Florida Office of Insurance Regulation Rule Development Workshop on Excessive Profits Scheduled for February 22

The Florida Office of Insurance Regulation (“OIR”) will review Rule 69O-189.007, entitled “Insurer Experience Reporting – Excessive Profits, Workers’ Compensation Insurance” at a rule development workshop scheduled for February 22 at 1 p.m. 

• Colodny Fass representatives will attend the February 22 workshop.  Should you wish to provide comments or suggestions for presentation at this meeting, please forward these to Sandy Fay (sfay@cftlaw.com) no later than 5 p.m. on Friday, February 19.

The OIR agreed to initiate rulemaking relating to Florida’s excessive profits law as a result of a Joint Motion filed by FFVA Mutual Insurance Company (“FFVA” or “the Petitioner”) and the Florida Office of Insurance Regulation (“OIR”) with the Florida Division of Administrative Hearings (“DOAH”) on January 21, 2010.

Pursuant to the Motion, the January 25-26 related DOAH hearing had been canceled and the case stayed, pending the development and adoption of an appropriate Rule relating to section 627.215, F.S., which 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.

During August, 2009, FFVA 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.  The Petition presented that 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.  The Petitioner 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 calendar-year earned premium, accident-year incurred losses and loss adjustment expenses, administrative and selling expenses, and policyholder dividends. 

Under current law, 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.

To view the meeting notice, click here.  Copies of the current Rule, applicable statute and related OIR Workers’ Compensation Excessive Profits Reporting Form F are attached for review.

Should you have any questions or comments, please contact Colodny Fass.

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