FFVA Excessive Profits Hearing Canceled; OIR to Initiate Related Rulemaking Before February 21
Jan 25, 2010
Based on a Joint Motion filed by FFVA Mutual Insurance Company (“FFVA”) and the Florida Office of Insurance Regulation (“OIR”) with the Florida Division of Administrative Hearings (“DOAH”) on January 21, 2010, the OIR has agreed to initiate rulemaking relating to the State’s excessive profits law.
As a result, the previously scheduled January 25-26 DOAH hearing has been canceled and the case stayed, pending the development and adoption of an appropriate Rule relating to section 627.215, F.S., which statute authorizes the OIR to order the return of “excessive profits” to policyholders as cash refunds or credits by workers’ compensation, employer’s liability, commercial property and commercial casualty insurers.
A notice of rulemaking will be issued before February 21, 2010.
During August, 2009, FFVA had challenged the extent of the OIR’s authority through a petition alleging that section 627.215, F.S. does not authorize the OIR to substitute its own information and calculations in an insurer’s excessive profits reporting forms. In its petition, FFVA argued the law does not provide the OIR with a process to review forms filed by an insurer group, nor does it stipulate any criteria for the alteration, challenge, or rejection of the forms. FFVA further argued that section 627.215 does not define “administrative and selling expenses” that should be deducted from earnings to determine whether an excessive profit has been earned.
Workers’ compensation, employer’s liability, commercial property, and commercial casualty insurers are required to file data with the OIR regarding their (1) calendar-year earned premium; (2) accident-year incurred losses and loss adjustment expenses; (3) administrative and selling expenses; and (4) policyholder dividends. (See § 627.215, Fla. Stat. (2009)).
An excessive profit has been realized if the net aggregate underwriting gain is greater than the net aggregate anticipated underwriting profit plus five percent earned premiums for the three most recent calendar years for which the data is to be filed. An insurer’s underwriting gain or loss is computed by subtracting “[t]he sum of the accident-year incurred losses and loss adjustment expenses as of December 31 of the year, developed to an ultimate basis, plus the administrative and selling expenses incurred in the calendar year, plus policyholder dividends applicable to the calendar year, . . . from the calendar-year earned premium.” If an insurer is determined to have realized an excessive profit, then the OIR has the authority to order the return of those profits. Section 627.215 does not appear to provide for a review, approval, or rejection process by the OIR.
Should you have any questions or comments, please contact Colodny Fass.
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