Florida Regulations 69O-144.006: Credit for Reinsurance: Reinsurers Maintaining Trust Funds
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(1) Trusteed Reinsurers. Pursuant to Section 624.610(3)(c)1., F.S., the Office shall allow credit for reinsurance ceded by a domestic insurer to an assuming insurer which, as of any date on which statutory financial statement credit for reinsurance is claimed, and thereafter for so long as credit for reinsurance is claimed, maintains a trust fund in an amount prescribed below in a qualified financial institution as defined in Section 624.610(6)(b), F.S., for the payment of the valid claims of its U.S. domiciled ceding insurers, their assigns and successors in interest. Such reinsurers shall be referred to as “”trusteed reinsurers”” if approved by the Office.
(a)1. An assuming insurer seeking trusteed reinsurer status in this state, pursuant to Section 624.610(3)(c), F.S., and this rule, shall file an application under the standards provided in Fl. Admin. Code R. 69O-144.002(3)(a), and in this rule.
2. An assuming insurer seeking to maintain its trusteed reinsurer status in this state shall make the additional filings required by Fl. Admin. Code R. 69O-144.002(3)(b), and shall continue to meet the applicable requirements of this rule.
(b) The following requirements apply to the following categories of assuming insurer:
1.a. The trust fund for a single assuming insurer shall consist of funds in trust in an amount not less than the assuming insurer’s liabilities attributable to reinsurance ceded by U.S. domiciled insurers; and,
b. The assuming insurer shall maintain a trusteed surplus of not less than $20 million, except as provided in sub-subparagraph (1)(b)1.c. of this subsection.
c. At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years, the insurance regulator with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of U.S. ceding insurers, policyholders and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates and the effect of the surplus requirements on the assuming insurer’s liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than thirty percent (30%) of the assuming insurer’s liabilities attributable to reinsurance ceded by U.S. ceding insurers covered by the trust.
2.a. In the case of a group including incorporated and individual unincorporated underwriters, the trust fund shall consist of:
(I) For reinsurance ceded under reinsurance agreements with an inception, amendment, or renewal date on or after August 1, 1995, a trusteed account in an amount not less than the group’s several liabilities attributable to business ceded by United States domiciled ceding insurers to any member of the group;
(II) For reinsurance ceded under reinsurance agreements with an inception date on or before July 31, 1995, and not amended or renewed after that date, notwithstanding the other provisions of this rule, funds in trust in an amount not less than the group’s several insurance and reinsurance liabilities attributable to business written in the United States; and,
(III) In addition to these trusts, the group shall maintain a trusteed surplus of which $100 million shall be held jointly for the benefit of the U.S. domiciled ceding insurers of any member of the group for all the years of account.
b.(I) The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of regulation and solvency control by the group’s domiciliary regulator as are the unincorporated members.
(II) The group shall, within ninety (90) days after its financial statements are due to be filed with the group’s domiciliary regulator, provide to the Office:
(A) An annual certification by the group’s domiciliary regulator of the solvency of each underwriter member of the group; or
(B) If a certification is unavailable, a financial statement, prepared by independent public accountants, of each underwriter member of the group.
(c)1.a. Credit for reinsurance shall not be granted unless the form of the trust and any amendments to the trust have been approved by either the insurance regulator of the state where the trust is domiciled or the insurance regulator of another state who, pursuant to the terms of the trust instrument, has accepted responsibility for regulatory oversight of the trust.
b. The form of the trust and any trust amendments also shall be filed with the insurance regulator of every state in which the ceding insurer beneficiaries of the trust are domiciled.
c. The trust instrument shall provide that:
(I) Contested claims shall be valid and enforceable out of funds in trust to the extent remaining unsatisfied thirty (30) days after entry of the final order of any court of competent jurisdiction in the United States;
(II) Legal title to the assets of the trust shall be vested in the trustee for the benefit of the grantor‘s U.S. ceding insurers, their assigns and successors in interest;
(III) The trust shall be subject to examination as determined by the Office;
(IV) The trust shall remain in effect for as long as the assuming insurer, or any member or former member of a group of insurers, shall have outstanding obligations under reinsurance agreements subject to the trust; and,
(V) No later than February 28 of each year, the trustee of the trust shall report to the Office in writing setting forth the balance in the trust and listing the trust’s investments at the preceding year-end, and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the following December 31.
(VI) Any amendment to the trust shall be filed with the Office no later than thirty (30) days after approval of the amendment by the insurance regulator with principal regulatory oversight of the trust.
2.a. Notwithstanding any other provisions in the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by this subsection, or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the insurance regulator with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the insurance regulator with regulatory oversight over the trust or other designated receiver all of the assets of the trust fund.
b. The assets shall be distributed by and claims shall be filed with and valued by the insurance regulator with regulatory oversight over the trust in accordance with the laws of the state in which the trust is domiciled applicable to the liquidation of domestic insurance companies.
c. If the insurance regulator with regulatory oversight over the trust determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the U.S. beneficiaries of the trust, the insurance regulator with regulatory oversight over the trust shall return the assets, or any part thereof, to the trustee for distribution in accordance with the trust agreement.
d. The grantor shall waive any right otherwise available to it under U.S. law that is inconsistent with this provision.
(d) For purposes of this rule, the term “”liabilities”” shall mean the assuming insurer’s gross liabilities attributable to reinsurance ceded by U.S. domiciled insurers that are not otherwise secured by acceptable means, and, shall include:
1. For business ceded by domestic insurers authorized to write accident and health, and property and casualty insurance:
a. Losses and allocated loss expenses paid by the ceding insurer, recoverable from the assuming insurer;
b. Reserves for losses reported and outstanding;
c. Reserves for losses incurred but not reported;
d. Reserves for allocated loss expenses; and,
e. Unearned premiums.
2. For business ceded by domestic insurers authorized to write life, health and annuity insurance:
a. Aggregate reserves for life policies and contracts net of policy loans and net due and deferred premiums;
b. Aggregate reserves for accident and health policies;
c. Deposit funds and other liabilities without life or disability contingencies; and,
d. Liabilities for policy and contract claims.
(e) Assets deposited in the trust and the trusteed surplus of a single assuming insurer shall consist of assets of a quality and limitation substantially similar to that required in Part II of Florida Statutes Chapter 625, and shall be valued according to their fair market value.
(f) Assets deposited in the trust and the trusteed surplus of a group including incorporated and individual unincorporated underwriters established to meet the requirements of Section 624.610(3)(c)3.b., F.S., shall be of the type and subject to limitations of the following:
1. Assets deposited in the trusts established pursuant to Section 624.610(3)(c)3.b., F.S., and this rule shall be valued according to their fair market value and shall consist only of cash in U.S. dollars, certificates of deposit issued by a U.S. financial institution as defined in Section 624.610(6)(a), F.S., clean irrevocable, unconditional and “”evergreen”” letters of credit issued or confirmed by a qualified U.S. financial institution, as defined in Section 624.610(6)(a), F.S., and investments of the type specified in this subsection.
2. Investments in or issued by an entity controlling, controlled by or under common control with either the grantor or beneficiary of the trust shall not exceed five percent (5%) of total investments.
3. No more than ten percent (10%) of the total of the investments in the trust may be securities denominated in foreign currencies. For purposes of applying the preceding sentence, a depository receipt denominated in U.S. dollars and representing rights conferred by a foreign security shall be classified as a foreign investment denominated in a foreign currency.
4. No more than twenty percent (20%) of the total of the investments in the trust may be foreign investments authorized under sub-sub-subparagraph (1)(f)5.a.(V), sub-subparagraph (1)(f)5.c., sub-sub-subparagraph (1)(f)5.f.(II) or sub-subparagraph (1)(f)5.g. of this subsection.
5. The assets of a trust established to satisfy the requirements of subsection (1) shall be invested only as follows:
a. Government obligations that are not in default as to principal or interest, that are valid and legally authorized and that are issued, assumed or guaranteed by:
(I) The United States or by any agency or instrumentality of the United States;
(II) A state of the United States;
(III) A territory, possession or other governmental unit of the United States;
(IV) An agency or instrumentality of a governmental unit referred to in sub-subparagraphs (1)(f)5.(I) and (II) of this paragraph, if the obligations shall be by law (statutory or otherwise) payable, as to both principal and interest, from taxes levied or by law required to be levied or from adequate special revenues pledged or otherwise appropriated or by law required to be provided for making these payments, but shall not be obligations eligible for investment under this paragraph if payable solely out of special assessments on properties benefited by local improvements; or
(V) The government of any other country that is a member of the Organization for Economic Cooperation and Development and whose government obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC;
b. Obligations that are issued in the United States, or that are dollar denominated and issued in a non-U.S. market, by a solvent U.S. institution (other than an insurance company) or that are assumed or guaranteed by a solvent U.S. institution (other than an insurance company) and that are not in default as to principal or interest if the obligations:
(I) Are rated A or higher (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the NAIC, or if not so rated, are similar in structure and other material respects to other obligations of the same institution that are so rated;
(II) Are insured by at least one authorized insurer (other than the investing insurer or a parent, subsidiary or affiliate of the investing insurer) licensed to insure obligations in this state and, after considering the insurance, are rated AAA (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the NAIC; or
(III) Have been designated as Class One or Class Two by the Securities Valuation Office of the NAIC;
c. Obligations issued, assumed or guaranteed by a solvent non-U.S. institution chartered in a country that is a member of the Organization for Economic Cooperation and Development or obligations of U.S. corporations issued in a non-U.S. currency, provided that in either case the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC;
d. An investment made pursuant to the provisions of sub-subparagraph (1)(f)5.a., b. or c. of this subsection, shall be subject to the following additional limitations:
(I) An investment in or loan upon the obligations of an institution other than an institution that issues mortgage-related securities shall not exceed five percent (5%) of the assets of the trust;
(II) An investment in any one mortgage-related security shall not exceed five percent (5%) of the assets of the trust;
(III) The aggregate total investment in mortgage-related securities shall not exceed twenty-five percent (25%) of the assets of the trust; and,
(IV) Preferred or guaranteed shares issued or guaranteed by a solvent U.S. institution are permissible investments if all of the institution’s obligations are eligible as investments under sub-subparagraphs b.(I) and b.(II) of this subsection, but shall not exceed two percent (2%) of the assets of the trust.
e. As used in this chapter:
(I) “”Mortgage-related security”” means an obligation that is rated AA or higher (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the NAIC and that either:
(A) Represents ownership of one or more promissory notes or certificates of interest or participation in the notes (including any rights designed to assure servicing of, or the receipt or timeliness of receipt by the holders of the notes, certificates, or participation of amounts payable under, the notes, certificates or participation), that:
(i) Are directly secured by a first lien on a single parcel of real estate, including stock allocated to a dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling or mixed residential and commercial structure, or on a residential manufactured home as defined in 42 U.S.C. § 5402(6), whether the manufactured home is considered real or personal property under the laws of the state in which it is located; and,
(ii) Were originated by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution that is supervised and examined by a federal or state housing authority, or by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to 12 U.S.C. sections 1709 and 1715b, or, where the notes involve a lien on the manufactured home, by an institution or by a financial institution approved for insurance by the Secretary of Housing and Urban Development pursuant to 12 U.S.C. § 1703; or
(B) Is secured by one or more promissory notes or certificates of deposit or participations in the notes (with or without recourse to the insurer of the notes) and, by its terms, provides for payments of principal in relation to payments, or reasonable projections of payments, or notes meeting the requirements of sub-sub-sub-subparagraphs (1)(f)5.e.(A)(i) and (A)(ii) of this subsection;
(II) “”Promissory note,”” when used in connection with a manufactured home, shall also include a loan, advance or credit sale as evidenced by a retail installment sales contract or other instrument.
f. Equity interests:
(I) Investments in common shares or partnership interests of a solvent U.S. institution are permissible if:
(A) Its obligations and preferred shares, if any, are eligible as investments under this subsection; and,
(B) The equity interests of the institution (except an insurance company) are registered on a national securities exchange as provided in the Securities Exchange Act of 1934, 15 U.S.C. sections 78a to 78kk or otherwise registered pursuant to that Act, and if otherwise registered, price quotations for them are furnished through a nationwide automated quotations system approved by the National Association of Securities Dealers, Inc. A trust shall not invest in equity interests under this paragraph an amount exceeding one percent (1%) of the assets of the trust even though the equity interests are not so registered and are not issued by an insurance company;
(II) Investments in common shares of a solvent institution organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development, if:
(A) All its obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC; and,
(B) The equity interests of the institution are registered on a securities exchange regulated by the government of a country that is a member of the Organization for Economic Cooperation and Development;
(III) An investment in or loan upon any one institution’s outstanding equity interests shall not exceed one percent (1%) of the assets of the trust. The cost of an investment in equity interests made pursuant to this paragraph, when added to the aggregate cost of other investments in equity interests then held pursuant to this paragraph, shall not exceed ten percent (10%) of the assets in the trust;
g. Obligations issued, assumed or guaranteed by a multinational development bank, provided the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC.
h. Letters of Credit.
(I) In order for a letter of credit to qualify in funding the trust, the trustee shall have the right and the obligation pursuant to the deed of trust or some other binding agreement (as duly approved by the Office) to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiaries of the trust if the letter of credit will otherwise expire without being renewed or replaced.
(II) The trust agreement shall provide that the trustee shall be liable for its negligence, willful misconduct or lack of good faith. The failure of the trustee to draw against the letter of credit in circumstances where such draw would be required shall be deemed to be negligence and willful misconduct.
(2) Certified reinsurers involved with trust funds should refer to subsection 69O-144.007(10), F.A.C. Insurers dealing with trust funds that do not meet the requirements of this rule should refer to Fl. Admin. Code R. 69O-144.009
Rulemaking Authority 624.308(1), 624.610(4), (15) FS. Law Implemented 624.307(1), 624.610 FS. History-New 9-13-22.
Terms Used In Florida Regulations 69O-144.006
- Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Contract: A legal written agreement that becomes binding when signed.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Deed: The legal instrument used to transfer title in real property from one person to another.
- Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
- Grantor: The person who establishes a trust and places property into it.
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Lien: A claim against real or personal property in satisfaction of a debt.
- Mortgagee: The person to whom property is mortgaged and who has loaned the money.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Oversight: Committee review of the activities of a Federal agency or program.
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Personal property: All property that is not real property.
- Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
- Trustee: A person or institution holding and administering property in trust.
2. An assuming insurer seeking to maintain its trusteed reinsurer status in this state shall make the additional filings required by Fl. Admin. Code R. 69O-144.002(3)(b), and shall continue to meet the applicable requirements of this rule.
(b) The following requirements apply to the following categories of assuming insurer:
1.a. The trust fund for a single assuming insurer shall consist of funds in trust in an amount not less than the assuming insurer’s liabilities attributable to reinsurance ceded by U.S. domiciled insurers; and,
b. The assuming insurer shall maintain a trusteed surplus of not less than $20 million, except as provided in sub-subparagraph (1)(b)1.c. of this subsection.
c. At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least three full years, the insurance regulator with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of U.S. ceding insurers, policyholders and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including when applicable the lines of business involved, the stability of the incurred loss estimates and the effect of the surplus requirements on the assuming insurer’s liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than thirty percent (30%) of the assuming insurer’s liabilities attributable to reinsurance ceded by U.S. ceding insurers covered by the trust.
2.a. In the case of a group including incorporated and individual unincorporated underwriters, the trust fund shall consist of:
(I) For reinsurance ceded under reinsurance agreements with an inception, amendment, or renewal date on or after August 1, 1995, a trusteed account in an amount not less than the group’s several liabilities attributable to business ceded by United States domiciled ceding insurers to any member of the group;
(II) For reinsurance ceded under reinsurance agreements with an inception date on or before July 31, 1995, and not amended or renewed after that date, notwithstanding the other provisions of this rule, funds in trust in an amount not less than the group’s several insurance and reinsurance liabilities attributable to business written in the United States; and,
(III) In addition to these trusts, the group shall maintain a trusteed surplus of which $100 million shall be held jointly for the benefit of the U.S. domiciled ceding insurers of any member of the group for all the years of account.
b.(I) The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of regulation and solvency control by the group’s domiciliary regulator as are the unincorporated members.
(II) The group shall, within ninety (90) days after its financial statements are due to be filed with the group’s domiciliary regulator, provide to the Office:
(A) An annual certification by the group’s domiciliary regulator of the solvency of each underwriter member of the group; or
(B) If a certification is unavailable, a financial statement, prepared by independent public accountants, of each underwriter member of the group.
(c)1.a. Credit for reinsurance shall not be granted unless the form of the trust and any amendments to the trust have been approved by either the insurance regulator of the state where the trust is domiciled or the insurance regulator of another state who, pursuant to the terms of the trust instrument, has accepted responsibility for regulatory oversight of the trust.
b. The form of the trust and any trust amendments also shall be filed with the insurance regulator of every state in which the ceding insurer beneficiaries of the trust are domiciled.
c. The trust instrument shall provide that:
(I) Contested claims shall be valid and enforceable out of funds in trust to the extent remaining unsatisfied thirty (30) days after entry of the final order of any court of competent jurisdiction in the United States;
(II) Legal title to the assets of the trust shall be vested in the trustee for the benefit of the grantor‘s U.S. ceding insurers, their assigns and successors in interest;
(III) The trust shall be subject to examination as determined by the Office;
(IV) The trust shall remain in effect for as long as the assuming insurer, or any member or former member of a group of insurers, shall have outstanding obligations under reinsurance agreements subject to the trust; and,
(V) No later than February 28 of each year, the trustee of the trust shall report to the Office in writing setting forth the balance in the trust and listing the trust’s investments at the preceding year-end, and shall certify the date of termination of the trust, if so planned, or certify that the trust shall not expire prior to the following December 31.
(VI) Any amendment to the trust shall be filed with the Office no later than thirty (30) days after approval of the amendment by the insurance regulator with principal regulatory oversight of the trust.
2.a. Notwithstanding any other provisions in the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by this subsection, or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the insurance regulator with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the insurance regulator with regulatory oversight over the trust or other designated receiver all of the assets of the trust fund.
b. The assets shall be distributed by and claims shall be filed with and valued by the insurance regulator with regulatory oversight over the trust in accordance with the laws of the state in which the trust is domiciled applicable to the liquidation of domestic insurance companies.
c. If the insurance regulator with regulatory oversight over the trust determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the U.S. beneficiaries of the trust, the insurance regulator with regulatory oversight over the trust shall return the assets, or any part thereof, to the trustee for distribution in accordance with the trust agreement.
d. The grantor shall waive any right otherwise available to it under U.S. law that is inconsistent with this provision.
(d) For purposes of this rule, the term “”liabilities”” shall mean the assuming insurer’s gross liabilities attributable to reinsurance ceded by U.S. domiciled insurers that are not otherwise secured by acceptable means, and, shall include:
1. For business ceded by domestic insurers authorized to write accident and health, and property and casualty insurance:
a. Losses and allocated loss expenses paid by the ceding insurer, recoverable from the assuming insurer;
b. Reserves for losses reported and outstanding;
c. Reserves for losses incurred but not reported;
d. Reserves for allocated loss expenses; and,
e. Unearned premiums.
2. For business ceded by domestic insurers authorized to write life, health and annuity insurance:
a. Aggregate reserves for life policies and contracts net of policy loans and net due and deferred premiums;
b. Aggregate reserves for accident and health policies;
c. Deposit funds and other liabilities without life or disability contingencies; and,
d. Liabilities for policy and contract claims.
(e) Assets deposited in the trust and the trusteed surplus of a single assuming insurer shall consist of assets of a quality and limitation substantially similar to that required in Part II of Florida Statutes Chapter 625, and shall be valued according to their fair market value.
(f) Assets deposited in the trust and the trusteed surplus of a group including incorporated and individual unincorporated underwriters established to meet the requirements of Section 624.610(3)(c)3.b., F.S., shall be of the type and subject to limitations of the following:
1. Assets deposited in the trusts established pursuant to Section 624.610(3)(c)3.b., F.S., and this rule shall be valued according to their fair market value and shall consist only of cash in U.S. dollars, certificates of deposit issued by a U.S. financial institution as defined in Section 624.610(6)(a), F.S., clean irrevocable, unconditional and “”evergreen”” letters of credit issued or confirmed by a qualified U.S. financial institution, as defined in Section 624.610(6)(a), F.S., and investments of the type specified in this subsection.
2. Investments in or issued by an entity controlling, controlled by or under common control with either the grantor or beneficiary of the trust shall not exceed five percent (5%) of total investments.
3. No more than ten percent (10%) of the total of the investments in the trust may be securities denominated in foreign currencies. For purposes of applying the preceding sentence, a depository receipt denominated in U.S. dollars and representing rights conferred by a foreign security shall be classified as a foreign investment denominated in a foreign currency.
4. No more than twenty percent (20%) of the total of the investments in the trust may be foreign investments authorized under sub-sub-subparagraph (1)(f)5.a.(V), sub-subparagraph (1)(f)5.c., sub-sub-subparagraph (1)(f)5.f.(II) or sub-subparagraph (1)(f)5.g. of this subsection.
5. The assets of a trust established to satisfy the requirements of subsection (1) shall be invested only as follows:
a. Government obligations that are not in default as to principal or interest, that are valid and legally authorized and that are issued, assumed or guaranteed by:
(I) The United States or by any agency or instrumentality of the United States;
(II) A state of the United States;
(III) A territory, possession or other governmental unit of the United States;
(IV) An agency or instrumentality of a governmental unit referred to in sub-subparagraphs (1)(f)5.(I) and (II) of this paragraph, if the obligations shall be by law (statutory or otherwise) payable, as to both principal and interest, from taxes levied or by law required to be levied or from adequate special revenues pledged or otherwise appropriated or by law required to be provided for making these payments, but shall not be obligations eligible for investment under this paragraph if payable solely out of special assessments on properties benefited by local improvements; or
(V) The government of any other country that is a member of the Organization for Economic Cooperation and Development and whose government obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC;
b. Obligations that are issued in the United States, or that are dollar denominated and issued in a non-U.S. market, by a solvent U.S. institution (other than an insurance company) or that are assumed or guaranteed by a solvent U.S. institution (other than an insurance company) and that are not in default as to principal or interest if the obligations:
(I) Are rated A or higher (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the NAIC, or if not so rated, are similar in structure and other material respects to other obligations of the same institution that are so rated;
(II) Are insured by at least one authorized insurer (other than the investing insurer or a parent, subsidiary or affiliate of the investing insurer) licensed to insure obligations in this state and, after considering the insurance, are rated AAA (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the NAIC; or
(III) Have been designated as Class One or Class Two by the Securities Valuation Office of the NAIC;
c. Obligations issued, assumed or guaranteed by a solvent non-U.S. institution chartered in a country that is a member of the Organization for Economic Cooperation and Development or obligations of U.S. corporations issued in a non-U.S. currency, provided that in either case the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC;
d. An investment made pursuant to the provisions of sub-subparagraph (1)(f)5.a., b. or c. of this subsection, shall be subject to the following additional limitations:
(I) An investment in or loan upon the obligations of an institution other than an institution that issues mortgage-related securities shall not exceed five percent (5%) of the assets of the trust;
(II) An investment in any one mortgage-related security shall not exceed five percent (5%) of the assets of the trust;
(III) The aggregate total investment in mortgage-related securities shall not exceed twenty-five percent (25%) of the assets of the trust; and,
(IV) Preferred or guaranteed shares issued or guaranteed by a solvent U.S. institution are permissible investments if all of the institution’s obligations are eligible as investments under sub-subparagraphs b.(I) and b.(II) of this subsection, but shall not exceed two percent (2%) of the assets of the trust.
e. As used in this chapter:
(I) “”Mortgage-related security”” means an obligation that is rated AA or higher (or the equivalent) by a securities rating agency recognized by the Securities Valuation Office of the NAIC and that either:
(A) Represents ownership of one or more promissory notes or certificates of interest or participation in the notes (including any rights designed to assure servicing of, or the receipt or timeliness of receipt by the holders of the notes, certificates, or participation of amounts payable under, the notes, certificates or participation), that:
(i) Are directly secured by a first lien on a single parcel of real estate, including stock allocated to a dwelling unit in a residential cooperative housing corporation, upon which is located a dwelling or mixed residential and commercial structure, or on a residential manufactured home as defined in 42 U.S.C. § 5402(6), whether the manufactured home is considered real or personal property under the laws of the state in which it is located; and,
(ii) Were originated by a savings and loan association, savings bank, commercial bank, credit union, insurance company, or similar institution that is supervised and examined by a federal or state housing authority, or by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to 12 U.S.C. sections 1709 and 1715b, or, where the notes involve a lien on the manufactured home, by an institution or by a financial institution approved for insurance by the Secretary of Housing and Urban Development pursuant to 12 U.S.C. § 1703; or
(B) Is secured by one or more promissory notes or certificates of deposit or participations in the notes (with or without recourse to the insurer of the notes) and, by its terms, provides for payments of principal in relation to payments, or reasonable projections of payments, or notes meeting the requirements of sub-sub-sub-subparagraphs (1)(f)5.e.(A)(i) and (A)(ii) of this subsection;
(II) “”Promissory note,”” when used in connection with a manufactured home, shall also include a loan, advance or credit sale as evidenced by a retail installment sales contract or other instrument.
f. Equity interests:
(I) Investments in common shares or partnership interests of a solvent U.S. institution are permissible if:
(A) Its obligations and preferred shares, if any, are eligible as investments under this subsection; and,
(B) The equity interests of the institution (except an insurance company) are registered on a national securities exchange as provided in the Securities Exchange Act of 1934, 15 U.S.C. sections 78a to 78kk or otherwise registered pursuant to that Act, and if otherwise registered, price quotations for them are furnished through a nationwide automated quotations system approved by the National Association of Securities Dealers, Inc. A trust shall not invest in equity interests under this paragraph an amount exceeding one percent (1%) of the assets of the trust even though the equity interests are not so registered and are not issued by an insurance company;
(II) Investments in common shares of a solvent institution organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development, if:
(A) All its obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC; and,
(B) The equity interests of the institution are registered on a securities exchange regulated by the government of a country that is a member of the Organization for Economic Cooperation and Development;
(III) An investment in or loan upon any one institution’s outstanding equity interests shall not exceed one percent (1%) of the assets of the trust. The cost of an investment in equity interests made pursuant to this paragraph, when added to the aggregate cost of other investments in equity interests then held pursuant to this paragraph, shall not exceed ten percent (10%) of the assets in the trust;
g. Obligations issued, assumed or guaranteed by a multinational development bank, provided the obligations are rated A or higher, or the equivalent, by a rating agency recognized by the Securities Valuation Office of the NAIC.
h. Letters of Credit.
(I) In order for a letter of credit to qualify in funding the trust, the trustee shall have the right and the obligation pursuant to the deed of trust or some other binding agreement (as duly approved by the Office) to immediately draw down the full amount of the letter of credit and hold the proceeds in trust for the beneficiaries of the trust if the letter of credit will otherwise expire without being renewed or replaced.
(II) The trust agreement shall provide that the trustee shall be liable for its negligence, willful misconduct or lack of good faith. The failure of the trustee to draw against the letter of credit in circumstances where such draw would be required shall be deemed to be negligence and willful misconduct.
(2) Certified reinsurers involved with trust funds should refer to subsection 69O-144.007(10), F.A.C. Insurers dealing with trust funds that do not meet the requirements of this rule should refer to Fl. Admin. Code R. 69O-144.009
Rulemaking Authority 624.308(1), 624.610(4), (15) FS. Law Implemented 624.307(1), 624.610 FS. History-New 9-13-22.