6991583, 69O-138.005 - Florida Administrative Rules, Law, Code, Register

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Notice: 6991583

Notice of Meeting/Workshop Hearing

Department:

DEPARTMENT OF FINANCIAL SERVICES

Division:

OIR – Insurance Regulation

Chapter:

FINANCIAL EXAMINATIONS AND REQUIREMENTS

Overview

RULE:

69O-138.005

Exams By Non Employees

The Financial Services Commission, Office of Insurance Regulation announces a hearing to which all persons are invited.

DATE AND TIME:

PLACE:

Subject:

This is the Final Public Hearing on the adoption of proposed amendments to Rule 69O-138.005, Florida Administrative Code, published on October 3, 2008 in Vol. 34, No. 40, of the Florida Administrative Weekly. Two notices of change were published on December 26, 2008 in Vol. 34, No. 52, and March 6, 2009 in Vol. 35, No. 9.
Pursuant to the provisions of the Americans with Disabilities Act, any person requiring special accommodations to participate in this workshop/meeting is asked to advise the agency at least 5 days before the workshop/meeting by contacting: Robin Westcott, Office of Insurance Regulation, E-mail: robin.westcott@floir.com. If you are hearing or speech impaired, please contact the agency using the Florida Relay Service, 1(800)955-8771 (TDD) or 1(800)955-8770 (Voice).
For more information, you may contact: Robin Westcott, Office of Insurance Regulation, E-mail: robin.westcott@floir.com.

THE FULL TEXT OF THE PROPOSED RULE IS:
69O-138.005 Examination of Insurers.
(4) Section 624.316(2)(e), Florida Statutes, allows the Office to conduct examinations of an insurer by contracting for with the consent of the insurer utilizing the services of an independent Certified Public Accountant, an actuary, or a reinsurance specialist, an investment specialist, information technology specialist, or any combination of these individuals, as the particular circumstances of the examination require. An examination performed pursuant to this subsection must meet the requirements of subsection (1).
(a) An For purposes of this subsection, an actuary meeting the criteria established in Rule 69O-138.043 or 69O-170.031, F.A.C., will qualify to conduct an examination under this subsection.
(b)1. A For purposes of this subsection, a reinsurance specialist shall be qualified to conduct an examination under this subsection if that contractor person can demonstrate competency by education and experience to perform such an examination. Competency by education and experience shall be demonstrated if any one of the following is true:
a. An individual qualifies as an actuary pursuant to either Rule 69O-138.043 or 69O-170.031, F.A.C., and has at least one years’ experience with the kind of reinsurance which will be the subject of the examination.
b. An individual has a bachelor’s degree from an accredited college or university and four years of professional experience in insurance/reinsurance accounting or in reinsurance transactions. A master’s degree from an accredited college or university in accounting, insurance, or risk management can substitute for one year of the required experience. Professional experience as described above can substitute on a year-for-year basis for the required education.
c. An individual is in good standing with the Society of Financial Examiners and is certified by that organization to be eligible to hold the title of Certified Financial Examiner.
2. In selecting a person as a reinsurance specialist the Office shall consider the individual’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed. This consideration shall include the individual’s experience with the kind of insurance which is the subject of the examination; knowledge of accounting principles, practices and procedures; ability to prepare financial statements to reflect the reinsurance transactions; ability to provide professional and technical assistance; understanding of risk transfer as defined in the NAIC Examiners Handbook and the NAIC Accounting Practices and Procedures and Annual Statement Instruction Manuals, as adopted in Rule 69O-137.001, F.A.C.; and the ability to evaluate claims experience, both reported and incurred but not reported, relevant to the type of insurance which is the subject of the examination.
(c)1. An investment specialist shall be qualified to conduct an examination under this subsection if that contractor can demonstrate competency by education and experience to perform such an examination in that capacity. Competency by education and experience shall be demonstrated if any one of the following is true:
a. An individual has a bachelor’s degree from an accredited college or university and four years of professional experience in the capacity for which the contractor is to perform. A master’s degree from an accredited college or university in accounting, or finance can substitute for one year of the required experience. Professional experience as described above can substitute on a year-for-year basis for the required education.
b. An individual is in good standing with the Society of Financial Examiners and is certified by that organization to be eligible to hold the title of Certified Financial Examiner.
2. In selecting a person as an investment specialist the Office shall consider the individual’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed.
(c) Regardless of education or experience, no independent certified public accountant, or actuary, or reinsurance specialist shall be qualified to conduct examinations under this subsection if such person:
1. Has been found guilty of, or has pleaded guilty or nolo contendere to, any felony or crime punishable by imprisonment of one year or more under the law of the United States or any state thereof or under the law of any other country, which involves moral turpitude, without regard to whether a judgement of conviction has been entered by the court having jurisdiction in such case; or
2. Has been found to have violated the insurance laws of this state with respect to any previous reports submitted to this Office; or
3. Has failed to detect or disclose material information in previous reports filed with this Office or other state officials having jurisdiction or regulatory authority in insurance matters or another state; or
4. Has performed any work for a regulated entity who has had delinquency proceedings initiated against it within three years after said work was performed without adequate explanation to the Office of how such work was not related to the cause of the delinquency proceedings; or
5. Is prohibited under Section 624.310, Florida Statutes, from engaging in insurance related activities in this state.
(d)1. An information technology specialist shall be qualified to conduct an examination under this subsection if that contractor can demonstrate competency by education and experience to perform such an examination in that capacity. Competency by education and experience shall be demonstrated if the individual has a bachelor’s degree from an accredited college or university and four years of professional experience in the capacity for which the contractor is to perform. A master’s degree from an accredited college or university in information technology or a similar field can substitute for one year of the required experience. Professional experience as described above can substitute on a year-for-year basis for the required education.
2. In selecting a person as an information technology specialist the Office shall consider the individual’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed.
(d) The agreement of the insurer to perform an examination under this subsection is not required if the Office reasonably suspects criminal misconduct on the part of the insurer.
(e) The firm selected by the office to perform the examination shall have no conflicts of interest that might affect its ability to independently perform its responsibilities on the examination.
(e)1. In the event that the Office and the insurer agree to conduct an examination utilizing the services of an independent Certified Public Accountant, an actuary, or a reinsurance specialist, or any combination of these, the Office shall submit a list of three firms in each of the specialties required by the particular circumstances of the examination to be performed (the term “firm” shall also include individuals) acceptable to the Office, from which the insurer shall select the firm or firms to conduct the examination.
2. The acceptability of a firm to the Office shall be determined based on consideration of the firm’s professional competence, objectivity, and cost.
3. Consent of the insurer shall be demonstrated by written confirmation from an officer of that insurer which indicates agreement that an examination be performed by the firm, and acknowledgement that the firm is acceptable to the insurer.
4. All payments for an examination under this subsection shall be made directly to the firm in accordance with the rates and terms agreed to by the Office, the insurer, and the firm performing the examination.
(f) The rates charged to the insurer being examined under the contract shall be consistent with rates charged by other firms in a similar profession and shall be comparable with the rates charged for comparable examinations. The rates and terms shall be set forth in the contract.
(f) In the event that the examination is conducted without the consent of the insurer, pursuant to Section 624.316(2)(e), Florida Statutes, the insurer must pay all reasonable charges of the examining firm if the examination finds impairment, insolvency (as that term is defined in Section 631.011, Florida Statutes), or criminal misconduct on the part of the insurer. In the event that the examination is conducted without the consent of the insurer and no impairment, insolvency, or criminal misconduct is found, then all reasonable charges of the examining firm shall be borne by the Office.
(g) Contractors may submit a curriculum vitae detailing their experience and qualifying credentials to the Office, as well as a proposed hourly rate for services to be performed. The acceptability of a contractor to the Office shall be determined based on consideration of the firm’s professional competence, objectivity, and that the rates charged are consistent with rates charged by other firms in a similar profession, as referenced in subsection (4), above, providing comparable services, so as to protect the examined insurer from being overcharged for the examination. Once a contractor has been accepted by the Office, they will be placed on a list of eligible examination contractors.
(h) In selecting contractors to conduct a specific examination, the Office shall consider the contractor’s experience, knowledge, skill, and abilities as they relate to the needs of the examination to be performed. This consideration shall include the contractor’s experience with the kind of insurance which is the subject of the examination.
(i) After a contractor has been selected for a specific examination the Office shall enter into a contract with the contractor, detailing the scope of work for the engagement. The contract shall include a provision that the contractor has no conflict of interest that might affect its ability to independently perform its responsibilities. The contractor shall submit all requests for payment to the Office in the manner prescribed by the contract.
(j) All requests for reimbursement of travel expenses are to be made on Form DFS-C1-500 (Rev. 07/08). This form is incorporated by reference and adopted by this rule for this purpose. It is available at http://www.floir.com/DFS-C1-500.xls.
(k) Upon receipt and review of the contractor’s request for payment, the Office will invoice the insurer being examined and the insurer shall make payment to the Office pursuant to Sections 624.316(2)(e)3. and 624.320(2), Florida Statutes.
(l) Upon receipt of the payment from the insurer being examined, the Office will make payment to the contractor in accordance with the rates and terms set out in the completed Form OIR-A1-1976, Professional Services Agreement for Non Employee Examination.
(m) Forms OIR-A1-1976, Professional Services Agreement for Non Employee Examination (12-08); OIR-A1-1977, Scope of Services Addendum to Professional Services Agreement for Non Employee Examination (12-08); and OIR-A1-1978, Amendment to Scope of Services Addendum (12-08), are incorporated by reference and adopted herein as the contracts by which the contractors are retained. All forms referenced in this rule are available for viewing at the Officer’s humped at www.floir.com.
(5) Section 624.316(2)(f)1., Florida Statutes, requires the examination of a domestic insurer once each year for any domestic insurer that has continuously held a Certificate of Authority for less than 3 years. For purposes of an examination under this subsection, the 3 years shall constitute the time period from the date the Certificate of Authority is granted through the following 3 full calendar years in which the insurer has been licensed. The examination must cover the preceding fiscal year or the time period since the last examination. An insurer may not be required to pay more than $25,000 to cover the costs of any one examination under this subsection, nor may an independent certified public account’s audited report be substituted for the required examination.
(6) Section 624.320, Florida Statutes, requires each insurer examined by the Office, pursuant to Section 624.316, Florida Statutes, to pay the Office for the expenses of that examination, subject to the cap imposed by Section 624.316(2)(f)1.c., Florida Statutes.
(7) Pursuant to Section 624.316(2)(f)2., Florida Statutes, the Office may extend the examination period to a maximum of once every 5 years. If an insurer petitions the Office, prior to November 1 of the year preceding the year in which the examination is due, to extend an examination from a 3 year time period to 5 years, the Office will grant such an extension if the insurer affirmatively demonstrates the following: that the insurer has continuously held a Certificate of Authority without a change in ownership subject to Section 624.4245 or 628.461, Florida Statutes, for more than 15 years, and has demonstrated sufficient compliance, pursuant to Section 624.316(2)(f)3., Florida Statutes, for each of the years since the last examination. Petitions shall be directed to Property and Casualty Financial Oversight or Life and Health Financial Oversight, as appropriate for that insurer. An extension granted as a result of a petition to the Office will be effective for that examination period only and will have no effect on the schedule of subsequent examinations. Extensions granted shall not be construed as a waiver of the Office’s authority under Section 624.316, Florida Statutes, to conduct specific target examinations as often as the Office determines is reasonable under the facts and circumstances of a particular insurer’s situation.
Rulemaking Specific Authority 624.308(1), 624.316(2) FS. Law Implemented 624.307(1), 624.316, 624.3161, 624.320, 624.321(1), 624.424 FS. History–New 6-9-93, Amended 11-23-94, 4-4-99, Formerly 4-138.005, Amended_________.

A copy of the agenda may be obtained by contacting: Governor and Cabinet Website: http://www.myflorida.com/myflorida/cabinet/mart.html.

PRINT PUBLISH DATE:

4/10/2009 Vol. 35/14

REFERENCE MATERIALS:

No reference(s).

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