Domestic Surplus Lines Bill Passes First Committee
A proposal in the Senate (SB 1402) and House (HB 951) would authorize “domestic surplus lines insurers” to issue policies in Florida. Although the bills are in their early stages of consideration, the Senate version recently passed the Banking and Insurance Committee with a 9-0 vote.
Currently, because surplus lines insurers issuing policies in Florida by law are unauthorized insurers, they cannot simultaneously be domiciled in this state and yet authorized to issue surplus lines policies. The bill would allow the Florida Office of Insurance Regulation to make Florida domestic insurers eligible to transact surplus lines policies in Florida. A domestic surplus lines insurer must have at least $15 million in surplus as to policyholders.
A domestic surplus lines insurer would be required to meet all financial and solvency requirements imposed by Florida law on admitted domestic insurers. However, the domestic surplus lines insurer would not be required to file and gain approval of their policy forms, rates and rating plans. Domestic surplus lines insurers also would not be subject to admitted market restrictions on policy cancellations, nonrenewals and renewals. As with surplus lines insurers under current law, the policies issued by a domestic surplus lines insurer would not be subject to guaranty fund protection.
Supporters of the bill believe allowing domestic surplus lines insurers would increase capacity and coverage options available to policyholders in a hard insurance market. On the other hand, those questioning the merits of the proposal point out that admitted market insurers have been adversely affected by the absence of effective legislative solutions to problems plaguing the Florida market for the last decade, including the prevalence of litigation associated with assignments of benefits (AOBs) and the proliferation of represented and litigated claims. By allowing domestic surplus lines insurers, the legislature essentially would favor insurers that are not subject to Florida regulations while leaving the admitted market with limited tools to continue working through Florida’s market crisis.