SB 886 - This act subjects Chapter 383 malpractice associations to stricter insurance regulations.383 ASSESSMENTS - Under the terms of this act, 383 malpractice association assessments are broken into 4 types of assessments: initial assessments, regular assessments, operating assessments, and special assessments. A 383 malpractice association's articles of association and bylaws must specify how the various assessments apply to current and former members (Section 383.016).
Under the act, special assessments made by an association after the 5th anniversary of the termination date of a former member's coverage under the association's policy shall not apply to the former member (Section 383.015).
ARTICLES OF ASSOCIATION AND BYLAWS - Under the act, a copy of the articles of association and bylaws shall be attached to a policy issued by an assessable association (Section 383.018).
383 AUDITS - Under the terms of this act, 383 malpractice associations shall be subject to various auditing and financial reporting insurance laws (Section 383.035).
LIMITATIONS ON AMOUNT OF INSURANCE PREMIUM AN ASSOCIATION CAN WRITE - The act removes the prohibition on the Department of Insurance which precluded it from placing limitations on the amount of premium an association can write or on the amount of insurance or liability limit an association can provide (Section 383.035).
ASSOCIATION SURPLUS REQUIREMENTS - The act requires assessable associations to maintain a policyholder's surplus of at least $600,000 (Section 383.035.5). Assessable associations licensed under Chapter 383 as of February 9, 2012, may renew their licenses with lower surplus requirements over a three year period ($200,000 surplus after 2012, $400,000 surplus after 2013, and $600,000 surplus after 2014). Under current law, 383 malpractice associations are not required to maintain positive surpluses.
PREMIUMS WRITTEN/SURPLUS HELD MINIMUM RATIO - The act requires 383 associations to maintain a specified ratio of premiums written to surplus held. A 383 malpractice associations shall not cause the ratio of its net written premiums to its policyholder's surplus to exceed 3 to 1 without approval of the director. Assessable associations licensed under Chapter 383 as of February 9, 2012, may renew their licenses with higher ratios over a three year period (4 to 1 after 2012, 3.5 to 1 after 2013, and 3 to 1 after 2014)(Section 383.035.6).
Failure to comply with the surplus or premiums written/surplus ratio requirements constitutes grounds for revocation of an association's license (Section 383.035).
EXCEPTION TO SURPLUS AND PREMIUMS/SURPLUS HELD RATIOS FOR PROVIDING REINSURANCE - Under the terms of the act, any assessable association that cedes reinsurance in compliance with Section 375.426, for the term of all policies written by the association and with an annual cap of not less than 250% of the associations's annual net written premium, shall be exempt from the surplus and premiums written/surplus ratio provisions, if such reinsurance covers the association's per claim risk on such policies in at least the percentages set forth below that correspond to the association's surplus:
Surplus Per Claim Risk
0 to $ 999,999 80%
$1,000,000 to $ 2,999,999 70%
$3,000,000 to $ 5,999,999 60%
$6,000,000 to $10,000,000 50%
383 MALPRACTICE ASSOCIATION RATES - The act repeals a provision of law which currently provides that 383 malpractice association rates shall not be excessive or inadequate, nor shall they be unfairly discriminatory (Section 383.037).
DETERMINATION OF WHETHER A MEDICAL MALPRACTICE INSURANCE RATE IS EXCESSIVE, INADEQUATE, OR DISCRIMINATORY - Under current law, medical malpractice insurers are prohibited from issuing medical malpractice policies in which the rates are excessive, inadequate, or unfairly discriminatory. A determination of whether a base rate is excessive, inadequate, or unfairly discriminatory is determined by the director. This act clarifies this statute by requiring the director to hold a hearing before making such a finding and that the director must base the decision on competent and substantial evidence on the whole record rather than competent and compelling evidence (Section 383.206).
COMPLIANCE WITH THE NEW 383 ASSOCIATION LAWS - Assessable associations operating under the 383 malpractice association laws prior to August 28, 2012, shall have 180 days following such date to come into compliance with the requirements of the modified provisions and to file their articles of association and bylaws conforming to the modified provisions or the director may suspend the assessable association's certificate of authority or issue a cease and desist order prohibiting the assessable association from writing new business (Section 383.009).
The provisions of this act are virtually identical to those contained in SB 440 (2012) and SB 302 (2011).
STEPHEN WITTE