Amended Surplus Lines Citizens Depopulation Bill (HB 245) Advances During Florida House Session; HB 4059 Also Goes to Third Reading

The Florida House of Representatives met in Session yesterday, February 2, 2012, during which several insurance-related bills were considered.

One of bills debated on the House Floor was HB 245 relating to the Depopulation of Citizens Property Insurance Corporation (“Citizens.)  Filed by State Representative Jim Boyd (R-Bradenton), HB 245 provides that eligible surplus lines insurers would be able to participate, in same manner and on same terms as authorized insurer, in depopulation, take-out or keep-out programs relating to policies removed from Citizens.

After a brief presentation on the bill by Representative Boyd, State Representative Rick Kriseman (D-St. Petersberg) asked a series of questions relating to whether surplus lines carriers would receive Florida Insurance Guaranty Association (“FIGA”) protection.  He also asked whether, and how often carriers would need to demonstrate their solvency to the Florida Office of Insurance Regulation (“OIR”).  Yet further, he asked how consumers would be informed of the difference between admitted and non-admitted carriers.  In response, Representative Boyd explained that, under the provisions of HB 245, surplus lines carriers were not protected by FIGA.  Notices to the insured, he said, were required to have a large stamp indicating as such.  In addition, surplus lines carriers would need to demonstrate their solvency to the OIR as well as have $50 million in surplus prior to being allowed to participate in this program.  Individual agents would be tasked with the responsibility of educating the insured of the differences between the policies, he added.

State Representative Evan Jenne (D-Fort Lauderdale) asked about the differences among carriers and whether there was a mechanism placed in the bill that would prevent the surplus lines carrier from exponentially increasing rates a year after a take-out. Representative Boyd explained that, while surplus lines carriers were not required to file the same rate filings and forms as admitted carriers, they were still required to demonstrate their solvency to OIR.  Representative Boyd acknowledged that, while there was no written mechanism in the bill to prevent rate hikes a year after a carrier participates in a take-out, the marketplace provides the best stabilizing factor.  Thus, the surplus lines carrier has an incentive to remain competitive.

Additional House Members questioned Representative Boyd, including Representative Marty Kiar (D-Southwest Ranches) who offered a friendly amendment that would require surplus lines carriers to give notice to the policyholders that surplus lines carriers are not regulated by the OIR.  Representative Boyd did not accept the amendment but expressed his satisfaction that the bill’s current language provided for the appropriate amount of notice to an insured regarding the differences between Citizens and surplus lines carriers.

Lastly, State Representative John Legg (R-Port Richey) inquired on the similarity of coverage between Citizens policies and surplus lines policies as they relate to sinkholes, and whether a policyholder would be required to pay for sinkhole testing and comply with Citizens new sinkhole standards if he or she decided to return to Citizens.  Representative Boyd responded that Citizens was required to accept back any policyholder that left under this program, but would need to comply with all of the new sinkhole regulations, which may include paying for testing.

Representative Boyd then presented Amendment 142083, which would require a surplus lines carrier to provide a notice to the policyholder of any substantial differences in coverage between the existing policy and the policy being offered to the insured.  It also would authorize the OIR to establish any other notification requirement that it deemed necessary.  With no questions or debate on the amendment, it was adopted.

The bill as amended was then rolled to Third Reading without any additional debate or questions.

House Bill 4059 relating to Property and Casualty Insurance was also rolled to Third Reading with limited questions and no debate.  Filed by State Representative Larry Metz (R-Eustis), HB 4059 repeals a requirement that the Florida Financial Services Commission provide an annual report to the Florida Legislature consisting of specified data and analysis. 

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