a dividend or distribute cash or other property to shareholders unless the dividend or distribution is from that part of the available and accumulated surplus funds derived from realized net operating profits on insurer business and net realized capital gains.
An affiliate would include any company within the insurer’s holding company system having a contractual relation or other financial arrangement whereby a portion of the premium from the insurer is paid to the affiliate. Certain parameters related to dividend payments now applicable only to insurers would be applicable to affiliates of the insurer (as defined above) under revised section 628.371, Florida Statutes.
It would appear that this language would be broad enough to impose standards on affiliate managing general agencies (“MGAs”) that contract with affiliate insurers, and also upon any other affiliate entity that contracts or has another financial arrangement with the MGA or insurer and receives a portion of the insurer’s premium. It also appears this would capture all dividends, even if the affiliated entity realized income from sources other than its affiliated insurer.
In addition, one section of the holding company statutes would be amended under the provisions of this amendment, so as to require domestic and commercially domiciled insurers in a holding company system to file group financial statements, including financial information regarding all affiliates.
The statute would be further amended to require that certain transactions involving a domestic insurer and any person in its holding company system may not be entered, amended or terminated unless the Florida Office of Insurance Regulation (“OIR”) is given at least 60 days advance notice in writing and the OIR has not disapproved it within 30 days after receipt of the notice of the transaction. The types of transactions subject to this requirement include, without limitation, sales, loans and investments; reinsurance agreements; all management, service and cost-sharing arrangements; and any other transaction the OIR determines may adversely affect the interests of the insurer’s policyholders. This provision essentially replicates language that already exists in a regulation applicable to domestic insurers, but expands the notice requirement to 60 days rather than the 30 days in existing regulation.
A copy of the amendment is attached for your review.
Should you have any questions or comments, please contact Colodny Fass.
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