Holding Company Regulation Updates (Part 3 in the Series)
Over the last two days I’ve covered Florida’s existing holding company regulations and proposed changes in the 2013 legislature. Before wrapping up, this blog mentions other related changes that are part of the pending bills or are contained in companion bills.
Additional Proposed Law Changes
The bills would add a new section 628.805, Florida Statutes, to allow the FLOIR to organize and participate in supervisory colleges. The new statute would allow the FLOIR to participate in any supervisory college, initiate the establishment of a supervisory college, and coordinate activities of the supervisory college. A supervisory college may be formed as a temporary or permanent forum for cooperation among regulators charged with supervising an insurer or its affiliates. The FLOIR’s costs of participating in a supervisory college may be assed to the insurer involved.
The bills also would amend Section 636.045, Florida Statutes, governing prepaid limited health service organizations to confirm they are subject to Florida’s RBC requirements if they are authorized in one or more jurisdictions in addition to Florida. The legislature would make a similar change for health maintenance organizations at Section 641.225, Florida Statutes, and further would specify that any such health maintenance organization would be subject to the new acquisition statement requirements of Section 628.461, Florida Statutes, instead of the similar requirements of Section 628.4615, Florida Statutes, that currently apply to specialty insurers.
Senate Bill 834 serves as a companion public records bill in the Senate and HB 821 is the corresponding bill in the House of Representatives. Both main bills specify that they will take effect on October 1, 2013, as long as the corresponding public records exemption bills become law. The public records exemption bills specify that “proprietary business information” held by the FLOIR is confidential and exempt from disclosure under Florida’s very broad public records laws. The bills define proprietary business information to include any information, regardless of form, that is intended by the insurer to be private because its disclosure would cause harm to the organization and that has not been otherwise disclosed except pursuant to other confidential processes. The bills indicate that proprietary business information may include, but is not limited to disclosure, of the source of consideration in the acquisition or merger of an insurer, information about bids or contracts that would impair the ability of an insurer or affiliates to obtain goods or services on favorable terms, and internal auditing controls and reports of internal auditors. The bills further indicate that proprietary information may be found in actuarial opinion summaries, divestiture reports filed in accordance with the new provisions of Section 628.461, Florida Statutes, and enterprise risk reports. In addition, the FLOIR may obtain proprietary business information through its participation in supervisory colleges and through the sharing of information with other governmental entities or the NAIC.
Conclusion
The statutes and rules governing holding company systems in Florida have been largely unchanged for many years. Although these statutes and rules contain core provisions governing the reporting of affiliated transactions and acquisition of domestic insurers or their controlling parents, the regulatory framework for evaluating holding company systems has evolved since Florida’s laws were adopted. The Florida Office of Insurance Regulation in most instances has kept pace with evolving regulatory oversight techniques through its general authority to make inquiries of and examine insurers. Even so, Florida’s holding company laws do not fully address issues such as providing actuarial opinion summaries and enterprise risk reports and requiring notice of divestitures of controlling interests. If passed, SB 836 and HB 821 will ensure the FLOIR has this authority and meets NAIC accreditation standards in these areas. In addition, the bills will provide necessary protections for insurers providing confidential information to the FLOIR. Although current law allows insurers to claim trade secret protection for sensitive information, insurers retain the burden to enforce their trade secret claims when the confidential information is required, and there is no assurance that the trade secret claims will be upheld if challenged. The companion bills being pursued during the current legislative session will more definitively set forth the confidentiality obligations of the FLOIR in a manner that allows the FLOIR to obtain needed information while protecting the business interests of regulated insurers.
To monitor the progress of SB 836, HB 821 and the related bills during the legislative session, please see the legislative updates provided at www.radeylaw.com.