Examination of insurers.

(1)(a) The office shall examine the affairs, transactions, accounts, records, and assets of each authorized insurer and of the attorney in fact of a reciprocal insurer as to its transactions affecting the insurer as often as it deems advisable, except as provided in this section. The examination may include examination of the affairs, transactions, accounts, and records relating directly or indirectly to the insurer and of the assets of the insurer’s managing general agents and controlling or controlled person, as defined in s. 625.012. The examination shall be pursuant to a written order of the office. Such order shall expire upon receipt by the office of the written report of the examination.

(b) As a part of its examination procedure, the office shall examine each insurer regarding all of the information required by s. 627.915.

(c) The office shall examine each insurer according to accounting procedures designed to fulfill the requirements of generally accepted insurance accounting principles and practices and good internal control and in keeping with generally accepted accounting forms, accounts, records, methods, and practices relating to insurers. To facilitate uniformity in examinations, the commission may adopt, by rule, the Market Conduct Examiners Handbook and the Financial Condition Examiners Handbook of the National Association of Insurance Commissioners, 2002, and may adopt subsequent amendments thereto, if the examination methodology remains substantially consistent.

(2)(a) Except as provided in paragraph (f), the office may examine each insurer as often as may be warranted for the protection of the policyholders and in the public interest, but must, at a minimum, examine:

1. High-risk insurers at least once every 3 years.

2. Average- and low-risk insurers at least once every 5 years.

The examination shall cover the number of fiscal years since the last examination of the insurer, except for examinations of low-risk insurers, in which case the examination need only cover at least the preceding 5 fiscal years, and shall be commenced within 12 months after the end of the most recent fiscal year being covered by the examination. The examination may cover any period of the insurer’s operations since the last previous examination. The examination may include examination of events subsequent to the end of the most recent fiscal year and the events of any prior period that affect the present financial condition of the insurer.

(b) The office shall examine each insurer applying for an initial certificate of authority to transact insurance in this state before granting the initial certificate.

(c) In lieu of making its own examination, the office may accept a full report of the last recent examination of a foreign insurer, certified to by the insurance supervisory official of another state.

(d) The examination by the office of an alien insurer shall be limited to the alien insurer’s insurance transactions and affairs in the United States, except as otherwise required by the office.

(e) The commission shall adopt rules providing that an examination under this section may be conducted by independent certified public accountants, actuaries, investment specialists, information technology specialists, and reinsurance specialists meeting criteria specified by rule. The rules shall provide:

1. That the rates charged to the insurer being examined are consistent with rates charged by other firms in a similar profession and are comparable with the rates charged for comparable examinations.

2. That the firm selected by the office to perform the examination has no conflicts of interest that might affect its ability to independently perform its responsibilities on the examination.

3. That the insurer being examined must make payment for the examination pursuant to s. 624.320(1) in accordance with the rates and terms established by the office and the firm performing the examination.

(f) An examination under this section must be conducted at least once every year with respect to a domestic insurer that has continuously held a certificate of authority for less than 3 years. The examination must cover the preceding fiscal year or the period since the last examination of the insurer. The office may limit the scope of the examination.

(3) The office shall create, and the commission shall adopt by rule, a risk-based selection methodology for scheduling examinations of insurers subject to this section. Except as otherwise specified in subsection (2), this requirement does not restrict the authority of the office to conduct examinations under this section as often as it deems advisable. Such methodology must include all of the following:

(a) Use of a risk-focused analysis to prioritize financial examinations of insurers when such reporting indicates a decline in the insurer’s financial condition.

(b) Consideration of:

1. The level of capitalization and identification of unfavorable trends;

2. Negative trends in profitability or cash flow from operations;

3. National Association of Insurance Commissioners Insurance Regulatory Information System ratio results;

4. Risk-based capital and risk-based capital trend test results;

5. The structure and complexity of the insurer;

6. Changes in the insurer’s officers or board of directors;

7. Changes in the insurer’s business strategy or operations;

8. Findings and recommendations from an examination made pursuant to this section or s. 624.3161;

9. Current or pending regulatory actions by the office or the department;

10. Information obtained from other regulatory agencies or independent organization ratings and reports; and

11. The impact of an insurer’s insolvency on policyholders of the insurer and the public generally.

(c) Prioritization of property insurers for which the office identifies significant concerns about an insurer’s solvency pursuant to s. 627.7154.

(d) Any other matters the office deems necessary to consider for the protection of the public.

(4) The office shall present any proposed rules implementing this section to the commission no later than October 1, 2023. In addition to the methodology required by this section, such rule or rules must include a plan to implement the examination schedule in subsection (2). To facilitate the development of the methodology for scheduling examinations pursuant to this section, the commission may also adopt by rule the National Association of Insurance Commissioners Financial Analysis Handbook, to the extent that the handbook is consistent with and does not negate the requirements of this section.