Florida Senate Budget Subcommittee on Finance and Tax Amends, Passes SB 1816 Relating to Surplus Lines Insurance

The Florida Senate Budget Subcommittee on Finance and Tax passed as amended, CS/SB 1816 Relating to Surplus Lines, during its meeting today, April 13, 2011.  The bill is sponsored by Senator Mike Fasano (R-New Port Richey) and cosponsored by Senator Garrett Richter (R-Naples), and the Committee Substitute is sponsored by the Senate Banking and Insurance Committee.  CS/SB 1816 makes the following changes and amendments to law:

Section 1. Amends s. 626.931(1), F.S., to allow surplus lines agents 45 days after the end of the calendar quarter to file an affidavit stating that the agent has submitted all of the agent’s surplus lines transactions to the Florida Surplus Lines Service Office. Current law requires the affidavit to be filed on or before the end of the month after the end of the quarter.

Section 2. Amends s. 626.932(3), F.S., to specify that the surplus lines tax shall be computed on the gross premium when the surplus lines policy covers risks that are only partially in Florida and Florida is the home state as defined by the Nonadmitted and Reinsurance Reform Act of 2010 (“NRRA”).

Section 3. Amends s. 626.9325, F.S., to allow surplus lines agents 45 days following each calendar quarter to pay to the Surplus Lines Service Office all service fees related to policies reported during the previous quarter. Current law requires monthly payments. The fee will be computed on the gross premium when the surplus lines policy covers risks that are only partially in Florida, and Florida is the home state as defined by the NRRA.

Section 4. Creates s. 626.9362, F.S., to authorize the Department of Financial Services (“DFS”) and the Office of Insurance Regulation (“OIR”) to enter into cooperative reciprocal agreements with other states to collect and allocate nonadmitted insurance taxes for multistate risks pursuant to the NRRA. The agreements are authorized to create a comprehensive system for reporting, collecting, and allocating these taxes. The agreement may:

• Create a clearinghouse to receive and disburse nonadmitted insurance taxes;
• Create reporting requirements;
• Determine the methods for collecting and forwarding taxes to the appropriate state;
• Develop a premium tax allocation formula for multi-state nonadmitted risks;
• Provide for audits and exchanging information;
• Facilitate the reasonable administration of the cooperative reciprocal agreement; and,
• *Provide for the collection of a service fee to fund the operations and activities of the clearinghouse which shall not exceed 0.3% of the gross premium on transactions processed by the clearinghouse. (*See below discussion on late-filed amendment).

Provides that the reciprocal agreements must be implemented by the Florida Surplus Lines Service Office, which is authorized to collect the total tax imposed on a multi-state risk nonadmitted insurance premium and that the OIR and the DFS are granted rulemaking authority to administer agreements reached with other states.

Section 5. Amends s. 626.938(3), F.S., to require that insureds that do not use a surplus lines agent to procure surplus lines coverage must pay the surplus lines premium tax and the service fee within 45 days following each calendar quarter in which the insurance was procured. Current law requires payment within 30 days after the insurance is procured. The section also specifies that the surplus lines tax paid by the insured shall be computed on the gross premium when the surplus lines policy covers risks that are only partially in Florida and Florida is the home state as defined by the NRRA.

Section 6. Provides the act shall take effect upon becoming law.

During today’s meeting, a late-filed amendment by Senator Ellyn Setnor Bogdanoff (R-Fort Lauderdale) was adopted without questions or debate and was characterized as a friendly amendment because it was agreed upon by “the two interest groups.”  The amendment adds subparagraph (2)(g) to the newly created section 626.9362, F.S., governing cooperative reciprocal agreements authorized for collection and allocation of certain nonadmitted insurance taxes, stating: “[t]he terms of the agreement may include, but are not limited to, the following: … [p]roviding for the collection of a service fee to fund the operations and activities of the clearinghouse which shall not exceed 0.3 percent of the gross premium on transactions processed by the clearinghouse.”

The Committee returned to the bill as amended, and after no questions, testimony in support of and against the bill was offered.  Senator Gwen Margolis (D-Miami) made a motion for a Committee Substitute, without objection.  A vote was taken on the bill as amended and the bill was favorably passed.

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

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