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 domestic title insurer shall establish, segregate, and maintain a guaranty fund or unearned premium reserve as provided in this section. The sums to be reserved for unearned premiums on title guarantees and policies shall be considered and constitute unearned portions of the original premiums and shall be charged as a reserve liability of the insurer in determining its financial condition. Such reserved funds shall be withdrawn from the use of the insurer for its general purposes, impressed with a trust in favor of the holders of title guarantees and policies, and held available for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. This section does not preclude the insurer from investing such reserve in investments authorized by law, and the income from such investments shall be included in the general income of the insurer and may be used by such insurer for any lawful purpose.
(1) For an unearned premium reserve established on or after July 1, 1999, such reserve must be in an amount at least equal to the sum of paragraphs (a), (b), and (d) for title insurers holding less than $50 million in surplus as to policyholders as of the previous year end and the sum of paragraphs (c) and (d) for title insurers holding $50 million or more in surplus as to policyholders as of the previous year end or title insurers that are members of an insurance holding company system holding $1 billion or more in surplus as to policyholders and a superior, excellent, exceptional, or equivalent financial strength rating by a rating agency acceptable to the office:
(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 state law in effect at the time the associated premiums were written or assumed and as amended before 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) On or after January 1, 2014, for title insurers holding $50 million or more in surplus as to policyholders as of the previous year end or title insurers that are members of an insurance holding company system holding $1 billion or more in surplus as to policyholders and a superior, excellent, exceptional, or equivalent financial strength rating by a rating agency acceptable to the office, a minimum of 6.5 percent of the total of the following:
1. Direct premiums written; and
2. Premiums for reinsurance assumed, plus other income, less premiums for reinsurance ceded as displayed in Schedule P of the title insurer’s most recent annual statement filed with the office with such reserve being subsequently released as provided in subsection (2). Title insurers with less than $50 million in surplus as to policyholders and that are not members of an insurance holding company system with $1 billion or more in surplus as to policyholders and a superior, excellent, exceptional, or equivalent financial strength rating by a rating agency acceptable to the office must continue to record unearned premium reserve in accordance with paragraph (b).
(d) An additional amount, if deemed necessary by a qualified actuary, to 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, incurred but not reported claims, and unallocated loss adjustment expenses. The actuarial opinion must conform to the annual statement instructions for title insurers adopted by the National Association of Insurance Commissioners and 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 not calculated as of any date before 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) With respect to reserves established in accordance with:
(a) Paragraph (1)(a), the domestic title insurer shall release the reserve over the subsequent 20 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) 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 the subsequent 20 years as provided in this paragraph. The insurer shall release 30 percent of the initial sum during the year following 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 following 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) Paragraph (1)(c), the unearned premium for policies written or title liability assumed during a particular calendar year shall be earned, and released from reserve, over the subsequent 20 years at an amortization rate not to exceed the formula in this paragraph. The insurer shall release 35 percent of the initial sum during the year following 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 reserve released during the year following the year the premium was written or assumed, a percentage of the initial sum as follows: 15 percent during each year of the next succeeding 2 years, 10 percent during the next succeeding year, 3 percent during each of the next succeeding 3 years, 2 percent during each of the succeeding 3 years, and 1 percent during each of the next succeeding 10 years.
(d) Paragraph (1)(d), any additional amount established in any calendar year shall be released in the years subsequent to its establishment as provided in paragraph (c), 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 (c) 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) If a title insurer that is organized under the laws of another state transfers its domicile to this state, the insurer must calculate an adjusted statutory or unearned premium reserve as of the effective date of its redomestication to this state. The adjusted statutory or unearned premium reserve must be calculated as if subsections (1) and (2) had been in effect as to the insurer’s foreign statutory premium reserve for all years beginning 20 years before the date of redomestication. For purposes of calculating the adjusted statutory or unearned premium reserve, the balance of the insurer’s foreign statutory premium reserve as of the date 20 years before the redomestication shall be $0. If the adjusted statutory or unearned premium reserve exceeds the aggregate amount set aside for statutory or unearned premium in the insurer’s annual statement on file with the office on the date of redomestication, the insurer must, out of the total charges for policies of title insurance, increase its statutory or unearned premium reserve by an amount equal to one-sixth of that excess in each of the following 6 years, beginning with the calendar year that includes the redomestication, until the entire excess has been added. If the adjusted statutory or unearned premium reserve is less than the aggregate amount set aside for statutory or unearned premiums in the insurer’s annual statement on file with the office on the date of redomestication, the insurer may release the excess into surplus.
(4) 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 paragraph (1)(d).
(5) A domestic title insurer is not required to record a separate bulk reserve. However, if a separate bulk reserve is recorded, the statutory premium reserve must be reduced by the amount recorded for such bulk reserve. A domestic title insurer must obtain approval from the office before using or recording a bulk reserve.
(6) As used in this section, the term:
(a) “Bulk reserve” means provision for subsequent development on known claims.
(b) “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.
(c) “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 before filing its annual statement, the insurer must request 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.
(d) “Single risk” means the insured amount of a 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 policies. A 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; s. 2, ch. 2014-112; s. 2, ch. 2014-132; s. 1, ch. 2016-57; s. 38, ch. 2017-3.
