US Laws, Codes, Statutes & Cases

CHAPTER 625

ACCOUNTING, INVESTMENTS, AND DEPOSITS BY INSURERS

PART I

ASSETS AND LIABILITIES (ss. 625.01115-625.181)

PART II

INVESTMENTS (ss. 625.301-625.340)

PART III

ADMINISTRATION OF DEPOSITS (ss. 625.50-625.63)

PART IV

DOMESTIC STOCK INSURERS; EQUITY SECURITIES (ss. 625.75-625.83)

PART I

ASSETS AND LIABILITIES

625.01115  Definitions.

625.012  "Assets" defined.

625.031  Assets not allowed.

625.041  Liabilities, in general.

625.051  Unearned premium reserve.

625.061  Unearned premium reserve for marine and transportation insurance.

625.071  Special reserve for bail and judicial bonds.

625.081  Reserve for health insurance.

625.091  Losses and loss adjustment expense reserves; liability insurance and workers' compensation insurance.

625.101  Increase of inadequate loss reserves.

625.111  Title insurance reserve.

625.121  Standard Valuation Law; life insurance.

625.141  Valuation of bonds.

625.151  Valuation of other securities.

625.161  Valuation of property.

625.171  Valuation of purchase money mortgages.

625.172  Replacing certain assets; reporting certain liabilities.

625.181  Assets received as capital or surplus contributions.

625.01115  Definitions.--As used in this chapter, the term "statutory accounting principles" means accounting principles as defined in the National Association of Insurance Commissioners Accounting Practices and Procedures Manual as of March 2002 and subsequent amendments thereto if the methodology remains substantially consistent.

History.--s. 14, ch. 2001-213; s. 864, ch. 2003-261.

625.012  "Assets" defined.--In any determination of the financial condition of an insurer, there shall be allowed as "assets" only such assets as are owned by the insurer and which consist of:

(1)  Cash or cash equivalents, in the possession of the insurer, or in transit under its control, and including the true balance of any deposit in a solvent bank, savings and loan association, or trust company. Cash equivalents are short-term, highly liquid investments, with original maturities of 3 months or less, which are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

(2)  Investments, securities, properties, and loans acquired or held in accordance with this code, and in connection therewith the following items:

(a)  Interest due or accrued on any bond or evidence of indebtedness which is not in default and which is not valued on a basis including accrued interest.

(b)  Declared and unpaid dividends on stock and shares, unless such amount has otherwise been allowed as an asset.

(c)  Interest due or accrued upon a collateral loan in an amount not to exceed 1 year's interest thereon.

(d)  Interest due or accrued on deposits in solvent banks, savings and loan associations, and trust companies, and interest due or accrued on other assets, if such interest is in the judgment of the office a collectible asset.

(e)  Interest due or accrued on a current mortgage loan, in an amount not exceeding in any event the amount, if any, of the excess of the value of the property less delinquent taxes thereon over the unpaid principal; but in no event shall interest accrued for a period in excess of 90 days be allowed as an asset.

(f)  Rent due or accrued on real property if such rent is not in arrears for more than 3 months, and rent more than 3 months in arrears if the payment of such rent is adequately secured by property held in the name of the tenant and conveyed to the insurer as collateral.

(g)  The unaccrued portion of taxes paid prior to the due date on real property.

(3)  Premium notes, policy loans, and other policy assets and liens on policies and certificates of life insurance and annuity contracts and accrued interest thereon, in an amount not exceeding the legal reserve and other policy liabilities carried on each individual policy.

(4)  The net amount of uncollected and deferred premiums and annuity considerations in the case of a life insurer.

(5)(a)  Premiums in the course of collection, other than for life insurance, not more than 3 months past due, less commissions payable thereon. The foregoing limitation shall not apply to premiums payable directly or indirectly by the United States Government or by any of its instrumentalities. All premiums, excluding commissions payable thereon, due from a controlling or controlled person shall not be allowed as an asset to the extent that:

1.  The premiums collected by the controlling or controlled person and not remitted to the insurer are not held in a trust account with a bank or other depository approved by the office. Such funds shall be held as trust funds and may not be commingled with any other funds of the controlling or controlled person. Disbursements from the trust account may be made only to the insurer, the insured, or, for the purpose of returning premiums, an entity who is entitled to returned premiums on behalf of the insured. A written copy of the trust agreement must be filed with and approved by the office prior to its becoming effective. However, the investment income derived from the trust may be allocated as the parties deem proper. A controlling or controlled person shall deposit premiums collected into the trust account within 15 working days after collection;

2.  The controlling or controlled person has not provided to the insurer and the insurer has not maintained in its possession an unexpired, clean irrevocable letter of credit, payable to the insurer, issued for a term of not less than 1 year and in conformity with the requirements set forth in this subparagraph, the amount of which equals or exceeds the liability of the controlling or controlled person to the insurer, at all times during the period which the letter of credit is in effect, for premiums collected by the controlling or controlled person. The requirements are that such letter of credit be issued under arrangements satisfactory to the office and that the letter be issued by a banking institution which is a member of the Federal Reserve System and which has a financial standing satisfactory to the office;

3.  The controlling or controlled person has not provided to the insurer and the insurer maintained in its possession evidence that the controlling or controlled person has purchased and has currently in effect a financial guaranty bond, payable to the insurer, issued for a term of not less than 1 year and which is in conformity with the requirements set forth in this subparagraph, the amount of which equals or exceeds the liability of the controlling or controlled person to the insurer, at all times during which the financial guaranty bond is in effect, for the premiums collected by the controlling or controlled person. The requirements are that such a financial guaranty bond shall be issued under an arrangement satisfactory to the office and that the financial guaranty bond be issued by an insurer authorized to transact such business in Florida and which has a financial standing satisfactory to the office and which is neither controlled nor controlling in relation to either the insurer or the person for whom the bond is purchased; or

4.  A financial evaluation indicates that the controlling or controlled person is unlikely to have the ability to pay such premiums as they become due. The financial evaluation shall be based on a review of the books and records of the controlling or controlled person.

(b)  For the purpose of this subsection:

1.  "Controlling person" means any person owning, directly or indirectly, 25 percent or more of the voting securities of the insurer.

2.  "Controlled person" means any person that is, directly or indirectly, owned or controlled by a controlling person.

3.  "Controlling" or "controlled person" means any person that individually or in combination with other such persons owes to the insurer an amount that exceeds 50 percent of the insurer's total premiums in course of collection as stated on the insurer's financial statement.

(c)  The office shall disapprove any trust agreement filed pursuant to paragraph (a) which does not assure the safety of the premiums collected.

(6)  Installment premiums other than life insurance premiums to the extent of the unearned premium reserve carried on the policy to which such premiums apply.

(7)  Notes and like written obligations not past due, taken for premiums other than life insurance premiums, on policies permitted to be issued on such basis, to the extent of the unearned premium reserves carried thereon.

(8)  The full amount of reinsurance recoverable by a ceding insurer from a solvent reinsurer and which reinsurance is authorized under s. 624.610.

(9)  Amounts receivable by an assuming insurer representing funds withheld by a solvent ceding insurer under a reinsurance treaty.

(10)  Deposits or equities recoverable from underwriting associations, syndicates, and reinsurance funds, or from any suspended banking institution, to the extent deemed by the office available for the payment of losses and claims and at values to be determined by it.

(11)  Electronic and mechanical machines, including computer-operating software equipment and system software constituting a data processing and accounting system, the cost of which is at least $25,000, which cost shall be amortized in full over a period not to exceed 3 calendar years. The aggregate amount admitted under this subsection shall be limited to 3 percent of the insurer's capital and surplus, adjusted to exclude any electronic data processing equipment and operating software, net deferred tax assets, and net positive goodwill, as reported on the insurer's most recently filed annual statement.

(12)  Goodwill arising from acquisitions and mergers occurring after January 1, 2001.

(13)  Loans or advances by an insurer to its parent or principal owner if approved by the office.

(14)  Current income tax recoverables.

(15)  Capitalized interest.

(16)  Other assets, not inconsistent with the provisions of this section, deemed by the office to be available for the payment of losses and claims, at values to be determined by it.

History.--s. 109, ch. 59-205; ss. 13, 35, ch. 69-106; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 87, 98, 809(1st), ch. 82-243; s. 28, ch. 83-288; s. 11, ch. 85-245; ss. 184, 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 15, ch. 2001-213; s. 865, ch. 2003-261.

625.031  Assets not allowed.--In addition to assets impliedly excluded by the provisions of s. 625.012, the following expressly shall not be allowed as assets in any determination of the financial condition of an insurer:

(1)  Trade names, patents, agreements not to compete, and other like intangible assets.

(2)  Advances (other than policy loans) to officers and directors, whether secured or not, and advances to employees, agents, and other persons on personal security only.

(3)  Stock of such insurer, owned by it, or any material equity therein or loans secured thereby, or any material proportionate interest in such stock acquired or held through the ownership by such insurer of an interest in another firm, corporation, or business unit.

(4)  Furniture, fixtures, furnishings, safes, vehicles, libraries, stationery, literature, and supplies, other than data processing and accounting systems authorized under s. 625.012(11), except in the case of title insurers such materials and plants as the insurer is expressly authorized to invest in under s. 625.330 and except, in the case of any insurer, such personal property as the insurer is permitted to hold pursuant to part II of this chapter, or which is acquired through foreclosure of chattel mortgages acquired pursuant to s. 625.329, or which is reasonably necessary for the maintenance and operation of real estate lawfully acquired and held by the insurer other than real estate used by it for home office, branch office, and similar purposes.

(5)  The amount, if any, by which the aggregate book value of investments as carried in the ledger assets of the insurer exceeds the aggregate value thereof as determined under this code.

(6)  Bonds, notes, or other evidences of indebtedness which are secured by mortgages or deeds of trust which are in default.

(7)  Prepaid and deferred expenses.

History.--s. 111, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 89, 98, 809(1st), ch. 82-243; s. 40, ch. 89-360; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 16, ch. 2001-213.

625.041  Liabilities, in general.--In any determination of the financial condition of an insurer, liabilities to be charged against its assets shall include:

(1)  The amount, estimated consistent with the provisions of this code, necessary to pay all of its unpaid losses and claims incurred on or prior to the date of statement, whether reported or unreported, together with the expenses of adjustment or settlement thereof.

(2)  With reference to life and health insurance and annuity contracts:

(a)  The amount of reserves on life insurance policies and annuity contracts in force, valued according to the tables of mortality, rates of interest, and methods adopted pursuant to this code which are applicable thereto.

(b)  Reserves for disability benefits, for both active and disabled lives.

(c)  Reserves for accidental death benefits.

(d)  Any additional reserves that may be required by the office consistent with practice formulated or approved by the National Association of Insurance Commissioners or its successor organization, on account of such insurance, including contract and premium deficiency reserves.

(3)  With reference to insurance other than specified in subsection (2), and other than title insurance, the amount of reserves equal to the unearned portions of the gross premiums charged on policies in force, computed in accordance with this part.

(4)  Taxes, expenses, and other obligations due or accrued at the date of the statement.

(5)  Any insurer in this state that writes workers' compensation insurance shall accrue a liability on its financial statements for all Special Disability Trust Fund assessments that are due within the current calendar year. In addition, those insurers shall also disclose in the notes to the financial statements required to be filed pursuant to s. 624.424 an estimate of future Special Disability Trust Fund assessments, if the assessments are likely to occur and can be estimated with reasonable certainty.

History.--s. 112, ch. 59-205; ss. 13, 35, ch. 69-106; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 90, 98, 809(1st), ch. 82-243; s. 41, ch. 89-360; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 20, ch. 95-211; s. 17, ch. 2001-213; s. 5, ch. 2002-247; s. 6, ch. 2002-282; s. 866, ch. 2003-261.

625.051  Unearned premium reserve.--

(1)  As to insurance against loss or damage to property, except as provided in s. 625.061, and as to all general casualty insurance and surety insurance, every insurer shall maintain an unearned premium reserve on all policies in force.

(2)  The office may require that such reserves be equal to the unearned portions of the gross premiums in force after deducting applicable reinsurance in solvent insurers as computed on each respective risk from the date of issue of the policy. If the office does not so require, the portions of the gross premium in force, less applicable reinsurance in solvent insurers, to be held as an unearned premium reserve, shall be computed according to the following table:


Term for which policy

Reserve for unearned

was written

premium

1 year or less ............ ¹/₂

2 years ............ 1st year--³/₄

2nd year--¹/₄

3 years ............ 1st year--⁵/₆

2nd year--¹/₂

3rd year--¹/₆

4 years ............ 1st year--⁷/₈

2nd year--⁵/₈

3rd year--³/₈

4th year--¹/₈

5 years ............ 1st year--⁹/₁₀

2nd year--⁷/₁₀

3rd year--¹/₂

4th year--³/₁₀

5th year--¹/₁₀

Over 5 years ............ pro rata

(3)  In lieu of computation according to the foregoing table, the insurer at its option may compute all of such reserves on a monthly or more frequent pro rata basis.

(4)  After adopting a method for computing such reserve, an insurer shall not change methods without approval of the public insurance supervisory official of the state of domicile.

(5)  This section does not apply to title insurance.

History.--s. 113, ch. 59-205; ss. 13, 35, ch. 69-106; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 98, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 867, ch. 2003-261.

625.061  Unearned premium reserve for marine and transportation insurance.--As to marine and transportation insurance, the entire amount of premiums on trip risks not terminated shall be deemed unearned; and the office may require the insurer to carry a reserve equal to 100 percent of premiums on trip risks written during the month ended as of the date of statement.

History.--s. 114, ch. 59-205; ss. 13, 35, ch. 69-106; s. 3, ch. 76-168, s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 98, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 868, ch. 2003-261.

625.071  Special reserve for bail and judicial bonds.--In lieu of the unearned premium reserve required on surety bonds under s. 625.051, the office may require any surety insurer or limited surety insurer to set up and maintain a reserve on all bail bonds or other single-premium bonds without definite expiration date, furnished in judicial proceedings, equal to the lesser of 35 percent of the bail premiums in force or $7 per $1,000 of bail liability. Such reserve shall be reported as a liability in financial statements required to be filed with the office. Each insurer shall file a supplementary schedule showing bail premiums in force and bail liability and the associated special reserve for bail and judicial bonds with financial statements required by s. 624.424. Bail premiums in force do not include amounts retained by licensed bail bond agents or licensed managing general agents, but may not be less than 6.5 percent of the total consideration received for all bail bonds in force.

History.--s. 115, ch. 59-205; ss. 13, 35, ch. 69-106; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 98, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 1, ch. 2001-248; s. 869, ch. 2003-261.

625.081  Reserve for health insurance.--For all health insurance policies, the insurer shall maintain an active life reserve which places a sound value on the insurer's liabilities under such policies; is not less than the reserve according to appropriate standards set forth in rules issued by the commission; and, with the exception of credit disability insurance, in no event, is less in the aggregate than the pro rata gross unearned premiums for such policies.

History.--s. 116, ch. 59-205; ss. 13, 35, ch. 69-106; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 91, 98, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 870, ch. 2003-261; s. 6, ch. 2004-370; s. 151, ch. 2004-390.

625.091  Losses and loss adjustment expense reserves; liability insurance and workers' compensation insurance.--The reserve liabilities recorded in the insurer's annual statement and financial statements for unpaid losses and loss adjustment expenses shall be the estimated value of its claims when ultimately settled and shall be computed as follows:

(1)  For all liability and workers' compensation claims, the statement and statutory reserves and loss adjustment expenses shall be in accordance with the form of the annual statement as required in s. 624.424, and shall include the computed, determined, or estimated value of the unpaid reported claims and loss adjustment expenses, allocated and unallocated, and a provision for loss and loss adjustment expenses, allocated and unallocated, that are incurred but not reported. For claims under liability policies, the reserve for reported claims shall not be less than $1,000 for each outstanding liability suit.

(2)(a)  Workers' compensation tabular reserves and long-term disability claims including death claims may be reserved at the present value at 4 percent interest of the determined and the estimated future payments.

(b)  If workers' compensation reserves are discounted in accordance with paragraph (a), discounted loss and loss expense reserves shall be used in the computation of excess statutory reserves over statement reserves.

(3)  Structured settlements may be used to reduce reserves if:

(a)  There is the purchase of an annuity by the insurer to fund future payments that are fixed or determined by settlement provisions or statutes wherein the claimant is the payee, the transaction may be treated as a paid claim and the reserve taken down accordingly. The appropriate disclosure of the contingent liability for such amount must be disclosed in notes to the financial statements of the annual statement; or

(b)  The insurer assigns the obligation to make periodic payments to a third party and obtains a full and complete release from the claimant, the claim may be treated as a paid claim without additional disclosure.

(4)(a)  Accounting credit for anticipated recoveries from the Special Disability Trust Fund may only be taken in the determination of loss reserves and may not be reflected on the financial statements in any manner other than that allowed pursuant to this subsection.

(b)1.  For calendar years 1999-2003, an insurer recording anticipated recoveries from the Special Disability Trust Fund shall limit the aggregate amount to the amount management reasonably expects will be reimbursed or the following amount, whichever is lower:

a.  For financial statements filed in 2000, an insurer may take accounting credit in an amount equaling 80 percent of the amount utilized in calendar year 1996.

b.  For financial statements filed in 2001, an insurer may take accounting credit in an amount equaling 60 percent of the amount utilized in calendar year 1996.

c.  For financial statements filed in 2002, an insurer may take accounting credit in an amount equaling 40 percent of the amount utilized in calendar year 1996.

d.  For financial statements filed in 2003, an insurer may take accounting credit in an amount equaling 20 percent of the amount utilized in calendar year 1996.

2.  Subparagraph 1. does not apply to an insurer recording anticipated recoveries from the Special Disability Trust Fund on the basis of:

a.  A proof of claim which the fund has reviewed, determined to be a valid claim and so notified the carrier, and extended a payment offer; or

b.  A reimbursement request audited and approved for payment or paid by the fund;

(c)  Beginning with financial statements filed in 2004, an insurer may only take accounting credit for anticipated recoveries from the Special Disability Trust Fund for each proof of claim which the fund has reviewed, determined to be a valid claim and so notified the carrier, and extended a payment offer; or a reimbursement request audited and approved for payment or paid by the fund.

(d)1.  Beginning in calendar year 1998, each insurer shall separately identify anticipated recoveries from the Special Disability Trust Fund on the annual statement required to be filed pursuant to s. 624.424.

2.  For all financial statements filed with the office, each insurer shall disclose in the notes to the financial statements of any financial statement required to be filed pursuant to s. 624.424 any credit in loss reserves taken for anticipated recoveries from the Special Disability Trust Fund. That disclosure shall include:

a.  The amount of credit taken by the insurer in the determination of its loss reserves for the prior calendar year and the current reporting period on a year-to-date basis.

b.  The amount of payments received by the insurer from the Special Disability Trust Fund during the prior calendar year and the year-to-date recoveries for the current year.

c.  The amount the insurer was assessed by the Special Disability Trust Fund during the prior calendar year and during the current calendar year.

History.--s. 117, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; s. 86, ch. 79-40; ss. 2, 3, ch. 81-318; ss. 92, 98, 809(1st), ch. 82-243; ss. 47, 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 2, ch. 97-262; s. 871, ch. 2003-261.

625.101  Increase of inadequate loss reserves.--If loss experience shows that an insurer's loss reserves, however computed or estimated, are inadequate, the office shall require the insurer to maintain loss reserves in such additional amount as is needed to make them adequate. This section does not apply as to life insurance.

History.--s. 118, ch. 59-205; ss. 13, 35, ch. 69-106; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 98, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 872, ch. 2003-261.

625.111  Title insurance reserve.--In addition to an adequate reserve as to outstanding losses relating to known claims, as required under s. 625.041, a title insurer shall establish, segregate, and maintain a guaranty fund or unearned premium reserve as provided in this section. The sums required under this section to be reserved for unearned premiums on title guarantees and policies at all times and for all purposes shall be considered and constitute unearned portions of the original premiums and shall be charged as a reserve liability of such insurer in determining its financial condition. While such sums are so reserved, they shall be withdrawn from the use of the insurer for its general purposes, impressed with a trust in favor of the holders of title guarantees and policies, and held available for reinsurance of the title guarantees and policies in the event of the insolvency of the insurer. Nothing contained in this section shall preclude such insurer from investing such reserve in investments authorized by law for such an insurer and the income from such invested reserve shall be included in the general income of the insurer to be used by such insurer for any lawful purpose.

(1)  For unearned premium reserves established on or after July 1, 1999, such unearned premium reserve shall consist of not less than an amount equal to the sum of:

(a)  A reserve with respect to unearned premiums for policies written or title liability assumed in reinsurance before July 1, 1999, equal to the reserve established on June 30, 1999, for those unearned premiums with such reserve being subsequently released as provided in subsection (2). For domestic title insurers subject to this section, such amounts shall be calculated in accordance with provisions of law of this state in effect at the time the associated premiums were written or assumed and as amended prior to July 1, 1999.

(b)  A total amount equal to 30 cents for each $1,000 of net retained liability for policies written or title liability assumed in reinsurance on or after July 1, 1999, with such reserve being subsequently released as provided in subsection (2). For the purpose of calculating this reserve, the total of the net retained liability for all simultaneous issue policies covering a single risk shall be equal to the liability for the policy with the highest limit covering that single risk, net of any liability ceded in reinsurance.

(c)  An additional amount, if deemed necessary by a qualified actuary, which shall be subsequently released as provided in subsection (2). Using financial results as of December 31 of each year, all domestic title insurers shall obtain a Statement of Actuarial Opinion from a qualified actuary regarding the insurer's loss and loss adjustment expense reserves, including reserves for known claims, adverse development on known claims, incurred but not reported claims, and unallocated loss adjustment expenses. The actuarial opinion shall conform to the annual statement instructions for title insurers adopted by the National Association of Insurance Commissioners and shall include the actuary's professional opinion of the insurer's reserves as of the date of the annual statement. If the amount of the reserve stated in the opinion and displayed in Schedule P of the annual statement for that reporting date is greater than the sum of the known claim reserve and unearned premium reserve as calculated under this section, as of the same reporting date and including any previous actuarial provisions added at earlier dates, the insurer shall add to the insurer's unearned premium reserve an actuarial amount equal to the reserve shown in the actuarial opinion, minus the known claim reserve and the unearned premium reserve, as of the current reporting date and calculated in accordance with this section, but in no event calculated as of any date prior to December 31, 1999. The comparison shall be made using that line on Schedule P displaying the Total Net Loss and Loss Adjustment Expense which is comprised of the Known Claim Reserve, and any associated Adverse Development Reserve, the reserve for Incurred But Not Reported Losses, and Unallocated Loss Adjustment Expenses.

(2)(a)  With respect to the reserve established in accordance with paragraph (1)(a), the domestic title insurer shall release the reserve over a period of 20 subsequent years as provided in this paragraph. The insurer shall release 30 percent of the initial aggregate sum during 1999, with one quarter of that amount being released on March 31, June 30, September 30, and December 31, 1999, with the March 31 and June 30 releases to be retroactive and reflected on the September 30 financial statements. Thereafter, the insurer shall release, on the same quarterly basis as specified for reserves released during 1999, a percentage of the initial aggregate sum as follows: 15 percent during calendar year 2000, 10 percent during each of calendar years 2001 and 2002, 5 percent during each of calendar years 2003 and 2004, 3 percent during each of calendar years 2005 and 2006, 2 percent during each of calendar years 2007-2013, and 1 percent during each of calendar years 2014-2018.

(b)  With respect to reserves established in accordance with paragraph (1)(b), the unearned premium for policies written or title liability assumed during a particular calendar year shall be earned, and released from reserve, over a period of 20 subsequent years as provided in this paragraph. The insurer shall release 30 percent of the initial sum during the year next succeeding the year the premium was written or assumed, with one quarter of that amount being released on March 31, June 30, September 30, and December 31 of such year. Thereafter, the insurer shall release, on the same quarterly basis as specified for reserves released during the year first succeeding the year the premium was written or assumed, a percentage of the initial sum as follows: 15 percent during the next succeeding year, 10 percent during each of the next succeeding 2 years, 5 percent during each of the next succeeding 2 years, 3 percent during each of the next succeeding 2 years, 2 percent during each of the next succeeding 7 years, and 1 percent during each of the next succeeding 5 years.

(c)  With respect to reserves established in accordance with paragraph (1)(c), any additional amount established in any calendar year shall be released in the years subsequent to its establishment as provided in paragraph (b), with the timing and percentage of releases being in all respects identical to those of unearned premium reserves that are calculated as provided in paragraph (b) and established with regard to premiums written or liability assumed in reinsurance in the same year as the year in which any additional amount was originally established.

(3)  At any reporting date, the amount of the required releases of existing unearned premium reserves under subsection (2) shall be calculated and deducted from the total unearned premium reserve before any additional amount is established for the current calendar year in accordance with the provisions of paragraph (1)(c).

(4)  As used in this section:

(a)  "Net retained liability" means the total liability retained by a title insurer for a single risk, after taking into account the deduction for ceded liability, if any.

(b)  "Qualified actuary" means a person who is, as detailed in the National Association of Insurance Commissioners' Annual Statement Instructions:

1.  A member in good standing of the Casualty Actuarial Society;

2.  A member in good standing of the American Academy of Actuaries who has been approved as qualified for signing casualty loss reserve opinions by the Casualty Practice Council of the American Academy of Actuaries; or

3.  A person who otherwise has competency in loss reserve evaluation as demonstrated to the satisfaction of the insurance regulatory official of the domiciliary state. In such case, at least 90 days prior to the filing of its annual statement, the insurer must request approval that the person be deemed qualified and that request must be approved or denied. The request must include the National Association of Insurance Commissioners' Biographical Form and a list of all loss reserve opinions issued in the last 3 years by this person.

(c)  "Single risk" means the insured amount of any title insurance policy, except that where two or more title insurance policies are issued simultaneously covering different estates in the same real property, "single risk" means the sum of the insured amounts of all such title insurance policies. Any title insurance policy insuring a mortgage interest, a claim payment under which reduces the insured amount of a fee or leasehold title insurance policy, shall be excluded in computing the amount of a single risk to the extent that the insured amount of the mortgage title insurance policy does not exceed the insured amount of the fee or leasehold title insurance policy.

History.--s. 119, ch. 59-205; s. 2, ch. 65-359; s. 1, ch. 72-363; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 93, 98, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 1, ch. 92-34; s. 2, ch. 93-253; s. 2, ch. 99-286; s. 1, ch. 99-336.

625.121  Standard Valuation Law; life insurance.--

(1)  SHORT TITLE.--This section shall be known as the "Standard Valuation Law."

(2)  ANNUAL VALUATION.--The office shall annually value, or cause to be valued, the reserve liabilities, hereinafter called "reserves," for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurer doing business in this state, and may certify the amount of any such reserves, specifying the mortality table or tables, rate or rates of interest, and methods, net-level premium method or others, used in the calculation of such reserves. In the case of an alien insurer, such valuation shall be limited to its insurance transactions in the United States. In calculating such reserves, the office may use group methods and approximate averages for fractions of a year or otherwise. It may accept in its discretion the insurer's calculation of such reserves. In lieu of the valuation of the reserves herein required of any foreign or alien insurer, it may accept any valuation made or caused to be made by the insurance supervisory official of any state or other jurisdiction when such valuation complies with the minimum standard herein provided and if the official of such state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the office when such certificate states the valuation to have been made in a specified manner according to which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by the law of that state or jurisdiction. When any such valuation is made by the office, it may use the actuary of the office or employ an actuary for the purpose; and the reasonable compensation of the actuary, at a rate approved by the office, and reimbursement of travel expenses pursuant to s. 624.320 upon demand by the office, supported by an itemized statement of such compensation and expenses, shall be paid by the insurer. When a domestic insurer furnishes the office with a valuation of its outstanding policies as computed by its own actuary or by an actuary deemed satisfactory for the purpose by the office, the valuation shall be verified by the actuary of the office without cost to the insurer.

(3)  ACTUARIAL OPINION OF RESERVES.--

(a)1.  Each life insurance company doing business in this state shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commission by rule are computed appropriately, are based on assumptions which satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this state. The commission by rule shall define the specifics of this opinion and add any other items determined to be necessary to its scope.

2.  The opinion shall be submitted with the annual statement reflecting the valuation of such reserve liabilities for each year ending on or after December 31, 1992.

3.  The opinion shall apply to all business in force, including individual and group health insurance plans, in the form and substance acceptable to the office as specified by rule of the commission.

4.  The commission may adopt rules providing the standards of the actuarial opinion consistent with standards adopted by the Actuarial Standards Board on December 31, 2002, and subsequent revisions thereto, provided that the standards remain substantially consistent.

5.  In the case of an opinion required to be submitted by a foreign or alien company, the office may accept the opinion filed by that company with the insurance supervisory official of another state if the office determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.

6.  For the purposes of this subsection, "qualified actuary" means a member in good standing of the American Academy of Actuaries who also meets the requirements specified by rule of the commission.

7.  Disciplinary action by the office against the company or the qualified actuary shall be in accordance with the insurance code and related rules adopted by the commission.

8.  A memorandum in the form and substance specified by rule shall be prepared to support each actuarial opinion.

9.  If the insurance company fails to provide a supporting memorandum at the request of the office within a period specified by rule of the commission, or if the office determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by rule of the commission, the office may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare such supporting memorandum as is required by the office.

10.  Except as otherwise provided in this paragraph, any memorandum or other material in support of the opinion is confidential and exempt from the provisions of s. 119.07(1); however, the memorandum or other material may be released by the office with the written consent of the company, or to the American Academy of Actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the office for preserving the confidentiality of the memorandum or other material. If any portion of the confidential memorandum is cited by the company in its marketing or is cited before any governmental agency other than a state insurance department or is released by the company to the news media, no portion of the memorandum is confidential.

(b)  In addition to the opinion required by subparagraph (a)1., the office may, pursuant to commission rule, require an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commission by rule, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including but not limited to the investment earnings on the assets and considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including, but not limited to, the benefits under, and expenses associated with, the policies and contracts.

(c)  The commission may provide by rule for a transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this subsection.

(4)  MINIMUM STANDARD FOR VALUATION OF POLICIES AND CONTRACTS ISSUED BEFORE OPERATIVE DATE OF STANDARD NONFORFEITURE LAW.--The minimum standard for the valuation of all such policies and contracts issued prior to the operative date of s. 627.476 (Standard Nonforfeiture Law) shall be any basis satisfactory to the office. Any basis satisfactory to the former Department of Insurance on the effective date of this code shall be deemed to meet such minimum standards.

(5)  MINIMUM STANDARD FOR VALUATION OF POLICIES AND CONTRACTS ISSUED ON OR AFTER OPERATIVE DATE OF STANDARD NONFORFEITURE LAW.--Except as otherwise provided in paragraph (h) and subsections (6), (11), and (14), the minimum standard for the valuation of all such policies and contracts issued on or after the operative date of s. 627.476 (Standard Nonforfeiture Law for Life Insurance) shall be the commissioners' reserve valuation method defined in subsections (7), (11), and (14); 5 percent interest for group annuity and pure endowment contracts and 3.5 percent interest for all other such policies and contracts, or in the case of life insurance policies and contracts, other than annuity and pure endowment contracts, issued on or after July 1, 1973, 4 percent interest for such policies issued prior to October 1, 1979, and 4.5 percent interest for such policies issued on or after October 1, 1979; and the following tables:

(a)  For all ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies:

1.  For policies issued prior to the operative date of s. 627.476(9), the commissioners' 1958 Standard Ordinary Mortality Table; except that, for any category of such policies issued on female risks, modified net premiums and present values, referred to in subsection (7), may be calculated according to an age not more than 6 years younger than the actual age of the insured.

2.  For policies issued on or after the operative date of s. 627.476(9), the commissioners' 1980 Standard Ordinary Mortality Table or, at the election of the insurer for any one or more specified plans of life insurance, the commissioners' 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors.

3.  For policies issued on or after July 1, 2004, ordinary mortality tables, adopted after 1980 by the National Association of Insurance Commissioners, adopted by rule by the commission for use in determining the minimum standard of valuation for such policies.

(b)  For all industrial life insurance policies issued on the standard basis, excluding any disability and accidental death benefits in such policies:

1.  For policies issued prior to the first date to which the commissioners' 1961 Standard Industrial Mortality Table is applicable according to s. 627.476, the 1941 Standard Industrial Mortality Table; and

2.  For such policies issued on or after that date, the commissioners' 1961 Standard Industrial Mortality Table.

(c)  For individual annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies, the 1937 Standard Annuity Mortality Table or, at the option of the insurer, the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the office.

(d)  For group annuity and pure endowment contracts, excluding any disability and accidental death benefits in such policies, the Group Annuity Mortality Table for 1951; any modification of such table approved by the office; or, at the option of the insurer, any of the tables or modifications of tables specified for individual annuity and pure endowment contracts.

(e)  For total and permanent disability benefits in or supplementary to ordinary policies or contracts:

1.  For policies or contracts issued on or after January 1, 1966, the tables of period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 disability study of the Society of Actuaries, with due regard to the type of benefit;

2.  For policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either those tables or, at the option of the insurer, the class three disability table (1926);

3.  For policies issued prior to January 1, 1961, the class three disability table (1926); and

4.  For policies or contracts issued on or after July 1, 2004, tables of disablement rates and termination rates adopted after 1980 by the National Association of Insurance Commissioners, adopted by rule by the commission for use in determining the minimum standard of valuation for those policies or contracts.

Any such table for active lives shall be combined with a mortality table permitted for calculating the reserves for life insurance policies.

(f)  For accidental death benefits in or supplementary to policies:

1.  For policies issued on or after January 1, 1966, the 1959 Accidental Death Benefits Table;

2.  For policies issued on or after January 1, 1961, and prior to January 1, 1966, either that table or, at the option of the insurer, the Intercompany Double Indemnity Mortality Table;

3.  For policies issued prior to January 1, 1961, the Intercompany Double Indemnity Mortality Table; and

4.  For policies issued on or after July 1, 2004, tables of accidental death benefits adopted after 1980 by the National Association of Insurance Commissioners, adopted by rule by the commission for use in determining the minimum standard of valuation for those policies.

Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies.

(g)  For group life insurance, life insurance issued on the substandard basis, and other special benefits, such tables as may be approved by the office as being sufficient with relation to the benefits provided by such policies.

(h)  Except as provided in subsection (6), the minimum standard for the valuation of all individual annuity and pure endowment contracts issued on or after the operative date of this paragraph and for all annuities and pure endowments purchased on or after such operative date under group annuity and pure endowment contracts shall be the commissioners' reserve valuation method defined in subsection (7) and the following tables and interest rates:

1.  For individual annuity and pure endowment contracts issued prior to October 1, 1979, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, or any modification of this table approved by the office, and 6 percent interest for single-premium immediate annuity contracts and 4 percent interest for all other individual annuity and pure endowment contracts.

2.  For individual single-premium immediate annuity contracts issued on or after October 1, 1979, and prior to October 1, 1986, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, or any modification of this table approved by the office, and 7.5 percent interest. For such contracts issued on or after October 1, 1986, the 1983 Individual Annual Mortality Table, or any modification of such table approved by the office, and the applicable calendar year statutory valuation interest rate as described in subsection (6).

3.  For individual annuity and pure endowment contracts issued on or after October 1, 1979, and prior to October 1, 1986, other than single-premium immediate annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, or any modification of this table approved by the office, and 5.5 percent interest for single-premium deferred annuity and pure endowment contracts and 4.5 percent interest for all other such individual annuity and pure endowment contracts. For such contracts issued on or after October 1, 1986, the 1983 Individual Annual Mortality Table, or any modification of such table approved by the office, and the applicable calendar year statutory valuation interest rate as described in subsection (6).

4.  For all annuities and pure endowments purchased prior to October 1, 1979, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table, or any modification of this table approved by the office, and 6 percent interest.

5.  For all annuities and pure endowments purchased on or after October 1, 1979, and prior to October 1, 1986, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table, or any modification of this table approved by the office, and 7.5 percent interest. For such contracts purchased on or after October 1, 1986, the 1983 Group Annuity Mortality Table, or any modification of such table approved by the office, and the applicable calendar year statutory valuation interest rate as described in subsection (6).

After July 1, 1973, any insurer may have filed with the former Department of Insurance a written notice of its election to comply with the provisions of this paragraph after a specified date before January 1, 1979, which shall be the operative date of this paragraph for such insurer. However, an insurer may elect a different operative date for individual annuity and pure endowment contracts from that elected for group annuity and pure endowment contracts. If an insurer makes no such election, the operative date of this paragraph for such insurer shall be January 1, 1979.

(i)  In lieu of the mortality tables specified in this subsection, and subject to rules previously adopted by the former Department of Insurance, the insurance company may, at its option:

1.  Substitute the applicable 1958 CSO or CET Smoker and Nonsmoker Mortality Tables, in lieu of the 1980 CSO or CET mortality table standard, for policies issued on or after the operative date of s. 627.476(9) and before January 1, 1989.

2.  Substitute the applicable 1980 CSO or CET Smoker and Nonsmoker Mortality Tables in lieu of the 1980 CSO or CET mortality table standard;

3.  Use the Annuity 2000 Mortality Table for determining the minimum standard of valuation for individual annuity and pure endowment contracts issued on or after January 1, 1998, and before July 1, 1998.

4.  Use the 1994 GAR Table for determining the minimum standard of valuation for annuities and pure endowments purchased on or after January 1, 1998, and before July 1, 1998, under group annuity and pure endowment contracts.

(j)  The commission may adopt by rule the model regulation for valuation of life insurance policies as approved by the National Association of Insurance Commissioners in March 1999, including tables of select mortality factors, and may make the regulation effective for policies issued on or after January 1, 2000.

(k)  For individual annuity and pure endowment contracts issued on or after July 1, 2004, excluding any disability and accidental death benefits purchased under those contracts, individual annuity mortality tables adopted after 1980 by the National Association of Insurance Commissioners, adopted by rule by the commission for use in determining the minimum standard of valuation for those contracts.

(l)  For all annuities and pure endowments purchased on or after July 1, 2004, under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under those contracts, group annuity mortality tables adopted after 1980 by the National Association of Insurance Commissioners, adopted by rule by the commission for use in determining the minimum standard of valuation for those contracts.

(6)  MINIMUM STANDARD OF VALUATION.--

(a)  The interest rates used in determining the minimum standard for the valuation of:

1.  All life insurance policies issued in a particular calendar year on or after the operative date of s. 627.476(9);

2.  All individual annuity and pure endowment contracts issued in a particular calendar year on or after January 1, 1982;

3.  All annuities and pure endowments purchased in a particular calendar year on or after January 1, 1982, under group annuity and pure endowment contracts; and

4.  The net increase, if any, in a particular calendar year after January 1, 1982, in amounts held under guaranteed interest contracts,

shall be the calendar year statutory valuation interest rates for the year-of-issue purchase or increase as defined in this subsection.

(b)  The calendar year statutory valuation interest rates I shall be determined as follows, and the results rounded to the nearest 0.25 percent:

1.  For life insurance:

I = 0.03 + W(R1-0.03) + (W/2)(R2-0.09).

For purposes of this subparagraph, "R1" is the lesser of R and .09; "R2" is the greater of R and .09; "R" is the reference interest rate defined in this subsection; and "W" is the weighting factor defined in this subsection.

2.  For single-premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options:

I = 0.03 + W(R-0.03).

For purposes of this subparagraph, "R" is the reference interest rate defined in this subsection, and "W" is the weighting factor defined in this subsection.

3.  For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on an issue-year basis, except as stated in subparagraph 2., the formula for life insurance stated in subparagraph 1. shall apply to annuities and guaranteed interest contracts with guarantee durations in excess of 10 years, and the formula for single-premium immediate annuities stated in subparagraph 2. shall apply to annuities and guaranteed interest contracts with guarantee durations of 10 years or less.

4.  For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single-premium immediate annuities stated in subparagraph 2. shall apply.

5.  For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change-in-fund basis, the formula for single-premium immediate annuities stated in subparagraph 2. shall apply.

However, if the calendar year statutory valuation interest rate for any life insurance policies issued in any calendar year determined without reference to this sentence differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than 0.5 percent, the calendar year statutory valuation interest rate for such life insurance policies shall be equal to the corresponding actual rate for the immediately preceding calendar year. For purposes of applying the immediately preceding sentence, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980, the reference interest rate defined for 1979 being used, and shall be determined for each subsequent calendar year regardless of when s. 627.476(9) becomes operative.

(c)  The weighting factors referred to in the formulas stated in paragraph (b) are given in the following tables:

1.  Weighting factors for life insurance:


Guarantee Duration

Weighting

  (Years)

Factors

10 or less: ............ 0.50
More than 10, but not more than 20: ............ 0.45
More than 20: ............ 0.35


For life insurance, the "guarantee duration" is the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy.

2.  Weighting factor for single-premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options: 0.80.

3.  Weighting factors for other annuities and for guaranteed interest contracts, except as stated in subparagraph 2., shall be as specified in sub-subparagraphs a., b., and c., according to the rules and definitions in sub-subparagraphs d., e., and f. and in paragraph (f):

a.  For annuities and guaranteed interest contracts valued on an issue-year basis:


Guarantee Duration

Weighting Factor

  (Years)

for Plan Type

5 or less: ............ A--0.80

B--0.60

C--0.50

More than 5, but not more than 10: ............ A--0.75

B--0.60

C--0.50

More than 10, but not more than 20: ............ A--0.65

B--0.50

C--0.45

More than 20: ............ A--0.45

B--0.35

C--0.35

b.  For annuities and guaranteed interest contracts valued on a change-in-fund basis, the factors shown in sub-subparagraph a. increased by: 0.15 for Plan Type A; 0.25 for Plan Type B; 0.05 for Plan Type C.

c.  For annuities and guaranteed interest contracts valued on an issue-year basis, other than those with no cash settlement options, which do not guarantee interest on considerations received more than 1 year after issue or purchase and for annuities and guaranteed interest contracts valued on a change-in-fund basis which do not guarantee interest rates on considerations received more than 12 months beyond the valuation date, the factors shown in sub-subparagraph a. or derived in sub-subparagraph b. increased by: 0.05 for Plan Type A; 0.05 for Plan Type B; 0.05 for Plan Type C.

d.  For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the "guarantee duration" is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee duration in excess of 20 years. For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.

e.  "Plan type," as used in the tables above, is defined as follows:

(I)  Plan Type A:  At any time, the policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer; the policyholder may withdraw funds only without such adjustment but in installments over 5 years or more; the policyholder may withdraw funds only as an immediate life annuity; or no withdrawal is permitted.

(II)  Plan Type B:  Before expiration of the interest rate guarantee, the policyholder may withdraw funds only with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer; the policyholder may withdraw funds only without such adjustment but in installments over 5 years or more; or no withdrawal is permitted. At the end of interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than 5 years.

(III)  Plan Type C:  The policyholder may withdraw funds before expiration of interest rate guarantee in a single sum or installments over less than 5 years either without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurer or subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.

f.  An insurer may elect to value guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue-year basis or on a change-in-fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options must be valued on an issue-year basis.

(d)  The "reference interest rate" referred to in paragraph (b) is defined as follows:

1.  For all life insurance, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year next preceding the year of issue, of the interest rate index.

2.  For single-premium immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the average over a period of 12 months, ending on June 30 of the calendar year of issue or year of purchase, of the interest rate index.

3.  For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year-of-issue basis, except as stated in subparagraph 2., with guarantee duration in excess of 10 years, the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of the interest rate index.

4.  For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a year-of-issue basis, except as stated in subparagraph 2., with guarantee duration of 10 years or less, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of the interest rate index.

5.  For other annuities with no cash settlement options and for guaranteed interest contracts with no cash settlement options, the average over a period of 12 months, ending on June 30 of the calendar year of issue or purchase, of the interest rate index.

6.  For other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, valued on a change-in-fund basis, except as stated in subparagraph 2., the average over a period of 12 months, ending on June 30 of the calendar year of the change in the fund, of the interest rate index.

(e)  The interest rate index shall be the Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Service, Inc., as long as this index is calculated by using substantially the same methodology as used by it on January 1, 1981. If Moody's corporate bond yield average ceases to be calculated in this manner, the interest rate index shall be the index approved by rule promulgated by the commission. The methodology used in determining the index approved by rule shall be substantially the same as the methodology employed on January 1, 1981, for determining Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Service, Inc.

(f)  As used in this subsection, an "issue-year basis" of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of purchase of the annuity or guaranteed interest contract; and the "change-in-fund" basis of valuation refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund.

(7)  COMMISSIONERS' RESERVE VALUATION METHOD.--

(a)1.  Except as otherwise provided in this subsection and subsections (11) and (14), reserves according to the commissioners' reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums, shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then-present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then-present value of such benefits provided for by the policy and the excess of sub-subparagraph a. over sub-subparagraph b. as follows:

a.  A net-level annual premium equal to the present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due; provided, however, that such net-level annual premium shall not exceed the net-level annual premium on the 19-year premium whole life plan for insurance of the same amount at an age 1 year higher than the age at issue of such policy.

b.  A net-1-year-term premium for such benefits provided for in the first policy year.

2.  For any life insurance policy which is issued on or after January 1, 1985, for which the contract premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess, and which provides an endowment benefit, a cash surrender value, or a combination thereof in an amount greater than such excess premium, the reserve according to the commissioners' reserve valuation method as of any policy anniversary occurring on or before the assumed ending date, defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium, shall, except as otherwise provided in subsection (11), be the greater of the reserve as of such policy anniversary calculated as described in subparagraph 1. and the reserve as of such policy anniversary calculated as described in subparagraph 1. but with:

a.  The value defined in subparagraph 1. being reduced by 15 percent of the amount of such excess first year premium;

b.  All present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date;

c.  The policy being assumed to mature on such date as an endowment; and

d.  The cash surrender value provided on such date being considered as an endowment benefit.

In making the above comparison, the mortality and interest bases stated in subsections (5) and (6) shall be used.

(b)  Reserves according to the commissioners' reserve valuation method for:

1.  Life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums;

2.  Group annuity and pure endowment contracts, purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under s. 408 of the Internal Revenue Code, as now or hereafter amended;

3.  Disability and accidental death benefits in all policies and contracts; and

4.  All other benefits, except life insurance and endowment benefits in life insurance policies, and benefits provided by all other annuity and pure endowment contracts,

shall be calculated by a method which is consistent with and yields results consistent with the principles of paragraph (a).

(c)  This subsection shall apply to all annuity and pure endowment contracts other than group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under s. 408 of the Internal Revenue Code, as now or hereafter amended. Reserves according to the commissioners' annuity reserve method for benefits under annuity or pure endowment contracts, excluding any disability and accidental death benefits in such contracts, shall be the greatest of the respective excesses of the present values, at the date of valuation, of the future guaranteed benefits, including guaranteed nonforfeiture benefits, provided for by such contracts at the end of each respective contract year, over the present value, at the date of valuation, of any future valuation considerations derived from future gross considerations, required by the terms of such contract, that become payable prior to the end of such respective contract year. The future guaranteed benefits shall be determined by using the mortality table, if any, and the interest rate or rates specified in such contracts for determining guaranteed benefits. The valuation considerations are the portions of the respective gross considerations applied under the terms of such contracts to determine nonforfeiture values.

(8)  MINIMUM AGGREGATE RESERVES.--

(a)  In no event shall an insurer's aggregate reserves for all life insurance policies, excluding disability and accidental death benefits, issued on or after the operative date of s. 627.476, be less than the aggregate reserves calculated in accordance with the methods set forth in subsections (7), (11), and (12) and the mortality table or tables and rate or rates of interest used in calculating nonforfeiture benefits for such policies.

(b)  In no event may the aggregate reserves for all policies, contracts, and benefits be less than the aggregate reserves determined by the qualified actuary to be necessary to render the opinion required by subsection (3).

(9)  OPTIONAL RESERVE BASIS.--

(a)  Reserves for all policies and contracts issued prior to the operative date of s. 627.476 may be calculated, at the option of the insurer, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by the laws in effect immediately prior to such date.

(b)  For any category of policies, contracts, or benefits specified in subsections (5) and (6), issued on or after the operative date of s. 627.476 (the Standard Nonforfeiture Law for Life Insurance), reserves may be calculated, at the option of the insurer, according to any standard or standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided; but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for therein.

(10)  LOWER VALUATIONS.--An insurer which at any time had adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard herein provided may, with the approval of the office, adopt any lower standard of valuation, but not lower than the minimum herein provided; however, for the purposes of this subsection, the holding of additional reserves previously determined by a qualified actuary to be necessary to render the opinion required by subsection (3) shall not be deemed to be the adoption of a higher standard of valuation.

(11)  DEFICIENCY RESERVE.--If in any contract year the gross premium charged by any life insurer on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, there shall be maintained on such policy or contract a deficiency reserve in addition to the reserve defined by subsections (7) and (12). For each such policy or contract, the deficiency reserve shall be the present value, according to the minimum valuation standards of mortality and rate of interest, of the differences between all such valuation net premiums and the corresponding premiums charged for such policy or contract during the remainder of the premium-paying period. For any category of policies, contracts, or benefits specified in subsections (5) and (6), issued on or after the operative date of s. 627.476 (the Standard Nonforfeiture Law for Life Insurance), the aggregate deficiency reserves may be reduced by the amount, if any, by which the aggregate reserves actually calculated in accordance with subsection (9) exceed the minimum aggregate reserves prescribed by subsection (8). The minimum valuation standards of mortality and rate of interest referred to in this subsection are those standards stated in subsections (5) and (6). However, for any life insurance policy which is issued on or after January 1, 1985, for which the gross premium in the first policy year exceeds that of the second year and for which no comparable additional benefit is provided in the first year for such excess, and which provides an endowment benefit, a cash surrender value, or a combination thereof in an amount greater than such excess premium, the foregoing provisions of this subsection shall be applied as if the method actually used in calculating the reserve for such policy were the method described in subsection (7), the provisions of subparagraph (7)(a)2. being ignored. The amount of the deficiency reserve, if any, at each policy anniversary of such a policy shall be the excess, if any, of the amount determined by the foregoing provisions of this subsection plus the reserve calculated by the method described in subsection (7), the provisions of subparagraph (7)(a)2. being ignored, over the reserve actually calculated by the method described in subsection (7), the provisions of subparagraph (7)(a)2. being taken into account.

(12)  ALTERNATE METHOD FOR DETERMINING RESERVES IN CERTAIN CASES.--In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurer based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of such a nature that the minimum reserves cannot be determined by the methods described in subsection (7), the reserves which are held under any such plan shall:

(a)  Be appropriate in relation to the benefits and the pattern of premiums for that plan; and

(b)  Be computed by a method which is consistent with the principles of this section, as determined by rules promulgated by the commission.

(13)  CREDIT LIFE AND DISABILITY POLICIES.--

(a)  For policies issued prior to January 1, 2004:

1.  The minimum reserve for single-premium credit disability insurance, monthly premium credit life insurance, and monthly premium credit disability insurance shall be the unearned gross premium.

2.  As to single-premium credit life insurance policies, the insurer shall establish and maintain reserves that are not less than the value, at the valuation date, of the risk for the unexpired portion of the period for which the premium has been paid as computed on the basis of the commissioners' 1980 Standard Ordinary Mortality Table and 3.5 percent interest. At the discretion of the office, the insurer may make a reasonable assumption as to the ages at which net premiums are to be determined. In lieu of the foregoing basis, reserves based upon unearned gross premiums may be used at the option of the insurer.

(b)  For policies issued on or after January 1, 2004:

1.  The minimum reserve for single-premium credit disability insurance shall be either:

a.  The unearned gross premium, or

b.  Based upon a morbidity table that is adopted by the National Association of Insurance Commissioners and is specified in a rule the commission adopts pursuant to subsection (14).

2.  The minimum reserve for monthly premium credit disability insurance shall be the unearned gross premium.

3.  The minimum reserve for monthly premium credit life insurance shall be the unearned gross premium.

4.  As to single-premium credit life insurance policies, the insurer shall establish and maintain reserves that are not less than the value, at the valuation date, of the risk for the unexpired portion of the period for which the premium has been paid as computed on the basis of the commissioners' 1980 Standard Ordinary Mortality Table or any ordinary mortality table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by rule adopted by the commission for use in determining the minimum standard of valuation for such policies; and an interest rate determined in accordance with subsection (6). At the discretion of the office, the insurer may make a reasonable assumption as to the ages at which net premiums are to be determined. In lieu of the foregoing basis, reserves based upon unearned gross premiums may be used at the option of the insurer.

(14)  MINIMUM STANDARDS FOR HEALTH PLANS.--The commission shall adopt a rule containing the minimum standards applicable to the valuation of health plans in accordance with sound actuarial principles.

History.--s. 120, ch. 59-205; ss. 1, 2, ch. 61-106; s. 17, ch. 63-400; s. 1, ch. 65-11; ss. 13, 35, ch. 69-106; ss. 1, 2, ch. 73-324; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 1, 3, ch. 79-356; ss. 1, 6, ch. 81-289; ss. 2, 3, ch. 81-318; ss. 98, 809(1st), 810, ch. 82-243; ss. 48, 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 1, ch. 93-118; s. 21, ch. 95-211; s. 369, ch. 96-406; s. 8, ch. 97-292; s. 2, ch. 2000-365; s. 873, ch. 2003-261; s. 7, ch. 2004-370; s. 152, ch. 2004-390.

625.141  Valuation of bonds.--

(1)  All bonds or other evidences of debt having a fixed term and rate of interest held by an insurer may, if amply secured and not in default as to principal or interest, be valued as follows:

(a)  If purchased at par, at the par value.

(b)  If purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield in the meantime the effective rate of interest at which the purchase was made, or in lieu of such method, according to such accepted method of valuation as is approved by the commission.

(c)  Purchase price shall in no case be taken at a higher figure than the actual market value at the time of purchase, plus actual brokerage, transfer, postage, or express charges paid in the acquisition of such securities.

(2)  The office shall have full discretion in determining the method of calculating values according to the rules set forth in this section, but no such method or valuation shall be inconsistent with the method formulated or approved by the National Association of Insurance Commissioners or its successor organization and set forth in the latest edition of its publication "Valuation of Securities"; provided that such valuation methodology is substantially similar to the methodology used by the National Association of Insurance Commissioners in its July 1, 2002, edition of such publication. Amortization of bond premium or discount must be calculated using the scientific (constant yield) interest method taking into consideration specified interest and principal provisions over the life of the bond. Bonds containing call provisions shall be amortized to the call or maturity value or date that produces the lowest asset value.

History.--s. 122, ch. 59-205; ss. 13, 35, ch. 69-106; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 95, 98, 809(1st), ch. 82-243; s. 42, ch. 89-360; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 18, ch. 2001-213; s. 875, ch. 2003-261.

625.151  Valuation of other securities.--

(1)  Securities, other than those referred to in s. 625.141, held by an insurer shall be valued, in the discretion of the office, at their market value, or at their appraised value, or at prices determined by it as representing their fair market value.

(2)  Preferred or guaranteed stocks or shares while paying full dividends may be carried at a fixed value in lieu of market value, at the discretion of the office and in accordance with such method of valuation as it may approve.

(3)  Stock of a subsidiary corporation of an insurer shall not be valued at an amount in excess of the net value thereof as based upon those assets only of the subsidiary which would be eligible under part II for investment of the funds of the insurer directly.

(a)  If the surplus as to policyholders of an insurer including investments in subsidiaries does not exceed $100 million, investments in subsidiaries and related corporations as defined in s. 625.325, including common stock, preferred stock, debt obligations, other securities, and loans to such corporations, shall be valued in an amount which in the aggregate does not exceed the lesser of:

1.  Ten percent of the insurer's admitted assets; or

2.  Fifty percent of the insurer's surplus as to policyholders in excess of the minimum surplus as to policyholders required under this code.

(b)  If the surplus as to policyholders of an insurer including investments in subsidiaries is $100 million or more, investments in subsidiaries and related corporations as defined in s. 625.325, including common stock, preferred stock, debt obligations, other securities, and loans to such corporations, shall be valued in an amount which in the aggregate does not exceed 25 percent of the insurer's admitted assets.

(4)  No valuations under this section shall be inconsistent with any applicable valuation or method contained in the latest edition of the publication "Valuation of Securities" published by the National Association of Insurance Commissioners or its successor organization; provided that such valuation methodology is substantially similar to the methodology used by the National Association of Insurance Commissioners in its July 1, 2002, edition of such publication.

History.--s. 123, ch. 59-205; ss. 13, 35, ch. 69-106; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 96, 98, 809(1st), ch. 82-243; s. 43, ch. 89-360; s. 6, ch. 90-119; ss. 49, 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 876, ch. 2003-261.

625.161  Valuation of property.--

(1)  Real property owned by an insurer which is reported in financial statements filed with the office shall be valued at the lower of depreciated cost or fair market value.

(2)  Real property acquired pursuant to a mortgage loan or contract for sale, in the absence of a recent appraisal deemed by the office to be reliable, shall not be valued at an amount greater than the unpaid principal and accrued interest of the defaulted loan or contract at the date of such acquisition, together with any taxes and expenses paid or incurred in connection with such acquisition, and the cost of improvements thereafter made by the insurer and any amounts thereafter paid by the insurer on assessments levied for improvements in connection with the property.

(3)  Other real property held by an insurer shall not be valued at an amount in excess of fair value as determined by recent appraisal. If the valuation of real property is based on an appraisal more than 5 years old, the office may, at its discretion, call for and require a new appraisal in order to determine fair market value.

(4)  Personal property acquired pursuant to chattel mortgages made in accordance with s. 625.329 shall not be valued at an amount greater than the unpaid balance of principal and accrued interest on the defaulted loan at the date of acquisition, together with taxes and expenses incurred in connection with such acquisition, or the fair value of such property, whichever amount is the lesser.

(5)  In carrying out its responsibilities under this section, in the event that the office and the insurer do not agree on the value of real or personal property of such insurer, the office may retain the services of a qualified real or personal property appraiser. In the event it is subsequently determined that the insurer has overvalued assets, the office shall be reimbursed for the costs of the services of any such appraiser incurred with respect to its responsibilities under this section regarding an insurer by said insurer and any reimbursement shall be deposited in the Insurance Regulatory Trust Fund.

(6)  Any insurer that reported real estate as of December 31, 2000, with a value in excess of that allowed by subsection (1) shall comply with the requirements of that subsection beginning January 1, 2001.

History.--s. 124, ch. 59-205; ss. 13, 35, ch. 69-106; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 98, 809(1st), ch. 82-243; s. 44, ch. 89-360; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 19, ch. 2001-213; s. 877, ch. 2003-261.

625.171  Valuation of purchase money mortgages.--Purchase money mortgages on real property referred to in s. 625.161(2) shall be valued in an amount not exceeding the acquisition cost to the insurer of real property covered thereby or 90 percent of the fair value of such real property, whichever is less.

History.--s. 125, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 98, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 90, ch. 2002-1.

625.172  Replacing certain assets; reporting certain liabilities.--

(1)  The office, upon determining that an insurer's asset has not been evaluated according to applicable law or that it does not qualify as an asset, shall require the insurer to properly reevaluate the asset or replace the asset with an asset suitable to the office.

(2)  The office, upon determining that an insurer has failed to report certain liabilities that should have been reported, shall require that the insurer report such liabilities to the office within 90 days.

(3)  If it is determined that the proper valuation of an asset or the establishment of certain liabilities would place the insurer in financial impairment or insolvency, the office may, at its discretion, immediately suspend the certificate of authority of an insurer or take other action it deems appropriate to protect the interests of policyholders or the general public.

History.--s. 1, ch. 70-122; s. 1, ch. 70-439; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 97, 98, 809(1st), ch. 82-243; s. 2, ch. 90-248; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 878, ch. 2003-261.

625.181  Assets received as capital or surplus contributions.--Assets received by an insurer as a capital or surplus contribution shall, for purposes of this code, be deemed to be purchased by the insurer at a cost equal to, in the discretion of the office, their market value, their appraised value, or prices determined by the office as representing their fair market value. Assets so acquired shall be valued in accordance with the appropriate sections of this code as if the insurer had purchased such assets directly.

History.--ss. 7, 21, ch. 90-119; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 879, ch. 2003-261.

PART II

INVESTMENTS

625.301  Scope of part.

625.302  Eligible investments.

625.303  General qualifications.

625.304  Authorization of investment.

625.305  Diversification.

625.306  Cash and deposits.

625.307  United States Government obligations.

625.308  Loans guaranteed by the United States.

625.309  State and Canadian public obligations.

625.310  County, municipal, and district obligations.

625.311  Public improvement bonds.

625.312  Public utility obligations.

625.313  Securities of certain agencies.

625.314  Public housing obligations.

625.315  Obligations of State Board of Education.

625.316  International development banks.

625.317  Corporate bonds and debentures.

625.318  Religious institution obligations.

625.319  Equipment trust certificates.

625.320  Building and loan or savings and loan association accounts.

625.321  Policy loans.

625.322  Collateral loans.

625.323  Ship loans.

625.324  Corporate stocks.

625.325  Investments in subsidiaries and related corporations.

625.3255  Capital participation instrument.

625.326  Foreign investments.

625.3262  State of Israel obligations.

625.327  Mortgage loans.

625.329  Chattel mortgages.

625.330  Special investments by title insurer.

625.331  Special consent investments.

625.332  Prohibited investments and investment underwriting.

625.333  Real estate, in general.

625.338  Time limit for disposal of ineligible property and securities; effect of failure to dispose.

625.340  Investments of foreign or alien insurers.

625.301  Scope of part.--Except as to s. 625.340, this part of this chapter shall apply only to domestic insurers and commercially domiciled insurers.

History.--s. 126, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; s. 2, ch. 85-214; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.302  Eligible investments.--

(1)  Insurers shall invest in or lend their funds on the security of, and shall hold as invested assets, only eligible investments as prescribed in this part of this chapter.

(2)  Any particular investment held by an insurer on the effective date of this code, and which was a legal investment at the time it was made, and which the insurer was legally entitled to possess immediately prior to such effective date, shall be deemed to be an eligible investment.

(3)  Eligibility of an investment shall be determined as of the date of its making or acquisition, except as stated in subsection (2).

(4)  Any investment limitation based upon the amount of the insurer's assets or particular funds shall relate to such assets or funds as shown by the insurer's annual statement as of December 31 next preceding date of acquisition of the investment by the insurer, or as shown by a current financial statement of the insurer.

History.--s. 127, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.303  General qualifications.--

(1)  No security or investment (other than real property and personal property acquired under s. 625.333) shall be eligible for acquisition unless it is interest-bearing or interest-accruing, is entitled to receive dividends if and when declared and paid or is otherwise income-producing, is not then in default in any respect, and the insurer is entitled to receive for its exclusive account and benefit the interest or income accruing thereon.

(2)  No security or investment shall be eligible for purchase at a price above its market value unless it is approved by the office and is made in accordance with valuation procedures of the National Association of Insurance Commissioners which have been adopted by the commission.

(3)  No provision of this part shall prohibit the acquisition by an insurer of other or additional securities or property if received as a dividend, as a lawful distribution of assets, or under a lawful and bona fide agreement of bulk reinsurance, merger, or consolidation. Any investment so acquired which is not otherwise eligible under this part shall be disposed of pursuant to s. 625.338 if property or securities.

History.--s. 128, ch. 59-205; s. 1, ch. 70-188; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 99, 122, 809(1st), ch. 82-243; s. 10, ch. 82-386; s. 80, ch. 83-216; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 880, ch. 2003-261.

625.304  Authorization of investment.--An insurer shall not make any investment or loan, other than a policy loan or annuity contract loan of a life insurer, unless the same is authorized or approved by the insurer's board of directors or by a committee authorized by such board and charged with the supervision or making of such investment or loan. The minutes of any such committee shall be recorded and regular reports of such committee shall be submitted to the board of directors.

History.--s. 129, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 100, 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.305  Diversification.--

(1)  Every insurer must maintain an amount equal to its entire reserve, as required under part I of this chapter, and the minimum surplus as to policyholders required to be maintained by the insurer under this code invested in coin or currency of the United States, in assets allowed by s. 625.012, except loans or advances to affiliates to the extent unsecured and in investments as authorized under this part, other than the investments authorized under either of the following sections:

(a)  Section 625.331.

(b)  Section 625.333, except paragraph (1)(a).

(2)  Investments eligible under subsection (1), except investments acquired pursuant to s. 625.331, are subject to the following limitations:

(a)  The cost of investments made by insurers in stock authorized by s. 625.324 shall not exceed 15 percent of the insurer's admitted assets; the cost of such investment in common stocks shall not exceed 10 percent of the insurer's admitted assets; and the cost of such investment in stock of any one corporation shall not exceed 3 percent of the insurer's admitted assets. Notwithstanding any other provision in this chapter, the cost basis or market value, if lower, of all stock investment shall be used for the purpose of determining the asset value against which such percentage limitations are to be applied.

(b)  Such other limitations, if any, as may be expressly provided for in the section under which the investment is authorized.

(3)  The cost of investments made by insurers in a mortgage loan authorized by s. 625.327 shall not exceed the lesser of 5 percent of the insurer's admitted assets or 10 percent of the insurer's capital and surplus. An insurer shall not invest in additional mortgage loans without the consent of the office if the admitted value of all mortgage loans held by the insurer exceeds:

(a)  With respect to life and health insurers, 40 percent of the admitted assets of the insurer.

(b)  With respect to property and casualty insurers, 10 percent of the admitted assets of the insurer.

(4)  The cost of investments in bonds, debentures, notes, commercial paper, or other debt obligations issued, assumed, or guaranteed by any solvent institution, which investments are classified as medium to lower quality obligations, other than obligations of subsidiaries or related corporations as that term is defined in s. 625.325, shall be limited to:

(a)  No more than 13 percent of an insurer's admitted assets.

(b)  No more than 5 percent of an insurer's admitted assets in obligations that have been given a rating of 4, 5, or 6 by the Securities Valuation Office of the National Association of Insurance Commissioners.

(c)  No more than 1.5 percent of an insurer's admitted assets in obligations that have been given a rating of 5 or 6 by the Securities Valuation Office of the National Association of Insurance Commissioners.

(d)  No more than 0.5 percent of an insurer's admitted assets in obligations that have been given a rating of 6 by the Securities Valuation Office of the National Association of Insurance Commissioners.

(e)  No more than 10 percent of an insurer's admitted assets, if the investments are in issuers from any one industry.

(f)  No more than 2 percent of an insurer's admitted assets if the investment is in any one issuer.

(5)  For purposes of subsection (4), the following definitions shall apply:

(a)  "Medium to lower quality obligations" means obligations that have been given a rating of 3, 4, 5, or 6 by the Securities Valuation Office of the National Association of Insurance Commissioners.

(b)  "Industry" means a distinct and recognized area of economic activity that consists of the production, manufacture, or distribution of common goods, products, commodities, or services.

(6)  Each insurer shall possess and maintain adequate documentation to establish that its investments in medium to lower quality obligations do not exceed the limitations under subsection (4).

(7)  Any investments in excess of those permitted by subsection (4) are not allowed as an asset of the insurer.

(8)  The office may limit the extent of an insurer's deposits with any financial institution which does not meet its regulatory capital requirement if the office determines that the financial solvency of the insurer is threatened by a deposit in excess of such limit.

(9)  The provisions of this section supersede any inconsistent provision of s. 106 of the Secondary Mortgage Market Enhancement Act of 1984 (15 U.S.C. s. 77r).

(10)  Every domestic life insurance company that issues variable annuity contracts may invest and reinvest amounts received in connection with such variable contracts in common stocks, subject to the following limitations:

(a)  All common stock investments must be in stock that is listed or admitted to trading on a securities exchange located in the United States, or which is publicly held and has been traded in the "over the counter market" for not less than 1 year preceding the date of purchase and for which stock market quotations have been readily available for that 1 year period.

(b)  A domestic life insurance company that issues variable annuity contracts may not invest more than 5 percent of all of the amounts received in connection with such contracts in the securities of one corporation or insurer.

(c)  A domestic life insurance company that issues variable annuity contracts may not, as a result of investing any funds received in connection with such contracts, beneficially own or hold, together with the investments permitted under paragraph (2)(a), more than 15 percent of the outstanding securities of any corporation or issuer. Any foreign life insurance company that issues variable annuity contracts in this state and which invests the funds received in connection with such contracts in accordance with the laws of its state of domicile, is in compliance with this section.

(d)  A domestic life insurance company may not invest in the common stock of any corporation if such investment creates a conflict of interest between officers and directors of the investing company and those of the corporation whose stock is purchased.

History.--s. 130, ch. 59-205; s. 2, ch. 70-188; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 1, 2, ch. 79-245; ss. 2, 3, ch. 81-318; ss. 101, 122, 809(1st), ch. 82-243; s. 2, ch. 87-250; s. 1, ch. 89-227; s. 45, ch. 89-360; ss. 50, 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 10, ch. 93-410; s. 4, ch. 2000-370; s. 881, ch. 2003-261.

625.306  Cash and deposits.--An insurer may have funds in coin or currency of the United States on hand or on deposit in any solvent national or state bank, savings and loan association, or trust company.

History.--s. 131, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 102, 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.307  United States Government obligations.--An insurer may invest in bonds, notes, warrants, and other evidences of indebtedness which are direct obligations of the Government of the United States or for which the full faith and credit of the Government of the United States is pledged for the payment of principal and interest.

History.--s. 132, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.308  Loans guaranteed by the United States.--

(1)  An insurer may invest in loans insured or guaranteed as to principal and interest by the Government of the United States, or by any agency or instrumentality of the Government of the United States, to the extent of such insurance or guaranty.

(2)  An insurer may invest in student loans insured or guaranteed as to principal by the Government of the United States, or by any agency or instrumentality of the Government of the United States, to the extent of such insurance or guaranty.

History.--s. 133, ch. 59-205; s. 1, ch. 74-43; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.309  State and Canadian public obligations.--An insurer may invest in bonds, notes, warrants, and other securities not in default which are the direct obligations of any state of the United States or of the District of Columbia, or of the Government of Canada or any province thereof, or for which the full faith and credit of such state, district, government, or province has been pledged for the payment of principal and interest.

History.--s. 134, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.310  County, municipal, and district obligations.--An insurer may invest in bonds, notes, warrants, and other securities not in default of any county, district, incorporated city, or school district in any state of the United States, or the District of Columbia, or in any province of Canada, which are the direct obligations of such county, district, city, or school district and for payment of the principal and interest of which the county, district, city, or school district has lawful authority to levy taxes or make assessments.

History.--s. 135, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.311  Public improvement bonds.--An insurer may invest in bonds, notes, certificates of indebtedness, warrants, or other evidences of indebtedness which are payable from revenues or earnings specifically pledged therefor of any public toll bridge, structure, or improvement owned by any state, incorporated city, or legally constituted public corporation or commission, all within the United States or Canada, for the payment of the principal and interest of which a lawful sinking fund has been established and is being maintained and if no default on the part of the issuer in payment of principal or interest has occurred on any of its bonds, notes, warrants, or other securities within 5 years prior to the date of investment therein.

History.--s. 136, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 103, 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.312  Public utility obligations.--An insurer may invest in the bonds, notes, certificates of indebtedness, warrants, or other evidences of indebtedness which are valid obligations issued, assumed, or guaranteed by the United States or any state thereof or by any county, municipal corporation, district, political subdivision, civil division, or public instrumentality of any such government or unit thereof, or in any province of Canada, if by statute or other legal requirements such obligations are payable as to both principal and interest from revenues or earnings from the whole or any part of any utility supplying water, gas, a sewage disposal facility, electricity, or any other public service, including but not limited to a toll road or toll bridge.

History.--s. 137, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 104, 122, 809(1st), ch. 82-243; s. 81, ch. 83-216; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.313  Securities of certain agencies.--An insurer may invest in bonds, debentures, or other securities of the following agencies, whether or not such obligations are guaranteed by the Government of the United States:

(1)  The Federal National Mortgage Association, and stock thereof when acquired in connection with the sale of mortgage loans to such association.

(2)  Any federal land bank, when such securities are issued under provisions of the Act of Congress entitled the ¹"Federal Farm Loan Act" and approved July 17, 1916, and any acts amendatory or supplementary to that act.

(3)  Any federal home loan bank, when such securities are issued under provisions of the Act of Congress entitled "Federal Home Loan Bank Act" and approved July 22, 1932.

(4)  The Home Owners' Loan Corporation, created by the Act of Congress entitled "Home Owners' Loan Act of 1933" and approved June 13, 1933.

(5)  Any federal intermediate credit bank, created by the Act of Congress entitled ²"Agricultural Credits Act of March 4, 1923."

(6)  The Central Bank for Cooperatives and regional banks for cooperatives organized under the ³Farm Credit Act of 1933, or by any of such banks; and any notes, bonds, debentures, or other similar obligations, consolidated or otherwise, issued by farm credit institutions pursuant to the Farm Credit Act of 1971, Pub. L. No. 92-181.

(7)  Any other similar agency of the Government of the United States which is of similar financial quality.

History.--s. 138, ch. 59-205; s. 3, ch. 74-92; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 105, 122, 809(1st), ch. 82-243; s. 82, ch. 83-216; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

¹Note.--Repealed by Pub. L. No. 92-181 in 1971.

²Note.--Repealed by Pub. L. No. 86-230 in 1959.

³Note.--Repealed by Pub. L. No. 92-181 in 1971.

625.314  Public housing obligations.--An insurer may invest in the bonds, debentures, or other securities of public housing authorities, issued under the provisions of the Act of Congress entitled the "Housing Act of 1949" and approved July 1949; the ¹"Municipal Housing Commission Act" or the ¹"Rural Housing Commission Act," and any additional amendments, or issued by any public housing authority or agency in the United States, if such bonds, debentures, or other securities are secured by a pledge of annual contributions to be paid by the United States or any agency thereof.

History.--s. 139, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

¹Note.--Not listed in Popular Names section of U.S.C.S.

625.315  Obligations of State Board of Education.--An insurer may invest in bonds or motor vehicle anticipation certificates issued by the State Board of Education of Florida under authority of s. 18, Art. XII of the State Constitution of 1885 as adopted by s. 9(d) of Art. XII, 1968 revised constitution, and the additional provisions of s. 9(d).

History.--s. 140, ch. 59-205; s. 31, ch. 69-216; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.316  International development banks.--An insurer may invest in obligations issued, assumed, or guaranteed by the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, or the International Finance Corporation.

History.--s. 141, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 106, 122, 809(1st), ch. 82-243; s. 2, ch. 84-166; ss. 51, 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.317  Corporate bonds and debentures.--An insurer may invest in bonds, notes, or other interest-bearing or interest-accruing obligations of any solvent corporation organized under the laws of the United States or Canada or under the laws of any state, the District of Columbia, any territory or possession of the United States, or any Province of Canada or in bonds or notes issued by the Citizens Property Insurance Corporation as authorized by s. 627.351(6).

History.--s. 142, ch. 59-205; s. 2, ch. 76-96; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 107, 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 882, ch. 2003-261.

625.318  Religious institution obligations.--An insurer may invest in secured obligations of duly constituted churches and of church holding companies.

History.--s. 143, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 108, 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.319  Equipment trust certificates.--An insurer may invest in equipment trust obligations or certificates adequately secured and evidencing an interest in transportation equipment, wholly or in part within the United States, and the right to receive determined portions of rental, purchase, or other fixed obligatory payments for the use or purchase of such transportation equipment.

History.--s. 144, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.320  Building and loan or savings and loan association accounts.--An insurer may invest in share or saving accounts of savings and loan associations or building and loan associations.

History.--s. 145, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; s. 1, ch. 78-64; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.321  Policy loans.--A life insurer may lend to its policyholder, upon pledge of the policy as collateral security, any sum not exceeding the cash loan value of the policy; or may lend against pledge or assignment of any of its supplementary contracts or other contracts or obligations, so long as the loan is adequately secured by such pledge or assignment. Loans so made are eligible investments of the insurer.

History.--s. 146, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.322  Collateral loans.--An insurer may invest in loans with a maturity not in excess of 12 years from the date thereof which are secured by the pledge of assets permitted by part I of this chapter. Loans made pursuant to this section shall not be admitted as an asset when it is considered probable that any portion of the amounts due under the contractual terms of the loan will not be collected. Collateral loans reported in financial statements filed with the office shall not exceed the value of the collateral held by the company.

History.--s. 147, ch. 59-205; s. 3, ch. 70-188; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 20, ch. 2001-213; s. 883, ch. 2003-261.

625.323  Ship loans.--An insurer may invest in:

(1)  Bonds, notes, or other evidences of indebtedness which are secured by mortgages on barges, tugboats, ships, or other shipping vessels if payment of such indebtedness or part thereof is insured by the Secretary of Commerce under the terms of the Federal Ship Mortgage Insurance Act, as amended.

(2)  Bonds, notes, or other evidences of indebtedness which are secured by mortgages on barges, tugboats, ships, or other shipping vessels which are under lease or charter party to a solvent institution whose fixed interest obligations, if any, would be eligible investments under s. 625.317 (corporate obligations), and if such lease or charter party is assigned as additional security for such bonds, notes, or other evidences of indebtedness.

History.--s. 148, ch. 59-205; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429.

625.324  Corporate stocks.--An insurer may invest in stocks, common or preferred, of any corporation created or existing under the laws of the United States or of any state or Canada or any province thereof. An insurer may invest in stocks, common or preferred, of any corporation created or existing under the laws of any foreign country other than Canada if such stocks are listed and traded on a national securities exchange in the United States or, in the alternative, if such investment in stocks of any corporation created or existing under the laws of any foreign country are first approved by the office. Nothing in this section shall apply to qualifying investments made by an insurer in a foreign country under authority of s. 625.326.

History.--s. 149, ch. 59-205; s. 4, ch. 70-188; s. 1, ch. 70-439; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 109, 122, 809(1st), ch. 82-243; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 884, ch. 2003-261.

625.325  Investments in subsidiaries and related corporations.--

(1)  AUTHORIZATION.--Any insurer, either by itself or in cooperation with one or more persons, may organize or acquire one or more subsidiaries, subject to the limitation of subsection (2). Such subsidiaries may conduct any kind of business, and their authority to do so shall not be limited by reason of the fact that they are subsidiaries of an insurer.

(2)  ADDITIONAL INVESTMENT AUTHORITY.--In addition to investments in common stock, preferred stock, debt obligations, and other securities permitted under all other sections of this chapter, an insurer may also invest and maintain investments in common stock, preferred stock, debt obligations, and other securities of one or more subsidiaries or related corporations. At the time any such new or additional investment is made, the sum of the insurer's cost of such investment and the aggregate values as permitted by s. 625.151(3) of all existing investments in such corporations shall not exceed the lesser of:

(a)  Ten percent of the insurer's admitted assets; or

(b)  Fifty percent of the insurer's surplus as to policyholders in excess of the minimum surplus as to policyholders required to be maintained by the insurer under this code.

(3)  DEFINITIONS.--For purposes of this section:

(a)  "Subsidiary" means a corporation in which the insurer holds, directly or indirectly through an intermediary, sufficient stock to give the insurer a controlling interest.

(b)1.  "Related corporation" means a corporation in which the insurer's parent corporation holds, directly or indirectly through an intermediary, sufficient stock to give the insurer's parent corporation a controlling interest.

2.  As to a limited reciprocal, "related corporation" means any corporation that is a member of the limited reciprocal.

(4)  DEBT OBLIGATIONS.--Debt obligations, other than mortgage loans, made under the authority of this section must meet amortization requirements in accordance with the latest edition of the publication "Valuation of Securities" by the National Association of Insurance Commissioners or its successor organization; provided that such amortization methodology is substantially similar to the methodology used by the National Association of Insurance Commissioners in its July 1, 2002, edition of such publication.

(5)  INVESTMENT INCLUDES LOANS.--For purposes of this section, an insurer's investment in a subsidiary or related corporation shall be deemed to include all sums loaned to such subsidiary or related corporation.

(6)  CONSTRUCTION.--Nothing in this section shall be construed to expand, extend, or otherwise enlarge the provisions of chapter 687.

History.--s. 150, ch. 59-205; s. 1, ch. 65-17; ss. 13, 35, ch. 69-106; s. 5, ch. 70-188; s. 3, ch. 76-168; s. 1, ch. 77-457; ss. 2, 3, ch. 81-318; ss. 110, 122, 809(1st), ch. 82-243; s. 46, ch. 89-360; s. 8, ch. 90-119; ss. 187, 188, ch. 91-108; s. 4, ch. 91-429; s. 885, ch. 2003-261.

625.3255  Capital participation instrument.--An insurer may invest in any capital partici